Emily Coltman FCA, Chief Accountant to FreeAgent, which provides the UK’s market-leading online accounting system for freelancers and small businesses, reflects for Startacus on whether Britain is really “open for business” as George Osborne affirmed in his Budget earlier this week. Here she highlights a few key points...
Annual Investment Allowance increase
The doubling of the Annual Investment Allowance to £500,000 from 1st April 2014 until 31st December 2015 is good news only if you’re planning to buy more than £250,000 worth of new equipment for your business in the near future.
Any extra tax reliefs for small business owners?
The current relief for research and development costs for loss-making businesses, currently 11%, will go up to 14.5% from 1st April 2014. This is potentially very useful for businesses developing innovative technology.
Also, the SEIS investment scheme that gives tax relief for investors in certain small businesses will be made permanent, including the 50% capital gains tax reinvestment relief. This may well help your business attract investment if you want to grow it.
Will tax be simplified?
George Osborne promised in his speech to collect Class 2 National Insurance through Self Assessment rather than separately. What he didn’t say was that this won’t be introduced until April 2016, so we have two more years’ worth of separate collection first.
The full budget report also promised that the government will review and implement recommendations made by the Office of Tax Simplification around employee benefit tax. That’s if you employ staff and provide them with non-cash benefits such as company cars. There will be a review investigating making these simpler by running them through the payroll, and a “general exemption for non-taxable expenses” and a “trivial benefits exemption”. This could remove the requirement to report many business expenses on forms P11D, which could save in accounting bills. But at the moment we are promised only a review, so it’s a case of watching this space.
Have the VAT thresholds changed?
The VAT thresholds usually increase on 1st April every year, and the full budget report confirms this will happen again.
From 1st April 2014 the threshold at which you must register for VAT if your business makes enough taxable sales will go up from £79,000 to £81,000, and the threshold at which you can voluntarily de-register for VAT will go up from £77,000 to £79,000 worth of annual taxable sales. Remember that these limits are on a rolling 12-month basis, rather than applying to your business’s accounting year. Remember too that you also have to register if your VATable sales will go through the limit in the next 30 days.
Any other useful nuggets?
Along with the combination of cash ISAs and stocks and shares ISAs to form the New ISA (which will go by the excellent name of NISA - say that out loud and you’ll see what I mean), the government will consult on including both peer-to-peer loans and debt securities offered through crowdfunding in ISAs. This is interesting for investors in small businesses.
The full budget report mentions a new online system to enable people in financial difficulty to set up their own payment plan for self-assessed income tax. There was no additional information about this, so it’ll be interesting to see how flexible HMRC are prepared to be on this, for example when it comes to payment terms. Will they expect payment of a £5,000 debt at £50 per month? Only time will tell.
If your business exports goods outside the UK, the budget also promises to double lending for exporting, provided through UK Export Finance, to £3bn and cut interest rates on these loans by a third.
What didn’t we see?
There was no mention of IR35 or any more detail about the government’s plans to reduce tax avoidance by clamping down on so-called “artificial employment”.
I saw nothing specific for home-based businesses either, which is a disappointment, nor anything that will seriously reduce the red-tape burden to small businesses around tax.
In short, there wasn’t a great deal of news for small business owners in the Budget - and nothing for them to either become over-excited or over-despondent about...
Emily Coltman FCA is Chief Accountant to FreeAgent, which provides the UK's market-leading online accounting system for small businesses and freelancers. Try it for free at www.freeagent.com
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