Q. Was there any good news for SMEs in the Budget?
A. Whilst not transforming the landscape for SMEs, there was certainly some good news. The Chancellor looked to shift some of the tax burden onto large corporates, giving him some room to assist smaller businesses.
The rate of corporation tax, already set to be reduced from its current rate of 20% to 18% from 1 April 2020, will instead be reduced to 17% by 2020.
Changes to Stamp Duty Land Tax may mean a reduced cost on commercial property transactions, specifically freehold and lease premium transactions below £1,050,000.
Business rates were also reduced in the Budget. From 1 April 2017, the rateable value threshold for full relief will increase from £6,000 to £12,000, which is expected to take around 600,000 small businesses out of the business rates regime. There is also a tapering of the relief where the rateable value of the property is between £12,000 and £15,000. From 2020, the indexation of business rates will be calculated using CPI instead of RPI, which is expected to provide a further saving.
There have also been changes around entrepreneurs’ relief, which may give rise to greater investment from individuals other than employees or directors, thus making this a potentially larger source of funds for private companies.
For more information on this please contact Keith McAlister on 01892 701355
Q. I am helping my son buy a flat to live in; the purchase price is £250,000. I understand because I already own a property, if the flat is purchased in our joint names, we will have to pay additional rate Stamp Duty Land Tax (SDLT) at 5%, rather than the usual 2%. Is there anything we can do to avoid or reduce this amount?
A. The simplest option would be to gift or loan your son the amount needed to buy the flat, so he can purchase the property in his sole name. If he doesn’t already own a property then SDLT will be payable on the purchase price above £125,000 at the usual 2% rate. If you are purchasing the property in joint names for asset protection reasons, perhaps because you are worried about him holding such a valuable asset in his sole name and you want to retain some control over the property, you could purchase the property through a trust. Careful planning is still needed to avoid the additional SDLT rate applying. If you purchase the property through what is called a discretionary trust, which gives the trustees complete discretion as to when and how to benefit your son or other beneficiaries, then the additional rate SDLT will be payable. If, however, you give your son what is called a life interest (i.e. a right to occupy the property) then the SDLT rules look through the trust and, provided it is the only property which your son either owns or has a right to occupy, the usual 2% SDLT rate will apply.
For more information on this please contact Nicola Plant on 01892 701330