March 18, 2016 A Budget for business
The Chancellor of the Exchequer, George Osborne, may have heralded his March 2016 Budget as one which puts the next generation first but it also contained plenty of changes for businesses, small and large, to chew over. We’ll pass over the headline grabbing sugar tax and instead take a look at some of the key elements of a budget which has had to be drawn up in the face of international uncertainty.
Let’s start with a few of the fairly straightforward measures:
- Corporation tax. Since he came into office George Osborne has gradually reduced the headline rate of corporation tax. Now he has added a further reduction, with an announcement that the rate will fall to 17% by April 2020.
- Business rates. With effect from April 2017 the threshold for small business rate relief will rise to £12,000, with tapered relief up to £15,000. The threshold for the higher rate is also to rise from £18,000 to £51,000. In addition, with effect from 2020 the calculation base for increases will move to CPI from RPI.
- Commercial stamp duty. New rates of 0% on purchases up to £150,000, 2% on the next £100,000 and a 5% top rate above £250,000 have been introduced alongside a 2% rate for high value leases with a net present value above £5 million. These new bandings took effect from midnight on 16th March 2016 with transitional rules for those who had exchanged contracts but not yet completed.
In line with his aim to make this a budget for the future, the Chancellor also announced a roadmap which is designed not only to deliver a low tax system but also one which will attract and encourage overseas businesses and multi-national corporations to conduct business in the UK. At the same time, he took steps to level the playing field between the largest and smallest organisations.
For example, he intends to put measures in place to enable companies to use losses more flexibly. Whilst this measure is estimated to help more than 70,000 businesses there will be a 50% restriction on losses in excess of £5 million. Other measures include a fixed ratio rule limiting corporate tax deductions for net interest expense and the incorporation of recent revisions to the OECD transfer pricing guidelines into UK transfer pricing legislation.
As with any budget, the Chancellor may have spoken for just over an hour but reading and considering the implications of the associated papers which set out his proposals in detail will take much longer. At the time of writing, the budget debate in Parliament is still ongoing and no doubt further information will come to light as the various measures are studied in depth.