Following the recent budget statement, our colleagues at Donald Reid Group have looked at some of the issues raised in more depth. Here, Keng Cheong, Tax Manager at DRG Chartered Accountants, considers the impact of the Pre-Brexit Budget on businesses.

Boost to business investment

The announcements of new structures and buildings allowance and a temporary increase in the Annual Investment Allowance to £1m will be a boost to business investment. For the former, the allowance allows developers (and subsequent purchasers) to obtain relief on the cost of constructing new non-residential structures. The latter allows businesses who are planning to make material acquisitions to obtain immediate relief of up to £1m rather than writing down allowance at 18%.

Introduction of digital services tax

With bricks and mortar businesses in mind, the introduction of the digital services tax is a small step to attempt to level the playing field and recognises the value derived from UK customers by large multinationals. Much has been said about the amount of tax that will be collected from this tax. However, its introduction will allow the Government to revise the safe harbour provisions should the need arise in the future.

Tax avoidance measures

Together with the above, the Government continues to bring in measures to tackle tax avoidance. These include changing the definition of permanent establishment, introducing legislation to tax income referable to UK sales from intangible properties held in a low tax jurisdiction and preventing abuse of the R&D tax credit scheme. In respect of R&D, the restriction may discourage rather than encourage innovation as small and medium enterprises reinvest the repayment. Preventing abuse is necessary but steps to prevent this should not penalise other claimants. We await the outcome of the consultation.

An interesting announcement is the government will seek to introduce a targeted relief for the cost of goodwill in the acquisition of businesses with eligible intellectual property from April 2019.