Chancellor Rishi Sunak delivered his first Budget in the House of Commons yesterday, where he announced the government’s tax and spending plans for the year ahead. The Private Client team have provided comment on some of the reforms that will impact our clients most.
Entrepreneurs’ relief
This change to entrepreneurs relief is as good as abolishing it completely and this is a huge mistake. While a sensible change following proper consultation would be welcomed, this is a step too far.
By cutting the relief entrepreneurs will only be able to benefit up to £100k during their lifetime. This is not enough to drive support of creativity and entrepreneurship. Businesses need consistency and this budget needs to look beyond the immediate implications of coronavirus to provide a vision beyond the next 12 months.
Small business rates
Sandwiched between Brexit and coronavirus, the Chancellor went into this already delayed Budget on the brink of an unprecedented global crisis. It is positive to see he is able to inject such significant support to small businesses. Abolishing business rates for certain small businesses for a year and providing cash grants to others, is a bold step, and will be a relief for business owners across the UK.
There are almost 6 million small and medium sized businesses in the UK who will potentially be impacted by coronavirus, and it is reassuring to see the Chancellor is supporting entrepreneurial spirit. However, the cost of these spending announcements are adding up and it is vital that the Chancellor continues to look beyond one year – businesses need certainty beyond this.
Stamp duty
Although a crowd-pleaser, these Stamp Duty changes will have little impact on the housing market. Overseas buyers activity only accounts for a small part of the overall property market and so the impact of a 2% hike in the rate for overseas buyers, whilst a blow, is not fatal. There are still overriding macroeconomic factors that make the UK an attractive place to invest.
IR35
It is disappointing that the Chancellor has not offered more clarity here, a “gentle” approach to implementation isn’t helpful. The Chancellor needs to take a serious look at whether IR35 will ever be fit for purpose; the Courts will always lag behind commercial employment practices and the HMRC view will be somewhere behind the courts.
As it stands, ensuring compliance with IR35 reforms will be a significant cost to businesses and being tied up by more red tape will not help anyone. Too many questions remain unanswered and a “soft” introduction to the regulation does not address the crux of the problem.
VAT on ebooks
Finally the Chancellor has caught up – it’s never made sense that VAT was charged on a digital book, when its print equivalent was rightly exempt. Today’s announcement is long overdue and will not only put money into the pocket of consumers but also benefit authors , publishers and the wider UK economy . There should not be a tax on knowledge. By modernising the tax system, we have removed a barrier to childhood literacy and are promoting access to books for all.
If you have any questions following the Budget or if you would like to know how the budget will impact you, get in touch.
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