Chris Morgan, head of tax policy at KPMG comments on the effect on business following today’s Budget announcement.
"There will be a mixed reaction from corporates to the Chancellor’s Summer Budget:
The drop in the corporation tax rate, going down to 18% in 2020, will be very welcome and while banks will see an 8% surcharge on profits as of next year this will be offset by the fall in the bank levy.
For smaller businesses the increase in the NIC threshold to £3,000 will be an incentive to take on more staff and the fixing of the annual investment allowance at £200,000 provides more certainty for investment.
However, there will be a large hit for large corporations in tax years 2017-2019 as the effect of the acceleration of tax payments comes through and, while this is a timing issue, it will be problematic for companies with cash flow difficulties.
Additionally, while a number of anti-avoidance measures were announced, for example relating to the use of losses against a controlled foreign company charge or attaching a penalty to failing the general anti-abuse rules (GAAR), these, in reality, will affect very few companies.
Compulsory National Living Wage
The big question for all employers though will be the compulsory National Living Wage to be introduced as of next year. Many companies already pay such a wage but for those in a sector that traditionally pays at the lower end, such as social care, retail, leisure or hospitality, the question will be to what extent the increased cost can be passed on to customers. The likes of retail and leisure industries may well profit from consumers having more money in their pockets as a result of higher wages and increased personal allowances – but time will tell whether other sectors will see the same sort of benefit.
Overall, today’s announcements represent a mixed bag for business but certainly more black and white than the previous Budget."
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Jess Liebmann, KPMG Corporate Communications
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KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.