Accountant Emily Coltman gives the lowdown on how the Autumn Statement might affect small businesses.
The Chancellor George Osborne has made his annual Autumn Statement in Parliament and as always it's been a mixture of good news and not-so-good revelations for the small business sector.
Emily Coltman FCA and chief accountant to online accounting software provider FreeAgent, gives a brief run-down of some of the golden nuggets that were announced in the Autumn Statement for freelancers, contractors and small service-based businesses – and also a few potential timebombs!
The golden nuggets…
Business rates reductions and discounts
If you pay business rates on a property you use for your business, and are eligible for Small Business Rates Relief (SBRR), this has been extended for another year to April 2015.
But that's just the tip of the iceberg. You also won't lose your entitlement to SBRR if you take on a second property; you can retain SBRR on your first property for a year after you take the second one on, with effect from 1st April 2014.
Also, there'll be a £1,000 discount on the rates of retail premises (including pubs, restaurants, cafes, and charity shops) if the property rateable value is under £50,000. This will run for 2 years from April 2014.
And, if between 1st April 2014 and 31st March 2016 you take over and move into a retail property that's been empty for more than a year, then for the first 18 months you will receive a 50% discount on your business rates.
These measures are all aimed at boosting Britain's high streets and increasing the number of small shops and other retailers trading.
Travelling not quite so expensive
The planned fuel duty rise in September 2014 has been cancelled, which is good news for business owners who spend a lot of time on the roads.
Train fares are also capped to rise in line with the Retail Prices Index, rather than above it.
More funding for new businesses
The British Business Bank's funding will also be increased by a further £250 million.
No employer's NI for younger staff
From April 2015, if you employ staff aged under 21, you won't have to pay employer's NI on their wages, so long as they are earning less than £42,285 a year (£813 a week).
Above that limit employer's NI will be charged as normal.
Exemption on medical benefits
There will be a tax exemption for amounts up to £500 paid by employers for medical treatment for employees. It wasn't made clear when this will come in.
…and the ticking timebombs…
Changes to IR35
The full report of the Autumn Statement said: "The government will legislate to prevent employment intermediaries from being able to use contrived contracts to disguise the employment of workers. This will take effect from April 2014 and raise around £400 million each year."
It further refers to "amending existing legislation" and "consulting on strengthening existing legislation".
We can expect changes to IR35 early in the New Year, so if you are a contractor or freelancer operating through your own limited company, be vigilant and keep your eyes open for more detail in this area.
Payments up front for private use of company cars
At the moment, if you have a company car or van, your tax code will be altered to collect the extra tax on it, which can happen months after you are first allowed to use the vehicle.
From 6th April 2014, however, we're promised legislation which will "ensure individuals make payments for private use of a company car or van in the relevant tax year".
More details can be expected.
This is a classic piece of tinkering at the edges of the tax system, rather than implementing the wholesale reforms and simplification it so sorely needs. KPMG apparently describe the UK's tax system as the most competitive in the world – given its complexity, I would beg to differ!
Nine of the Office for Tax Simplification's recommendations to simplify the taxation of employee benefits and expenses are due to be implemented in January 2014, though nobody has yet said which ones, and continued developments to simplify National Insurance for the self-employed are also promised.
But it is my belief that if the UK is genuinely to compete on a global business scale, it needs a simple, flexible and robust tax system which does not require an accountancy qualification to fully understand.
And we're a long way from that.
*Emily Coltman FCA is Chief Accountant to FreeAgent. The company provides an award-winning online accounting system designed to meet the needs of freelancers and small businesses. Try it for free at www.freeagent.com