UK BUDGET March 2016

Transcription

1 UK BUDGET March 2016 The Chancellor, George Osborne released his second all-conservative Government Budget on Wednesday, 16 March This is our third UK budget within a timeframe of 12 months. Mr Osborne s introductory paragraph quotes This is a Budget that puts the next generation first. In uncertain times and against a deteriorating global economic outlook, this Budget delivers security for working people. It takes the next bold steps in the government s long-term economic plan. It reduces the deficit, achieves a surplus and makes the reforms needed so Britain is fit for the future. Some highlighted changes include reducing the corporation tax rate to 17% by 2020, increased flexibility on loss relief for corporates, reliefs to encourage investment in business by extension of Entrepreneurs relief, cuts in business rates, loans to participators anti-avoidance rates increased, cuts in capital gains tax but not for buy to lets, continued pattern of excluding buy-to-let landlords from any relieving provisions, changes to SDLT for commercial property (slice rather than a slab system), extended HMRC powers, a new sugar levy on soft drink manufacturers/importers, new lifetime ISA savings regime for the under 40s,... Please note that this is not intended to be a comprehensive summary, but instead is to highlight points which may be of particular reference to you and your business. PERSONAL TAX ISSUES Personal allowance for 2016/17 is 11,000 and is to increase to 11,500 for 2017/18. Basic rate band taxed at 20% will be 32,000 for 2016/17 increasing to 33,500 for 2017/18. Higher rate band taxed at 40% will be increased to 43,000 for 2016/17 increasing to 45,000 for 2017/18. Additional tax rate will remain at 45% for 2016/17. Self employed NIC to be abolished from April Details on how the self employed will access contributory benefits will be announced in due course. A new Lifetime ISA will be available from April 2017 for adults under the age of 40 where they can save up to 4,000 per year, and receive a 25% bonus from the government. Savings can be used to buy a first home up to 450k or for retirement savings at age 60. E.g. individual 4k and Gov 1k. ISA limit will be increased to 20,000 from 6 April ISA tax advantages will continue during the administration of their estate. Help to Save individuals in low income working households (e.g. in receipt of Universal Credit or Working tax credits) will be able to save up to 50 a month into a Help to Save account and receive a 50% government bonus after 2 years. Account holders can then continue with the scheme for a further 2 years. Savings income:- - Personal Savings Allowance (PSA) from 6 April 2016 a new tax free savings 1

2 allowance of 1,000 for basic rate taxpayers and 500 for higher rate taxpayers (not available for additional rate taxpayers). Within these thresholds a 0% of tax applies to the savings income. Property and trading income allowances w.e.f April 2017 a 1,000 allowance will be introduced for both property and trading income. Individuals with such income below 1,000 will no longer be required to report or pay tax on that income. Dividend tax credits - as previously announced dividend tax credits are to be abolished w.e.f April 2016 to be replaced with a Dividend tax Allowance of 5,000 p.a. Anything over this 5,000 amount will be taxed at 7.5% for basic rate, 32.5% for higher rate and 38.1% for additional rate taxpayers. It is important to note that this 5,000 is included within the basic rate band and is not additional to the basic rate band. Non-domicile status from 2017/18 long term UK resident non doms are treated as deemed UK domiciled for income tax and capital gains with the rules to apply after the individual is UK resident for 15 out of the last 20 years. The existing 17 out of the last 20 years for IHT purposes will be harmonised with these new rules. New deeming provisions were also previous announced for UK born doms who left, acquired a domiciled of choice abroad but returned to the UK. These non-doms who become deemed-domiciled in April 2017 can treat the cost base of their non-uk based assets as being the MV on 6 April Furthermore, transitional provisions will apply regarding offshore funds. Savings income From 6 April 2016, Banks, building societies and NS&I will cease to deduct tax from savings interest. Open-Ended Investment Companies, authorised unit trusts, investment trust companies and P2P loans will be able to pay interest without the deduction of income tax w.e.f April Employee management incentive (EMI) rights issues relating to shares received on the exercise of an EMI share option will be treated in the same way as other rights issues for the purpose of identification. New shares will be treated as acquired at the same time as the original shares. Disguised remuneration schemes measures to be introduced to deny the reliefs available where it is used as part of a tax avoidance scheme w.e.f 16 March A new charge on loans paid through such schemes that have not been taxed and remain outstanding at 5 April Sporting testimonials from April 2017 there will be an exemption of 100k for employed sportspersons on income from sporting testimonials that are not contractual or customary. BUSINESS TAXATION Corporation tax to be reduced from 20% to 19% from April 2017 and to 17% from April Corporation tax payment dates for large companies as previously announced is to be delayed (large - with annual taxable profits of 20m). W.e.f April Loan to participators tax rate to be increased from 25% to 32.5% and will apply to loans made or benefits conferred by close companies on or after 6 April Capital allowances on business cars 100% relief on the purchase of low emission cars to be extended for a further 3 years to April From April 2018 only cars with CO 2 emissions below 50g/km will be eligible for 100% relief. Also from April 2018 the threshold for the main rate of capital allowances for business cars will be reduced from 130g/km to 110g/km. Corporation tax loss relief to be made more flexible. Losses arising on or after April 2017 that are carried forward will be usable against profits from other income or available for group relief. Also from April 2017, companies will face a 50% restriction on brought forward losses being set off against current year profits above 5m only. This 5m threshold will apply to groups as a whole. A 25% restriction will apply to banks from April Corporate interest expenses tax deduction new rules to target profit shifting through interest expenses to be introduced from April This is intended to target large 2

3 multinational enterprises. Digital tax accounts From 2018 businesses, the self employed and landlords who are making quarterly reports to HMRC under measures announced during 2015 will be able to make pay as you go tax payments on a voluntary basis. Anti-avoidance rules to be introduced to target multi-nationals avoiding tax through hybrid cross border business structures. Patent box modifications from July 2016 to be dependent on the R&D spend by the company. Business rates w.e.f 1 April 2020 business rates in England will be uprated by reference to the CPI. From 1 April 2017 small business rate relief (SBRR) will double and the threshold will increase to rateable values of up to 12,000 tapering to 15,000. R&D tax credits legislation to be amended for the SME to ensure that it continues to work as intended after the previous large company scheme ends on 31 March Business Premises Renovation Allowance to expire on 31 March 2017 for Corporation tax and 5 April 2017 for Income tax and will not be extended. Capital allowances and leasing plans to counter 2 types of avoidance to prevent artificially lowering the disposal value of p&m and tax as income any payment received for agreeing to take responsibility for tax-deductible lease-related payments. This measure has been effective from 25 November Offshore property developers special rules to ensure that the full amount of profits from trading in UK land will always be subject to UK tax regardless of UK resident status. Trading income received in non-monetary form will be fully brought into account in calculating taxable profits for income tax (including property income) and corporation tax purposes. Royalty withholding tax regime to introduce a number of changes. Soft drinks levy A new levy is to be introduced and payable by producers/importers. W.e.f. April Transfer pricing will be updated in line with the revisions to the OECD TP Guidelines. Extending Enhanced Capital Allowances (ECAs) for Enterprise Zones (EZs) legislation to be introduced to change the period in which 100% ECAs are available in EZs to 8 years from the date that they are announced. Also a pilot EZ will be introduced on 2 sites near Coleraine. Consultation announced on Substantial shareholdings exemption relief reform. Consultation on the taxation of partnerships with aim to resolve uncertainties. Museums and galleries relief to be introduced from 1 April 2017 for temporary and touring exhibition costs. Large business strategies to be published as previously announced. EMPLOYMENT ISSUES National Living Wage a new compulsory living wage of 7.20 p/h for over 25s to be introduced from April 2016 with the aim to increase to 9.00 p/h by National Minimum Wage for year olds will increase to 6.95, for year olds will increase to 5.55, for year olds to 4.00 and increase to 3.40 for apprentices from October The accommodation offset will increase to 6.00 from October NMW rates will be amended in April each year in line with the NLW rate w.e.f April Apprenticeship levy on employers w.e.f April Personal service company during July 2015, the Government explored options to tighten up the IR35 rules, and one option was for the contractor to determine the status and also to pay the tax and NIC owing under those rules. The Budget announced that these rules from April 2017 would be introduced but only in respect to a client who is a public service body and who engages the services of a worker through a PSC. Shared Parental Leave - government to consult on how to extend Shared Parental leave and pay to working grandparents, etc. 3

4 Tax free childcare to be introduced for children under the age of 12 w.e.f early Employer supported childcare to remain open for new entrants until April Termination payments over 30K will be liable to employer s NIC. The scope of the 30k income tax exemption is to be tightened up under further consultation. W.e.f. April Employment Allowance will be withdrawn for a year for employers facing civil penalties for hiring illegal workers. W.e.f. April Employer provided pensions from April 2017 the tax and NICs relief available for employer arranged pensions will be increased from 150 to 500. Salary sacrifice the government is considering limiting the range of benefits that attract income tax and NICs advantages when provided as part of a salary sacrifice scheme. It is likely the Cycle to Work scheme, for example, will be unaffected. Simplification of tax on employee benefits and expenses to include:- - Extending the voluntary payrolling framework to allow employers to account for tax on non-cash vouchers and credit tokens in real time. W.e.f. April Trivial benefits exemption (usually up to 50) w.e.f April Consulting on proposals to simplify the process for applying for and agreeing PAYE Settlement Agreements. - Consulting on proposals to align the dates by which an employee has to make a payment to their employer in return for a benefit-in-kind they receive to make good - Legislating to ensure that if there is a specific statutory provision for calculating the tax charge on a BIK this must be used. Tax relief for travel and subsistence tax relief will be restricted for individuals engaged through intermediaries, i.e. an umbrella company or a personal service company on home to work travel and subsistence expenses. Otherwise no changes. Car benefit appropriate percentage for 2019 and 2020 to increase by 3% for cars emitting more than 75g/km of CO 2 to a maximum of 37%. Van benefit charge to increase by RPI w.e.f 6 April PENSION A number of changes announced but tax relief on pension contributions is not reduced. Pension flexibility - a number of changes include:- - Re-aligning the tax treatment of serious ill-health lump sums to allow tax free payment for under 75 s who have less than a year to live. - Tax serious ill-health lump sums at the marginal rate for over 75 s instead of 45%. - Convert dependants flexi-access drawdown accounts to nominees accounts when dependants turn 23 to avoid a lump sum payment taxed at 45%. - Allow defined contribution payments already in payment to be paid as a trivial commutation lump sum for pension savings under 30, Making top ups to fund dependents death benefits will be treated as authorised payments. - Remove unnecessary legislation relating to charity lump sum death benefits. Pension allowance as previously announced from 6 April 2016 the lifetime allowance for pension contributions will be reduced to 1M. Dependent Scheme Pensions to be simplified to determine if a dependant s scheme pension exceeds the authorised limit. W.e.f 6 April Bridging pensions tax rules will be aligned with DWP legislation following the introduction of the single tier pension w.e.f 6 April Pension dashboard to be launched where individuals can view all their retirement savings in one place by Employer financed pension advice tax and NIC free up to 500 w.e.f. April

5 PROPERTY TAX Wear & Tear Allowance (W&T) as previously announced, w.e.f. April 2016 W&T allowance will be replaced with a new relief allowing landlords of furnished rental properties to deduct the actual cost of replacing furnishings. Restricting mortgage interest cost relief to basic rate of 20% as previously announced for landlords of residential properties. This includes beneficiaries of deceased persons estates. This restriction is to be phased in over 4 years w.e.f. 6 April This change will not impact furnished holiday lets. SDLT an additional 3% SDLT will apply to purchases of additional residential properties from 1 April Purchasers will have 36 months to claim a refund of higher rate if they buy a new main residence before disposing of their previous main residence. Rates of non-residential SDLT will be reformed to a band system: Non residential property w.e.f. 17 March k 0% 150K - 250k 2% > 250k 5% Transitional provisions for properties where contracts have already been exchanged. Purchaser can elect to apply the old or new rates for such contracts. A new 2% rate for leaseholds with a NPV over 5m. CAPITAL TAXES CGT rates reduced from 18% to 10% for basic taxpayers and from 28% to 20% for higher rate taxpayers from 6 April 2016 with the exception of chargeable gains on residential properties which remain unchanged. Entrepreneurs Relief 10% tax rate a number of changes announced including:- - Relief available on disposals of privately held qualifying assets where the accompanying disposal of business assets is to a family member. Backdated to disposals w.e.f 18 March The reintroduction of the transfer of goodwill on incorporation in certain instances. This reintroduction is only where an individual holds less than 5% of the shares & voting power in the acquiring company. Back dated to disposals made from 3 December Relief introduced for shareholdings in joint ventures and partnerships arrangements. - Extension of relief to gains arising to external individual investors who purchase new shares after Budget day in unlisted trading companies subject to several conditions, e.g. holding shares for 3 years from 6 April 2016 and continuously hold for 3 years before disposal. Tax rate of 10% will apply and separate 10m lifetime limit. Employee shareholder status individual lifetime limit of 100,000 will be introduced for arrangements entered into w.e.f 17 March 2016 on gains eligible for CGT exemption through employee shareholder status. IHT legislation will be introduced to ensure that the residence nil-rate band will be available in cases where a person downsizes or ceases to own a home and other assets are passed on death to direct descendants. W.e.f deaths on or after 6 April 2017 where the deceased downsized or disposed of a property on or after 8 July INDIRECT TAX VAT No rate changes VAT registration threshold to increase to 83,000 and the deregistration threshold will 5

6 increase to 81,000 w.e.f 1 April VAT penalties consultation to take place for a new penalty for participating in VAT fraud. VAT representative on high risk taxpayers new provisions to give HMRC more powers to appoint a UK representative with joint and several liability, providing greater flexibility in seeking security and enable HMRC to hold an online marketplace joint and several liability for the unpaid VAT. Insurance Premium Tax to increase to 10% w.e.f 1 October Air Passenger Duty to increase in line with RPI w.e.f 1 April Fuel duty rates to remain frozen for 2016/17 at 57.95pence per litre. Alcohol duty rates to be increased in line with inflation for sparkling cider exceeding 5.5% but less than 8.5% abv and all wine rates at or below 22% abv w.e.f. 21 March The duty rates on other wine and high strength cider have been frozen. OTHER Climate change levy to be increased from April Offshore evasion deterrents to include increasing the minimum penalties for deliberate offshore tax evasion, remove the protection from naming for unprompted disclosures, etc. Simple assessment to allow HMRC to make an assessment of a person s income tax or capital gains tax liability without requiring them to complete a self assessment tax return where HMRC has sufficient information to make the assessment. FULL RATES AND ALLOWANCES CAN BE FOUND AT The above is intended as a general summary to the measures announced in UK Budget All changes announced are subject to being enacted in the forthcoming Finance Bill. It is possible that the measures described above may be modified during the legislative process and prior to enactment. No action should be taken on the basis of the above without obtaining professional taxation advice. If you have any further questions, please do not hesitate to contact us. Telephone: (from ROI 048) 6