Many of the measures in Chancellor George Osborne’s Summer Budget got a warm welcome from Bristol business figures – particularly support for small businesses.
Jeremy Richards, head of office at property agency JLL’s Bristol office, said: “The Chancellor’s continued focus on investment in improving the M4 and the electrification of the Great Western mainline is welcome; it is vital that due emphasis is placed on important new infrastructure projects in the region.
“The announcement regarding the delivery of three million new apprenticeships is one of the most important points put forward in this Budget when addressing further stability and economic growth for the UK. The whole country is suffering from a chronic shortage of skilled construction workers. This is driving up construction costs and affecting the viability of much-needed housing and commercial developments.
“Providing a plentiful supply of skilled construction workers would help ease the pressure on costs while improving productivity in the industry and providing a further boost to employment.”
Mr Richards also welcomed moves to relax the Sunday trading laws, adding: “This is a welcome announcement from the Chancellor.
“With people able to shop online 24/7, the physical retail world needs to be able to compete. Time is the most vital commodity that people have and more flexibility is required to enable people to fit shopping into their busy lives. At a time of rising consumer confidence more shopping time can only be good news for retailers and consumers alike.”
However, he added that the Chancellor now needed to tackle “the stranglehold that an outdated business rates system is having on retailers”.
Dave Mouncey, tax partner at the Bristol office of Smith & Williamson, the accountancy and investment management group, said the Government’s pledge to provide further resources and powers to combat tax evasion, avoidance and aggressive tax planning would reaffirm messages that companies of all sizes needed to take great care with their tax compliance so as not to fall foul of HM Revenue & Customs’ (HMRC) new powers.
“Minds will need to be focused on good compliance, notably, due to a new requirement for greater transparency of tax strategies for ‘large’ businesses, tough new penalties for invoking the General Anti-Abuse Rules and the naming and shaming of serial users of failed tax avoidance schemes,” he said.
Malcolm Emery, partner and dual-qualified chartered tax adviser and solicitor at law firm Thrings, which an office in Bristol, and said the Chancellor missed the opportunity to reduce the VAT rate of 20% – one of the highest in Europe.
“A flat rate reduction of 2.5% would have been a welcome relief to businesses since it is their customer base which is ultimately responsible for this cost at a time when the effects of the austerity measures put in place by the coalition government are still being felt,” he said.
However, he described the reduction in the rate of corporation tax rate as “clearly good news for business [which] will help companies rebuild their reserves and bolster their ability to reinvest”.
The relaxation in Sunday trading laws would also be welcomed by many businesses, he said, but added that some smaller retailers may be less enthusiastic given the increase in competition from supermarkets and other large retail outlets freed from the current Sunday trading constraints.
Bonnie Dean, chief executive of Bristol & Bath Science Park, welcomed the specific references to investment in the South West in the Budget. She was pleased to hear of the Government’s acknowledgement of the continuing importance of investing in the science and technology sector.
She said: “It is positive that investment will be made in transport and key sectors such as defence and cyber security where the South West has a leading position.
“An allocation of up to £10M to the broadband programme in the region, focused on local projects delivering speeds of 100mbps and above is also a boost for enterprise.”
She also welcomed the regional science and innovation audits, which will involve working with businesses, universities, local enterprise partnerships (LEPs) and cities to map science and innovation strengths and to identify potential areas of strategic focus.
“Technologies are emerging and converging very rapidly and it’s a global race to keep and attract businesses so that the new industries they create are developed in the UK for the benefit of the country.
“Fortunately the UK has a leading position based on the strength and quality of our research base. It is essential that this is recognised in the Spending Review.”
KPMG Bristol tax partner Julian Cockwell said fixing the annual investment allowance at £200,000 would encourage small and medium-sized businesses to invest in new plant and equipment and could help towards plugging the UK’s yawning productivity gap.
“The Annual Investment Allowance has been up and down like a yo-yo over the last few years, so today’s announcement gives much-needed certainty,” he said.
“Britain’s makers, doers and growers will see particular benefit from this. So often, new equipment and technology is the key to improved productivity for our manufacturers, retailers and agricultural businesses, so stimulating investment from them will go a long way to helping address the UK’s productivity gap.”
Paul Oldham, regional director at BGF (Business Growth Fund), which was set up to help the UK’s growing smaller and medium-sized firms, welcomed the Chancellor’s focus on regional growth.
“We know from talking to small and mid-sized businesses across the South West that confidence is up and that the landscape is ripe for growth. Empowering city regions to help businesses in key areas like skills, infrastructure and planning can help improve these conditions and build on the example of the Northern Powerhouse.”
However, accountancy firm EY’s Bristol-based tax partner Karen Kirkwood said businesses had been left with mixed messages from the Budget.
“The promise of cuts in corporation tax rate from 2017/18 was tempered by large business being the biggest funder of the Chancellors’ Budget through the requirement to pay taxes three months earlier. This measure alone gave the Chancellor almost £4.5bn in 2017-18 and echoes the change that Gordon Brown introduced in his first Budget back in 1997.
“On a positive note, this cashflow raid also allowed the Chancellor to fund the rise in the annual investment allowance to £200,000.”
Accountancy firm Bishop Fleming, which has a base in Bristol, welcomed some Budget measures but drew up a list of five disappointments and also predicted that 300 pages will be added to the tax rules book.
Managing partner Matthew Lee said: “Many of George Osborne’s announcements were good news for the region’s owner-managed businesses, including the reduction in Corporation Tax, the freezing of fuel duty, confirmation of the region’s transport investment and the confirmation of a £200,000 annual investment allowance.
“However, there are five major points on which we were very disappointed.”
- Pensions
Having already reduced the maximum pension pot to £1m, Mr Osborne is now eroding tax relief on pension contributions. This is at total variance with the Government’s declared aim of getting more people to save for their retirement and is highly demotivating for higher earners.
- Business Rates
Having promised a long overdue ‘root-and-branch’ review, the Chancellor made no mention of business rates in his Budget statement. This will be a big disappointment to businesses of all sizes.
- Dividend payments
The announcement of a new tax on dividends is unwelcome, bringing with it yet more complexity in calculating an individual’s tax liability. The existing basis is simple to understand, but the new one will do little to raise additional income while making it difficult for people to understand what their liabilities will be.
- More – not less – tax complexity
Like a succession of chancellors, George Osborne has spoken about cutting tax complexity, but today’s Budget seemed to ignore all the recommendations from his own Office of Tax Simplification. Measures like the new Living wage rules (adding a new age-tier of 25-plus), the new dividend rules, and the new pension contribution rules, will all add to the complexity of UK tax. Right now, the rule-book has already grown to 6,000 pages: today’s announcements will add at least 300 pages. We have yet to see a 21st Century chancellor deliver on tax simplification, and reduce the number of pages in that rule book.
- Tax evasion vs avoidance and planning
Mr Osborne opened his statement with the claim that he’ll capture £5bn from ‘tax evasion, avoidance, and planning’. Evasion is illegal: avoidance and planning are legal. Does the Chancellor understand the difference? Today’s Budget amends some of the avoidance and planning measures, like pension contributions and dividends, but does he really believe that taxpayers who plan their affairs are sitting on billions of pounds of unpaid tax?
“I heard nothing in the Budget to explain how he’ll tackle the much bigger issue of international corporations that elude their fair share of tax,” said Mr Lee.
Chris Williamson, tax and estate planning associate at Bristol headquartered law firm TLT, said the Chancellor had delivered a clear message that perceived inequalities in tax rules that benefited non-UK domiciliaries (non-doms) would end and the HMRC would be given additional resources to ensure compliance.
“The predicted changes for non-doms are grouped into two distinct areas: new IHT rules on UK residential property held through offshore structures and changes to the taxation of non-doms,” he said.
“The changes are wide reaching and the Government acknowledges that significant consultation will be required to ensure related legislation reflects the objectives. The fact that the rules will not take effect until 2017 is to be welcomed as it will allow non-doms to consider their options.”
Sharon Omer-Kaye, accountancy firm Baker Tilly’s South West tax partner, said the Budget had been far more significant than expected.
“[Chancellor George Osborne] seems to have shown some creativity in navigating around the triple lock, finding numerous areas for generating revenues while announcing some eye-catching measures such as the new Living Wage, designed to generate a feelgood factor about progress in the economy.
“In addition to the heavily trailed changes to the inheritance tax threshold which increases to up to £1m for a couple over their lifetime reflecting the value of a family home, the other significant announcement concerned buy to let property owners, who will be adversely affected by mortgage interest being abolished.”
She said corporate businesses were set to benefit from the further reductions in corporation tax although this could be offset by higher costs for employers such as meeting the apprenticeship levy and the National Living Wage requirement.
“There will also be a review of how dividends are taxed, the outcome of which seems likely to be that most recipients will be no worse off, and may actually be better off. However recipients of large dividends from private businesses and holders of large investment portfolios may well stand to lose out,” she said.
