Deloitte: Individuals and small businesses are winners in first revenue-neutral Budget of the parliament
Bill Dodwell, Head of Tax Policy at Deloitte, comments on Budget 2016:
"Budget 2016 is a complex mixture of tax changes in the first revenue-neutral Budget of the parliament. Winners are individuals, savers, higher rate taxpayers, small businesses and oil companies. Losers are larger businesses, property investors and drinkers of sugary pop.
"The Chancellor has decided to move faster in implementing the manifesto promises of higher personal allowances and lifting the higher rate threshold to £50,000. The Treasury estimates that increasing the higher rate threshold to £45,000 from 2017 will take half a million people out of higher rate tax – the first reduction since 2010.
"Although the Budget confirms that there will be no changes to pensions, the Chancellor has taken the opportunity to introduce a Lifetime ISA alongside pensions. Those under 40 will be able to contribute £4,000 per year from 2017 and receive a government contribution of £1,000 – until age 50. This sounds remarkably like a pensions ISA.
"Capital gains tax rates are being cut to 20% and 10% from April 2016, currently 28% and 18%, except for gains from residential property and carried interest.
"Business rates are being reformed – but only to benefit those operating in the smallest properties. From 2017, rates will no longer be levied on 600,000 out of 1.8 million commercial properties – up from the current 385,000 exemption. From 2020 indexation of rates will drop from the old RPI measure to CPI – but larger businesses will be concerned by the long wait.
"We also see the first instalment of BEPS measures – changing international corporate taxation – adopted from 2017. The Treasury estimates that it will raise about £1.3 billion annually from limiting tax deductions for interest and financing costs, outlawing the use of hybrids - arrangements where tax deductions are not matched with equivalent taxable income in another country - and introducing a withholding tax on some royalty payments. Other BEPS measures, such as changes to the intercompany transfer pricing rules, will raise further amounts. All businesses will benefit from the cut in corporation tax to 17% in 2020.
"Taxing sales through digital platforms is one of the new challenges for revenue authorities. There will be a new £1,000 exemption for those selling unwanted goods, or occasionally renting out the spare room. Platforms are being required to provide more information to HMRC and may be required to take on joint liability with sellers for VAT payments to the Exchequer.
"Property continues to be seen by the Chancellor as source of revenue. Commercial property moves onto tiered rates, as with residential property, but the main rate goes up from 4% to 5%. There are also changes to ensure that property developers overseas pay UK tax on development gains.
"Overall, the measures are lengthy and much more study will be needed when the Finance Bill comes out on 24 March."
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