The annual Budget is normally fairly uneventful and is seen by many as often being pretty dull. However, the Budget 2016 was anything but dull, or uneventful, as it contained some surprises, and even caused a complete furore in Parliament with the subsequent resignation of Ian Duncan Smith over cuts to Disability Benefits. Here Lawyer Monthly speaks to several lawyers and other professionals to find out their opinions on the Budget’s announcements, and the impact they will have.
Managing director of Brown Turner Ross solicitors, Dave Bushell:
“It’s an adventurous budget aimed at stimulating the economy as a whole. It is welcome news for SME businesses with many of our clients at Brown Turner Ross set to benefit from generous rate reductions. However, local authorities already stretched by austerity measures look to suffer further. Our clients purchasing commercial property will see positives in a reduction of commercial stamp duty. The cut to the rate of capital gains tax means the rate is now heading in the direction where it should be. Corporation tax changes will hopefully bring the UK in line with other countries and encourage inward investment. As the managing director of a medium sized business, the insurance premium tax was one element of the budget I was keeping a close eye on. I was surprised at the moderate 0.5% rise. However this does leave scope to increase in the future.”
David Ward, Employment Solicitor at Blacks Solicitors LLP:
“The Employment Team at Blacks Solicitors LLP anticipated the 2016 Budget with trepidation, facing the prospect of the £30,000 tax free ‘compensation payment’ being abolished completely from settlement agreements. We breathed a sigh of relief when it was announced that this would remain but with employers having to pay National Insurance Contributions above £30k, from April 2018.
“What was surprising is that the Budget has deemed that all pay in lieu of notice payments (contractual or not) will be taxable from the same date (previously non contractual payments were tax free). At Blacks we can provide specialist advice on Employee Shareholder Schemes (ESS) and we were also surprised to hear that all arrangements entered into after 17 March 2016 will be subject to an individual lifetime limit of £100,000 on gains that are eligible for the ESS Capital Gains Tax exemption. For us, these are the key changes and we think they could have been much worse.”
Christian Mancier, Corporate Law Partner at Gorvins Solicitors:
“The Chancellor extended the availability of Entrepreneurs’ Relief in a surprise move. Prior to the budget Entrepreneurs’ Relief (where the gain on the sale of shares in a private limited company is taxed at an effective rate of 10%) was only available to those who held shares in a company, were also a director or employee of the company concerned and met a number of other criteria. Following yesterday’s budget announcement this has now been broadened to apply to shareholders who are not employees or directors in a move to encourage investment into private limited companies. This only applies to new shares issued from 17th March 2016 onwards and the shareholder concerned must hold them for 3 years before qualifying for the relief. The shareholder concerned must specifically not be a director or employee of the company concerned to qualify for this new aspect of the relief. Hopefully this will encourage individuals to invest in growing companies without being put off by the possible tax consequences down the line.”
Andrew Watters, senior tax partner at Thomas Eggar, part of Irwin Mitchell LLP:
“The Chancellor has effectively declared war on international tax avoidance. The weapons include restrictions on royalty payments, interest payments and use of losses. This means it will be harder to pay royalties or interest to group companies outside the UK to reduce taxable UK profits. It will be harder to set losses against profits and harder to avoid a UK footprint when doing business in the UK.
“Small businesses owners will be pleased. They are to benefit from lower corporation tax, cuts in stamp duty on commercial property and reduction in business rates.
“The Budget will let workers keep more of their money through changes in tax rates. There are incentives to save some of that money as the Government will contribute to savings as, for example, through the Lifetime ISA. This is a good Budget for the self-employed and owners of small businesses. Apart from the drop in direct rates of tax, there are also reduction in chargeable gains tax, stamp duty on commercial property and business rates.
“The focus on unacceptable tax avoidance continues. Some favourite measures to reduce profits and thus tax payable in the UK include payment of royalties and interest to offshore group companies. That will now be more difficult. There are also restrictions on the use of losses to set against profits. These restrictions are particularly harsh for the banks, which have large amounts of losses to set against future profits. It will also be more difficult to avoid a UK tax footprint when doing business in the UK. These measures come on the back of a significant Supreme Court decision last week relating to a tax avoidance scheme on bankers’ bonuses.”
Phil Foster, MD of Love Energy Savings:
“It is safe to say that this has been one of the more promising Budgets for small businesses. Reform of the corporation tax alludes to a Robin Hood style approach being taken by the Chancellor, and an increase in the business rate relief threshold is bound to be welcomed by the smallest of our nations businesses.
“His desire to ‘light the fires of enterprise’ and continue with his ‘devolution revolution’ sound very exciting in theory, but it will be interesting to see if measures are this dynamic in practice. What about those localities that lack a vibrant business population and what if investment is limited? These are the important questions that the budget failed answer.”