Small Business Highlights
New Chancellor, Phillip Hammond, has made his first formal statement of intent for the country’s finances after the EU referendum.
At a strategic level the government has promised greater investment in both infrastructure (e.g. £1.1bn extra investment in local transport networks in England and £220m to reduce traffic pinch points) and housing (e.g. £2.3bn housing infrastructure fund for new builds in high-demand areas and £1.4bn to help build 40,000 affordable homes).
There were also plenty of points of specific interest for Black Country businesses. Here’s Lewis Smith & Co.’s selection of the highlights:
- Confirmation that the National Living Wage will rise from £7.20 to £7.50 from April 2017.
- Fuel duty rise to be postponed because of an increase in the price of oil.
- Income tax threshold to be raised to £11,000 to £11,500 in April 2017
- Higher rate income tax threshold will increase to rise to £50,000 by 2020
- Commitment to a cut in the CT rate to 17% by 2020.
- As mentioned in our “HMRC targets salary sacrifice” article in August, tax savings on salary sacrifice schemes will be widely curtailed – pensions, childcare and cycling schemes excepted.
- Employee and employer NI thresholds will be equalised at £157 per week from April.
The Chancellor also announced a particular area of VAT will be subject to review to cut down on, as the government sees it, an unfair tax loophole.
HMRC is keen to stop “limited cost” businesses (ones where VAT inclusive expenditure is below certain thresholds) unduly benefiting from flat rate VAT scheme. From 1 April 2017 businesses operating flat rate schemes will have to check whether they fall in to the status of a limited cost trader. If they do then their flat rate scheme percentage increases to 16.5%.
Anti-forestalling (forestalling is the practice of paying or invoicing in advance to avoid tax increases) legislation has been published to stop limited cost traders using lower flat rates after 1st April 2017.
Clearly this introduces an extra level of compliance for many of our small businesses customers. You will need to check your status as a limited cost trader and apply the higher percentage if necessary. This could be an annual check for some of you if you are close to the threshold.
Lewis Smith & Co. – Accountants for businesses in Halesowen