Dealers stand to benefit from a variety of business-focused measures in the Budget.
Chancellor of the Exchequer George Osborne announced that cuts to corporation tax rates will continue, with it falling from the current 20% to 17% from April 2020.
The Stamp Duty Land Tax regime for commercial property is being brought closer into line with residential property, removing the ‘cliff edge’ extra increase. It will be capped at 5%.
Gareth Peters, tax director at MHA, said this will benefit purchasers of commercial property for less than £1.05 million, such as franchised dealers expanding with certain niche brands.
“The “slab system” whereby just £1 of extra purchase proceeds could result in thousands in extra tax is being replaced. From midnight, any dealers buying a commercial property for less than £1.05 million will pay less duty. Purchases above this level will unfortunately result in more duty than under the existing rules. The ties in with the overall theme of the Chancellor’s budget, which was targeting larger businesses to help smaller ones,” said Peters.
Changes to Capital Gains Tax may also benefit larger dealer groups which decide to sell the business. Peters added: “Most dealers would expect to pay just 10% capital gains tax when they sell their company, by virtue of Entrepreneurs’ Relief. However, the relief only applies to the first £10 million of capital gains.
"Above that level, the main rate of capital gains tax is payable. This is currently 28% but will fall to 20% from 6 April. This is a welcome tax reduction for larger dealers who will have gains exceeding their £10 million lifetime allowance.”
Peters added that owner operators should consider urgently whether they should take additional dividents in the next few days.
This is because, as announced in last year’s budget, from April 6 the tax dividend tax regime is being reformed, with dealers facing substantial tax increases. The effective tax rates are increasing by 7.5 percentage points: from 25% to 32.5% for a higher rate taxpayer and from 30.56% to 38.1% for an additional rate taxpayer.
"As a matter of urgency dealers will need to consider whether they should take additional dividends in the next few days before the new rates apply," he said.