Autumn Statement 2015 - what does it mean for small businesses?
Earlier today the Chancellor presented the Autumn Statement for 2015. Here, our Chief Accountant, Emily Coltman FCA, takes a look at the changes that were outlined in both the Chancellor’s speech and in the detailed report published by the Treasury, and what they could mean for small businesses.
The Annual Investment Allowance is due to fall from £500,000 to £200,000 on 1st January 2016. Today’s announcement confirmed that after this date it will remain at £200,000 until the next general election.
If you run a limited company based in Northern Ireland, then you could see your Corporation Tax bill fall from 20% to 12.5% of the company’s profits from 2018. That’s a request put forward by the Northern Irish parties, which the UK government is considering - so at this stage it’s still on the drawing board.
And if you pay small business rates, the rate relief scheme has been extended for another year.
The not-so good
If you own a second home and you plan to sell it, then instead of being able to wait until 31st January after the end of the tax year to pay your capital gains tax, from April 2019 you’ll need to pay all or part of that tax within 30 days of the disposal.
Noticeably, several issues that many commentators had been expecting to hear about in the Autumn Statement were not addressed. These included:
- Dividend tax. It appears that the dividend tax will be levied as announced in the Summer Budget.
- IR35. Nothing was said about IR35 legislation specifically, and while the Chancellor did mention "taking action on disguised remuneration" in his speech, I believe this refers to the use of payments through trusts and pension schemes, instead of salary, to reward employees.
- The rumoured introduction of restrictions to contract lengths wasn’t mentioned. This would have meant that contractors would have had to join their clients’ payroll after only one month of engagement. Thankfully it would appear that this was a red herring.
- Trivial benefits. It had been hoped that legislation would confirm that trivial benefits need not go on form P11D. This has not been included in the Autumn Statement, though it may be addressed in a future Finance Bill.
The contractor world has been holding its breath for a while about the possible restriction of tax relief on travel and subsistence costs and how that might work. While there was no final guidance on this, it was briefly referred to in paragraph 3.20 of the Autumn Statement report:
“As confirmed at Summer Budget 2015, the government will legislate to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company. Following consultation, relief will be restricted for individuals working through personal service companies where the intermediaries legislation applies. This change will take effect from 6 April 2016.”
The emphasis in the paragraph above is mine.
One possible interpretation of this is that the proposed restriction will apply to:
- individuals working through umbrella companies
- individuals working through personal service companies, but only for projects where IR35 applies
If the second point is correct then this could be very good news, as it would eliminate the subjective and overly stringent “supervision, direction or control” tests that were initially proposed. In my view it is also much easier for all parties concerned to apply the same set of tests to determine whether a deemed payment is required and whether tax relief can be claimed on travel and subsistence, than to use two different sets of tests.
To quote from the report:
“By 2020, most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account... This will not apply to individuals in employment or pensioners, unless they have secondary incomes of more than £10,000 per year from self-employment or property. The government will consult on the details in 2016.”
This means that instead of filing an annual tax return, small business owners will need to begin to file quarterly reports online to HMRC. We’ll be closely watching how this develops and taking part in the consultations as far as possible.
Unlike the Summer Budget, the Autumn Statement contained very little that will be relevant for small businesses. It still remains to be seen what was meant by paragraph 3.20 of the report, as quoted above, but it is a great relief that the reports of contractors having to join the payroll after a month now seem to be no more than rumours.
- Guest blog post: self-employed? Here’s how to take control of your pension situation
- 2-Step Verification is here!
- What we’ve learned about Making Tax Digital from the new consultation documents
- Video: limited company directors’ responsibilities explained by HMRC
- Change to browser requirements