Corporation Tax, as can be the case in the Budget, led the way for other measures. Future cuts in Corporation Tax (to 19% in April 2017 and 18% in April 2020) have been positioned as offsetting the increased labour costs resulting from the statutory Living Wage and Apprentice Levy announcements, though whether these two elements will balance out is yet to be seen.
Productivity has been highlighted as an issue and business investment is no doubt one way to boost this. The “fixing” of the annual investment allowance at £200,000 has been positioned as an increase from the £25,000 set for the next fiscal year but in reality is a significant reduction from the £500,000 that has been in place for almost two years. Tax bills may well increase as a consequence.
Many family business owners employed at senior levels within the business restrict their salaries to ensure the business has the cash it needs to invest and grow. They then receive additional dividend payments linked to the profitability of the company and consequently, owners will see significant tax rises as a result of the changes announced last week. This will add complexity to income tax calculations and the changing tax rates mean that family businesses may want to consider the timing of dividend payments.
Many successful family businesses have been established by individuals and families arriving in the UK from overseas. The complex area of tax domicile resulted in tax benefits to many business owners and the politics of tax over the past few years has focused attention on these. From April 2017, the regime will change and those who have been tax resident in the UK for 15 out of the last 20 years will be taxed on their worldwide income and assets which would previously have been outside the UK Inheritance Tax net will be caught. The previous regime has been revised over recent years but these changes are more fundamental and family business owners who have “non-dom” status should review how they will be affected quickly.
Sources: www.kpmgenterprise.co.uk ( Article published: 2015/07/17 – Gary Deans KPMG’s Head of Family Business)
