Budget 2018 – How does it impact the Healthcare Sector?
There were plenty of announcements relating to the NHS in the recent budget, with a focus on mental health. Announcements included:
- Confirmation of an extra £20.5bn of funding over the next 5 years
- The NHS 10-year plan to include a mental health crisis service in all A&Es with more mental health ambulances, crises services in the community and a new mental health crisis hotline
- £10m towards air ambulances
- £10m donation to the Armed Forces to support veterans with mental health needs
- Private Finance Initiative (PFI) projects to be abolished for future projects but existing contracts will be honoured. A centre of excellence will be established to actively manage PFI contracts in the public sector, starting with health
The chief executive of the NHS confederation, Niall Dickson, welcomed the extra money for the NHS but is concerned about the challenge ahead: ‘rising demand, a monumental workforce crisis and an urgent need to change the way services are delivered will make the next few years very tough indeed’.
As expected, it was announced that this will be extended to the private sector but only for medium and large businesses and not until April 2020. These rules already apply in the public sector and have had a major impact on how contracts are carried out within the NHS. The responsibility for assessing the employment status is with the engaging business and not the contractor. Care needs to be taken if you trade through your own company, and although associate dentists have long been treated as self-employed this is not necessarily always going to be the case. Correctly worded contracts are essential, as is ensuring that the reality fits the contract.
Rates and allowances
There was an unexpected increase in the personal allowance and higher rate threshold from 6 April 2019, 1 year earlier than previously announced, to £12,500 and £50,000 respectively.
Pensions and payroll
- Lifetime allowance for pension savings increased in line with CPI for 2019/20, rising to £1,055,000
- Annual allowance of £40,000 and Income level above which annual allowance is tapered of £150,000 remain unchanged
- Employers Allowance for NIC will only be available to small businesses from April 2020 (Annual NIC bill in previous tax year less than £100,000)
- Increases to National Minimum Wage (NMW) National Living Wage (NLW) and Apprentice Wage (AW) effective from April 2019 as follows:
||From April 2019
||19 & under (+ all in first year)
- From 01/01/2019 Annual Investment Allowance (AIA) increased to £1m for a 2-year period
- Transitional rules where accounting period straddles the date of change
- New Structural Buildings Allowance (SBA), with 2% deduction per year for capital expenditure on new structures and buildings incurred on or after 29/10/18 provided contract wasn’t already in place
- Special rate pool writing down allowances reduced from 8% to 6% from April 2019. This will affect cars bought since April 2018 with CO² emissions of more than 110g/km
- Enhanced capital allowances and first year tax credits on environmentally beneficial plant and machinery to end in April 2020
- 100% allowances on electric vehicle charging points extended to 2023
Entrepreneur’s Relief (ER)
- Where available, ER reduces the rate of CGT on the disposal of a business or associated asset to 10%
- From 29/10/18 2 new criteria for a company to be treated as a personal company for ER purposes. A shareholder must be intitled to a 5% interest in both the company’s distributable profits and the net assets of the company available on winding up
- So, a shareholder needs to have 5% of the ordinary shares, voting rights, distributable profits and net assets on winding up. This may mean some shareholders will no longer qualify
- With effect from 06/04/2019, the minimum qualifying period of ownership to qualify for ER extended from 1 year to 2 years
Research and Development Relief (R&D)
- R & D is a relief available to small and medium companies who carry out qualifying R&D
- The budget announced a limit, effective for accounting periods beginning on or after 1 April 2020, to the amount of payable tax credit that can be claimed by a company, based on 3 times the company’s total PAYE & national insurance contribution payment for the period
- R & D remains a valuable relief and if you are developing a new process, product or service, or improving on an existing one then you could qualify.
- Changes to Principle Private Residence Relief (PPR), which exempts your only or main residence from Capital Gains Tax (CGT), effective from 06/04/20
- Final period of ownership exemption reduced from 18 months to 9 months
- Letting relief conditions will mean that relief will only be available where there is shared occupancy (i.e. the owner and the tenant both live in the property)
- This will affect you if you sell a property that you have lived in but then rented out