AUTUMN BUDGET 2017 The Full Story
AUTUMN BUDGET 2017 THE FULL STORY A FOCUS ON INVESTMENT IN TECHNOLOGY, YOUNG PEOPLE AND LONG-TERM PROSPERITY It was a polished delivery by the Chancellor of the Exchequer, Philip Hammond. He spoke about a future full of change, full of new challenges and above all, a future full of new opportunities. To tackle this, the government promised to continue to invest in infrastructure and technology, build the homes people need, and help families and young people with the cost of living. For businesses, increasing the benefit of R&D tax relief will encourage companies to make further investments in the development of technology. There was also mention of further investment into the Northern Powerhouse and Midlands Engine initiatives, with 1.7bn going into the Transforming Cities Fund. For young people, stamp duty for the majority of first time buyers was abolished, along with bringing in simple measures such as extending the qualifying age on railcard discounts. Here are our thoughts on the changes announced and how they might affect you. SIMON BAINES Head of Tax simonb@pkfcooperparry.com +44 (0) 7867 536 828
WHAT S INSIDE #1 FOR YOU #2 FOR BUSINESSES #3 INDIRECT TAXES
#1 FOR YOU The Chancellor s speech contained welcome news for young people: not only will first time buyers benefit from no or greatly reduced stamp duty liabilities, but the increases in the personal allowance and basic rate band will ensure that low to middle rate earners will retain a greater proportion of their income. SARAH AXE Personal Tax Partner
#1 FOR YOU PERSONAL TAX The tax free personal allowance will increase to 11,850 from 6 April 2018. The basic rate band will increase to 34,500 from 6 April 2018, which means that the higher rate threshold will increase to 46,350. The income limit for the 0% starting rate for savings income will be frozen at 5,000 for 2018-19. But the dividend 0% rate band will be dropped from 5,000 to 2,000. The capital gains tax exemption will increase to 11,700 for 2018-19 ( 5,850 for most trustees). Landlords will be able to claim a fixed rate deduction for every mile of their business journeys and this will be backdated to April 2017. This is an alternative to claiming a % of expenses incurred and capital allowances. The implementation of a 30 day window, in which you ll have to pay capital gains tax on sales of residential properties, will be deferred until April 2020. The penalties for late tax returns will be reformed to a points based system. The government will consult on whether to simplify and harmonise penalties and interest on late payments of tax. Final decisions on both will follow this consultation. You ll no longer be able to purchase a certificate of tax deposit from 23 November 2017. If you currently hold a certificate, it ll be honoured until 23 November 2023 at which point it ll be repaid. The government will publish a call for evidence to establish how rent-a-room relief is used to make sure it s better targeted at longer term lettings. As previously announced Making Tax Digital will be introduced for businesses whose turnover exceeds the VAT threshold and only for VAT reporting. It will not be widened beyond this until 2020 at the earliest.
#1 FOR YOU PERSONAL TAX CONT D CONSULTATIONS ON PERSONAL TAX WORTH KNOWING ABOUT Non-residents have been taxed on gains made on UK residential properties since April 2015. A consultation has been published to extend this to all UK non-residential property with effect from 6 April 2019. A consultation will be issued on how to make the taxation of trusts simpler, fairer and more transparent. A consultation will be issued on how relief may be obtained where Entrepreneurs Relief is reduced because the holding is reduced below 5% if new shares are issued to raise funds for commercial purposes. Late tax return penalties and interest for late payment of tax will be consulted on as mentioned above. ANY QUESTIONS? Send Sarah a note: saraha@pkfcooperparry.com or give her a call on: +44 (0) 7786 126 268
#1 FOR YOU INVESTMENTS & SAVINGS ISAs The ISA allowance remains at 20,000 for 2018/19. The Lifetime ISA allowance, available to individuals between 18 and 40 years, also remains at 4,000, and is part of the overall 20,000 allowance. The Junior ISA and Child Trust Fund allowance will increase to 4,260 for 2018/19. PENSIONS The lifetime allowance will increase to 1,030,000 for 2018/19. This is the first increase since 2012 when the lifetime allowance was reduced from 1.8m down to the current level of 1m. No other changes were announced on pensions, with no changes to tax relief, the annual allowance or the availability of the tax free lump sum on retirement. VENTURE CAPITAL TRUSTS (VCTs) Changes are to be made on the rules for investments made by VCTs to ensure they continue to focus on long term higher risk companies that intend to grow and develop. These rule changes include: requiring 30% of funds raised in an accounting period to be invested in qualifying holdings within 12 months after the end of the accounting period increasing the proportion of funds that must be held in qualifying holdings from 70% to 80%. In addition, the rules for the availability of income tax relief are to be tightened where: firstly, a VCT buys back shares from an investor and the investor subscribes for new shares in the same VCT within a six-month period secondly, an investor sells shares in a VCT and subscribes for new shares in another VCT within a six-month period, and where those VCTs merge. Fortunately, the Chancellor left alone any further changes to pensions. Instead, he focused on encouraging investment into high risk knowledge intensive companies that face the greatest difficulties in raising finance. However, for those who are lured by the lucrative tax reliefs on offer, they should also consider the quality of the investment. Remember: risk and return are related! JONATHAN ELSIGOOD Cooper Parry Wealth Partner
#1 FOR YOU INVESTMENTS & SAVINGS CONT D VCTS AND EIS: KNOWLEDGE- INTENSIVE COMPANIES The annual limit for individuals to invest under EIS will double to 2m, provided that the amount above the first 1m is invested in knowledge intensive companies. Currently, individuals can claim income tax relief of 30% up to 1m. The new limit will be available for shares issued on or after 6 April 2018. The annual EIS and VCT limit on the amount of tax advantaged investments a knowledge intensive company may receive will be increased to 10m. ANY QUESTIONS? Send Jonathan a note: jonathane@cooperparry.com or give him a call on: +44 (0) 7711 771 359
#2 FOR BUSINESSES The Chancellor didn t spring any big surprises for businesses, which is good news. He confirmed no changes to the previously announced rates of corporation tax but made a welcome enhancement to the rate of R&D tax credits. Beyond these headlines, there were a number of technical tweaks and anti-avoidance measures for us tax geeks to digest! PHILIP ROGERS Tax Partner
#2 FOR BUSINESSES BUSINESS TAX The rate of corporation tax will remain at 19% until March 2020, and will then reduce to 17% from 1 April 2020. Finance Bill 2017 will include measures that address the allocation of partnership profits. This is to reduce uncertainty or opportunities for avoiding or delaying the payment of tax. Indexation allowance on the disposal of capital assets such as land and buildings by a company will be frozen from 1 January 2018. This ll result in increased capital gains in future periods. Companies may also be required to report increased deferred tax liabilities on their balance sheets. From April 2019 companies will be required to withhold income tax on certain royalty payments to non-uk residents. This is intended to counter arrangements where profits that relate to UK sales are directed offshore. We re expecting to see a consultation document in respect of the changes in December this year. The Finance Bill will extend the availability of first year tax credits on environmentally friendly plant and machinery for five years. But the value of the credit will be reduced from 19% and will instead be based on two-thirds of the corporation tax rate in the year of expenditure. As in previous years the energy-saving technology list (ETL) will be updated. The availability of disincorporation relief will not be extended beyond the current 31 March 2018 expiry date. The government has continued the reform and relaxation of business rates. The Chancellor announced the following key changes: bringing forward the switch to consumer price index from retail price index to 1 April 2018 increasing the frequency of revaluations from five year to three-year intervals extension of the 1,000 discount for pubs, with a rateable value of up to 100,000, for one year from 1 April 2018. Further to the introduction of the corporate interest deduction restriction in Finance Bill 2016, there ll be further technical changes introduced in future finance bills. There ll also be similar minor changes to the hybrid mismatch rules. For UK companies with an overseas permanent establishment, the ability to claim double taxation relief in respect of tax paid overseas has been restricted in certain circumstances. From 22 November 2017 two potential loopholes in intellectual property tax have been closed. Companies will now be required to recognise license arrangements with related parties on a market value basis. Where a company disposes of intellectual property, any non-cash consideration will need to be recognised at its market value.
#2 FOR BUSINESSES R&D From 1 January 2018 the Research and Development Expenditure Credit (RDEC) will increase from 11% to 12%. This will equate to an effective saving of 9.72p per 1 of qualifying expenditure. This change will benefit large companies and other companies claiming under the large company scheme. The government will also be starting a campaign to increase awareness of R&D tax credits amongst smaller and medium size enterprises. They re going to focus on those companies that develop and use key emerging technologies such as Artificial Intelligence. As previously announced, HMRC will pilot a 3-year advanced clearance scheme for RDEC (large company scheme) claimants. This means some claims will be pre-approved and uncertainty around the availability of relief should be reduced. EMPLOYMENT TAX From 6 April 2018 if you ve got a company car that s diesel, the benefit in kind supplement will increase from 3% to 4%. This won t apply if your car meets the clean emissions standards. The government confirmed that the previously announced measures to counter the current and historic use of disguised remuneration schemes will be implemented. All employees and selfemployed individuals who ve previously received a disguised remuneration loan must let HMRC know by 1 October 2019. CONSULTATIONS ON BUSINESS TAX WORTH KNOWING ABOUT A consultation on employment status tests shall kick off soon. This is to improve clarity and align the tests with modern working practices. There s going to be a consultation on the intangible fixed assets tax rules. These might be changed to provide better support and incentives for UK companies that hold intellectual property. HMRC previously carried out a consultation on proposals to require notification of offshore financial arrangements by businesses and other intermediaries involved in their creation or promotion. A response document will be published in December 2017. The government has announced that it will introduce a national insurance contributions (NICs) bill in 2018. It s expected to take effect from April 2019 and shall include the abolition of Class 2 NICs and reforms to the NICs treatment of termination payments. From 1 April 2018 you ll be able to charge your electric or hybrid car at work without being taxed on a benefit in kind. ANY QUESTIONS? Send Philip a note: philipr@pfkcooperparry.com or give him a call on: +44 (0) 7748 321 010
#3 INDIRECT TAXES The Office for Tax simplification report published earlier this month caused a stir as it was wrongly interpreted that the OTS was suggesting a reduction in the VAT registration turnover threshold to bring more smaller business within the VAT regime. The Chancellor has moved on this to announce a freeze of the threshold at 85,000 for the next two years but he will be consulting on the subject Other than that, the likes of Amazon will start to look closely at the legislation relating to online market places as the Government moves to plug what they believe is a huge gap in businesses from overseas selling to UK consumers who are not accounting for VAT. JULIAN ROSSER VAT Specialist
#3 INDIRECT TAXES VAT The VAT registration turnover threshold remains at 85,000 for the next two years from 1 April 2018. VAT will be due on all goods that are sold through online market places where those goods are in the UK at the point of sale. This will be achieved by extending joint and several liability for online marketplaces and displaying VAT numbers online. Following a consultation into options for tackling fraud in construction labour supply chains, the government will introduce a VAT domestic reverse charge to prevent VAT losses. This will have effect on and after 1 October 2019. CONSULTATION ON VAT WORTH KNOWING ABOUT The government will review the timing of taxation on import VAT following exit from the EU. The government will consult on possible measures to ensure that business are accountable for the same amount of VAT, irrespective of whether the payment is made by cash, vouchers or other methods. STAMP TAXES From 22 November 2017 first time buyers will not be required to pay any stamp duty when they buy properties worth 300,000 or less. Where the purchase consideration is more than 300,000 but less that 500,000, stamp duty will only be due on the consideration over 300,000 (at a rate of 5%). There ll also be a tightening up of the rules that require stamp duty to be paid at a higher rate on second homes, holiday homes and so on for transactions taking place on or after 22 November 2017. The Annual Tax on Enveloped Dwellings (ATED) charge will rise by 3% from April 2018. ATED generally applies to companies that hold higher value residential properties. The government has confirmed that the 14-day filing and payment window for land transactions will take effect from 1 March 2019. This will be accompanied by a simplified stamp duty land tax return to assist with compliance. OTHER INDIRECT TAXES There ll be the standard increase in Vehicle Excise Duty Rates, based on the Retail Price Index. This will come into effect from 1 April 2018. A supplement for new diesel vehicles will also apply from 1 April 2018. ANY QUESTIONS? Send Julian a note: julianr@pfkcooperparry.com or give him a call on: +44 (0) 7792 030 457
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