Welcome to the PA’s PA Budget Special 2016
It was a packed Budget with a number of measures of interest to publishers....
While the Chancellor’s headline announcement was the cut to corporation tax, from the current rate of 20% to 17% by 2020, there were other, particularly small business, tax-friendly announcements which publishers will need to examine closely such as the annual threshold for 100% relief on business rates for small firms rising from £6,000 to £12,000 and the higher rate from £18,000 to £51,000, which the government says will exempt 600,000 firms.
In addition, following much-lauded statements from Google and Facebook about their tax arrangements, the Chancellor announced a number of measures designed to see large, international, companies pay their fair of tax. As Osborne put it in his statement, these are designed to ensure UK companies selling on the internet or on the high street are able to operate on a level playing field with internet companies. Already being billed as the Starbucks Tax, this will see the government, over the next 5 years, raise nearly £8 billion from large companies and multinationals through changes to the rules on interest and other measures, including:
- Introducing rules to prevent multinational companies avoid paying tax in any of the countries they do business in, a technique called hybrid mismatches
- Taxing outbound royalty payments better – these are fees for using intellectual property like patents and copyrights – meaning multinationals pay more tax in the UK
- Making sure offshore property developers are taxed on their UK profits
Reforms to education and school budgets featured heavily, the detail of which will be of interest to education publishers. All schools becoming academies and being freed up from the National Curriculum may impact the production of learning resources, while the move towards fairer funding for schools may lead to an increase in the funding available for textbooks – at least for some. The current system for allocating school funding will be replaced by the first National Funding Formula for schools from 2017-18. Subject to consultation, it is the government’s aim that 90% of schools who gain additional funding will receive the full amount they are due by 2020. To enable this the government will provide around £500 million of additional core funding to schools over the course of this Spending Review, on top of the commitment to maintain per pupil funding in cash terms. A further announcement of new funding for 25% of schools, available as a result of the newly-announced Sugar Tax, to pay for extra school hours at the end of the day (with a focus on the extra time being used for sport) will need to monitored closely to ensure the monies made available by the government are enough to cover the cost of this additional opening – there should be no syphoning off of existing limited resources to pay for it. The Education Secretary is also due to publish a White Paper tomorrow setting out further measures the government proposes to introduce to improve the quality of education. We will review this carefully for implications for publishers.
The Chancellor also continued to demonstrate his willingness to use fiscal levers to help the creative sector. Following the tax breaks of previous budgets for various sectors (high-end drama, film, video games, animation), it was announced that a new tax relief is to be introduced from 1 April 2017 to encourage museums and galleries to develop creative new exhibitions and display their collections across the country. The relief will be available for the costs of developing temporary or touring exhibitions and will follow a consultation on its design over summer 2016. This willingness is something the publishing industry should look to harness.
Local government financing Measures were announced which will see 100% of local government resources come from their own area by the end of the Parliament. This may have an impact on the funding available for libraries and other community reading initiatives.