This year’s spring budget whilst causing a stir amongst some cabinet members, has created some positive elements for rural businesses, yet as usual a few nasty stings in the tail as commented by Louis Fell from George F White Rural Chartered Surveyors.
The positives include the Corporation Tax rate reducing to 17%. Louis Fell commented that “with many rural businesses functioning as partnership or sole trader, now might be the time to discuss whether moving to a company structure might be beneficial, particularly if you are a higher rate tax payer. Particularly if you’re expanding or taking on debt, then paying back the capital is much more cash flow positive from 17% tax rate compared to 40%”
A further positive is the doubling of the small business rates relief threshold, which has gone up to £12,000. Tapered relief will apply to businesses with a rateable value of between £12,000 and £15,000. Many new farm diversification projects are starting to be subjected to business rates, so this will be a welcome announcement and should encourage new business start-ups.”
Those planning to sell assets will also welcome the change in Capital Gains tax, with the main rate dropping from 28% to 20% and the basic rate dropping from 18% to 10%. Entrepreneur’s relief will still apply. Louis also noted that “any rural businesses in the region run as self-employed will be pleased to benefit from the abolition of Class 2 National Insurance contributions. It may only amount to about £150 per annum, but during tight financial times, any reduction is very welcome”.
As with all budgets there is usually a negative. “The major sting in the tail for those making significant land purchases is that Stamp Duty land Tax has changed and is moving away from what’s referred to as ‘slab’ structure, to a ‘slice’ structure, where the tax is now applied progressively. For smaller purchases, it is a positive shift, however for larger purchases; say a farm, the new level of tax could be onerous. A farm purchased for £3m would have previously paid £120,000 SDLT, and will now pay £139,500 SDLT. This obviously adds significantly to the level of funds required for larger purchases.” This change comes into force straight away.
Many businesses may want to revisit their on-going strategic planning not only for tax planning, but business structures in light of the changes announced in the budget. Louis is keen to point out that any changes made should not been done in isolation as it’s never a good move to let the tax tail wag the business dog.