Looking ahead to Budget 2016
07 March 2016
In the emergency Budget in July 2015, the Chancellor committed to publish a business tax road map by April 2016 so it is reasonable to assume that this will be the centrepiece of his Budget announcements on 16 March. It is likely that the BEPS actions will feature in the roadmap as we already have some implementation timings:
- Patent box changes take effect from 1 July 2016
- The Multilateral Agreement implementing changes to tax treaties is due to be signed on 31 December 2016 (although the changes may not take effect until rather later)
- New rules targeting avoidance through hybrid mismatch arrangements take effect from 1 Jan 2017
- The first Country-by-Country reporting on transfer pricing will begin later in 2017 (for accounting periods starting from 1 Jan 2016).
A the moment, it is less clear when any changes relating to the abuse of the permanent establishment rules and further changes aimed a linking transfer pricing to value creation will take effect. But perhaps the most important change will be limiting corporate interest deductions to 30% of EBITDA – highly-geared businesses will be keen to learn when the current tax relief regime will be cut back.
The planned corporation tax rate reductions will no doubt feature heavily but it will be interesting to see if the Chancellor can afford to create more bright spots on the road map before 2020. Business rates reform may feature although it is perhaps unlikely that changes will be made in short term.
It seems likely that the Chancellor will be will be unable to get through his Budget speech without mentioning the EU referendum and the risks that he believes a Brexit would create. It is possible that he will promise yet another emergency Budget if the UK does vote to leave the EU – so that he can address short term uncertainty amongst UK businesses and potential in-bound investors.
The Chancellor has already warned that economic growth may be below previous estimates due to a worldwide economic slowdown and it is also quite possible that his annual borrowing target will not be met. Therefore, a promise of a further tough spending review later in this Parliament is likely.
After floating various options to reduce the cost of the current pension tax reliefs, it now appears that the Chancellor has decided that it is ‘not the right time’ for radical pension changes. However, it is possible that he will again reduce the annual allowance for pension contributions – bringing it down to £30,000 is now unlikely to trigger much protest but would generate some savings for the Treasury.
Hopefully more details will emerge on how the apprenticeship levy will work for companies that have to pay it from April 2017. Employers will need to plan ahead to make the most of the apprentice training budget that the levy is intended to create. There may also finally be some practical steps towards the alignment of income tax and NIC based on recommendations from the Office of Tax Simplification.
Join our Budget webinar on Thursday 17 March at 9.30am to hear how it will affect your business.