Budget 2014 – Business Briefing
This business briefing highlights the key issues for small and medium-sized enterprises (SMEs) in the 2014 Budget.
Tax free childcare
The government has confirmed that the new tax-free childcare scheme will be launched in autumn 2015. Under the scheme, working families (all parents in the household must be "in work" earning on average £50 a week, although there will be dispensations for certain workers) will be able to claim 20% of qualifying childcare costs for children under 5 (and children with disabilities under 17) from autumn 2015. The new scheme will be available for children under 12 within the first year of the scheme's operation. Claims will be capped at £2,000 per child per year. If one family member is an additional rate taxpayer, the family will not be eligible to participate.
The new scheme will replace the current employer-supported childcare schemes and unlike the current regime, will be available to the self-employed. Employees registered for employer-supported childcare before the commencement of the new scheme will be able to continue to participate in the employer schemes for as long as the employer offers it, or may switch to the new scheme. Once the new scheme has commenced, employer-supported schemes will be closed to new entrants. A working family will not be able to participate in both an employer-supported scheme and the new scheme. However, the provision of workplace nurseries by employers will not be affected by the introduction of the new scheme and families will be able to benefit from both.
There will be an extension of the Apprenticeship Grants for Employers scheme, providing grants for employers for an additional 100,000 apprenticeships by 2015-16.
Tax relief for occupational health treatment
A tax exemption for amounts up to £500 paid by employers for medical treatments for employees is expected to become available in October 2014, to coincide with the introduction of the Health and Work Service.
VAT registration and deregistration
The VAT registration limit will be increased in line with inflation for both taxable supplies and for acquisitions from other member states from £79,000 to £81,000 with effect from 1 April 2014.
The VAT deregistration limits will also increase to:
- £81,000 for acquisitions from other member states.
- £79,000 for taxable supplies within the UK.
The revised deregistration limits also take effect from 1 April 2014.
SEIS income tax and CGT re-investment relief permanent
The seed enterprise investment scheme (SEIS), which is designed to encourage individuals to invest in start-up trading companies, will be made permanent. Currently, SEIS income tax relief applies to investments in qualifying shares issued on or after 6 April 2012 and before 6 April 2017 up to an annual investment limit of £100,000. Capital gains tax (CGT) reinvestment relief applies to gains accruing in 2013-14 provided an investment in qualifying shares is made in 2013-14. There are no changes to the amounts that qualify for relief.
Increase in repayable R&D tax credit for loss-making SMEs
With effect from 1 April 2014, the tax credit for research and development (R&D) that loss-making SMEs can claim by way of a cash sum from HMRC will increase from 11% to 14.5% of the enhanced R&D expenditure (currently enhanced to 225% of actual qualifying expenditure). An SME is defined as a company or organisation with fewer than 500 employees and either an annual turnover not exceeding 100 million Euros or a balance sheet not exceeding 85 million Euros.
Self-service time to pay
A new online system will be introduced to enable taxpayers in financial difficulty to set up a payment plan for self-assessed income tax. Details of the new system and the time-frame for its introduction have yet to be announced.
Direct recovery of tax debts
Legislation will be introduced to allow HMRC to recover tax and tax credit debts of £1,000 or more directly from taxpayer bank and building society accounts, including ISAs. These powers will be subject to rigorous safeguards.
This measure will modernise and strengthen HMRC’s powers to recover tax and tax credit debts. It will focus on debtors who owe at least £1,000 and have been contacted multiple times by HMRC to pay and refused to do so. A minimum aggregate balance of £5,000 will be left across all accounts, including ISAs, after the debt is recovered.
Annual investment allowance increased to £500,000 until December 2015
The annual investment allowance (AIA) cap will be increased to £500,000 (from £250,000). The new amount will apply to qualifying expenditure incurred between 1 April 2014 (for corporation tax) or 6 April 2014 (for income tax) and 31 December 2015. Currently, the AIA operates by providing a 100% allowance for qualifying expenditure up to the specified annual cap.
Business premises renovation allowance
Legislation will be introduced to clarify the type of expenditure that qualifies for relief under the business premises renovation allowance.
Enterprise zones: enhanced capital allowances extended investment period
The period in which 100% enhanced capital allowances (ECAs) are available in Enterprise Zones (EZs) will be extended by three years until 31 March 2020. Legislation will also introduce a power to make future extensions to the duration of ECA schemes. ECAs are available to companies investing in qualifying plant and machinery on designated sites within EZs.