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Business implications

Changes to business rates and reliefs for R&D will be welcome news for firms, says Matthew Rideout, but the Autumn Budget will probably not have a major impact on business who are facing the challenges of Brexit and continuing high inflation.

First the good news. The Chancellor did not lower the threshold for compulsory VAT registration for the current limit of £85,000 to the level suggested by the Office for Tax Simplification of £20,000. This would have hit many small business hard. It would impose an additional administrative burden on them.

In addition many small businesses sell to consumers who are unable to recover the VAT. So the business would have been faced with making a 20% increase in the sailing prices or cutting their gross margin. Instead the VAT registration threshold is held at £85,000 for two years.

Perhaps the other good news was the change in business rate increase from April 2018 being changed to the Consumer Price Index (CPI) from the Retail Price Index (RPI). This will have the impact of lowering the increase by 1%.

The Chancellor also announced that business rates would be revalued every three years instead of five years at present. In addition pubs in England will continue to receive a £1,000 business rates discount in 2018/19.

Businesses in the technical sectors will welcome the investment in maths and science in schools. The investment in construction and digital training courses will help businesses in those sectors having difficulty recruiting school-leavers.   

What else was in the budget?

Perhaps the most significant announcement was an extra £3bn to ensure government is ready on day one of exit from the European Union.

This includes funding to prepare the border, the future immigration system and new trade relationships. Business still is awaiting news of an agreement on the transitional arrangements following Brexit and the ultimate deal, if any, between the UK and the EU.

The Chancellor also announced that £1.7bn will go towards improving transport in English cities, with half given to Combined Authorities with Mayors and the rest allocated by a competition.

Limited companies investing in Research and Development will welcome the increase in the tax relief for large companies (and small and medium sized enterprises in some cases) that carry out qualifying R&D and claim Research and Development Expenditure Credit (RDEC)

Encouragement to invest

Apart from the measures outlined above, business will be frustrated that there was no increase in the allowances for businesses investment in plant and machinery such as the Annual Investment Allowance.

Business investment is slowing and the absence of any further incentives will probably mean investment continuing to drop at least until the uncertainty over Brexit and the impact of inflation on consumers ceases.   

Investors in Venture Capital Trusts (VCTs) and VCT fund managers will be disappointed by the measures to limit the scope of an anti-abuse rule relating to share buy-backs by VCTs.