The last budget of 2015?
We’re pretty sure this won’t be the last 2015 Budget, whoever gets the keys to 10 Downing Street in May. So we don’t intend to dwell on it too much.
However, what did have us scratching our heads, was how George appeared to magically shrink last year’s projected 2020 Budget surplus from £23 billion to just £7 billion - so where has all this money gone?!
Lesley usually gives me the third degree when 10p goes missing in our household or anything unaccounted for appears on our credit card statements!
Apart from the above, we don’t intend to bamboozle you with too many facts and figures, just comment generally on some of the more interesting points.
Off we go then…
NEW RULES FOR FARMER’S AVERAGING
One of the more interesting proposals was the extension of the averaging period for farmers from 2 years to 5 years – the current rules have been in place for some time now.
As Farming was highlighted in the Budget as one of the UK’s regional strengths that could contribute to a national economic recovery, is this a last ditch attempt by George to woo rural voters?
TAX SIMPLIFICATION – DEATH OF THE TAX RETURN
We’ve already indicated that the government intends to transform the tax system by introducing digital tax accounts - thus removing the need for individuals and small businesses to complete annual tax returns.
Whilst we welcome the use of modern technology, we’d issue a few words of caution because the Government's implementation of IT projects has a history of being problematic– does anyone remember RTI?
Also, because HMRC will ultimately gain access to more up to date information, will they use this as a weapon against small business owners and force them to pay their taxes more quickly?
ANNUAL INVESTMENT ALLOWANCE
Whilst this is currently £500,000, it's due to be slashed to £25,000 in January next year. Amazingly no mention was made of this in the Budget.
Given that the Government is purporting to be encouraging entrepreneurial activity, this uncertainty is bound to have a detrimental effect on the capital expenditure plans of many small and medium sized businesses - particularly if their year-end straddles 31 December 2015.
Proposals have been made to restrict tax relief for travel and subsistence for workers engaged through either an umbrella company or their own a personal service company, as HMRC perceives this area is open to abuse.
This move is bound to upset those contractors who were previously happy to suffer a long distance commute safe in the knowledge that they would be able to claim tax relief on their travel expenses!
R&D TAX CREDITS/ACADEMICS
From Autumn 2015, the government will introduce voluntary advanced assurances lasting 3 years. This will be for smaller businesses making a first claim. And they'll also reduce the time taken to process a claim from 2016.
They are also going to produce new standalone guidance aimed specifically at smaller companies, backed by a 2-year publicity strategy, to raise awareness of R&D tax credits.
We welcome these steps taken to support innovation, though conversely at the same time we are mystified as to why academics who dispose of shares in ‘spin out' companies using intellectual property to which they have contributed, may be penalised going forward (sorry if that's a bit technical but it is an area of controversy!).
Essentially, the Government are looking to ‘review’ whether Capital Gains Entrepreneur’s Relief should continue to be available on these type of share disposals.
We think that potentially denying a valuable tax break (Capital Gains are taxed at an effective rate of 10%) does not seem the right way to reward innovative thinking.
Expect more Budget updates after May, though in the meantime if you’d like more advice on how these changes might affect you, or would like to discover how we can help your business, simply email our friendly tax adviser, [email protected] or give us a call on 01202 048696.