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When I was a young child and then later on as I read it to my own young children, I enjoyed The Cat in the Hat by Dr Seuss.

In it there is the following page:-

‘look at me!
look at me!
look at me NOW!
it is fun to have fun
but you have to know how.
i can hold up the cup
and the milk and the cake!
i can hold up these books!
and the fish on a rake!
i can hold the toy ship
and a little toy man!
and look! with my tail
i can hold a red fan!
i can fan with the fan
as i hop on the ball!
but that is not all.
oh, no.
that is not all…’

I was very much reminded of those lines during the budget when the chancellor kept adding new giveaways on top of each other.

While the Chancellor went into great detail on the additional spending that he was committing the country to over the forthcoming years, and this will be the focus of the national media, there seems to be little in the way of evidence as to where this money was coming from. The Chancellor stated on many occasions that the hard work of the British people has created an economy working for everyone, and it would appear that he has made his spending pledges on the back of an assumed improvement in the economy of the forthcoming five years.

While fortunately on the whole the budget was tax negative in that the tax measures gave money away rather than collected it, there were a number of measures that will affect our clients and the main ones are:-

•The main measure that will need to be looked into is the extension to the qualifying period to be eligible for entrepreneurs’ relief which has been extended from one year to 2 and will mean anybody looking to alter shareholdings in advance of the sale will need to plan a little further in advance than previously. There is one advantage of this in that it will align the qualification period entrepreneurs’ relief and inheritance tax business property relief meaning that if a company qualifies for one relief it should qualify for the other which will make some elements of tax planning easier.

•One of the main worries in advance of the budget was that the Chancellor would reduce the threshold for VAT registration which is something that would adversely affect smaller businesses and whilst he has chosen not to increase the limit in line with inflation he has frozen it for a period of two years subject to further consultation taking place in that time as to the best way for him to move forward.

•An unexpected surprise which will be well received by many of our clients who undertake significant investment is the increase of the annual investment allowance to £1 million per annum for the next two years starting from the 1st of January 2019. There is also the introduction of a new industrial buildings allowance for newly built premises. On the downside, this is funded by a reduction in the capital allowance rate of the 8% down to 6%. On the whole in the short term these measures will benefit the vast majority of our clients.

•A disappointing development was the fact that the Chancellor will scrap the national insurance allowance for businesses with a national insurance cost of in excess of £100,000 per annum from April 2020 this will affect businesses with a payroll cost of £700,000 or more.

•A further challenge to labour intensive business is the announcement of further increases in the national living wage and national minimum wage.

•The chancellor has introduced measures to reduce the availability of the full principal private residence relief when the property has not been occupied fully as a private residence throughout its period of ownership in particular lettings relief is going to be reduced and the deemed final period of occupation will come down to 9 months, not that long ago it was three years.

•The Chancellor recognised the difficulties facing retailers and small retailers will get a one third discount of their business rates bill.

•The biggest tax raising measure in the budget, per treasury estimates, is the introduction of rules similar to those that have been introduced in the public sector this year, for private sector businesses which are either large or medium in relation to identifying IR35 cases and putting the onus on the hirer to decide whether the contractor is employed or self-employed. We would point out that status issues are something that we argue with the HMRC on a regular basis and HMRC’s record of success at the tribunal is particularly poor and anybody who does face issues in the future arising out of this matter measure should take professional advice

•The Chancellor announced coming measures with regard to obtaining relief for the acquisition of goodwill including eligible intellectual property although the details are still outstanding.

•Finally the Chancellor announced the usual raft of increases in the nil rate and basic rate band and he has achieved his goal of the combination of the two being £50,000 in addition the capital gains nil rate band increases to £12,000.

Looking at the budget summaries from the Treasury showing where the money is expected to come from, it appears that by and large the Chancellor seems to have stuck to spending just the extra income that is coming in as a result of the growth in the economy as opposed to looking to tax and spend.

Returning to The Cat in the Hat the following page reads:-

‘that is what the cat said…
then he fell on his head!
he came down with a bump
from up there on the ball.
and sally and i,
we saw ALL the things fall!’

and the Chancellor hinted that a similar fate might befall him if there was a no deal Brexit and he was required to do a new budget next March.

And so as The Cat in Hat concludes:-

‘then our mother came in
and she said to us two,
‘did you have any fun?
tell me. what did you do?’

and sally and i did not know
what to say.
should we tell her
the things that went on there that day?

should we tell her about it?
now, what SHOULD we do?
what would YOU do
if your mother asked YOU?’