Budget 2016: Top predictions from North West business leaders

Ahead of what is already shaping up to be a divisive Budget, with the Independent calling its George Osborne’s ‘toughest’ to date and the Financial Times his ‘most boring’, we spoke to business leaders across the North West to get their views on what they want and what they expect to see.

The comments collected from the region were varied, covering everything from potential changes to the IR35 legislation, to rental income reforms and the impact such changes would have on buy-to-let landlords, to unlocking skills and innovaion to drive the Northern Powerhouse.

With the new Budget set to be revealed on Wednesday (March 16), take a look at the comments below to see if the predictions match your own expectations.

Will Campbell, tax partner at accountants and business advisors Beever and Struthers

Beever and Struthers’ Will Campbell lays out what he calls the Chancellor’s Three Ps - the probable, the possible and the potential:

“The probable is without doubt the pension regime. Since ‘pension simplification’, a misnomer without peer, virtually every single Budget has tinkered with the regime. It seems clear that there will once again be change.

“The only question is just how radical will that change be. The runners and riders in no order of priority are:

• Annual allowance - places a cap on allowable contributions, was once £255k, is now £40k and could head to £25k?

• Lifetime limit - places a cap on lifetime savings, was at one time £1.8m, is set to shortly become £1m and could head to £750k?

• Rate of relief - widely predicted to move to a uniform rate which would incentivise basic rate taxpayers with a higher rate of relief but penalise higher rate taxpayers

• Rate of relief - more radically abandon entirely up front relief for contributions and repackage the whole regime along ISA (individual savings account) lines.

“The possible comes in the form of petrol duty which for a host of reasons has now been frozen for four years. With the recent decline in prices at the pump there has not been a better opportunity to restart the annual cycle of duty increases.

“The potential is introduced by newly published figures from HM Revenue & Customs (HMRC) which show that collectively additional rate taxpayers, being those with taxable incomes over £150k, actually paid £8bn more income tax in the first year after the additional rate was cut to 45% than they did the previous year when the additional rate was 50%.

“Whilst the correlation is a lot more nuanced that the headline suggests there is at least the potential to repeat the trick and present it as a revenue-raising move.”

John Lyon, managing director of accountancy firm ICS

“The contentious issue of IR35 is likely to be addressed either in the Budget or around the same time. Either way, I expect the rules will be much tighter and will likely take the form of a supervision, direction and control test.

“Although any change in IR35 legislation is not likely to be introduced until April 2017, which is still only just over one year away and will potentially have a big impact on the industry.

“Together with IR35, changes to travel and subsistence expenses are also due to be announced. This means that as of April 6, any person who is either a limited company director working inside IR35 or is employed through an umbrella company can no longer claim for travel and subsistence costs as expenses and benefit from any type of tax relief on these costs. Those who are working outside of IR35 will not be affected by the changes.

“The issue with this, however, is that there are certain responsibilities that come with working through limited companies, which means this solution doesn’t suit all individuals.

“My worry is that the flexibility in the freelance workforce will be forgotten about. There are many benefits to being a contractor or freelancer, but there are also disadvantages that they have to deal with, for example, the possibility of being in and out of work and having no holiday pay or pension contribution.

“If it is made even more difficult for them to be paid, then there is a risk they will no longer want to work on a contract basis.

“It is also expected that two other perceived issues will be addressed from April this year, it will be announced. These are Members Voluntary Liquidations (MVLs) and the new tax-free dividend allowance. Despite these expected changes, it is still a very interesting time for the flexible workforce, as changes mean more opportunities.”

Joanne Thompson, CEO of software firm Penrillian

“It is clear that the Northern Powerhouse will feature heavily in the Budget, but for the promise of the Northern Powerhouse to be realised it needs to encompass and motivate the whole of the North.

“The Chancellor must look to use his budget to unlock some of the talent and innovation that we have across the whole of the North, and not just focus its attentions on its major cities such as Manchester.

“There is an inherent tendency for central and regional bodies to place the emphasis on large organisations; however, when it comes to rapid deployment of innovation, smaller businesses by their very nature tend to be more agile and fleet of foot.

“There are hundreds of SMEs across the North, including rural areas like Penrith where we are based, creating brilliantly innovative products and services.

“In order to truly grow the economy in the North, we need to harness and drive our growth from SMEs. I’d like to see more funds being directed to the British Business Bank in order to unlock the huge potential we have amongst our small businesses across the North.

“One of the key objectives for the Northern Powerhouse is to create an environment in which the North works together and speaks with one coherent voice.

“Without support for the input and creativity of our smaller businesses the Northern Powerhouse won’t achieve the long term economic growth that UK Plc needs us to contribute, and the Chancellor needs to recognise this on Wednesday.”

Wayne Brophy, managing director of recruitment firm Cast UK

“One of the key issues dominating the recruitment industry from a legislative point of view is the April deadline for the implementation of new travel and subsistence (T&S) rules, which are part of the Finance Bill 2016.

“This aims to restrict workers operating via employment intermediaries from receiving tax relief on T&S expenses and it continues to be the subject of much debate as many employers are not fully familiar with the changes.

“As employers consider the impact of this legislation, it looks like the umbrella and payroll industry continues to lobby for change. There needs to be more engagement on this issue to bring clarity where there is confusion.

“We’d like to see more measures to incentivise visionary SMEs, given that they are major catalysts for economic growth. Greater transparency is also called for on tax avoidance so that the public is reassured the Government is taking this issue seriously and reiterating that the UK is a fair and transparent tax destination for business.

“It’s also highly likely that the Budget will be used as a platform to tackle the issue of EU membership and I expect the Chancellor to warn businesses of the potential economic threat posed by Brexit, given the heated discussions among the business community.”

Jo Ecob, director at accountants Abrams Ashton

“There are far less big surprises and uncertainty from the Chancellor’s Budget than we’ve seen in previous years.

“The Autumn Statement tends to set the stage for most of the major changes in tax rules, limits and reliefs and not forgetting the amount of information that’s leaked to the media in the run up to the announcements.

“What we do know about this year’s Budget is that there will be considerable reform to rental income. Buy-to-let landlords must therefore start thinking about better, more efficient ways to structure their property portfolio before the increased tax changes bite.

“Employers have also faced increasing costs and administrative burden over recent years.

“First the eradication of statutory sick pay recovery followed by complex auto-enrolment legislation and now new Living Wage requirements – something which is a big concern for low pay sectors.

“Apprenticeships are also about to change, again, increasing cost to the employer. Whilst the compensation firms can claim in employers NI allowance will rise by £1,000 next year (less than £20 a week) this saving will prove disproportionately expensive for smaller businesses that can’t absorb or pass it on like larger ones can.

“Increasing employment is crucial to a thriving economy, with higher numbers of people in work meaning reduced state subsidies and a more inclusive society. What I would like to see from the Budget is further measures to assist smaller employers to recruit an additional staff member, whether that’s monetary help or a reduction in reporting requirement and record keeping.”

Gill Molloy, group tax director at Champion Accountants

“There has been a number of consultation papers released by HMRC in the early part of this year and the biggest in particular for our own clients, is the changes to company distribution.

“Currently, owners and directors enjoy a degree of freedom when it comes to making certain commercial decisions that help to enhance your tax position. For example, property developers with a number of development schemes can place each in a separate limited company to ring fence the commercial risk. This prevents any issues from an individual site impacting on the wider business.

“Once the scheme completes, they can wind the business up and distribute the net profit after tax, which nine times out of ten will also benefit for 10% Entrepreneurs’ Relief.

“From the information that’s already been released, it seems that they intend to curb these perceived advantages by making sure the profits from Members’ Voluntary Liquidations (MVLs) are treated as dividends and become subject to income tax.

“Many believe that Entrepreneurs’ Relief is costing the Government money and impacting on cash flow due to the speed in which the incentive can deliver capital gains to the individual.

“However, taking this away could reduce one of the motivations to start a business or perhaps take an entrepreneurial risk. I therefore hope that the revenue takes a pragmatic approach and is sensitive to the wider effects on companies when clamping down on specific sectors and making the proposed changes.”

Philip Whitehurst, partner at law firm DTM Legal

“The Chancellor’s room for manoeuvre in Wednesday’s Budget is limited. Concerns about not upsetting the electorate and forcing them into the arms of the Brexit campaign may mitigate against more austere plans he may have hatched and electoral promises about not raising income tax rates, National Insurance or VAT will further restrict him.

“A Budget to assist business, particularly SMEs, should contain several measures. Simplification of the tax system, a freezing of business rates and action on the promise to provide business with a corporate taxes roadmap to allow planning for the future would all be welcome.

“We also need a personal tax regime that encourages work growth and entrepreneurship, including the retention of entrepreneurs’ relief and raising the income tax threshold so that those on minimum wage are out of the tax system altogether.

“However, with what economists predict is a £17bn shortfall on where he expected the public finances would be, we should all brace ourselves for some bad news including potential increases to fuel duty, taking advantage of the current low oil prices, and company car and road tax.

“I’d also expect to see announcements over the sale of the government’s stakes in Lloyds and RBS.

“And finally, following Prime Minister’s Questions in January, in which the Government said it wanted suggestions from the public about what they wanted to see in the Budget, it will be interesting to see if Mr Osborne references anything put forward.”