A new image for George the builder

Susannah SimpsonGeorge Osborne’s focus today was firmly on rebuilding the UK’s finances whilst maintaining economic stability and security.

Not so much a rabbit as a U-turn, his pirouette on tax credits will, in part, be funded by increased corporate tax receipts which he sees as confirmation that the UK economy is steering a safe and steady course.

The 1% cut in corporation tax to 19% in 2017 and to 18% in 2020 was announced earlier this year, and apart from blocking some intangible asset and capital allowance tax schemes that artificially reduce taxpayers’ bills, which are a bit of a minority sport, this area remained relatively unscathed.

Much of his commentary related to measures restricted to England so we will watch with interest to see whether John Swinney can or even wishes to introduce similar measures in Scotland when he reveals his draft budget on December 16.  Scotland has already integrated health and social care budgets, but without the flexibility to impose the 2% levy on Council Tax that George Osborne promised for Councils in England – another potential ‘watch this space’ for Scotland.

One change that applies to businesses in Scotland and across the UK is the introduction of the Apprentice Levy, which was outlined earlier this summer. From 1 April 2017, a 0.5% levy will be applied to employers wage bills however, while this will be an additional cost for employers and another area of red tape, many smaller employers will not suffer the levy.  Only employers with a wage bill in excess of £3m will be caught in this net.

PwcEmployers will also welcome plans to delay the next two scheduled increases in automatic enrolment minimum contribution rates by 6 months each, a move that will align these changes with the start of the tax year. At a time when they are facing increasing employment costs, this will help simplify things for payroll functions. It also underlines the fact that auto enrolment is very much a payroll tax that companies face.

Famous for bringing Dolly the Sheep to the world’s stage, Edinburgh’s world-renowned research institutes, scientists and universities are again coming to the fore, with the Chancellor announcing plans to back business by backing science.  For the capital, this boost is set to deliver a new agri-tech centre. Links with major research centres in England will also be enhanced with funding to potentially launch a new air route between Edinburgh and Oxford.

Other announcements that apply to Scotland included setting the block grant for Scotland at over £30 billion by 2020 and a rise in capital spending on infrastructure by £1.9 billion through to 2021.

The infrastructure increase is good news for the construction industry but how the block grant increase will be impacted by the introduction of the Smith Commission recommendations is uncertain.  The Smith Commission recommendations allow Scotland to set its own rates of income tax but they do not allow Scotland to set and vary the rate of Corporation tax.  We will watch with interest to see whether the reduction in the Northern Ireland rate of corporation tax to 12.5% from 1 April 2018 will have an impact on investment into Scotland.

With many expecting more of a slash and burn budget, the Chancellor was the winner here with more funds to play with and the ability to redress the tax credit balance.  Those on low incomes will also be raising a glass as they breathe a welcome sigh of relief.

Susannah Simpson is private business partner, PwC in Scotland

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