Category Archives: Business Innovate

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    Budget 2016 – A budget for small business and savers

    This year’s Budget is one that small companies should be excited about, the chancellor not only announced his intention to lower corporation tax to 17% by 2020 but also a raft of measures to shift support towards smaller businesses and savings.

    Many will ask, why is such a shift important? SMEs make up a significant proportion of businesses and economic activity in the UK. The FSB estimate that small businesses accounted for 99.3% of all private sector businesses at the start of 2015. That is a lot of activity and economic potential that could be unlocked.

    Whilst there have been some announcements that add costs of items such as the implementation of the National Living Wage, assistance to small companies during the transition until 2020 will help to relieve cash flow issues.

    There were also new saving products in the budget with the launch of Help to Save and the lifetime ISA. These will be a welcome relief to individuals that have struggled to improve their financial position give the historically low interest rates.

    Infrastructure was another potential beneficiary with the announcement of HS3, Crossrail 2, several road investments and extra funds for flood defences. Such investment is key to ensuring the economic potential of the UK in the future. Caution should, however, be urged. Whilst the commitment to these projects is sound progress the UK still struggles in the international rankings for its infrastructure and its investment levels are generally considered to be below where they need to be.

    Below is a summary of the key announcements from the budget documents (click here)

    Announcements

    • Permanently double Small Business Rate Relief from 50% to 100%.
    • Increase the threshold for the standard business rates multiplier to a rateable value of £51,000.
    • From April 2020, switch in the annual indexation of business rates from RPI to CPI
    • By 2022 local authority business rate systems will be linked to HMRC digital tax accounts
    • From April 2018, Class 2 NICs will be abolished
    • The government will reform Class 4 NICs
    • The introduction of two new £1,000 allowances for property and trading income.
    • From 6 April 2016, the higher rate of Capital Gains Tax (CGT) will be reduced from 28% to 20%, and the basic rate will be reduced from 18% to 10%.
    • A restriction of the amount of profit (in excess of £5m) that can be offset through losses carried forward.
    • Abolish the CRC energy efficiency scheme following the 2018-19 compliance year
    • The reform of stamp duty on commercial property
    • Increase the VAT registration threshold in line with inflation to £83,000 from 1 April 2016
    • A further £3.5bn of savings from public spending in 2019-20
    • Around £1.5bn investment in areas such as housing, schools and transport over the next three years
    • Increasing the personal allowance from £11,000 in 2016-17 to £11,500 in 2017-18
    • Increase the higher rate threshold by £2,000 to £45,000 in 2017-18
    • The devolution of power to school leaders, expecting all schools to become academies by 2020
    • Create a National Funding Formula for schools from 2017-18.
    • Invest £20 million a year of new funding in a Northern Powerhouse Schools.
    • A new soft drinks industry levy targeted at producers and importers of soft drinks that contain added sugar.
    • The ISA allowance will rise from £15,240 to £20,000 in April 2017
    • From 6 April 2017 any adult under 40 will be able to open a new Lifetime ISA. They can save up to £4,000 each year and will receive a 25% bonus from the government on every pound they put in
    • A new Help to Save scheme for those on low incomes
    • Increase the existing £150 Income Tax and National Insurance relief for employer arranged pension advice to £500
    • The delivery of 13,000 affordable homes by bringing forward £250 million of capital spending
    • Move to a more zonal and ‘red line’ planning approach
    • The new mandatory National Living Wage (NLW) will come into effect from 1 April 2016, set at £7.20 an hour for workers aged 25 and above.
    • The main rate of the NMW, which applies for workers aged between 21 and 24, at £6.95 from October 2016
    • An individual lifetime limit of £100,000 on gains eligible for Capital Gains Tax (CGT) exemption through Employee Shareholder Status
    • £300 million of funding to improve northern transport connectivity and is giving the green light to High Speed 3
    • The green light to Crossrail 2, supported by £80 million to help fund development
    • Deliver a 5G strategy in 2017
    • Launch of the second Roads Investment Strategy, which will determine the investment plans for the period from 2020-21 to 2024-25
    • Allocate a £50 million Pothole Action Fund for England in 2016-17
    • Boost spending on flood defence and resilience by over £700 million by 2020-21
    • £50 million for innovation in energy storage
    • Auction Contracts for Difference of up to £730 million this Parliament
    • Establish a new Broadband Investment Fund
    • Commit to the 750MHz public sector spectrum in bands under 10GHz being made available by 2022
    • New devolution deals with the West of England, East Anglia, and Greater Lincolnshire
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    Business Innovate – The Budget 2015; surprises and innovation

    The final Budget before the election was always going to struggle to provide sizable giveaways with such tight public finances, but even so there were some interesting surprises.

    The most innovative of these was the announcement of a Help to Buy: ISA, where for every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings. Many first time buyers are sure to welcome such a scheme.

    Alongside this, was the designating of the first 20 Housing Zones outside London, and continuing to work with the other 8 shortlisted areas. The problem, however, remains that supply and demand simply are too unbalanced.

    There were also a few measures that should help to boost employment opportunities for the young with the abolition of Employer NICs for under 21 year olds from April 2015 and continued support for apprentices. This alongside a rise in the personal allowance to £10,800 in 2016-17 should help to continue to reduce the tax burden on those entering employment for the first time.

    There were also few interesting measures that are sure to receive less headlines but will help to transform and reduce the cost of administering government services. The Budget announced:

    • That following a successful trial, the government will implement ‘GOV.UK Verify’ which is a new way for people to prove their identity online when using government services.
    • The government will transform the tax system over the next Parliament by introducing digital tax accounts, removing the need for annual tax returns.

    Such measures, have the potential if they are further linked in the future providing a truly seamless point of access for government services.

    Finally, a number of specific investments were announced that the government hope will continue to improve the UK’s international standing as a leader in research, development and innovation. Such as:

    • £1 million to the Centre for Process Innovation to support innovation and knowledge transfer in the North East’s chemicals sector.
    • £14 million to invest in an Advanced Wellbeing Research Centre (AWRC).
    • A package of measures to improve the accessibility of R&D tax credits for smaller businesses.
    • A further £100 million in cutting-edge research projects through the current UK Research Partnership Investment Fund round.
    • £400 million for the next round of funding for cutting-edge scientific infrastructure.

    Go to: http://businessinnovate.co.uk/

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    Business Innovate – Autumn Statement: innovative steps that make difference

    The 2014 Autumn Statement left little room for manoeuvre, the deficit is not as low as the government would like and the temptation for giveaways is significant. What can be said though is that whilst the deficit challenge remains, the focus on innovation and reform rather than grand gestures is a welcome relief.

    I use to illustrate this point two particular measures announced in the Autumn Statement.   The first is that of apprenticeships. The education system and tax system in reality does not encourage the knowledge and skills transfer that is possible between businesses and youngsters entering the labour market. Yet there has traditionally been a mix of mismatched and poor incentives to encourage limited business and individuals to undertake such schemes. This has now potentially changed.

    The Autumn Statement announced that it was abolishing employer National Insurance contributions for apprentices aged under 25 on earnings up to the upper earnings limit. This in the grand scheme of spending is not a significant sum but the message and incentive is right. It encourages that transfer from education to work and helps to build a relationship between business and future potential employees and output. Such innovative thinking is long overdue with business craving practical skills to improve productivity.

    The second measure that stands out is the reform of stamp duty. This tax has long created distortions in the housing market. It is well overdue for reform but the changes announced today should be part of a continued effort to reform the housing market to ensure that future generations are able to own their own home, which is of a reasonable quality, at an affordable rate. In this respect stamp duty is an issue because it creates artificial holes in pricing where buyers have to spend significantly more to reach the ‘next level’ of the ladder. It is no longer just the first time buyers that don’t have the capital but also the second movers. This is why such reform is so important and innovative. I would, however, also stress that this is only part of the solution. It is a demand side response where as in actual fact the UK suffers a supply side problem. This is why the measures to increase the degree of house building are welcomed but do not equate to anything near the 260,000 homes a year required to meet population growth.

    So whilst the majority of this statement contains small changes there is some significant progress. It should, however, never be underestimated that the measures announced are actually the first steps to what are long needed reform.

    Autumn Statement: Summary of other main points

    TAX

    • Stamp Duty rates overhauled. Top rate now 12% on properties worth more than £1.5m effective from midnight Wednesday. There will be no duty on properties worth up to £125,000 then 2% rate on the portion up to £250,000 then 5% up to £925,000, then 10% up to £1.5m.
    • Higher rate income tax threshold to rise to £42,385 next year.
    • Income tax-free personal allowance to rise to £10,600 rather than the planned £10,500 next year, giving wage boost of £825 a year.
    • ISAs can be inherited tax free.
    • Fuel duty remains frozen.
    • People who die under 75 to be able to pass on annuities, tax free.

    CORPORATE TAX

    • A so-called ‘Google Tax’  will introduce a levy of 25% on profits shifted abroad by multi-national firms. The Diverted Profits Tax aims to raise more than £1bn over five years.
    • Banks to pay almost £4bn more in tax over next five years, with profits which can be offset by losses for tax purposes to be limited to 50%.
    • Inflation-linked increase in business rates capped at 2% and discount for shops, pubs and cafes increased by 50% to £1,500.

    SAVINGS

    • Limit on saving in New ISAs to rise to £15,240

    DEVOLUTION & ‘NORTHERN POWERHOUSE’

    • Business rates for Wales to be devolved to Welsh Government.
    • Plans law to devolve corporation tax to Northern Ireland if the Northern Ireland executive shows it can manage the financial implications.
    • Investment of £250m in new advanced material science institute in Manchester with branches in Leeds, Sheffield and Liverpool. Tendering for new franchises for Northern Rail and Trans-Pennine Express to ensure modern trains.

    EDUCATION

    • Government-backed student loans of up to £10,000 are to be made available for postgraduates.

    TRAVEL

    • Air Passenger Duty for under-12s abolished from May 2015. Scrapped from 2016 for under-16s.

    SAVINGS

    • A further £10bn of Whitehall efficiencies is planned while £5bn more is sought from crackdown on tax evasion and avoidance.
    • Public service pension reforms will be completed, saving £1.3bn annually.

    SPENDING

    • NHS gets additional £2bn every year for frontline services. A £1.2bn investment in GP services will be paid for from foreign exchange fines.
    • Government spending £10bn less than forecast this year but warns the coming years will require “very substantial savings in public spending.”

    PUBLIC FINANCES

    • Office for Budget Responsibility (OBR): Forecast 2014 GDP growth upgraded to 3% from 2.7%. 2015 forecast raised to 2.4%.
    • “Deficit is falling this year and every year.” Deficit now cut in half. OBR forecasts borrowing to fall from £97.5bn in 2013/14 to £91.3bn in 2014/15 (£5bn above annual target). Budget surplus of £23bn predicted for 2019/20.
    • Osborne says deficit reduction better than some predicted as welfare spending is lower and interest paid on national debt is considerably lower.
    • OBR predicts wage growth above inflation for the next five years.

    Go to: http://businessinnovate.co.uk/

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    Business Innovate – Budget 2014 – Innovation, before big announcements

    Whilst the 2014 Budget was unlikely to be one of significant spending given the fiscal constraints that continue to challenge government, it did provide a backdrop of significant innovation in several policy areas which has not been seen for a number of years.

    The most significant of these innovations was in the area of pensions and savings. The UK has for a long time struggled to encourage individuals to think of their long term needs, with policies built up over a number of years being bolted on to an ever more complex system.

    The 2014 Budget looks to be taking some significant shifts in these areas. On pensions the Chancellor announced that from April 2015, the government will change the tax rules to allow people to access their defined contribution pension savings as they wish from the point of retirement. If a significant number of individuals choose such action this would be a significant step away from the current system of having to purchase an annuity and could lead to some interesting market innovations in terms of providing incomes for retirement.

    Another area of innovation surrounded encouraging saving, with the launch of the New ISA (NISA). This NISA will not only see its limit raised to £15,000 but will also allow individuals to transfer the amount they invest in cash and shares, removing the set restriction for each area. Another possibly more important innovation is that ISA eligibility will be extended to peer-to-peer loans, and all restrictions around the maturity dates of securities held within ISAs will be removed. Again this could provide a number of new investment opportunities that provide better rates and direct savings into small businesses through platforms in the peer to peer lending market.

    As well as encouraging individuals to save the Budget 2014 announced the doubling of the annual investment allowance (AIA) to £500,000 from April 2014 until the end of 2015. This will be a significant benefit to businesses wishing to invest and will mean that the scheme will cover 4.9 million firms (99.8% of businesses), providing 100% up-front relief on their qualifying investment in plant and machinery.

    Further to this the government also announced it will raise the rate of the R&D tax credit payable to loss making small and medium sized companies from 11% to 14.5% from April 2014, providing valuable support as the economy continues to improve.

    Looking forward, there is another interesting announcement for small business in the budget that the British Business Bank will issue a request for proposals to implement an innovative wholesale guarantees programme alongside the Budget. Such a scheme could provide significant support for businesses and provide targeted assistance in the future, and so Business Innovate looks forward to engaging with government on this further in the future.

    Whilst supporting small business is welcome, opening up opportunities is important as it allows companies to support themselves. The Budget announced an overhaul of UK Export Finance’s (UKEF) direct lending programme, doubling it to £3 billion and cutting interest rates to the lowest permitted levels. This scheme will mean that UK business will have access to one of the most competitive support schemes available for wining contracts in new markets, helping them to improve and expand overseas.

    Go to: http://businessinnovate.co.uk/

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    Business Innovate – Website launch

    Today the new progressive Business think tank, Business innovate opened for business. This launch meant that two major milestones  were hit:

    The launch of the Business Innovate website

    Following  development work by myself, today saw the launch of the Business Innovate website.

    This site combines clean looks, sharing capabilities, automatic newsletters, security features, membership and event management all in one place to help Business Innovate grow and reach a wider audience.

    Being responsive, users are able to easily access the site in a friendly format both via a pc and mobile device for easy reading both in the office and on the move.

    To view the site please go to: http://businessinnovate.co.uk

    Soft Launch event

    On the morning of January 16, the soft launch, kindly hosted at the KPMG offices in Salisbury Square, London, saw a broad range of individuals with connections to different sectors of UK business come together to discuss the remit of Business innovate.

    Two challenges were set for the roundtable of attendees to discuss. The first was whether the proposed areas that Business Innovate would explore, innovation and fair, inclusive and responsible business practices and their planned work areas constituted a holistic progressive business position. The second challenge was a discussion of what the priority business areas should be for Business Innovate to focus on ahead of the general election should be.

    Feedback from the table included agreement that the proposed areas for Business Innovate constituted a holistic progressive business position. On the priorities ahead of the general election, better supporting young people to access opportunities and relevant training was seen as critical for a sustainable UK business future and to tackle high youth unemployment.

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