New Government: 6 Things to Look Out For

By December 16, 2019 March 23rd, 2020 Insights
New Governement 6 things

The country has been through yet another election and this time Conservatives won a decisive majority to implement their vision of governance. While the governing party remains the same, the party has pledged changes in areas such as taxation that are important for businesses to be aware of. So what are the key things businesses need to look out for from the new government? Here are the main pledges from the Conservative manifesto and the possible changes that may be on the horizon as the new government begins its work.

Passing the Brexit Withdrawal Agreement

Perhaps the most clarity in terms of the new government’s action plan relates to Brexit. The Tories have been clear that they intend to pass the Brexit Withdrawal Agreement before the end of January and take the country out of the European Union. This would mean the withdrawal period would run its course by the end of next year. It’s not yet clear if the new government will propose the same Withdrawal Bill that was proposed in October but it’s likely to be nearly identical to it.

The new government will face the tough task of negotiating a trade agreement with the EU in record time. Michael Gove has promised that a deal gets delivered by the end of 2020 and many businesses would want this to happen as soon as possible. Brexit is still a number one issue for many SMEs and while the election created certainty around the topic, businesses will still need many questions answered and clarified.

Changing R&D Tax Credits

R&D is an important part of business innovation, with the current system allowing companies to claim back some of the expenses either through a reduction in Corporate Tax or as a cash lump sum. The new government could look to overhaul the system and provide businesses with more incentives to invest and innovate. The manifesto outlined a plan to increase the R&D Tax Relief rate to 13% from the current 12% and look at ways to incentivise investments in cloud computing in particular.

Increasing National Insurance Threshold and Employment Allowance

Another essential proposal is the promise to raise the National Insurance threshold next year to £9,500. Eventually, the party wants to make the first £12,500 of earnings tax free but this has only been mentioned and not pledged as part of the manifesto.

Tories have also said they would look into increasing Employment Allowance for SMEs. Currently, businesses and charities paying employers’ Class 1 National Insurance are allowed to write off up to £3,000 a year of those National Insurance payments. The party has said it would increase it to £4,000 but details around the scope of the change remain unclear.

Promising to Avoid Increases in Many Tax Rates

The new government has also made promises to avoid further hikes in most taxes. In the manifesto, the Conservatives pledged to not raise the following taxes:

  • Income tax
  • National Insurance
  • Value Added Tax

Businesses can, therefore, breath a sigh of relief and continue operating as before. However, all tax systems are unlikely to remain untouched. Members of the government have mentioned plans to introduce a 3% stamp duty surcharge for non-UK residents in cases where the buyer is an individual or a company.

Cracking Down on Tax Avoidance

Tories have also pledged to go after tax avoiders and evaders although there are no clear proposals as to how the crackdown would look like. The party has talked about creating a new anti-tax avoidance and evasion law to close loopholes. This would include increasing the prison term for the worst tax fraud to 14 years and strengthening the Anti –Tax Evasion unit of HMRC.

Reviewing Systems to Help Business

Finally, the Tory manifesto promised to start reviews on numerous systems that impact businesses. They pledged to examine:

  • Entrepreneur’s Relief
  • Business rates along with possible reductions to them
  • Self-employment in terms of improving the access to finance and credit

It’s unclear when these reviews would begin but the new government has promised to hold a new Budget in the first 100 days. The Budget is likely going to provide us with more detail on what proposals are going ahead and how the different pledges will shape policy decisions.

What You Can Do Now

The new government and its policies are still in the early days. It’s hard to make predictions as to what might happen and the reality is that promises don’t always amount to actual policies. The best thing most businesses can do is to wait for the Budget.

However, if there is one area where businesses should begin to act, it’s the issue around Brexit. If you haven’t already, then you should start speeding up your preparations for Brexit. As mentioned, the party has been clear it wants to pass the Brexit Withdrawal Agreement before the end of January and with a clear majority in place, it seems likely the country is going to leave the EU with or without a deal. While the transition period until the end of 2020 would give businesses a few more months to prepare, the reality is that the clock keeps ticking – there isn’t that much time to ensure your business is Brexit ready so actions are needed right now!

If you are struggling to understand the impact Brexit might have on your business, you can talk to us at Devonshire Green. Our team has plenty of experience in working with SMEs and we can help your business prepare for the upcoming changes. Contact us today and let’s figure out together what is on the horizon for your business!