Businesses asked for stability, but did the Chancellor deliver?

Businesses and taxpayers across the East Midlands shouldn’t have been too surprised by the tax measures announced in the Spring Budget, says Mike Tuhme, Tax Partner at KPMG in the East Midlands.

With the major annual fiscal event moving to the autumn from this year, the announcements seemed to have more of a feel of a Spring Statement than a full scale Budget with few major changes announced, particularly for UK corporates. The Chancellor was, however, eager to remind everyone that the UK is open for business by reinforcing the commitment to reduce the headline corporate tax rate to 19% in April of this year (the lowest in the G20) down to 17% in April 2020.

On top of these there were a number of areas where Phillip Hammond pledged to do more work to assist businesses, though without much detail provided at this stage, such as the simplification of R&D tax compliance and raising the threshold before businesses have to comply with the digital filing of their tax affairs.

A theme that has been lingering for many years is the potential alignment of the tax position for employed individuals with the self-employed, along with those individuals who choose to operate their business activities through companies. Action is now to be taken in this area with the Chancellor announcing a hike in class 4 NIC on the self-employed by 1% from April 2018 and a further 1% by April 2019 along with the reduction in the tax free dividend allowance from £5k to £2k from April 2018. Only time will tell if these actions will, for example, discourage incorporations.

The Chancellor also showed sympathy to the increases in business rates and, at the risk of introducing further complexity into the system, has introduced a number of targeted measures to lessen the impact of these especially for smaller enterprises and pub owners.

Overall, this Budget announcement showed Philip Hammond to be a Chancellor who prefers consultation with what seems to be a more measured and sensible approach to policy development, however, with Brexit looming and the main Budget moving to the Autumn, it may well be that there will be a few more surprises before the year is out.