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Class 4 National Insurance contributions (NICs)
It had already been announced in the 2016 Budget that Class 2 NICs will be abolished from April 2018. The government will now also legislate to increase the main rate of Class 4 NICs from 9% to 10% with effect from 6 April 2018 and from 10% to 11% with effect from 6 April 2019.
subject to tax, with effect from 8 March 2017. This extends legislation introduced in Finance Act 2016.
Substantial shareholding exemption (SSE) reform
Changes are proposed to some of the qualifying conditions for the SSE. The good news is that the changes remove some of the obstacles of qualifying for SSE.
• The condition that the investing company is required to be a trading company or part of a trading group is being removed.
• The condition that the investment must have been held for a continuous period, at a minimum of 12 months in the two years preceding the sale is being extended to a continuous period of 12 months in the six years preceding the sale.
• The condition that the company in which the shares are sold continues to be a qualifying company immediately after the sale, is withdrawn, unless the sale is to a connected party.
• For a class of investors defined as Qualifying Institutional Investors, the condition that the company in which the shares were sold is
a trading company has also been removed. The draft legislation contains a list of Qualifying Institutional Investors.
The changes have effect for disposals on or after 1 April 2017.
Comment
Both employed and self-employed earners who reached state pension age from 6 April 2016 have access to the same flat rate state pension. This means that the self-employed have gained £1,800 a year more than under the previous system. The government therefore think it is fair that the NIC differential between them is reduced as employees are paying 12%.
Research and development (R&D)
There are two types of tax reliefs for eligible R&D expenditure. Under one of these, qualifying companies can claim a taxable credit of 11% in relation to eligible R&D expenditure. This is known as the Research and Development Expenditure Credit (RDEC). To further support investment, the government will make administrative changes to the
RDEC to increase the certainty and simplicity around claims and will take action to improve awareness of R&D tax credits among small and medium-sized enterprises.
Appropriations to trading stock
From 8 March 2017, the government will remove the ability for businesses to convert capital losses into trading losses when appropriating a capital asset to trading stock.
Disposals of land in the UK
The government will amend legislation to ensure that all profits realised by offshore property developers developing land in the UK, including those on pre-existing contracts, are
Budget Summary 2017
Business Tax 7