Autumn Statement - Spreadsheets, Surprises, Simplicity?

Posted on in Business Tax

Today's first and last Autumn Statement of the Chancellor, Spreadsheet Phil, was perhaps a taste of things to come in a post-Brexit Teresa May government.

A sense of clamping down on any perceived unfairness necessitated by the expected poor post-Brexit finances for years to come. 

Spreadsheets

Spreadsheets have presumably told the Chancellor the following can no longer be afforded:

Employee Shareholder Status

As often is the case, a new tax relief to help encourage good behaviour is taken on by some advisers, packaged up and sold to large employers in such large numbers it becomes unaffordable for the Treasury to provide it. The interest and take up by SMEs was rare in my experience so few will suffer from this change.

VAT Flat Rate Consultants Clampdown

HMRC has presumably reported on some large profits being made under Gordon Brown's simplification scheme. In exchange for not claiming VAT back on costs, small businesses pay over a Flat Rate % of Turnover including VAT. Consultants have few VATable costs so lose less from using this scheme and usually overall make a VAT profit. From April 2017, if they want to continue using this scheme the % is set at such a high amount it's unlikely to be worthwhile for consultants to carry on using it. 

Incorporation Of Employees

Presumably the Chancellor was referring to IR35 and the continuing need to ensure 'true' employees pay the full national insurance due. He cannot afford to have an economy where the 'correct' national insurance isn't paid. 

Surprises

Autumn Budgets

Next March's Budget might be the last Spring Budget but it does mean there will be two Budgets in 2017. Expect this opportunity not to be wasted until we settle into a proper annual Autumn Budget cycle from 2018. 

Insurance Premium Tax Increase

In a higher inflation environment an increase from 10% to 12% will add to businesses' general inflationary pressures.

Partnership Profit Allocations

There is reference to ensure profits are more 'fairly allocated'. A consultation is on its way, so the details need to yet be reviewed. 

Simplicity?

VAT Flat Rate Consultants Clampdown

If the VAT Flat Rate was deemed no longer fit for purpose there must have been easier ways to deal with it. Instead we have a calculation looking at the amount spent by a small business on 'Goods' (defined differently to usual) which if it's too low means a higher 16.5% rate will apply. This will add several pages of legislation to an already overstretched statute book.

Benefits In Kind 

Simplifications will be introduced to make it easier for employers to pay the tax due on Benefits on behalf of their employees. This is a lump sum payment known as a Payroll Settlement Agreement or PSA and means separate entries aren't needed for each employee. Also some Benefits can be reduced by employees making late contributions after the end of the tax year. There will be a time limit of 6 July to make this payment so very late payments can't be made if HMRC later catches up with you! Arguably, withdrawing Salary Sacrifice for many benefits simplifies the whole employment package.

Productivity 

That elusive prize for dozens of Prime Ministers seems to be a particular UK problem. SMEs are often more productive than their larger counterparts partly because they can't afford to suffer the cost of inefficiencies. Another reason for the government to focus on this sector and offer ever more incentives in a post-Brexit UK.

Other 

There were many sundry other announcements confirming those already made such as the reduction to corporation tax to 17% by 2020. There are also a few consultations to keep in mind such as valuation of benefits in kind many of which need updating such as living accommodation but more worryingly a review of business expenses particularly when not reimbursed by your employer. Responses from HMRC to Making Tax Difficult (Digital) consultations will arrive in January 2017 during the busiest time of the year for many self employed people!

 

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Guest Wednesday, 19 December 2018