However, delving into the detail of the “Red Book” published alongside the Budget, there are a number of announcements that should not be overlooked by business.
Business Rates Review: this was a key CBI Budget recommendation, and the confirmation of a fundamental review will be hugely welcomed by businesses.
Corporation Tax: the Chancellor confirmed the Government’s plans to retain the current 19% rate in April 2020 and announced that the CT rate at 19% will also be set for the tax year beginning April 2021.
R&D tax credit: the two key recommendations in the CBI Budget submission were adopted by the Chancellor; increasing the rate of Research and Development Expenditure Credit (RDEC) from 12% to 13% and launching a consultation on whether expenditure on data and cloud computing should qualify for R&D tax credits.
Entrepreneurs’ Relief: following weeks of the press speculating over “will they”, “won’t they” scrap Entrepreneurs Relief (“ER”), the Chancellor struck a compromise and announced that ER will continue although it will be considerably scaled back with a reduction in the lifetime limit from £10m to £1m. It’s welcome that the relief continues and is something the CBI called for in their Budget Submission, the implications of reducing the lifetime limit from £10m to £1m needs to be explored further.
Structures and Buildings Allowance: the CBI successfully called for a creation of a Structures and Building Allowance ahead of the 2018 Budget. The new Chancellor announced an increase in this allowance from 2% to 3% at this Budget.
Employment Allowance: from April 2020, the Employment Allowance will be increased from £3,000 to £4,000.
Digital Services Tax: as expected, the government confirmed that the Digital Services Tax will come in as planned with effect from 1 April 2020 however, it was noted that the government will continue to give consideration to how the legislation applies to marketplace delivery fees and whether that application is consistent with the policy rationale of the DST. The exclusion of marketplace delivery fees is something the CBI has been calling for on the basis delivery fees relate purely to fulfilment and logistical activities and have no connection with user value contribution.
Intangible fixed assets: relief for pre-FA 2002 assets: the government will introduce legislation in Finance Bill 2020 on the tax treatment of intellectual property (the intangible fixed asset regime). This measure removes a restriction that exists in relation to pre-FA 2002 intangible assets that prevents some companies from claiming relief for older, well-established intellectual property rights. This means that corporation tax relief will be available for the cost of acquiring these assets in circumstances where it wasn’t previously and that corporate intangible assets will now be relieved and taxed under a single regime for acquisitions from 1 July 2020.
Postponement of VAT: government confirm postponed accounting for VAT on all imported goods. Since the EU referendum, the CBI has been campaigning for this to ensure businesses who rely on imports as part of their supply chain do not face cash flow challenges from 1 January 2021, when the UK will no longer be an EU member state.
Large Business Notification: from April 2021 large businesses will be required to notify HMRC when they take a tax position which HMRC is likely to challenge. How companies will be required to determine if HMRC are likely to challenge the position in practice is yet unknown but it is noted that this policy will draw on international accounting standards so it could be based on recognition principles for accounting purposes. The government will consult shortly on the detail of the notification process.
IR35: the rules will be implemented as previously announced. The government recently published the conclusion of its review into the reform following which it announced a number of changes, further details on the outcome of this review can be found here.
Corporate capital loss restriction: as announced at Budget 2018, from 1 April 2020, the government will restrict the proportion of annual capital gains that can be relieved by brought-forward capital losses to 50%. This measure includes an allowance that gives companies unrestricted use of up to £5 million capital or income losses each year, meaning that 99% of companies will be unaffected. Following consultation on the detailed design of the rules, the government will also exclude certain companies in liquidation from the scope of the restriction.
Funding for the British Business Bank: this Budget saw an extension of funding for the British Business Bank with the £200m to support large-scale venture growth funds in life sciences companies.
What did we see on regulation?
Reforming Regulation Initiative consultation: this is formerly known as the red tape challenge, and takes a similar approach is the same as previous iterations of the red tape challenge. The consultation closes on 11 June.
Regulators’ Pioneers Fund: a £10m fund for innovation projects.
Furman Review: the government adopted all 6 recommendations from the Furman Review:
- Establish and resource a pro-competition digital markets unit, tasked with securing competition, innovation, and beneficial outcomes for consumers and businesses
- The CMA should take more frequent and firmer action to challenge mergers that could be detrimental to consumer welfare, supported by changes to legislation where necessary
- The CMA’s enforcement tools should be updated and effectively used
- Continue to monitor how use of machine learning algorithms and AI evolves to ensure it does not lead to anti-competitive activity or consumer detriment, in particular to vulnerable consumers
- The CMA should conduct a market study into the digital advertising market
- Government should engage internationally, encourage cross-border co-operation between competition authorities in sharing best practice and a common approach to issues across international digital markets.
