Spring Budget 2017
It was confirmed that the rate of Corporation Tax will reduce to 19% from April 2017. As previously announced, the Corporation Tax rate will reduce by a further 2% to 17% by 2020.
|Financial year to 31 March 2017 31 March 2018|
|Taxable profits 20% 19%|
|Loans to participators rate 32.5% 32.5%|
Cash Basis Entry Threshold
From 6 April 2017, the cash basis entry threshold is to increase from £83,000 to £150,000.
Cash basis accounting is an optional and simplified method for calculating and reporting taxable profits for qualifying trading businesses.
The adverse effect of the changes to the rates revaluation in England in April 2017 on some businesses may be reduced in certain circumstances. The measures include:
- Support for small businesses losing small business rate relief to limit increases in their bills to the greater of £600 or the real term transitional relief cap for small businesses each year
- Providing English local authorities with funding to support discretionary relief, to allow them to provide support to individual hardship cases in their local areas
- A £1,000 business rate discount for pubs with a rateable value of up to £100,000 subject to state aid limits for businesses with multiple properties for one year from 1 April 2017
From 6 April 2017 the tax-free personal allowance will increase to £11,500. The higher rate threshold will rise to £45,000 except in Scotland where it remains at £43,000.
The £5,000 tax-free dividend allowance, introduced in April 2016, is to be reduced to £2,000 from 6 April 2018.
Capital Gains Tax
The annual capital gains tax exemption increases by £200 to £11,300.
There were no new announcements regarding inheritance tax. The new residence nil-rate band limit is available from 6 April 2017 at a rate of £100,000.
Savings and Pensions
Money Purchase Annual Allowance
The money purchase annual allowance (MPAA) will reduce from £10,000 to £4,000 from 6 April 2017.
There will be no changes to how the MPAA will operate or how it is calculated and the transitional provision for the 2015/16 tax year remains unchanged.
Any unused MPAA cannot be carried forward for later years.
Registration and Deregistration Thresholds
The taxable turnover threshold, which requires a person to register for VAT, increases from £83,000 to £85,000 per annum.
The threshold below which a VAT-registered person may apply to deregister increases from £81,000 to £83,000 per annum, and the relevant registration and deregistration threshold for Intra-Community acquisitions will also be increased from £83,000 to £85,000 per annum.
All these changes will take effect from 1 April 2017 and will prevent around 4,000 businesses from having to register in the financial year 2017/18.
Flat Rate Scheme
With effect from 1 April 2017, businesses eligible to use the flat rate scheme but which are classified as ‘limited cost’ businesses will have to account for VAT at 16.5% of their relevant gross turnover.
A ‘limited cost’ business is one which spends the following on relevant goods:
- less than 2% of its VAT flat rate turnover, or
- greater than 2% of its VAT flat rate turnover but less than £1,000 per year.
Relevant goods are those which are used exclusively for business purposes, but exclude the following:
- vehicle costs including fuel, unless the business is operating in the transport sector using its own, or leased vehicle
- food or drink for the business or its staff
- capital expenditure goods of any value
- goods for resale, leasing, letting or hiring out if the main business activity is not ordinarily the selling, leasing, letting or hiring out of such goods
- goods for re-selling or hiring out, unless selling or hiring is the main business activity.
The measure is designed to ensure fairness of treatment for businesses which are considered to be receiving an unfair advantage from the classification and rate they currently use.
Notice 733 provides guidance on the transitional rules for those operating the basic turnover method at paragraphs 8.2 and 9.7 respectively in that it explains the treatment for invoices issued or cash received after 23 November 2016 and before 1 April 2017. Those whose returns straddle 1 April 2ill have to split their accounting between the old and new rates.
If, in any period, the cost of relevant goods is more than the ‘limited cost’ threshold, the business may use the normal flat rate scheme percentage for that period.