Budget 2018: Business hopes and fears

Whilst the UK continues to enjoy record employment levels, sustained demand for its exports, and enviable levels of Foreign Direct Investment compared to the rest of Europe, a West Midlands solicitor is warning that now is not the time to jeopardise our enterprising, competitive business landscape or rock business confidence.

James Sage, a partner in FBC Manby Bowdler’s Corporate Team, has been reflecting on what he believes the Chancellor needs to deliver to UK businesses to ensure they approach the coming year with a positive economic outlook:

“The Chancellor speaks of his commitment to low taxation, but at the same time alludes to the potential necessity of small tax increases to both individuals and businesses.

“However, with productivity growth still weak; the skills shortage continuing to be a concern and an air of uncertainty deterring some businesses from investing and growing, this would be a bad move.

“The UK is strong in many respects, but greater levels of business confidence must be nurtured.  If that means promoting low taxation Keynesian Economics in the short-term, then I believe that’s preferable to punitive taxation hikes right now.”

The Department for International Trade recently reported on the continued strength of UK exports but as James continues, these can only be sustained and built on when businesses are supported in their growth:

“If businesses here in the West Midlands are provided with the environment to grow and invest, they’ll exude confidence which will not only serve them well here in the UK, but also on the world stage.

“The CBI has suggested increasing the Annual Investment Allowance to £500k for two years to boost innovation and competitiveness; a review of current levels of capital allowance; and the introduction of a Business Growth Accelerator to provide 12 months relief from business rates when carrying out improvements to commercial property. 

“These are all moves we’d welcome.  Whether they’re likely to be realised remains to be seen, but with less than a week until his next Budget, I urge the Chancellor to keep business at the heart of the UK’s future success.”

The Budget should be treated as an opportunity to make it easier for entrepreneurs to pass businesses to the next generation, according to Julia Rosenbloom, private client tax partner in the Birmingham office of accountancy, tax and investment management group Smith & Williamson.  

“Transferring assets to the next generation while a business owner is still alive can help ensure the organisation’s long-term success,” she said.  

“This is good for British enterprise and protecting jobs. Unfortunately, however, I have experience of business owners being put off from doing this given how some reliefs are organised. I would therefore call on the Chancellor to address this situation in the upcoming Budget.”  

Julia Rosenbloom’s four Budget proposals are:   

Give property businesses same reliefs as other businesses   

“It seems unfair that owners of traditional businesses enjoy various incentives, such as inheritance tax relief, from which property businesses are excluded. I have clients who manage large property portfolios as a full-time job plus employment and income can be created for teams of local people. 

“Property entrepreneurs should therefore be encouraged to grow successful businesses during their lifetimes that can be passed efficiently to successive generations.  

“To ensure that the system is not misused by property investors, a statutory definition for property businesses could be introduced, such as one that refers to scale or the level of activity required.”

Allow greater opportunity to make lifetime gifts while maintaining control

“Transferring a business to the next generation during an owner’s lifetime can help facilitate its long-term success and is undeniably positive for the wider British economy. I find that entrepreneurs often want to retain control and so are advised to set up a trust but this can mean they face inheritance tax charges where full reliefs are unavailable.  

“I would like the upcoming Budget to give business owners greater opportunities to transfer assets into trusts.” 

Make it easier to make gifts without crystallising CGT 

“Gifts are generally treated as though they are sales for CGT (capital gains tax) purposes even though there are no sale proceeds. This can lead to a CGT charge which puts people off gifting during their lifetime.  

“Deferral reliefs (so that CGT is only payable on an actual sale) are available but they don’t apply to all assets or in all situations. These reliefs should be extended to wider classes of assets to make it easier to move things down to the next generation.”  

Change SDLT rules for gifting property portfolios 

“Where debt is secured on property and it is transferred subject to that (which is generally the case unless the debt can be paid off), you currently get a Stamp Duty Land Tax (SDLT) charge. To facilitate the passage of property to the next generation, the rules should be changed so that no SDLT is chargeable in such circumstances.”