Autumn Statement 2016: Private Business implications
23 November 2016
(Mainly) expected changes for private businesses and their owners
Some of our team reflect on the Chancellors first Autumn Statement and explain what some of the measures might mean for private businesses.
In his inaugural Autumn Statement and the first major economic announcement since the Brexit vote, Chancellor Philip Hammond today set out to measures to tackle Britain’s challenges ‘head on’ and prepare the economy to be resilient as we exit the EU.
Surprisingly, Hammond announced that his first Autumn Statement will also be his last! From 2018, the UK will have just one annual Budget announcement, in line with other major economies.
In uncertain times following the UK’s decisions to leave the EU, many private businesses and their owners will be pleased to hear no new major tax changes were announced. So it is business as usual for most.
Private businesses will be most impacted by a number of changes to employment measures including:
- A marginal increase to employers NIC as a result of a reduction in nil rate thresholds
- Abolition of salary sacrifice arrangements other than pension, cycle to work, low emission cars and childcarevouchers;
- Abolition of Employee Shareholder Shares for arrangements entered into on or after 1 December; and
- Extended measures to tackle perceived avoidance from disguised remuneration arrangements.
The reduction to the rate of corporation tax to 17% from April 2017 was confirmed.
An important relief which exempts the sale of subsidiary companies from corporation tax will be simplified. This is welcome news.
Measures which restrict interest deductions from April 2017 will come into force as planned and draft legislation will be provided in December.
Dipan Shah, partner and London private business leader at PwC, commented:
“Overall the tax changes for small businesses were what we expected, with the reductions in the corporation tax rate to 17% by 2020 set to continue.
“SMEs will face restrictions in how tax-efficiently they can reward employees, because of restrictions in salary sacrifice, abolition of the share-for-rights scheme and marginal increases in employer national insurance contributions. The government is also seeking to help incubate growing businesses through a £400m investment via VC funds – which is welcome.”
UK tech startups
"In this Autumn Statement, the government has again highlighted the importance of fast growth tech companies to the UK with the injection of £400m into Venture Capital funds via the British Business Bank to unlock investment for scaling.
"Funding is a crucial element to the success of scaling business, but it's not the only one. While additional funding is always welcome and may help to relieve any uncertainty in the market, it should be combined with support to address skills issues, digital infrastructure limitations and the impact Brexit could have on export markets and talent availability."
Phil Vernon, business rates leader at PwC, said:
“There were some welcome announcements for business rates with a new 100% relief for new full-fibre infrastructure for a five year period and removal of the inconsistency between rural rate relief and small business rate relief, with the government doubling rural rate relief to 100% from 1 April 2017.
“There was also a welcome commitment to push ahead with reducing the burden of business rates by £6.7 billion over the next five years, as announced in the Budget. These measures will be welcome news for smaller businesses and they will be keen to see them implemented.
“However, there are still concerns for many businesses facing rate increases next year and while the Government has opted to lessen some of the impact of the April 2017 revaluation with a transitional scheme, they are still pressing ahead with a far less generous scheme in 2017 than the one adopted in 2010, when increases were capped around 12.5%.
“The business rates burden will increase for some businesses by up to 42% next year, which could see their payments increase by up to 75% from April 2018.
“There are also some unwelcome features of the transitional relief scheme that are still not addressed, as well as some regional variations where the scheme is not being adopted. Many of the business rates supplements do not receive transitional protection and so larger businesses could actually be facing increases of 48%.
“Businesses that expect to be better off after receiving their new rateable value may want to check the small print, because the transitional scheme also slows the benefit of any decrease. Larger businesses in England will see their decreases held back to around 5% in 2017. Businesses in Wales on the other hand will see their full decrease straight away next year.”
No changes were announced to capital gains tax rates, entrepreneurs relief or inheritance tax (IHT).
Confirmation was provided that the changes to the taxation of long term non domiciled individuals and IHT on UK residential property will come into force from April 2017 as expected.
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To discuss any of the implications arising from Autumn Statement and the impact to your business, please contact one of our team.