Budget summary - The BESA
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Tuesday, October 30, 2018

Budget summary

Alexi Ozioro

This budget is a good indication that the Chancellor feels freer to use Government funds ahead of Brexit more than we expected. There are a few noteworthy developments for BESA members, including tax cuts on equipment, changes to the Apprenticeship Levy and new rules on developments and housing.

  1. Growth estimated 1.6% in 2019, 1.4% in 2020, 1.5% in 2021 and 2022 and 1.6% in 2023
  2. OBR forecast sustained wage growth for next 5 years
  3. Full Spending Review confirmed by the Treasury for 2019
  4. Money set aside for a No Deal Brexit up from £1.5bn to £2bn (presumably if we get a deal this money is up for grabs)
  5. National Minimum Wage to be £8.21 from April 2019, up from £7.83. The age-related and apprentice rates will also go up:
    1. Increasing the rate for 21 to 24 year olds by 4.3% from £7.38 to £7.70 per hour
    2. Increasing the rate for 18 to 20 year olds by 4.2% from £5.90 to £6.15 per hour
    3. Increasing the rate for 16 to 17 year olds by 3.6% from £4.20 to £4.35 per hour
    4. Increasing the rate for apprentices by 5.4% from £3.70 to £3.90 per hour.
  6. In 2019 Government will set out the Low Pay Commission’s remit for 2020 and beyond and in coming months will consult with the LPC on this
  7. Personal Allowance to be raised to £12,500 and higher rate to be raised to £50,000 in April 2019, a year earlier than the Conservative manifesto commitment
  8. Fuel duty freeze again for the 9th consecutive year.

 

Business tax:

  1. For next two years, all retailers in England up to rateable value of £51,000 or less to get a third off Business Rates
  2. The Government will target the Employment Allowance (EA) to support smaller businesses, so from April 2020 Government will restrict access to employers with an employer National Insurance contributions (NICs) bill below £100,000 in their previous tax year
  3. Annual Investment Allowance up to £1 million from £200k for all qualifying investment in plant and machinery made on or after 1 January 2019 until 31 December 2020, to help stimulate business investment
  4. New non-residential structures and buildings will be eligible for a 2% capital allowance where all contracts for physical construction works are entered into on or after 29th of October 2018. This addresses a gap in the current capital allowance regime and will improve the international competitiveness of the tax system
  5. From April 2019 capital allowances rate for qualifying plant and machinery assets to go from 8% to 6%, to more closely match average accounts depreciation
  6. VAT registration threshold for small businesses will be maintained at the current £85,000 level for a further 2 years; but could change after 2021 due to flexibility from not having EU rules
  7. Responsibility for operating the off-payroll working rules will move from individuals to the organisation, agency or other third party engaging the worker. To give people and businesses time to prepare, this change will not be introduced until April 2020.   An explanatory note is available here.
  8. HMRC to be made a preferred creditor in business failures
  9. Government will introduce a VAT domestic reverse charge to prevent VAT losses through ‘Missing Trader’ fraud. This is when traders collect VAT on sales but go missing before passing that VAT to HMRC. This will shift responsibility for paying VAT along the supply chain to remove the chance it is stolen and will come in after 1 October 2019 via secondary legislation

 

Building, infrastructure and housing:

  1. PFI in future rejected, but current contracts will be honoured. No more PFI
  2. £675m to support councils to draw up plans to adapt high streets and a new consultation on development rights to allow upwards extensions above commercial premises and residential properties. This includes blocks of flats and to allow commercial buildings to be demolished and replaced with homes.
  3. £500m for the Housing Infrastructure Fund.
  4. Money for new partnerships with housing associations.
  5. First time buyer stamp duty relief extended and now available to shared ownership purchases below £500,000 (and retrospective for a year so transactions from 22nd November 2017 could claim a refund)
  6. A new consultation in January on a Stamp Duty surcharge of 1% for non-residents buying residential property
  7. From April 2021, a new Help to Buy Equity Loan scheme will run for 2 years until March 2023
  8. No systematic land-banking is taking place by big land-owning developers apparently? Government will respond to the Letwin review
  9. Government will provide up to £8 million to help costs of repairs and alterations to village halls, Miners’ Welfare halls and Armed Forces organisations’ facilities

 

Transport:

  • An additional £37m for Northern Powerhouse rail
  • London Underground DLR improvements to be paid for by the Housing Infrastructure Fund. Government will invest £291 million from the Housing Infrastructure Fund to unlock over 18,000 new homes
  • Government is considering the recommendations of the Independent Affordability Review of Crossrail 2, and will consider the at the Spending Review
  • An extra £240 million to the six metro mayors for significant transport investment in their areas

 

Environment:

  • Subject to consultation a tax will apply to the manufacture and import of plastic packaging that does not contain at least 30% recycled plastic, to transform financial incentives for manufacturers to produce more sustainable packaging
  • Government will end Enhanced Capital Allowances and First Year Tax Credits for technologies on the Energy Technology List and Water Technology List from April 2020. Savings will be reinvested in an Industrial Energy Transformation Fund, to support significant energy users to cut energy bills and transition UK industry to a low carbon future
  • Government will however extend the ECA for companies investing in electric vehicle charge points to 31 March 2023
  • Government will issue a call for evidence on introducing a new Business Energy Efficiency Scheme, focused on smaller businesses. Over time, this scheme will reduce business energy bills and carbon emissions. The call for evidence will seek views on a range of possible delivery options

 

Education:

  • Small firms will only pay 5%, not the current 10% of the tuition costs for the Apprenticeship Levy
  • Government will make £450 million available to enable Levy payers to transfer up to 25% of their funds for apprenticeship training in their supply chains
  • The Exchequer Secretary to the Treasury and the Minister for Apprenticeships and Skills will work with a range of employers and providers to consider how they are responding to the Levy across different sectors and regions, as well as the future strengthened role of apprenticeships in the post-2020 skills landscape
  • Government will work with employers to give workers the opportunity to upskill or retrain with £100 million for phase one of the National Retraining Scheme
  • This will include a new careers guidance service to help people identify opportunities in their area, and state of the art courses combining online learning with traditional classroom teaching to develop key transferable skills

 

Innovation:

  • Up to £121 million for the Made Smarter review work to support the transformation of manufacturing through digitally-enabled technologies, such as the Internet of Things and virtual reality.
  • The Government will launch a consultation on how to encourage greater innovation in the utilities sectors.

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