The Chancellor Philip Hammond presented the last Spring Budget on Wednesday 8 March 2017. In his speech the Chancellor was keen to point out that he wanted the tax system to be fair, particularly in relation to the distinction between employed and self-employed individuals. In this article, we look at how the Chancellor’s Spring Budget impacts the agricultural sector.
In the Budget speech the Chancellor announced that he has requested a report to be delivered in the summer on the wider implications of different employment practices. Also, the Budget included changes to NICs and the Dividend Allowance.
In December and January the government issued a number of the clauses, in draft, of Finance Bill 2017 together with updates on consultations.
The Budget updates some of these previous announcements and also proposes further measures. Some of these changes apply from April 2017 and some take effect at a later date.
Our summary focuses on the issues likely to affect you and your business.
Main Budget tax proposals
Our summary concentrates on the tax measures which include:
- increases to the Class 4 National Insurance rates – Update 15/03/17 – Chancellor withdraws plans to increase NI.
- a reduction in the Dividend Allowance
- changes to the timing of Making Tax Digital for smaller businesses.
Previously announced measures include:
- increases to the personal allowance and basic rate band (a decreased band for Scottish residents)
- the introduction of the Apprenticeship Levy
- changes to corporation tax loss relief
- the introduction of an additional inheritance tax residence nil rate band
- changes for non-UK domiciled individuals.
Main Budget announcements (Agriculture specific)
- Business rates – £300 million fund for councils to provide discretionary relief.
- £16 million to be made available for a new 5G technology hub
- £200 million to get full-fibre broadband to more homes and businesses
- Making Tax Digital delayed for a further year (2019) if your business is below the VAT threshold
- Introduction of T-levels
Agriculture 2017 Budget impact
It’s not all bad for agriculture – but issues still need addressing
Overall, it was an indifferent budget as far as agricultural businesses are concerned. There were calls for the Chancellor to give assurances over post-Brexit plans, but the Chancellor did not oblige. However, the good news is that the Chancellor announced a new T-level system. This is intended to put technical education courses on an equal footing with academic courses. This new system will increase the number of hours students train by 50% and replace the current 13,000 qualifications with 15. In order to pay for the new system, the Chancellor announced an extra £500m a year and The changes are expected to come into effect from 2019.
Making Tax Digital delay
The Chancellor announced that the Making Tax Digital project will be delayed for a further year (2019) for unincorporated businesses below the VAT threshold. However, those who are above the threshold will still have to comply in full with the project, so this could place an extra burden on farmers, contractors and rural service providers who have self-employed status.
Business rates have been devolved to Scotland, Northern Ireland and Wales. The business rates revaluation takes effect in England from April 2017 and will result in significant changes to the amount of rates that businesses will pay. The government announced £3.6 billion of transitional relief in November 2016. The Chancellor has now announced £435 million of further support for businesses. This includes:
- support for small businesses losing Small Business Rate Relief to limit increases in their bills to the greater of £600 or the real terms transitional relief cap for small businesses each year
- providing English local authorities with funding to support £300 million of discretionary relief, to allow them to provide support to individual cases in their local area.
The government will also introduce a £1,000 business rate discount for public houses with a rateable value of up to £100,000, for one year from 1 April 2017. This is subject to state aid limits for businesses with multiple properties.
Some welcome news was delivered in the form of £16m for a new 5G technology hub, and £200 million to get full-fibre broadband to more homes and businesses. However, it has been warned that there is no guarantee rural areas would feel the benefit.
Richard Marsh, Partner and Agriculture Specialist at Hawsons, had this to say: “As the vast majority of farmers are trading as self employed or within partnerships , the Chancellors U-turn on national insurance will be welcome. However the Budget remains of little importance compared to the uncertainty facing British agriculture post-Brexit.”
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