Philip Hammond, The Chancellor of the Exchequer, announced his first Spring Statement to Parliament on Tuesday, 13th March 2018.
He used the Statement to outline the economic forecast from the Office for Budget Responsibility (OBR) and launch a series of tax consultations.
The results of these will help to influence the Budget, which will now be held in the autumn.
In this summary, we explain the main points of interest for small business owners in the Spring Statement.
Business rate review brought forward to 2021
At Autumn Budget 2017, the Chancellor announced that business rates revaluations would take place every three years, following the next revaluation.
Business rates bills depend on a property's rateable value, which is based on the property and rental market. At present, these rateable values are only reviewed every 5 years (the so-called 'revaluation').
In the Spring Statement 2018 Mr Hammond announced that the next revaluation, will be brought forward to 2021 (originally planned for 2022).
Bringing forward the proposals will mean businesses can benefit from more frequent revaluations sooner and mean that business rates bills will more accurately reflect the current rental value of properties.
Lowering the VAT registration threshold
A consultation will review small businesses being discouraged to grow beyond the VAT registration threshold. Currently, the threshold is £85,000 and there are less than 40% of businesses that are registered. On the one hand, this leaves a lot of businesses without the burden of compliance and on the other, it can be a deterrent to grow. In the meantime, the threshold is set to stay at £85,000 until April 2020. The UK threshold is much higher than most of the other EU and OECD countries but to lower it would be a blow to small businesses as it is forecast to cost them £2.1 billion as well as the extra administration.
Any changes to lower the threshold will incur an additional cost to small businesses which could hinder their growth.
Ensuring online sellers are compliant
The accessibility and ease of use of online platforms and market places are allowing many more of us to generate a second income.
In today's Spring Statement, the Chancellor launched a tax consultation into online platforms and tax compliance of sellers. The purpose of the consultation paper is to better understand how the digital economy works and how the platforms interact with their sellers. HMRC wants to help sellers understand when they might have a tax liability and how they can better support them. Unsurprisingly, the paper also references that some sellers use online platforms to deliberately evade tax and the government are keen to explore what role the online platforms could play in reducing non-compliance.
The consultation paper discusses the approaches to online trading in other countries such as Estonia, where users can opt to send data to the tax authorities to allow pre-population of returns. In Belgium, platforms withhold 10% of gross payments from some sellers. Following the outcome of the consultation, perhaps we could see similar automation for UK online traders.
Seeking views on the role of cash in the new economy
In the Spring Statement, the Chancellor announced that the government is launching a consultation on what more it can do to:
- support people and businesses to use digital payments
- ensure that those who need to are able to pay with cash
- prevent the use of cash to evade tax and launder money
Cash is falling in popularity as a payment method and due to its anonymity and lack of audit trail, it is also vulnerable to tax evasion and money laundering. The government is looking for views on how it can reduce the level of fraud associated with it, whilst ensuring cash is still accessible for those that wish to continue using it.
It is clear from the consultation paper, that the government is looking for ways to encourage and support the use of digital payment methods.
Financing growth in innovative firms
An action plan has been announced to unlock £20 billion of investment over the next 10 years by enhancing the incentives for investing in Knowledge Intensive businesses through either Enterprise Investment Schemes, Seed Enterprise Investment Schemes or Venture Capital Trusts. The various proposals include:
- providing a tax exemption for dividends received from long term investment,
- an additional Capital gains tax deferral relief to bring-in additional investment and limit investors' exposure; and
- enhancing the mechanism to receive the tax relief on the investments a lot earlier.
This is to keep the UK at the forefront of new technology and encourage small businesses to provide innovative products in the new digital age. This should help the diverse technological businesses grow within the UK and develop the skills of the UK workforce.
Taxation of self-funded work-related training
Currently there are restrictions on the availability of tax relief for job-related training. Generally, it must be incurred or reimbursed by the employer to get tax relief. If an employee pays for his/ her own training, they receive no tax relief.
The position for the self-employed is more generous and they can claim relief for training; provided it is ongoing for an existing skill; not for the introduction of a new skill. The government announced a consultation to see how they can extend tax relief for such self-funded, work-related training.
In an ever-changing world, an additionally skilled work force will benefit the market place and help the economy. It will also benefit employees looking to boost their income, enhance their skills to meet the demands of the workplace or help them get back into employment by re-training.