Business Taxes and the Budget

Capital allowances
The annual investment allowance will temporarily
increase from £200,000 to £1 million for the twoyear
period from 1 January 2019 to 31 December
2020. This does mean there will once again be
complex rules for periods of account spanning
those dates, and businesses will need to take care
that they do not inadvertently spend too much at
the wrong time in the accounting period.

Employment allowance
Most employers can currently claim an
employment allowance of up to £3,000 to offset
against their liability to employer Class 1 NICs.
The Government are to restrict the allowance
to employers with an employer NICs liability of
less than £100,000 in the preceding tax year.
Where employers are connected, the £100,000
threshold will apply to their aggregated liability.
This change will take effect from 2020.

The government’s proposed reform of Class 2 and 4 NICs has had a chequered history. The original proposal was to abolish Class 2 contributions and reform Class 4 contributions. The Chancellor had to backtrack on the Class 4 reform due to the reaction to a proposed increase in rates and the Class 2 abolition was deferred to April 2019.
However a significant number of self-employed individuals with the lowest profits would have seen the voluntary payment they make to maintain access to the state pension rise substantially and so the government decided it would not be right to proceed with the abolition of Class 2.

VAT registration limits

The government had previously announced that the VAT registration and deregistration thresholds would be frozen at £85,000 and £83,000 respectively until April 2020.
The government has now announced that this freeze will continue for a further two years from 1 April 2020.

There was no mention of MTD in the Chancellor’s speech. However, as no changes were announced to the VAT threshold of £85,000, the introduction of MTD for VAT registered businesses remains a reality.

Digital Services Tax

The government remains committed to reform of the international corporate tax framework for digital businesses. However, pending global reform, interim action is needed to ensure the corporate tax system is sustainable and fair across different types of businesses.
Therefore, the government has announced that it will introduce a Digital Services Tax (DST) which will raise £1.5 billion over four years from April 2020. The DST will apply a 2% tax on the revenues of search engines, social media platforms and online marketplaces where their revenues are linked to the participation of UK users.
Businesses will need to generate revenues of at least £500 million globally to become taxable under the DST. The first £25 million of relevant UK revenues are also not taxable.

Exemption for travel expenses

Draft legislation has been issued which removes the requirement for employers to check receipts when making payments to employees for subsistence using benchmark scale rates. This will apply to standard meal allowances paid in respect of qualifying travel and overseas scale rates. Employers will only be asked to ensure that employees are undertaking qualifying travel. This will have effect from April 2019.
The proposed legislation will also allow HMRC to put the existing concessionary accommodation and subsistence overseas scale rates on a statutory basis from 6 April 2019. Like benchmark rates, employers will only be asked to ensure that employees are undertaking qualifying travel.