PEM News

PEM tax experts respond to the Budget 2017

Our tax experts comment on the Spring Budget.

Business rates

Derek Carr, tax partner, said: “Great news for local pubs who were fearing the business rates increases due to take effect this year. Philip Hammond announced a £1,000 discount to the business rates bills of most UK pubs which should help to stop these institutions from closing.

 “There is a £600 increase cap in business rates bills for other businesses and a new fairer system of business rates reviews is planned ahead of the next major revaluation exercise in 2022.”

Salary Sacrifice

Kate Millard, director of employment taxes, said: “While stating that employers can choose how to remunerate their employees, the Government has announced further consultations on the taxation of benefits in kind, employee expenses and accommodation benefits.

 “The stated aim of these reviews is to make the tax system fairer and more consistent, however a similar consultation into the use of salary sacrifice arrangements led to changes being introduced from 6 April 2017. These are going to be costly for Cambridge employers and employees and administratively burdensome to their HR departments.

“Many local employers such as the education and agriculture sectors, provide accommodation to employees which currently qualifies as job-related accommodation as it is necessary for the employees’ to do their jobs. The announcement of a further consultation on accommodation benefits will be greeted with dismay by many such employers who will be braced for costly changes to the rules due to the phenomenal increases in property prices in the Cambridge area.”

National Insurance 

Matthew Eady, director of share schemes and reward, said: “From next month, all public sector bodies – which includes government departments, schools, hospitals, doctors, dentists etc – that engage workers through personal service companies will be required to operate PAYE and Employers’ NIC on any payments made under an engagement if, broadly, were it not for the individuals’ service company, the individual would be an employee of that public sector body in his/her own right.

“This requirement was announced previously but it has effectively been relaunched today. The new rules essentially shift the role of tax collector to the public sector and will have a significant impact for many local organisations. If the new regime is successful, it will only be a matter of time before the rules are applied to the private sector.

“A level playing field for all taxpayers was a theme of the Budget. The Chancellor emphasised the disparities in the tax and National Insurance treatment of employees and other workers not paid through payroll. He signalled a move towards alignment of National Insurance Contributions rates for the self-employed and employees, with a 1% increase in Class 4 NICs in April 2018 and a further 1% increase in April 2019.

“We hope that the proposed changes and the promised review of such individuals does not stymie growth in Cambridge, which is heavily reliant on highly-skilled people working for many different companies or organisations on a self-employed basis or through their own personal service companies.”

Corporation Tax

Jan Fachot, director of business tax, said: “This Budget promises fairness, competitiveness and support in helping start and grow businesses - making the UK ‘the best place in the world’ to do business. We feel that this is a positive message in a time of great uncertainty over Brexit.

“The Chancellor confirmed the drop in Corporation Tax rate to 17% from April 2020. This follows the drop from 20% to 19% from 1 April 2017, making it the lowest corporation tax rate in the G20 and an attractive place to do business.”

Good news for Silicon Fen

There was more positive news for Cambridge as the Government continues to demonstrate its commitment to supporting innovation and technology with the aim of making the UK a world leader in this area. In the Autumn Statement 2016, it was announced that a £23bn fund would be available for additional infrastructure and innovation investment.

In today’s budget, we have received more information on how this will be spent and the Cambridge science and technology hub should benefit from:

- £300m fund to support the best research talent, including 1,000 new PhD places and fellowships focused on Science Technology Engineering and Mathematics (“STEM”) subjects; and

- £270m to make sure the UK is at the forefront of disruptive technologies like biotech, robotic systems and driverless vehicles.

R&D Tax

In addition to this, having concluded that the UK R&D tax regime is globally competitive, the Chancellor has acknowledged the need to reduce administrative burden and increase simplicity in order to provide certainty to those making claims. We think this will be welcomed by many local R&D businesses claiming or hoping to claim R&D tax relief. Details of how these improvements will be made are yet to be announced, PEM concludes.

If you would like more information on any of the points raised above please contact a member of our tax team on 01223 728222, or contact us through our contact page.