Small Business and the 2018 Budget

15th November 2018
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Given the length of the Budget document, businesses are still getting their heads round what it means for them. Here’s a quick list of seven points that could affect you as a small or medium sized business. Well, number seven isn’t strictly business related, its just nice to end on a positive!

1. Business Rates Cuts

If your business has a rateable value of up to £51,000, your Business Rates are cut by one third for two years. In terms of money in the bank, the Chancellor said that it will save each business up to £8,000 over the two years. According to government figures, this will have a positive impact on 90% of our cafes, restaurants and shops.

As Mike Turner, of Bird & Blend Tea Co., told This Is Money: “These cuts would have would have reduced our bills by about £3,000 when we started, which would have been very helpful, but they have come a little too late for us. This relief will help single location independents who bring diversity to the high street, it will also help online-only businesses open exciting bricks and mortar shop fronts.”

This is not the total revaluation of Business Rates that many retailers were hoping for to save our high streets. But there is a £675 million ‘Future High Streets Fund’ that councils can apply to for high street redevelopment projects.

2. VAT fears not realised

Despite worrying rumours to the contrary, the VAT threshold remains £85,000 until March 2022. This means that smaller businesses don’t have to prepare for the Making Tax Digital for VAT roll out yet.

3. R&D Tax Credits Cap

This is an old R&D Tax Credit regulation brought back to life, it was originally scrapped in 2012. It applies to loss making companies claiming payable tax credits as part of the SME R&D Tax Credit scheme. As of April 2020, you will only be able to claim an amount equal to your NICs and PAYE total, multiplied by three.

The new cap was not part of the speech, but in the Budget document section entitled ‘Avoidance, Evasion and Unfair Outcomes’. It is in place as part of the government’s drive to stop the system being defrauded by criminals. The Budget Note demonstrates the size of the problem to date: “HMRC has identified (and prevented) fraud attempts on the SME payable tax credit, worth £300 million in total. In these cases, companies were set up to claim the cash available through the payable credit even though they have no legitimate R&D activity.”

4. Annual Investment Allowance (AIA) goes up

The Annual Investment Allowance is a great tax relief opportunity for companies investing in plant and machinery (excluding cars). At the moment, you can claim 100% tax relief on plant and machinery purchases up to £200,000. In this Budget, the Chancellor announced an increase in this tax relief ceiling to £1 million. This is not a permanent increase and it runs from January 1st 2019 to December 31st 2020.

5. Apprenticeship Levy goes down

As part of a £695 million apprenticeship package, the Apprenticeship Levy is being reduced for smaller companies. It is going down from 10% to 5%.

6. When is self employed not self employed?

Yes, this is the IR35 argument. HMRC feel that a third of self employed people are “personal service companies” that should be reclassified as employed. This means that they can increase their income tax and NICs collection from these individuals. Taxpayers working in public sector institutions have already met the changes. As of April 2020, medium sized and large private companies will have to come in line.

This section of the Budget is entitled ‘Off-payroll working in the private sector’ and says: “Responsibility for operating the off-payroll working rules will move from individuals to the organisation, agency or other third party engaging the worker.” There will be guidance and support offered by HMRC.

7. Alcohol and Tobacco

Not necessarily strictly business, but we all want to know we can still afford a G&T or a pint! These rates changes come into force from 1st February 2019.

  • Spirits, beer, wine and made wine over 22% abv are staying at the same rates. As are still and sparkling cider and perry with a maximum 5.5% abv.
  • Sparkling cider and perry that is between 5.5% and 8.5% will rise with inflation.
  • Wine and made wine that is below 22% abv will also go up in line with inflation.
  • Cigarettes remain at inflation plus 2% and loose tobacco at inflation plus 1%.

One of the great things about belonging to the LRBC is that we discuss any current issues together. Our ‘hot topics’ section of our meetings include things like the impact of Budget announcements, as well as local issues, customer relations, industry specific issues and anything else our members find relevant to their businesses. It’s a good place to learn and share your own knowledge. It certainly combats that feeling of having to work everything out on your own. If you fancy coming to see what its about, give us a call on 01664 454066.

 

Claire McCabe

Claire McCabe

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