A Budget has passed without any further attack on the LLP structure or ownership. But there were several announcements that will have an impact on businesses and their owners operating in the professional services sector:
From April 2016, the pension annual allowance (AA) will be restricted for individuals with annual income of more than £150,000. The current AA of £40,000 will be restricted by £1 for every £2 of annual income over £150,000, with a minimum AA of £10,000. However, the announcement of aligning the pension input period with the tax year-end provides some interesting planning opportunities for the current year.
The Annual Investment Allowance (AIA) was due to be reduced to £25,000 for capital expenditure incurred from 1 January 2016. The AIA for small and medium sized businesses will now be set at £200,000 from 1 January 2016 for the rest of this Parliament. This is welcome news and removes the annual uncertainty previous years have created.
Over the years, a number of partners and owners have invested in property. From April 2017, individuals owning rental properties will see a phased restriction over four years in relation to tax relief available on finance costs. By 2020/21, all finance costs will attract basic rate tax relief only. In addition, from April 2016, the advantageous 10 per cent wear and tear allowance will be replaced with a system that allows a deduction for costs actually incurred.
Those business structured as a company or include a corporate in their group structure will no longer be able to claim tax relief on purchased goodwill for acquisitions in the accounting periods beginning or after 8 July 2015. This aligns trade and asset deals with shareholder purchases. This will have a significant impact on many firms growth strategy through merger and acquisition.
The government will consult in the Autumn on abolishing Class 2 and reforming Class 4 NICs.
If you have any queries on these issues please contact Mark Waddilove.