Preparing Britain for a post Brexit world.
Following on from the Chancellor’s largely confirmatory Autumn Statement, this year’s Budget was of a similar ilk. This did not come as a major surprise as it was previously announced that stability was key and that the Chancellor’s major focus would be on three things:
Focus on productivity
The Chancellor once again emphasised the UK’s need to increase its productivity. To do this, he laid out policies to transform technical education for young people, aimed at creating sector-specific routes to employment. For UK businesses this should mean that future employees are more ‘work ready’ to accelerate increased productivity.
Previously announced measures
In terms of previously announced measures, there was no real detail provided on further changes to the new loss relief and revised substantial shareholding exemption (SSE) legislation which will come into force from 1 April 2017 – we will have to wait for the publication of Finance Bill 2017 on 20 March for these. There was slightly more detail provided on changes to the draft legislation on the tax deductibility of corporate interest expenses. Also, as announced at Autumn Statement 2016, the Government still intends to consult on the taxation of non-UK resident companies chargeable to income tax. Finally, there was no change to the reduction in the corporation tax rate to 19% from April 2017 and then 17% from April 2020.
Infrastructure investment and innovation incentives
The Chancellor confirmed the Government’s desire to deliver their Industrial Strategy, to invest in the new 5G Network and local transport networks and to invest in research and development (R&D) in artificial intelligence and robotics. We commented at the Autumn Statement that smaller businesses should welcome this focus, provided that they have access to support large corporates to deliver these large infrastructure projects.
A particular aide to businesses in this area should be the new intention to simplify the administrative burden surrounding R&D tax incentives and to provide more simplicity and certainty. There was very little in the way of detail for these reforms but there is certainly reason for business to be optimistic about this announcement.
Also announced was a review into helping high growth businesses access long-term capital required to fund productivity enhancing investment. The review will aim to identify current barriers to institutional investment and consider existing tax reliefs aimed at encouraging investment and entrepreneurship.
With the upcoming revaluations, many businesses were right to be concerned about the effect that this will have on their cost base, and ultimately their profits. To help small businesses, the Chancellor announced £435 million of relief for those facing significant increases in their business rates. These include up to £600 of relief for those businesses losing Small Business Rates Relief, up to £1,000 discount to pubs with a rateable value below £100,000 and £300 million provided to local authorities to provide support to individual cases. This could provide greater opportunities for smaller businesses to open dialogues with local authorities on this and wider business issues.
As the UK heads into exit negotiations with the EU, the Chancellor demonstrated his intention to steer a steady ship and to make the UK the most competitive place for businesses to establish and grow. UK businesses should be relieved to have the breathing space to deal with current changes taking effect during this year.
Given the UK’s current fiscal deficit and pending exit from the EU, the Chancellor continues with a cautiously positive approach. He continues to signal that he wants to help smaller businesses continue to generate the strong growth that they have contributed in increasing numbers over the last few years. And above all, he is targeting a more productive UK which will be attractive to overseas investors and business partners.
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The Spring Budget provides some clarity on the approach to be taken under IFRS16 but more detail is still required.
Some changes to the draft Finance Bill 2017 legislation on tax deductibility of corporate interest expense have been announced.
HMRC are to launch a consultation on their process for risk profiling large businesses ahead of the summer recess.