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ONLINE ACCOUNTANTS & TAX ADVISERS
A summary of the main announcements following the Chancellor of the Exchequer presentation of his Budget to Parliament which affect Small businesses, Contractors / Freelancers, Private individuals and Landlords are outlined below.
All applicable clients will automatically receive an expert and bespoke review (not a standard mail shot) of their tax affairs to identify any specific and relevant tax planning opportunities or restrictions arising from the legislative changes.
The proposals below are subject to change upon passing of the actual legislation.
Rate and threshold changes
For 2018/19 there will be no personal allowance available where adjusted net income exceeds £123,700.
Corporation tax rate
The CT rate will be reduced from 19% to 17% from 01/04/20.
Corporation tax indexation allowance
Indexation allowance (inflation relief on capital gains) will be frozen at January 2018 for disposals after that date.
Tax free dividend allowance
The Dividend allowance will be reduced from £5,000 to £2,000 from 2018/19.
Class 2 NIC
From 6th April 2019, Class 2 NICs will be abolished. Traders whose profits are below the Class 4 threshold and who are not eligible for NIC credits may need to pay Class 3 contributions in order to accrue entitlement to State Pension and other contributory benefits.
Businesses with a turnover above the VAT threshold must maintain digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.
The new rules have effect from 1st April 2019 where a taxpayer has a ‘prescribed accounting period’ which begins on that date, and otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1st April 2019.
From 6th April 2018, subsistence expenses reimbursed within the benchmark subsistence scale rates will not need to be subject to receipt verification.
Pensions Auto enrolment
From 6th April 2018, the employer contribution towards an employee’s workplace pension will increase from 1% to 2%.
From 2019/20, termination payments in excess of the £30,000 exemption will be subject to employer’s national insurance contributions (NIC).
If a termination payment is paid with no contractual PILON (payment in lieu in notice) new rules will operate by deeming a proportion of the termination payment to be salary, which will be subject to income tax and NIC, and the £30,000 income tax and NIC exemption can apply to the balance remaining.
Foreign service relief will also be removed but if the employment to which the termination payment relates was not taxable as employment income in the UK, the termination payment will not be chargeable to tax in the UK.
The government will consult on extending the current public sector IR35 related regulations (the public body assesses the IR35 status) to the private sector.
The marriage allowance is increased to £1,185 from 6th April 2018.
R&D expenditure credit
From 1st January 2018, the rate of tax relief available to companies that carry out qualifying R&D and claim the research and development expenditure credit (RDEC) will increase from 11% to 12%.
The government will consult on how access to ER might be available to those whose holding in their company is reduced below the normal 5% qualifying level as a result of raising funds for commercial reasons by means of issuing new shares.
CGT payment deadline
The government had previously announced that capital gains tax would have to be paid within 30 days of the sale of a residential property (where an exemption does not apply). This proposal has now been deferred until April 2020.
Double taxation relief
Legislation will be introduced to restrict the amount of relief for foreign tax where
a company has received relief for losses against non-
Intangible fixed assets
The intangible fixed assets rules will be updated from 22/11/17, so that a licence between a company and a related party in respect of intellectual property is subject to the market value rule, and to also ensure that the tax value of any disposal of a company’s intangible assets is at market value even if the consideration is not in cash.
Company cars and fuel
No Benefit in kind charge will arise when an employer allows employees to charge an electric car at the workplace.
From 1st April 2018, the CO2 emission threshold for the 100% first year allowance reduces to 50g/km (from 75g/km).
The supplementary percentage applied in calculating the taxable benefit of a diesel car will increase from 3% to 4% from 6th April 2018.
Student Loan threshold increases
From 6th April 2018, the earnings thresholds for repaying student loans will increase as follows:
Plan 1 threshold increases to £18,330 from £17,775
Plan 2 threshold increases to £25,000 from £21,000
The Government intends to bring in a ‘reverse charge mechanism’ for specific supplies of labour in the industry to take effect in October 2019 after consultation.
The VAT registration threshold will remain frozen at £85,000 for two years until April 2020 (the deregistration threshold will remain at £83,000).
Relief will no longer be available where arrangements are intended to provide capital preservation in low risk companies.
From 6th April 2018, the government will double the amount an individual can invest
under EIS to £2m, provided that any amount over £1m is invested in one or more knowledge-
The annual investment limit for such companies receiving funds through EIS and VCTs will double to £10m.
IR enables investors to utlise a 10% rate of capital gains tax on disposal of their unlisted share investments.
IR is intended to encourage greater external and longer term investments in unlisted UK trading companies and attracts investors who may not be eligible for tax relief under the EIS / SEIS provisions.
IR is available on up to £10m of lifetime investments (separate to the £10m limit available under Entrepreneurs’ Relief). In contrast to ER, IR is only available to investors who are not an employee or director of the company invested in and requires a longer minimum shareholding period of 3 years.
The National Living Wage applies to all working people aged 25 and over. From April 2018 the rate will increase to £7.83.
UK property held by non UK residents
Tax will be introduced for gains on non residential property situated in the UK with effect from 1st April 2019 (companies) or 6th April 2019 (individuals and trusts). Only the gain accruing after that date will be charged.
From April 2020 non-
Annual tax on enveloped dwellings
The annual tax on enveloped dwellings (ATED) charges will rise by 3% from 1st April. The ATED charge applies to companies, partnerships with corporate members and collective investment schemes with an interest in UK property valued at more than £500,000 (contact us for exemptions that may apply).
Gift aid donor benefits
There are currently monetary thresholds for determining the level of benefit that can be supplied to donors in consequence of a donation on which gift aid can be claimed.
These will be replaced by two percentage thresholds from 6th April 2019.
The benefit threshold for the first £100 of the donation will remain at 25% of the amount of the donation and charities will be able to offer an additional benefit to donors up to 5% of the amount of the donation that exceeds £100.
The maximum value of the benefit that a donor will be able to receive remains at £2,500.
Offshore assessment time limits
Assessment time limits for non-
With effect from 6th April 2019, withholding tax will apply to royalty payments and payments for certain other rights, made to low or no tax jurisdictions in connection with sales to UK customers (No UK presence is required for these rules to apply).
Extension of First Year Tax Credits (FYTC)
The changes to FYTC will have effect from 1st April 2018.
Insolvency and tax debts
The government will expand existing security deposit legislation to corporation tax and CIS deductions. These changes will take effect from 6th April 2019 subject to consultation.
The law will be revised (from 2018/19) to be more compatible with commercial arrangements for allocating shares of profit and to avoid additional administrative burdens for taxpayers as follows:
Where a beneficiary of a bare trust is entitled absolutely to any income of that bare trust consisting of profits of a firm but is not themselves a partner in the firm, then they are subject to the same rules for calculating profits etc and reporting as actual partners.
Confirmation the allocation of partnership profits shown on the partnership return is the allocation that applies for tax purposes for the partners.
A new structured mechanism for the resolution of disputes between partners over the allocation of taxable partnership profits and losses shown on the partnership return.
A depreciatory transaction is one under which a company reduces the value of shares in a subsidiary (e.g. transferring an asset under market value to another member of the group) If the shares are sold at a loss within a specified period of the transaction, the loss is restricted by such an amount as is ‘just and reasonable’ to counter the effect of the depreciatory transaction. From 22/11/17, this period will be extended from 6 years to 12 years.
HMRC submission penalties
The Government will reform the penalty system for late or missing tax returns by adopting a new points based approach.
Online marketplaces retailers
HMRC are set to:
Certificates of Tax Deposit
HMRC Certificates of Tax Deposit can no longer be purchased after 23/11/17.