Budget 2018 – Summary
Our Tax Partner, Alastair Wilson, shares his summary.
BRITAIN IS OPEN FOR BUSINESS…
This was a key theme for this year’s announcement, and not unrealistic given some of the more positive announcements. However, we do have to remember that the Chancellor might have to take it all away again in the Spring if we end up in ‘No Deal’ territory!
It was clear that the Government had taken on board some of the key concerns of both the electorate and business with increased funding for Brexit negotiations. There was a real focus on mental wellbeing and supporting our veterans. Also, education improvement, plans for a modernised NHS, encouraging investment in our country, and enhancing the UK’s skills base.
Investment in the North East
The Budget saw positives and negatives for the North East region. There were some helpful measures that will genuinely benefit our local businesses and communities. This includes £400m for schools nationally. There will be £14m to help redevelop South Tees around SSI and a further £16.5m for Tees Valley as part of the ‘Transforming Cities’ initiative. Sunderland and Middlesbrough will also benefit from the £115m committed to fund Digital Catapult, which has bases in both cities.
The reduction in the Apprentice levy “co-investment” for SMEs to 5% (from 10%) also comes as a real positive for our region to encourage investment in skills and training. The Government has also made it easier for large companies to share a quarter of their levy funds to pay for apprenticeship training in supply chains.
Some tax measures to encourage investment were very welcome. These include the increase in the Annual Investment Allowance from £200,000 to £1million for two years from January 2019. Whilst this will encourage investment, we’ve had similar rules before. The AIA can be more complex to administer and utilise than businesses often realise. Care with timing investment will maximise the impact.
The big headline for an overall ‘tax boost’ for businesses came from the Structures and Buildings Allowance. The 2% reduction per annum for construction, land alteration and improvement costs of new non-residential structures and buildings will come as a welcome relief. This is partially reintroducing the benefit we used to have from Industrial Buildings Allowances – but potentially with a wider scope. However, this is being paid for by a reduction in capital allowances elsewhere. It therefore may be cost neutral (or just a cost) for more businesses than the new reliefs assist.
But if you were, for example, building a new automotive park on the A19, it should be very good news!
Save our High Streets
The theme of saving our high streets was clear. There will be extensive Government investment and a temporary reduction in business rates until the next revaluation. A reduction of business rates by a third for occupied retail properties (with a rateable value of less than £51,000) will make a real difference to North East “high street” businesses and comes as a real positive. It’s worth noting that retail does include restaurants etc. (the Treasury even highlighted hairdressers), so this will impact a broad range of business.
The cost of the positive changes have been largely funded by anti-avoidance measures. These have been consulted upon and will impact areas of the tax system which are not working as the general public would expect. However, the Chancellor may not be high up the Christmas card list for the shareholders of the large US owned social media companies!
Our website will highlight some of the key themes in more detail. As always, please get in touch with a member of our tax team if you’d like to discuss anything announced today in more detail.