Budget 2016 reviewed

Chancellor George Osborne has revealed details of the 2016 Budget, one he promises will make Britain "fit for the future".

Aside from a new 'sugar tax' on drinks, which will go towards improving schools, Osborne made headlines by reducing corporation tax, freezing fuel duty and furthering devolution powers.

We spoke to companies across Lancashire to see how the announcements will affect the red rose county.

Rachel Marsdin, tax partner at Moore and Smalley: “George Osborne pulled more than one rabbit out of the hat on business taxes, announcing that corporation tax would be reduced further, falling to 17 per cent by April 2020 – a further percentage point than previously announced.

“The announcement that small business rate relief would be more than doubled permanently, moving from £6,000 to £15,000, should help some of the smallest businesses in Lancashire, but for many medium-sized, owner-managed businesses it won’t make any difference.

“Another surprise measure was a sliding scale for commercial property stamp duty coming in from midnight tonight and this will help businesses who are planning on buying their own premises, saving potentially thousands of pounds.

“It was also announced that the government would abolish class 2 National Insurance Contributions for self-employed people from 2018 and this will also be welcome news for sole traders in the region.

“Another surprise move was the cut in Capital Gains Tax which will be reduced from 28 per cent to 20 per cent and from 18 per cent to 10 per cent for basic rate tax payers. This was unexpected as some had predicted that Capital Gains Tax might actually increase. This is good news for those in the region looking to benefit from the sale of assets, such as businesses, though this lower rate does not apply to residential property.”

Jo Ecob, director at Abrams Ashton Accountants: “The Chancellor has recognised the contribution that small firms make to the economy and has delivered real financial help for small to medium sized businesses.

“Our clients will welcome the business rate reform which will enable more than 250,000 enterprises to pay reduced or no rates at all. This, combined with the reduction in the annual threshold for small business tax relief which will be raised to £15,000 from £6,000, means that thousands of small enterprises will have more cash to support their growth and create jobs in those crucial early years.”

Jane Parry, managing partner & head of tax at PM+M: "With the EU Referendum only months away, it wasn’t much of surprise that this Budget was relatively non-eventful as far as middle England is concerned, with the Chancellor was obviously keen to not offend – or rile – either side of the divide.

"I think it’s fair to say that it was more about tax tinkering, rather than it being a career defining Budget. The changes to the tax thresholds for low and middle earners are without doubt crowd pleasers and will help.

"The devolution of power to local government has been a cornerstone of Conservative policy for a while. George Osborne’s announcement that local authorities will be responsible for collecting rates but not setting them seems somewhat strange; especially when you look at the challenges around local fundraising including a potential drain of young talent to London/ the South East and an ageing legacy population that will need to be paid for.

"Infrastructure and the Northern Powerhouse were the other two things that jumped out. The green light for HS3, a four-lane M62, a potential tunnel between Manchester and Sheffield to better connect the North West together with increases in flood defences should all be welcomed. All are long term projects, so need to be treated with cautious optimism.

"This Budget didn’t contain any major shocks and the Chancellor’s chants of low unemployment, the importance of staying in the EU and the fact that Great Britain has grown faster than any other major advanced economy this year were no surprise.

"I think we’ll see a bolder Budget post 23rd June."

Jayne O’Boyle, tax manager at Haworths Chartered Accountants: “Tax was high on the agenda today. George Osbourne warned of ‘storm clouds gathering’ at the start of his wide-ranging speech whereby the OBR cut growth expectations. Yet, a seemingly positive caveat followed with the revelation that corporation tax would be cut by a further 1 per cent to 17 per cent by 2020.

“The abolition of the Class 2 National Insurance Contributions (NIC) paid by the self-employed may not be so welcome, as these previously counted towards the state pension and benefits entitlement.

“This is now to be transferred to the Class 4 NIC, currently at a rate of 9 per cent - however there are rumours that this rate might be increased to 12 per cent to bring it in line with the national insurance paid by employees, which would not be received lightly.

“Surprisingly, the hype surrounding proposed IR35 changes in the autumn statement last year did not rear its head, yet the £12bn crackdown on tax avoidance as predicted was announced – and the measures revealed were more than expected.”

Mike Cherry, policy director at the Federation of Small Businesses: “In a Budget constrained by both the need to reduce the deficit and the economic outlook, the chancellor has listened to our calls for the tax system to be made simpler for small businesses and the self-employed and taken important action on business rates.

“In particular, FSB members have campaigned hard to make Small Business Rates Relief permanent, and expand it – and the chancellor has heeded our calls, taking many small firms out of the system altogether. The combined measures announced on business rates – the single biggest tax cut in today’s Budget - will be viewed by our members as a welcome and important step on the road to fundamental reform. In addition, online retailers will benefit from steps to secure a level playing field for smaller online businesses on VAT."

Steven Greenwood, director, Cassons Financial Planning: “The Chancellor is introducing a new Lifetime ISA from April 2017. Those who are under 40 can start a lifetime ISA, paying up to £4,000 pa. The government will add a 25 per cent bonus. This looks rather like a £5,000 contribution with 20 per cent tax relief – but the bonus will not be added until the end of each year. And there will be no bonus after age 50. Funds can be withdrawn from age 60; or at any age to pay for a first home (subject to detailed rules); or in cases of terminal illness. But if funds are withdrawn before age 60 for any other reason the 25 per cent bonus will be withdrawn. So too will any interest or investment growth on the bonus. And there will be a 5 per cent charge on such withdrawals.

"The chancellor did not explain the 5 per cent charge. It looks like a simple penalty to deter withdrawal before age 60. This is clearly designed as a prototype new pension scheme, with limited tax subsidy on contributions and no tax on withdrawals after age 60. The age 60 limit is less flexible than current pension rules which allow lump sums to be taken tax-free at age 55.”

John Garrard, managing director of Fish Insurance: "Having raised Insurance Premium Tax from six to 9.5 per cent in last year’s Budget, George Osborne today announced a further hike, taking the tax to 10 per cent. This is levied on a wide range of policies, including compulsory cover such as car insurance and voluntary protections such as insurances for the home, mobility aids and scooters.

"IPT is a regressive tax because it disproportionately impacts those on lower incomes, and, as the Department for Work & Pensions already concedes, a substantially higher proportion of families with a disabled member live in poverty. Any increase in the IPT rate hits them harder. It’s unfair and, in the reality of its application, discriminatory.

"It’s not just the DWP but HMRC that recognises the financial disadvantage disabled people face, although this just again highlights the illogicality of this latest tax measure. HMRC will refund VAT incurred on mobility products and cars adapted to accommodate a disability, but then levy IPT on the insurances necessary to protect them!"

Steve Warren, North West region director at EEF, the manufacturers’ organisation: “If there was ever a time when industry wanted to be left alone in a Budget then this is it. The Chancellor heeded business warnings of no major new policies which will add to costs already in the pipeline, particularly as manufacturers are at the sharp end of many of the big global challenges he alluded to. The icing on the cake would have been setting these in the context of a broader strategy for industry which still remains a gap in the Government’s armoury.

“Given the weaker outlook for our economy and global volatility, the Chancellor was right to reinforce the importance of Britain remaining in the EU. Much of what he said today about stability for future generations will mean nothing if the British people vote to leave. The UK would be in uncharted waters, the consequences of which could be highly damaging.

“Another Corporation tax cut is one important lever in keeping investment growth on track. The continued inclusion, however, of investment in plant and machinery in business rate calculations is a disappointment for the steel industry in particular. Government will need to do more to support steel this year.”

Maf Smith, RenewableUK’s deputy chief executive: “We welcome the Chancellor’s announcement that funding will be available for future rounds of competitive auctions to support offshore wind farms. The budget is tight but we’re up for the challenge. We’re confident that today’s announcement will deliver 3.5 gigawatts of new offshore wind capacity between 2021 and 2025 – powering more than 3.5 million British homes."

 

Anthony Cox, tax director, KPMG’s Preston office: “With a cut in corporation tax, a reduction in capital gains tax and a jump in the business rates threshold, this was broadly a Budget that works for the region’s business community. “The infrastructural investments committed to, from exploration of HS3 and upgrades to the A66 and A69, are undoubtedly good news for their potential to both make doing business in the North West easier and for boosting the Northern economy as a whole. Still, there remains a huge North/South divide when it comes to infrastructural investment. “On balance, I’d say our legion of growing entrepreneurial businesses are winners from this Budget.”

Damian Broughton, managing director, Danbro: “This was a good budget for small businesses and it’s great to see the chancellor delivering a range of incentives that will enable self-employed people to grow and develop. It’s also pleasing to see a number of initiatives that will promote business and improve connectivity across the UK.

“The one big disappointment was that proposed restrictions on travel and subsistence expenses for those under “supervision, direction or control” will go ahead as planned. We fear this could negatively impact the important contractor sector and put a brake on the economy.

“We have been part of far-ranging calls for a judicial review of this plan but that has been ignored. We’ve worked hard to make sure our clients who are affected by this will still benefit from working under an employment business but many others are not prepared for these changes.

“The move to make employers and agencies responsible for deducting tax and national insurance from personal service companies in the public sector is also a worry. This shift in responsibility will cause a lot of concerns among organisations and I fear also heralds a move to make the private sector take on the same responsibilities in the months to come.

“The government has pledged to review IR35 – which governs this process – but the lack of clarity on the issue could cause significant issues for self-employed people and employers alike.”