Keng Cheong, Tax Manager at DRG Chartered Accountants, considers the impact of the Pre-Brexit Budget on businesses.
Boost to business investment
The announcements of new structures and buildings allowance and a temporary increase in the Annual Investment Allowance to £1m will be a boost to business investment. For the former, the allowance allows developers (and subsequent purchasers) to obtain relief on the cost of constructing new non-residential structures. The latter allows businesses who are planning to make material acquisitions to obtain immediate relief of up to £1m rather than writing down allowance at 18%.
Introduction of digital services tax
With bricks and mortar businesses in mind, the introduction of the digital services tax is a small step to attempt to level the playing field and recognises the value derived from UK customers by large multinationals. Much has been said about the amount of tax that will be collected from this tax. However, its introduction will allow the Government to revise the safe harbour provisions should the need arise in the future.
Tax avoidance measures
Together with the above, the Government continues to bring in measures to tackle tax avoidance. These include changing the definition of permanent establishment, introducing legislation to tax income referable to UK sales from intangible properties held in a low tax jurisdiction and preventing abuse of the R&D tax credit scheme. In respect of R&D, the restriction may discourage rather than encourage innovation as small and medium enterprises reinvest the repayment. Preventing abuse is necessary but steps to prevent this should not penalise other claimants. We await the outcome of the consultation.
An interesting announcement is the government will seek to introduce a targeted relief for the cost of goodwill in the acquisition of businesses with eligible intellectual property from April 2019.
If you would like to discuss the above topics further or any other areas not covered above, please do not hesitate to get in touch with our team of tax specialists at DRG Chartered Accountants.
DISCLAIMER: This information is for guidance only, and professional advice should be obtained before acting on any information contained herein. We will not accept any responsibility for loss to any person as a result of action taken or refrained from in consequence of the contents of this publication.
