Corporate tax rate from 1 April 2015 20%
Annual investment allowance until 31 December 2015 £500,000
2015/16 personal allowance £10,600
2016/17 personal allowance £10,800
2017/18 personal allowance £11,000
- the Bill to devolve corporation tax rate setting powers to NI Executive expected to receive Royal Assent before the 2015 General Election;
- Finance Bill 2015 to include additional support to the creative media sector;
- increased flexibility and reduced tax for savers; and
- reiteration of existing measures to reduce employer's National Insurance contributions.
Northern Ireland Corporation Tax devolution
On 8 January 2015 legislation was introduced to Parliament to devolve a corporation tax rate setting power to the Northern Ireland Assembly. The bill was passed through the House of Lords on 17 March which represented another positive step on the way towards the full devolution of the corporate tax powers in Northern Ireland.
The Bill is expected to receive Royal Assent in Parliament before the 2015 General Election. However, the Stormont House Agreement is clear that the Executive must demonstrate that its finances are on a suitable footing in order for the legislation to be implemented and the corporation tax powers to be commenced.
Creative media tax reliefs
The creative media tax reliefs which were initially outlined in the Autumn Statement in December 2014 will be introduced in the Finance Bill 2015. This is welcome news for the creative sector which is set to play an increasing role in the economic development and growth of the region.
There will be an increase to the rate of film tax relief to 25% for all qualifying expenditure, and an extension to the high-end television tax relief, by reducing the minimum UK spend requirement from 25% to 10%. Changes will also be made to the cultural test to bring this in line with the film cultural test.
The draft legislation providing a tax relief for the producers of children’s television programmes has been revised to include children’s game shows and competitions. This relief will have effect from 01 April 2015.
Supporting businesses to grow and invest
In his Budget speech, the Chancellor recognised the value of the annual investment allowance (AIA) in encouraging UK businesses to invest by noting that the scheduled reduction from £500,000 to £25,000 from 1 January 2016 would not be remotely acceptable to businesses. However, he deferred making any further commitment to maintain the current level of this valuable incentive until the Autumn Statement.
In Grant Thornton’s Budget wishlist we called for the rapid implementation of all of the Office for Tax Simplification (OTS) recommendations, including the raising of the thresholds for transfer pricing and for quarterly instalment payments. While the Chancellor recognised the fantastic work of the OTS, disappointingly he has not taken the opportunity to implement many of its recommendations to reduce the regulatory burden for mid-size businesses.
Grant Thornton also called for the Chancellor to issue a consultation on the introduction of targeted tax relief for UK businesses for the initial costs of researching and entering into new export markets. While we welcome the additional support announced for UKTI activities in China, we believe the Chancellor should have taken the opportunity to introduce wider and more significant measures to promote exports more generally.
The Government has announced further encouragement for individuals to invest in their savings. Firstly, the introduction of a new personal savings allowance from 6 April 2016 will create a tax free allowance of £500 for higher rate taxpayers, and a generous £1,000 for basic rate taxpayers on interest generated from savings income. This new allowance is expected to benefit 95% of taxpayers, making them exempt from paying any tax on the interest element of their savings income.
Secondly, from 6 April 2016, individuals who already have an annuity will be able to effectively sell it on and be chargeable to income tax at their marginal rates, instead of paying tax of 55% on the cash lump sum. This is an extension to last year's Budget announcements which provided greater freedom for individuals accessing their pension savings. This new announcement will benefit up to five million pensioners. On a less encouraging note, from 6 April 2016, the lifetime allowance for pensions tax relief will reduce from £1.25 million to £1 million, and will be indexed to increase by the rate of inflation from April 2018.
Thirdly, following a technical consultation with ISA providers, the Government will introduce new rules in autumn 2015 which will provide greater freedom to individuals making savings into and drawings out of their ISA account. Individuals will be able to make drawings out of their ISA account and make deposits back into their account without losing their ISA tax benefits, as long as the money is deposited within the same financial year up to the maximum limit, which is £15,240 in 2015/16.
Lastly, in order to help first time buyers save for a deposit, the Government will introduce a Help to Buy ISA from Autumn 2015. The Help to Buy ISA effectively provides a 25% top-up for first time buyers, and is undoubtedly welcome news to aspiring homeowners. The top-up is capped at £3,000 (for those saving £12,000). Unfortunately, the measure fails to deal with the current housing shortage and the lack of supply of suitable housing. Therefore, we are concerned the boost provided through these measures could result in higher demand and ultimately lead to higher house prices.
Grant Thornton welcomes these announcements which provide greater incentives for individuals to both save and access their savings tax efficiently.
The battle for talent
The Chancellor noted in his speech that the abolition of employer's National Insurance contributions (NIC) for employers of under 21s and for young apprentices (under 25s) will go ahead from 6 April 2015 and 2016 respectively and that over one million employers have benefitted from the NIC Employment Allowance. We welcomed these measures when announced and had called recently for the NIC abolition to be extended to cover all apprentices.
UK businesses reported increasing skills shortages in the most recent Grant Thornton/ICAEW Business Confidence Monitor. We see the reduction in the employer's NIC costs for young apprentices as a step towards ensuring business have the employees with the right skillsets and we would encourage the next Government to be braver in cuts to NIC for apprentices to develop a more highly-skilled UK labour market.
The Chancellor has recognised the value that apprentices bring to the UK economy by raising of apprentices' hourly rates from October 2015, resulting in a salary increase in excess of £1,000 for a full-time apprentice.
We are pleased to see the Government's response to our request to give employers more direct control of apprenticeship funding through the introduction of an Apprenticeship Voucher from 2017. This will give employers the purchasing power to have an even greater say in the quality, value for money and relevance of the training that their apprentices receive.