On Wednesday 25th November, the Chancellor gave his Autumn statement for 2015 – here’s how it will affect the wallets and accounts of small businesses.
The Autumn Statement and Spending Review included a significant change of tactics – by scrapping his recent plan to cut tax credits. Osborne also jumped into some big challenges – not least with buy-to-let landlords who could face a tax rise, but small businesses who will see digital tax accounts by 2016-17.
It was music to our ears that the small business rate relief scheme will now be extended for another year, the decision was also welcomed by most business organisation.
The Chancellor also outlined the government’s plan to transfer power across the country in what he called a ’devolution revolution’, which would result in 100% business rate retention, giving councils the power to cut business rates in order to increase growth.
It was announced that 3 million apprenticeships will be created by 2020 and funded by a levy on large employers. This apprenticeship levy will now come into effect in April 2017, at a rate of 0.5% of an employer’s pay bill. A £15 million allowance for employers means that the levy will only be paid on employers pay bills over £3 million.
We were all surprised by the level of spending within the statement, but the OBR had optimistic forecasts for tax revenues, re-evaluation of housing association debt, falling interest costs, the money generated from stamp duty and the apprentice levy. All these factors allowed the Chancellor to soften the blow of government’s spending cuts.
Now the government has seen an improvement in the public finances, the most simple thing to do would be to avoid these changes completely, as tax credits are being phased out regardless as the Government will introduce universal credit. This means that the tax credit taper rate and thresholds will remain untouched and the income rise disregard will be £2,500.
The government have proposed no further changes to the universal credit taper, or to the work allowances further than those that passed through Parliament.
As the figures which have been published show, (Wednesday 25th November), the government are still on target to reach its £12 billion per year on welfare savings, as promised.
Stamp Duty Tax
From 1st of April 2016 if you are to purchase an additional second buy to let property, you will now pay an extra 3% in stamp duty. The money which has been raised from tax on people buying their second home will be used to help those individuals which are struggling to buy their first home. The government has stated that the additional tax will be invested in supporting their housing agenda and doubling the housing budget. The government will make the decision that any corporates and funds who own more than 15 residential properties are appropriate for exemption.
Capital Gains Tax
From April 2019 any payment of CGT due on the disposal of residential property must be made within 30 days of completion of disposal. This doesn’t affect gains on properties which are not liable for CGT due to private residence relief. The draft legislation will be published for consultation in 2016.
A new penalty of 60% of tax due to be charged in all cases has been introduced to improve HMRC’S ability to tackle marketed avoidance schemes. From what we understand, the Autumn Statement’s new rules will be introduced to “stop avoidance of stamp tax where ‘deep in the money’ options are used to transfer shares to a depositary receipt issuer or clearance service.” Finance Bill 2016 measures will take immediate effect from the 25 November 2015 and will focus in on the following policy measures including loans to participators, trustees of charitable trusts; capital allowances and leases; and related party rules, partnerships and transfers of intangible assets.
Digital Tax Accounts For Small Businesses
The Chancellor, George Osborne has promised in his Autumn Statement that the UK will have “the most digitally advanced tax administration in the world” and has said he will invest £1.3bn in digital tax accounts. Small businesses will now have access to digital tax accounts by 2016-2017. The plans to transform the tax system will be published shortly and these details will be looked at in 2016.
Personal Services Companies
The pre-autumn statement suggestions for PSC were just scare stories after all. This was about introducing a formal employment status test to confirm whether a contractor was an employee or not. The Chancellor has now reined in his idea of bringing thousands of freelance contractors onto corporate payrolls. Osborne now urges a promise of consultation on restricting relief to PSC’s caught by intermediaries legislation. You can look at this draft legislation when the new Finance Bill clauses are published in two weeks.
Action on disguised remuneration schemes
This was one of several anti-avoidance measures which has been promised by Osborne in his Autumn Statement. “The government will consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income where necessary, with effect from 25 November 2015.”