1 A disappointing budget for tax advisers, as lacking in measures, but a good one for small businesses as no new ‘nasties’ apart from ending indexation allowances for sales of chargeable assets in companies.
2 Much was expected on house building, in particular increasing the supply of new properties by relaxing the artificial planning constraints which distorts a proper market and leads to increased prices. Disappointingly nothing radical was proposed on this however. Stamp duty for abolished for first time buyers for properties up to £300k. High rates of stamp duty still exist though for transactions greater than £500k so people will be put off buying these houses and in consequence will not free up less expensive accommodation for which there is a demand. It therefore amounts to a subsidy rather like help to buy which arguably has been shown only to increase prices which benefit the larger developers. In fact, the Government’s own independent fiscal watchdog, the Office of Budget Responsibility agreed as much. An obvious solution is to increase planning consents in the Green Belt but the Chancellor categorically ruled that out to his political cost and that of the current Government.
3 My budget predictions for tax changes proved somewhat off the mark. The dividend allowance is still going to be reduced from 2018/19 to £2,000 from the current level of £5,000. Otherwise the Chancellor shirked any challenge to reduce reliefs to increase the tax yield in order to spend more on public services. It was an opportunity lost in terms of politics but taxpayers will welcome not being hit. However, if this leads to major political change and substantially increases the possibility of drastic tax rises for certain sections of the community, this will be seen as an opportunity lost to steal back the political imitative.
4 On VAT registration limits, the Chancellor did make a statement that other countries have drastically lower VAT registration limits than the UK which at £85k is the highest in Europe. This undoubtedly does lead to distortions and businesses deliberately foregoing growth opportunities to increase turnovers. That is bad for the UK economy. In purely economic terms it would be a nonsense to have such as high limit going, which when one exceeds it means having to increase prices by 20% to maintain margins. This of course only affects the businesses selling to consumers, and includes guest-houses, plumbing and taxi services etc. The artificial advantage given to such businesses to undercut VAT registered businesses is hardly a justification for maintaining this high limit. An opportunity for reform lost therefore. To move it would have risked antagonising small business owners though.
5 There were no changes in tax relief to pension contributions but no indication either of it not being changed next year so no end to the uncertainty there.
6 Before applying IR35 to the private sector, there will be a review upon the impact that this is having now on the Public sector –taxing such persons as employees as they are effectively employees even is they structure work through their company
7 Likewise, the Chancellor did nothing on the Gig economy as he tried in March but had to backtrack on.
8 There was a change in EIS to increase the limits on investments into “knowledge intensive companies” from £1m to £2m but to wants at the same time to ensure EIS is not used as a shelter for low risk capital preservation schemes – i.e. asset backed companies. There were no changes to Entrepreneurs relief.
9 Drivers of diesel company cars that currently have a 3% additional levy applied in calculating the company car benefit, will from next April have a 4% increase applied. This means that an employee with a £30k diesel car would see their annual diesel supplement tax rise by £300 year from £900 to £1,200. This is on top of the company car benefit that would apply to a non-diesel car in any event.
23rd November 2017