As you would expect of specialists in business accounting, we watched the Chancellor’s 2014 Autumn Statement speech extremely closely. There was the usual intense scrutiny of George Osborne’s announcements in the media, but what we wanted to know is: what does the Autumn Statement actually mean for small and medium sized businesses? Here’s our verdict in a nutshell – overall, there are some positive changes for business. In contrast, the Budget also features updates to areas such as expenses and benefits and Corporation Tax which mean that companies need to be extremely careful that they keep track of and respond to the changes. Read on for our round-up of the key points for businesses in the 2014 Autumn Statement.
Fuel Duty remains frozen which is clearly a positive for businesses.
The government will extend the doubling of Small Business Rate Relief for a further year from 1 April 2015. Business rates inflation will be capped at 2% and the government will extend the transitional arrangements for businesses facing significant bill increases due to the ending of Transitional Rate Relief from 1 April 2015 to 31 March 2017.
Corporation Tax: Goodwill on Incorporation
The government will stop individuals and partnerships from gaining a tax advantage by transferring their businesses into a company they control and then claiming Corporation Tax deductions for assets linked to the company’s reputation and customer relationships. The government will also stop individuals claiming Capital Gains Tax Entrepreneurs’ Relief on the transfer of these assets to the company. This will affect acquisitions on or after 3 December 2014
Close company loans to participators
The government has completed its review into the tax charge on loans from close companies to individuals, trusts and partnerships that have a share or interest in them. The government doesn’t intend to make any changes to the structure or operation of the tax charge following this review.
Employment Tax: National Insurance
The government will abolish employer NICs up to the upper earnings limit for apprentices aged under 25. This will come into effect from April 2016.
The personal allowance will be increased by a further £100 (from the £500 previously announced) in 2015-16 to £10,600. In addition, the higher rate threshold will increase in 2015-16 for the first time in five years; so that the full gains of the increase in the personal allowance are passed on to higher rate taxpayers. The increase in 2015-16 will be worth £120 to a typical basic rate taxpayer and £172 to a typical higher rate taxpayer. There was a further commitment to increase the higher rate threshold to £50k by 2020.
Expenses and Benefits
Budget 2014 also saw the announcement of a review of the rules for tax relief on travel and subsistence payments, in response to the OTS’s review on employee benefits and expenses. The government has undertaken the initial stages of this review and continues to take this work forward towards a full public consultation on the framework for new rules.
As announced at Budget 2014, the government is to simplify the administration of employee benefits and expenses. From April 2015 the government will provide a statutory exemption for trivial benefits in kind costing less than £50. From April 2016, the government will remove the £8,500 threshold below which employees do not pay Income Tax on certain benefits in kind and replace it with new exemptions for carers and for ministers of religion. It will also exempt certain reimbursed expenses and introduce a statutory framework for voluntary payrolling. The new exemption for reimbursed expenses will not be available if used in conjunction with salary sacrifice. In addition, the government will stop tax relief from being claimed on reimbursed business expenses when they are paid in conjunction with a salary sacrifice scheme.
The government is also concerned at the growing use of overarching contracts of employment by employment intermediaries such as ‘umbrella companies’, which allow some temporary workers to benefit from tax relief for home-to-work travel expenses that are not generally available to other workers. The government will review these arrangements and publish a discussion document inviting representations from interested parties to inform potential future action.
Construction Industry Scheme (CIS)
Here’s some good news if you’re the owner of a construction business. Following consultation, the government will implement a package of improvements to the CIS to reduce administrative burdens on construction companies. They are to publish a summary of responses shortly.
Tax Credits for the self-employed
The Autumn Statement also announced changes that will tighten the eligibility conditions for people claiming tax credits on the basis of self-employment, to prevent abuse of the system. There is a requirement that anyone claiming Working Tax Credit as self-employed must register with HMRC and provide their Unique Tax Reference. This will prevent bogus self-employment and abuse of the tax credits system, while allowing HMRC to continue to support those who are genuinely self-employed. Those declaring income less than the equivalent of working 24 hours a week at the National Minimum Wage (NMW) will also be required to provide evidence to HMRC that the work they are undertaking is genuine and effective.
Need more information or advice?
You can find more detail in this helpful summary from the BBC: http://www.bbc.co.uk/news/uk-politics-30307528/
Or you can read the comprehensive overview on the government website:
Wondering how the Autumn Statement 2014 changes could affect your business? We provide up to date, commercially-focused advice on all aspects of business accounting. Please get in touch to find out more.