The Chancellor crammed a lot into Budget 2014, including one or two pleasant surprises. What are the key changes for you and your company?
Seed enterprise investment scheme (SEIS). Kicking off with some good news: the Chancellor has extended indefinitely the tax breaks for anyone investing in start-up companies, i.e. those that have been around for two years or less. Unlike its sister scheme, the enterprise investment scheme, directors of start-up companies can take advantage of the SEIS tax breaks. These can be worth up to 64% of the amount you invest (see The next step).
Annual investment allowance (AIA). There’s more good news. The AIA, which allows businesses to claim a tax deduction equal to 100% of the cost of equipment for the year of purchase, won’t be reduced to £25,000 at the end of this year. Instead, it has doubled to £500,000 from 1 April 2014 until 31 December 2015.
Transfer of corporate profits. One of the Chancellor’s announcements did cause us a few jitters, at least at first. New rules will be introduced to stop companies within the same group transferring profits between themselves to reduce their overall tax bill. However, on closer reading it will only catch situations where a tax-avoidance scheme is involved. We’ll let you know more when the full details are published by HMRC.
VAT – prompt payment discounts. This change will affect your invoicing procedures where you offer customers a discount for paying promptly. Currently, you only have to charge VAT on the discounted amount, even where the customer doesn’t qualify for any reduction in price because they don’t pay in time. New rules will mean that your company will have to account for VAT on the actual price paid for goods and services. The change will take effect on 1 May 2014 for supplies of telecommunication and broadcasting services, but on 1 April 2015 for any other type of supply.
The tax break for directors investing in their own new companies has been extended indefinitely. The 100% tax deduction for buying equipment has doubled to £500,000 from 1 April 2014.