Giveaway Budget offers a few bones for business

22 November 2017, 15:51

In what was a Budget chock-full of giveaway measures, there were a few bones for businesses, most of whom will be reasonably satisfied with what was announced.

One of the biggest winners is the oil and gas sector, which should benefit from measures aimed at both extending the life of existing oil and gas fields, while encouraging investment in new ones.

The Chancellor is enabling a portion of tax reliefs attached to older fields to be passed to the buyer, bringing down the cost of decommissioning those fields, a key factor that has deterred investment.

Derek Leith, head of oil and gas tax at accountants EY, said it was "an unprecedented change" to UK oil and gas law.

Also likely to be pleased by this is the aviation sector, as Air Passenger Duty on long-haul economy flights and short-haul flights was frozen, which was probably as good as the airlines could have hoped for.

Their share prices rose, as did those of the estate agents, which ought to benefit from the stimulation to activity created by the big cuts in stamp duty for first time buyers.

For the pharmaceuticals industry, meanwhile, there was an extra £2.3bn to support spending on research and development and an increase in R&D; tax credits.

There was also cheer for smaller businesses.

The Chancellor decided against reducing the turnover threshold at which VAT is payable, despite speculation he would do.

The threshold will remain frozen at £85,000 for the next two years which, as Mr Hammond noted, is "by far the highest in the OECD".

He pointed out that, in Germany, VAT becomes payable by small businesses at just £15,600.

It is a giveaway that will cost the Treasury £15m next year and £55m the year after.

There was also good news on business rates, arguably the biggest bugbear for commerce, with the Chancellor bringing forward by two years the switch from indexing business rate rises from the higher RPI to the lower CPI.

He estimates that will be worth £2.3bn to businesses during the next five years and the measure was described by the employer's organisation, the EEF, as a "victory for businesses".

In a further gesture to businesses, Mr Hammond targeted the so-called 'staircase tax', which charges higher business rates to firms with premises that are linked by a communal lift, corridor or staircase.

This has been done by extending a £1,000 discount to pubs on their business rates but also, more importantly, by legislating to reinstate the original business rates bill for those firms affected and by backdating it.

Rate revaluations will also, in future, take place every three years instead of every five years in order to reduce the size of changes.

Self-employed private contractors also received some respite by announcing a consultation on extending so-called IR35 legislation - which effectively allows the Government to tax self-employed contractors as employees - next year.

There had been predictions that the rules, already in force in the public sector, would be extended to private sector firms.

And, above all, Mr Hammond also extended a hand to business by announcing no change to his plans to reduce corporation tax from the current 19% to 17% by 2020.

There had been fears that this might be deferred or even cancelled.

Not that it was all good news.

The change from five yearly to three yearly business rate revaluations will undoubtedly hurt some businesses by raising the sums they pay.

From January next year, businesses will no longer be able to claim relief for the effect of inflation against capital gains, pushing up the amounts of corporate taxes payable.

And there was also a whack for the big US tech firms, in the form of making online marketplaces jointly liable for VAT with sellers, as well as news that income tax will now be applied to royalties relating to UK online sales that are paid to low rate tax jurisdictions.

That looks like a measure squarely aimed at the likes of Amazon.

Also likely to emerge as losers from this Budget are the major house builders.

News of a review by Oliver Letwin, the former Shadow Chancellor, into what Mr Hammond called "the gap between planning permissions and housing starts" rattled shares in the likes of Barratt Developments and Persimmon.

On the whole, then, this was a Budget aimed at helping small businesses and a few larger ones - but hitting a handful of major outliers.