Summer Budget – Good for Business?

Wed 08 Jul 2015

As George Osbourne sits down and we reflect on the announcements of today, it looks like Owner Managed Businesses are in a better place.

Reduction in corporation tax rates, permanent increase in Annual Investment Allowance to £200k and new allowance for the first £5k of dividends are offset by increases in dividend tax rates and reductions in pensions annual allowance. But overall, it feels like owners are in a better place.

We have had several years of reducing corporation tax rates and have finally settled at 20% from April 2015… or so we thought.  In a surprise announcement, George Osbourne set out plans for the CT rates to reduce further to 19% from 1 April 2017 and 18% from 1 April 2020.  This makes the UK the most competitive in the G20 and, excluding tax havens, firmly in the top 20 CT rates in the world.

The Annual Investment Allowance for capital expenditure was set to reduce from £500,000 to £25,000 from 1 January 2016 and it had already been suggested Pre-Budget that this wouldn’t happen, so we were all expecting an announcement setting out another change. However, what we got was a much better result in a permanent uplift to an AIA of £200,000 from 1 January 2016.  This gives much more certainty for businesses when planning their capex and is at a decent level to cover most expenditure for most businesses.  The only thing to consider now is whether a large capex spend can be spread over 2 years to get double the allowance.

Some not so good new that was mentioned briefly, is around the deduction of amortisation of Goodwill. The Budget introduced a measure that removes the tax relief for amortisation of purchased goodwill (and certain customer related intangible assets) for acquisitions made from today. It’s not clear from the policy objective and impact summary why this measure was introduced, as there is no real tax avoidance around these rules however it will result in an increase to the cost of buying another business and will now mean that the sale of trade and assets of a business, rather than a share sale, is less attractive to the purchaser.

For more information contact Amy Reynolds at amy.reynolds@mazars.co.uk