Private Sector Contractors
Since 2016 many contractors working on contracts within the public sector have found it increasingly difficult to be paid for work done on an invoice basis. The public sector body has been required under the IR35 rules to assess if the contractor was in fact an employee and, often with little or no understanding of these complex employment status rules, HR departments have been regularly assessing the contractor to be an employee and as such deducting PAYE tax and employees NIC. Sadly this employment classification does not give the contractor the same rights as an actual employee to, for example sick, holiday or maternity/paternity pay, making the legislation unpopular with contractors.
In the 2018 budget the Chancellor has extended this rule to the contracts between contractors and large and medium sized private sector businesses and it will come into play from April 2020.
Moving to Electric Vehicles for Business
In order to encourage the use of electric vehicles for businesses the Budget 2018 gives 100% allowances for the expenditure incurred by businesses on the installation of electric charge point equipment. Meaning a business can set all of the cost of the qualifying expenditure against its profits for the year in which the expenditure is incurred and reduce its tax bill.
The Return of Allowances for Expenditure on Commercial Buildings
A new Structures and Buildings Allowance (SBA) will be immediately available on the eligible construction costs of new commercial structures and buildings. The allowance is intended to give tax relief over a period of time for the construction costs of buildings intended for commercial use, for the costs of improvement of existing structures and buildings including the cost of converting existing premises for use in a qualifying activity.
If the structure or building is of mixed use i.e. it has some residential element then the relief will be apportioned accordingly. It is not available for workspaces within a domestic dwelling, for example a home office. The relief will be limited to the original construction or renovation costs over a fixed period of 50 years at a rate of 2% per year. This will be granted regardless of changes of ownership.
The relief is available to businesses paying either corporation tax or income tax but because tax year end dates may not be the same as accounts year end dates it is important to discuss any purchase with us prior to completion. There may be an optimum purchase date to achieve maximum tax benefits. Remember there remain options to claim tax relief for plant and machinery which forms part of the integral features of buildings, for example air conditioning. This is a separate but still an important allowance to be reviewed prior to completing and purchase.
The Annual Investment Allowance (AIA)
The AIA is specifically for expenditure on plant and machinery with a few exceptions, the main one being cars. It’s a beneficial allowance of 100% of the expenditure incurred, with a limit for the period. Budget 2018 announced that AIA limit will increase for one year from 1st January 2019 until 31st December 2020 from £200,000 to £1 million pounds.
Business Rates for the High Street
The Business Rates for Shops, Pubs, Restaurants and Cafes will be cut by one third if their rateable value is below £51,000. It is estimated that will be up to 90% of all High Street retail properties. This cut will be for 2 years from April 2019.
National Living Wage increased to £8.21 from April 2019
Employment Taxes - Employment Allowance Restricted
Employment Allowance has been a major boost for some small businesses, reducing the employer’s National Insurance Contribution (NIC) payments down by a maximum of £3,000 where there is one employee or more working in the business and earning over the threshold. In the budget 2018 the Chancellor restricted this allowance to employers with NIC payments due of less than £100,000 in the last tax year.
The Employment Allowance remains a fantastic way to keep employment cost down. Speak to us if you are a sole director and employee of your company as it is possible that by employing someone on a part time basis or fairly low income level could be very cost efficient for your company.
If you would like to discuss any of the topics we’ve outlined then please get in touch with us – we’d be more than happy to answer any questions that you may have. Email firstname.lastname@example.org
To be continued.....