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What the Budget means for your business

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Philip Hammond

At least he listened – that’s the Chamber’s verdict on Chancellor Philip Hammond’s Budget on Monday.

He delivered on our number one ask, an increase in the Annual Investment Allowance from £200,000 to £1m.

And he went some way to meeting several of the other demands tabled by the British Chambers of Commerce on our behalf.

There was £30bn for roads, a freeze in fuel duty and a cut in business rates for smaller retailers. And the Chancellor halved the amount smaller businesses have to pay towards the cost of training apprentices.

Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, said: “The increase in the Annual Investment Allowance will provide the incentive many businesses need to push ahead with investment plans.

“He met us half-way on apprenticeships by halving the co-funding element for SMEs and we were pleased with the continued freeze in fuel duty, extra money for roads and help with business rates for smaller retailers.

“We’d have liked him to go further on business rates. The whole system needs reform but this is a step in the right direction.

“On average smaller retailers will be £8,000 a year better off for two years, which is a significant saving.

“But it won’t help some of the larger retailers who are closing stores and that’s a big worry. Businesses such as M&S and Debenhams attract shoppers who then spend money with smaller retailers too.

“If they disappear, it undermines the viability of town and city centres.

“He also announced money to help local authorities rejuvenate town centres. The acid test will be how quickly this comes through and if it is spent wisely.

“The freeze in fuel duty is especially important in a rural county like Cumbria and investment in roads is vital for businesses although some of the extra money appears to be for projects that have already been announced, such as the upgrade of the A66 between Penrith and Scotch Corner.”

He continued: “It was a give-away, box of chocolates and a bunch of flowers kind of Budget.

“There is additional cash for health, schools, housing, local authorities, defence – including funding to maintain the pace of the Dreadnought submarine programme in Barrow – money to soften the impact of Universal Credit and a crowd-pleasing freeze in duties on beer, cider and spirits.

“The Chancellor might just be laying the ground for an early General Election if Parliament fails to ratify whatever Brexit deal emerges. We’ll see.”

Rob added: “There were a couple of disappointments. We were hoping he would announce a Borderlands Growth Deal bringing devolved funding on transport, skills and projects to boost the economy.

“Instead, he said that negotiations were continuing.

“And he didn’t act on our call to delay implementation of Making Tax Digital or take action to alleviate the administrative and cost burden of Making Tax Digital to businesses. With only a few months to go before its introduction for VAT next April, we’re asking the Government to look again at this.

“Thankfully, he didn’t meddle with the VAT threshold. If he had lowered it, as some were predicting, it would have brought more small businesses under the scope of Making Tax Digital.”

Rob believes the economic outlook remains uncertain despite the upgrade in the Office for Budget Responsibility’s growth forecast for next year to 1.6%.

He said: “The OBR expects near-term growth to remain well below the long-term average. The forecast also implies that growth will remain unbalanced with a continued reliance on the services sector and consumer spending.

“If growth remains subdued, the UK’s ability to generate tax receipts may prove more of an uphill struggle than the OBR expects.”

Scroll down for our 12-point guide outlining everything Cumbrian businesses need to know about the Budget.

  1. BUSINESS TAXATION
  • Annual Investment Allowance (AIA) – increases from £200,000 to £1m for all qualifying investment in plant and machinery made from 1 January 2019 until 31 December 2020
  • Business rates bills will be cut by one-third for retail properties with a rateable value below £51,000 for 2 years from April 2019
  • New non-residential structures and buildings will be eligible for a 2% capital allowance where all the contracts for the physical construction works are entered into on or after 29 October 2018
  • From April 2019, the capital allowances special rate for qualifying plant and machinery assets will be reduced from 8% to 6%
  • From 6 April 2019 the minimum period throughout which the qualifying conditions for relief must be met will be extended from 12 months to 24 months
  • From April 2020, the government will introduce a new Digital Services 2% tax on the revenues of firms generate global revenues from in-scope business activities in excess of £500m per annum
  • The VAT threshold will be maintained at the current level of £85,000 until April 2022
  • From 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year
  • Employment Allowance: from April 2020 the government will restrict access to employers with an employer National Insurance contributions (NICs) bill below £100,000 in their previous tax year (EA provides businesses and charities with up to £3,000 off their employer NICs bill). Over 99% of micro-businesses and 93% of small businesses will still be eligible for the EA
  • New IR35 rules for self-employed individuals operating through personal service companies, introduced for contractors taken on by the public sector last year, to be extended to those engaged by ‘large’ and ‘medium’ private sector businesses from April 2020
  1. LABOUR MARKET AND SKILLS

Regulated wages:

Hourly National Living Wage and National Minimum Wage to increase next April as follows:

  • NLW up by 4.9% from £7.83 to £8.21:
  • 21 to 24 year olds by 4.3% from £7.38 to £7.70
  • 18 to 20 year olds by 4.2% from £5.90 to £6.15
  • 16 to 17 year olds by 3.6% from £4.20 to £4.35
  • apprentices by 5.4% from £3.70 to £3.90

Apprenticeships:

  • SME Apprenticeship Co-investment rate halved to 5%
  • A package of reforms to strengthen the role of employers in the apprenticeship programme
  • Transfers: up to £450m available to enable levy paying employers to transfer up to 25% of their funds to pay for apprenticeship training in their supply chains
  • £5m to Institute for Apprenticeships and National Apprenticeship Service in 2019-20, to identify gaps in the training provider market and deliver more Apprenticeship Standards
  • Treasury and DfE to work with employers on impact of Apprenticeship Levy and wider apprenticeship reforms
  • £100m for the first phase of the National Retraining Scheme (includes new careers guidance service and job finder service
  • T levels: £38m capital funding to implement first three T levels in 2020 across 52 providers

Parental bereavement leave and pay

  • From April 2020, a new statutory entitlement to two weeks’ paid leave for employees who suffer the death of a child under 18, or a stillbirth after 24 weeks of pregnancy (subject to meeting eligibility criteria)
  1. PENSIONS
  • Lifetime allowance for pensions to increase in line with CPI for 2019-20, rising to £1,055,000
  • Extra funding to develop the Pensions Dashboard 2019-20
  • Self Employed and Pensions: DWP to set out details on increasing pension participation and savings persistency among the self-employed
  1. HOUSING AND PLANNING

Housing:

  • The British Business Bank will deliver a new scheme providing guarantees to support up to £1 billion of lending to SME housebuilders providing £653m to 2021-22 for strategic partnerships with nine housing associations to deliver over 13,000 homes
  • £75m from the Home Building Fund for St Modwen plc, to fund infrastructure to build over 13,000 new homes a new five-year strategic business plan for Homes England, to be published on 30 October 2018
  • Housing Revenue Account cap that controls local authority borrowing for house building will be abolished from 29 October 2018 in England, enabling councils to increase house building to around 10,000 homes per year. The Welsh Government is taking immediate steps to lift the cap in Wales.
  • The Housing Infrastructure Fund, funded by the NPIF, will increase by £500m to a total £5.5 billion, unlocking up to 650,000 new homes
  • Accelerating housing delivery: Letwin Review (on land value capture) – government to respond in February, but notes no evidence of land banking as driver of slow build out rates in major house builders
  • £10m for Strategic housing deals in areas of high housing demand to deliver above their Local Housing Need
  • Help to Buy Equity Loan: government does not intend to introduce a further Help to Buy Equity Loan scheme after March 2023
  • Shared ownership: a call for evidence inviting proposals from investors to deliver a new wave of shared ownership homes
  • £8.5m for 500 parishes to allocate or permission land for homes sold at a discount, first to people with a direct connection to the local area

Planning reform:

  • Consultation on planning measures under the ‘change of use’ regime with new Permitted Development Rights to make it easier to establish new mixed use business models on the high street

Land value uplift:

  • Simplification of developer contributions system to provide more certainty and enable local areas to capture a greater share of uplift in land values for infrastructure and affordable housing. Includes a Strategic Infrastructure Tariff for Combined Authorities and joint planning committees with strategic planning powers.
  1. BREXIT
  • Budget 2017 set aside £1.5 billion for preparations by government departments taking place in 2019-20. Budget 2018 confirms an additional £500m of funding from the reserve for 2019-20
  1. INTERNATIONAL TRADE AND INVESTMENT
  • Commitment from HMRC to halve the time it takes to approve customs trusted traders within two years (including ‘Authorised Economic Operators’ or AEOs)
  • Department for International Trade (DIT) will expand its network of advisers in Europe
  • From summer 2019 citizens of the United States, Canada, New Zealand, Australia and Japan will be able to use the e-passport gates at UK ports
  1. BUSINESS SUPPORT
  • Small Business Leadership Programme: delivered with business schools and ‘leading businesses’ across England. 2,000 places will be delivered in 2019-20, with an ambition to train 10,000 people per year by 2025
  • £20m in 2019-20 to support local peer-to-peer networks to ‘share expertise on leadership, business development and technology adoption’
  • Continuation of the New Enterprise Allowance Scheme that helps unemployed people start their own business – Cumbria Chamber delivers this in Cumbria, Lancashire and Merseyside and we’ve helped to start 6,500 businesses so far
  1. RESEARCH AND DEVELOPMENT
  • Further £1.6 billion for R&D funding
  • National Productivity Investment Fund increased to £37bn by extending by one year to 2023-24
  • The amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year
  • £20m to support measures to tackle plastics and boost recycling: £10m more for plastics R&D, and £10m for innovation to boost recycling and reducing litter, such as smart bins
  • £5m to support new University Enterprise Zones
  1. ENVIRONMENTAL TAXATION (including Fuel and Vehicle Duty)
  • Fuel duty to be frozen for in 2019-20
  • Carbon price support (CPS) will be frozen at £18/tCO2
  • If the UK leaves the EU Emissions Trading Scheme, a Carbon Emission Tax would be introduced to meet carbon reduction commitments.
  • Enhanced Capital Allowances (ECAs) for electric vehicle charge points will extend to 31 March 2023
  • A £315m Industrial Energy Transformation Fund will be introduced to support businesses with high energy use to reduce usage
  • The government will issue a call for evidence on introducing a new Business Energy Efficiency Scheme to reduce small business bills and CO2
  • A tax on the production and import of plastic packaging will be introduced from April 2022 (subject to consultation)
  • Aggregates Levy will be frozen for 2019-20 but will return to index-linking in future
  • Vehicle Excise Duty (VED): Uprating – From 1 April 2019 VED rates for cars, vans and motorcycles will increase in line with RPI
  • Heavy Goods Vehicle (HGV) VED frozen for 2019-20
  • Company vehicles – From 6 April 2019 fuel benefit charges will increase in line with RPI and the van benefit charge will increase in line with CPI
  • Air Passenger Duty (APD) – no rise in Short-haul APD rates for 2020-21, long-haul rates will increase in line with RPI
  • The rates for long-haul economy will increase by £2, and the rates for those travelling in premium economy, business and first class will increase by £4. Those travelling long-haul by private jets will see the rate increase by £13.
  1. PERSONAL TAXATION AND BENEFITS
  • Personal allowance raised to £12,500 and Higher Rate Income Tax to £50,000 from April 2019
  • Government will not abolish Class 2 NICs during this Parliament. There are two remaining measures in the draft NICs Bill published on 5 December 2016: reforms to the NICs treatment of termination payments and income from sporting testimonials: government still intends to legislate for these reforms, which will take effect from April 2020.
  1. BUSINESS REGULATION
  • The UK Regulators Network will publish a plan in Spring 2019 on how it will improve collaboration between regulators
  • The government will review the process of setting ‘Strategic Policy Statements’ for Ofgem, Ofcom, and Ofwat
  1. ACCESS TO FINANCE
  • If no future relationship with the EIB is agreed the government will provide the British Business Bank with the resources to enable it to make up to £200m of additional investment in UK venture capital and growth finance in 2019-20
  • UK Export Finance (UKEF) will make a one-off increase to their Direct Lending Facility of up to £2 billion over 2020-21 and 2021-22

Listen to Rob Johnston speaking on BBC Radio Cumbria

Overall reaction, business rates, apprenticeships and town centre redevelopments

More reaction to the Budget, starting with the Borderlands Growth Deal, digital tax and the Spring Statement 2019

© Cumbria Chamber of Commerce