PKF Littlejohn LLP Tax Insights Autumn What it means for you. We ve reviewed and analysed today s so you don t have to. Here are our thoughts on the announcements and how they might affect you. www.pkf-littlejohn.com
Key points PERSONAL ALLOWANCE Increases to 11,850 in April 2018 VAT THRESHOLD Maintained at 85,000 for two years STAMP DUTY To be abolished for first time buyers purchasing homes worth up to 300,000 ENTERPRISE INVESTMENT SCHEME Investment limit doubled for knowledgeintensive companies INCOME TAX RATES Higher rate band rises to 46,350 R&D TAX CREDIT To increase from 11% to 12% from January 2018 ANTI- AVOIDANCE Measures to bring in an extra 4.8 billion by 2022/23 BUSINESS RATES OVERHAUL With more frequent revaluations and a move to RPI indexation 2 AUTUMN BUDGET - 22 NOVEMBER - PKF LITTLEJOHN
Philip Hammond s Autumn speech is likely to be remembered for the abolition of Stamp Duty for first time buyers and the jokes he made at the expense of his colleagues and opposition MPs. Autumn However, it appears that the Chancellor has once again decided to save some of the most interesting proposals for the Treasury documents, which were published soon after he sat down. For the first time and as widely predicted, the government has indicated that the rules preventing offpayroll working in the public sector through the use of personal service companies will be rolled out to the private sector, with proposals to be issued in 2018. No mention of that on the floor of the House of Commons. Wider changes in respect of the so-called gig economy and the employment status of its workers are also likely to follow from this. References to increasing the level of Enterprise Investment Scheme (EIS) relief in high knowledge companies were perhaps intended to mask the removal of EIS relief to investors in low risk businesses. What this means is not immediately clear, but new businesses in established industries may see their scope to raise tax incentivised funds significantly reduced. Finally, while many smaller businesses have cheered the proposal to maintain the VAT registration threshold at its current level - rather than reducing it as the Office of Tax Simplification had proposed they may not have spotted the Chancellor s statement in a letter to the Office of Tax Simplification that he is minded to keep it at its current level of 85,000 whilst we consider the issues raised. This could become a significant issue in the years to come. Overall, however, the tone is again of few significant immediate changes. At least we can be fairly comfortable that there was nothing controversial that will be reversed by the end of the week Chris Riley, Head of Tax PKF Littlejohn LLP t: +44 (0)20 7516 2427 e: criley@pkf-littlejohn.com 1. Your money 2. Your capital 3. Your business AUTUMN BUDGET - 22 NOVEMBER - PKF LITTLEJOHN 3
1. Your money Key contacts Global Mobility Joseph Brown t: +44 (0)20 7516 2252 e: jbrown@pkf-littlejohn.com US/UK Expatriate Taxation Jonathan Boyfield t: +44 (0)20 7516 2255 e: jboyfield@pkf-littlejohn.com Private Clients Karen Ozen t: +44 (0)20 7516 2273 e: kozen@pkf-littlejohn.com Private Clients Diana Lancaster t: +44 (0)20 7516 2278 e: dlancaster@pkf-littlejohn.com 4 AUTUMN BUDGET - 22 NOVEMBER - PKF LITTLEJOHN
The Government wants businesses and landlords to report their income and expenses to HMRC on a quarterly basis through the Making Tax Digital (MTD) initiative, but has now scaled back its ambitions. Although the Treasury remains committed to MTD, no business will be mandated to use MTD until April 2019, and then it will only apply to those with turnover above the VAT threshold ( 85,000), and then only in respect of their VAT obligations. The scope of MTD will not be widened before the system has been shown to work, and not before April 2020 at the earliest. The Personal Allowance for individuals will increase from 6 April 2018 to 11,850. The threshold for higher rate tax will also increase from the same date to 46,350. The Dividend Allowance introduced by the Government in April 2016 will reduce from 5,000 per annum to 2,000 per annum from 6 April 2018. From April 2018, there will be no benefit in kind charge on electricity that employers provide to charge employees electric vehicles. Also from 6 April 2018, the flat rate van benefit charge will increase to 3,350 per annum; the multiplier for the car fuel benefit charge will increase to 23,400; and the flat-rate van fuel benefit charge will increase to 633. The introduction of reforms to the National Insurance Contributions (NICs) Bill in respect of abolition of Class 2 NICs for the self-employed, and reforms of the NIC treatment of termination payments for employees, are to be delayed to allow more time to work on the details. The time limit for HMRC to make assessment of offshore tax non-compliance is increasing, in some cases as much as tripling, to at least 12 years. The off-payroll working rules (known as IR35) for engagements in the public sector were reformed in April, and the Treasury is now looking to extend these reforms into the private sector. External research has already been commissioned and is due to be published in 2018, with a consultation following thereafter. The Government is looking to reform the penalty system for late or missing tax returns, adopting a new points-based approach. There will be consultation on whether to harmonise the penalty and interest regime across the different taxes. The Certificate of Tax Deposit scheme, used by taxpayers to reduce their exposure to interest charges when liabilities are in dispute with HMRC, closes on 23 November for new certificates. Existing certificates will continue to be honoured for six years. HMRC is also looking to use new technology from 6 April 2019 to recover Self-Assessment debts closer to real-time, potentially collecting debts through Pay as You Earn (PAYE) income. The Chancellor announced a major boost for tech businesses in this and HMRC is also looking to new technology to help it collect tens of millions of pounds in extra revenue AUTUMN BUDGET - 22 NOVEMBER - PKF LITTLEJOHN 5
2. Your capital Key contacts Trusts and Capital Taxes Barry Luscombe t: +44 (0)20 7516 2204 e: bluscombe@pkf-littlejohn.com Wealth Management Mark Quaye t: +44 (0)20 7516 2220 e: mquaye@pkf-littlejohn.com Property Taxes Jonathon Collins t: +44 (0)20 7516 2226 e: jcollins@pkf-littlejohn.com Private Client and Trusts Shaharan Deen t: +44 (0) 20 7516 2396 e: sdeen@pkf-littlejohn.com 6 AUTUMN BUDGET - 22 NOVEMBER - PKF LITTLEJOHN
Stamp duty is to be abolished for all first-time buyers up to 300,000 and the first 300,000 on purchases up to 500,000. The Government will legislate to exempt certain transfers of shares and land from stamp taxes when resolving failing financial institutions. The exemption will be limited to transfers to public bodies and affected creditors. The Stamp Duty and Stamp Duty Reserve Tax, a 1.5% charge on the issue of shares (and transfers integral to capital raising) into overseas clearance services and depositary receipt systems, will not be reintroduced following the UK s exit from the EU. The 30-day payment window between a capital gain arising on a residential property and payment will be deferred until April 2020 for non- UK residents. The investment limits for individuals investing in knowledge-intensive companies receiving investments under the EIS and VCTs rules will be increased to 2 million, provided a minimum of 1 million is invested in knowledge-intensive companies. The annual EIS and VCT limit on the amount of investment a knowledge-intensive company may receive will be increased to 10 million. The band of savings income that is subject to the 0% starting rate will be kept at its current level of 5,000 per annum for 2018-19. The ISA annual subscription limit for 2018-19 will remain unchanged at 20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2018-19 will be uprated in line with CPI to 4,260. The lifetime allowance for pension savings will increase in line with CPI inflation, rising to 1,030,000 for 2018-19. From April 2019, tax relief for employer premiums paid into life assurance products or certain overseas pension schemes will be modernised to cover policies when an employee nominates an individual or registered charity to be their beneficiary. The Treasury will publish a consultation response on the proposed requirement for designers of certain offshore structures that could be misused to evade taxes to notify HMRC of these structures and the clients using them. This will be done in conjunction with the OECD and EU. The assessment time limits for non-deliberate offshore tax non-compliance will be extended so that HMRC can assess at least 12 years of back taxes without needing to establish deliberate non-compliance, following a consultation in spring 2018. The Government will publish a consultation in 2018 on how to make the taxation of trusts simpler, fairer and more transparent. Doubling the EIS relief is good news for both investors and knowledgeintensive companies - but the system is still too complex for small businesses AUTUMN BUDGET - 22 NOVEMBER - PKF LITTLEJOHN 7
3. Your business Key contacts Business Tax Owner Managed Catherine Heyes t: +44 (0)20 7516 2237 e: cheyes@pkf-littlejohn.com Business Tax Insurance Mimi Chan t: +44 (0)20 7516 2264 e: mchan@pkf-littlejohn.com Not for Profit Sarah Kelsey t: +44 (0)20 7516 2298 e: skelsey@pkf-littlejohn.com Business Tax Employment Ian Gadie t: +44 (0)20 7516 2256 e: igadie@pkf-littlejohn.com Business Tax - International Tom Gareze t: +44 (0)20 7516 2212 e: tgareze@pkf-littlejohn.com VAT and Customs Duties Nick McChesney t: +44 (0)20 7516 2262 e: nmcchesney@pkf-littlejohn.com VAT and IPT Luigi Lungarella t: +44 (0)20 7516 2228 e: llungarella@pkf-littlejohn.com 8 AUTUMN BUDGET - 22 NOVEMBER - PKF LITTLEJOHN
The R&D tax credit available to companies will increase to 12% from 11% with effect from 1 January 2018. All gains on disposals of UK property by non-uk residents, will be brought into the scope of UK tax. This will apply to gains accrued on or after April 2019, with targeted exemptions for institutional investors. From April 2020, rental income received by non- UK resident companies with UK property assets will be subject to Corporation Tax rather than Income Tax. Also from that date, gains arising to non-resident companies on the disposal of UK property will be charged to Corporation Tax rather than Capital Gains Tax. In view of the planned reduction in Corporation Tax, this will reduce the tax charged on such income but may limit other reliefs available. With effect from April 2019, withholding tax will be extended to royalty payments and payments for certain other rights made to low or nil tax jurisdictions, in connection with sales to UK customers. The rules will apply regardless of where the payer of the royalties is located. Indexation allowance relief, which is available to UK companies to reduce their chargeable capital gains for the effects of inflation, will be frozen from 1 January 2018. Various measures to alleviate the impact of planned increases of business rates affecting small businesses are to be introduced, including increasing the frequency of the revaluation from five years to three years. The Government has published a position paper setting out how it proposes to address the taxation of digital businesses. The VAT registration threshold has been frozen at the current level of 85,000 until April 2020. However, the Government will consult on the future level of the threshold in response to the recent Office of Tax Simplification (OTS) report on the issue. Digital marketplaces will be expected to play a wider role in ensuring that their users are compliant with the tax rules in order to tackle online VAT fraud. The Treasury is to call for evidence in 2018, seeking views on how the tax system or charges could reduce the amount of single-use plastics waste. Several measures have been announced to change the taxation of employee expenses, including a consultation on extending the tax relief currently available to employees and the selfemployed for work related training costs. A number of proposals have been made to tackle anti-avoidance including: preventing perceived abuse of the entitlement to the employment allowance often by offshore structures. removing the 6 year time limit within which companies must adjust for transactions that have reduced the value of shares being disposed of in a group company. implementing the OECD s proposals to combat base erosion and profit shifting (BEPS) by international groups. AUTUMN BUDGET - 22 NOVEMBER - PKF LITTLEJOHN 9
National insurance contributions (NICs) 2018/19 Class 1 Payable on weekly earnings of: Employee (primary) Employer (secondary) Below 116 (lower earnings limit) Nil 116-162 (primary threshold) *0% Up to 162 (secondary threshold) Nil Above 162 13.8% 162.01-892 (upper earnings limit) **12% 162.01-892 upper secondary threshold (UST) for under 21s 12% 0% 162.01-892 apprentice upper secondary threshold (AUST) for under 25s 12% 0% Above 892 **2% - *No NICs are actually payable but notional Class 1 NIC is deemed to have been paid; this protects contributory benefit entitlement. **Over state pension age, the employee contribution is generally nil. Income tax and personal savings Income Tax 2018/19 /18 Basic rate band income up to *** 34,500 *** 33,500 Starting rate for savings income *0% *0% Basic rate 20% 20% Dividend ordinary rate **7.5% **7.5% Higher rate income over *** 34,500 *** 33,500 Higher rate 40% 40% Dividend upper rate **32.5% **32.5% Additional rate income over 150,000 150,000 Additional rate 45% 45% Dividend additional rate **38.1% **38.1% Starting rate limit (savings income) * 5,000 * 5,000 From 6 April 2016 The Scottish Parliament has the power to set a separate rate of income tax for Scottish taxpayers. The above shows the main rates and allowances. There are some minor differences if you are a Scottish tax payer. *If an individual s taxable non-savings income exceeds the starting rate limit, then the starting rate limit for savings will not be available for savings income. 1,000 of savings income for basic rate taxpayers will be tax-free. For higher rate taxpayers the limit is 500 and for additional rate there is no exemption. **The first 2,000 ( 5,000 for /18) of dividends are charged at 0%. ***Plus personal allowance where available (see below). Personal allowances (PA) 2018/19 /18 Personal allowance 11,850 11,500 Married couple s allowance (MCA) (relief given at 10%) Either partner born before 6 April 1935 * 8,695 * 8,445 Transferable Tax Allowance ( Marriage Allowance ) For certain married couples (relief given at 20%) 1,185 1,150 *Allowances are reduced by 1 for every 2 that adjusted net income exceeds 28,900 ( 28,000 for /18) to a minimum MCA of 3,360 ( 3,260 for /18). Where adjusted net income exceeds 100,000, PA is reduced in the same way until it is nil. 10 AUTUMN BUDGET - 22 NOVEMBER - PKF LITTLEJOHN
Our expert team can help you understand the impact of the on you and your business. To find out more, please contact us. Autumn Corporate/International Tax Chris Riley t: +44 (0)20 7516 2427 e: criley@pkf-littlejohn.com Global Mobility Joseph Brown t: +44 (0)20 7516 2252 e: jbrown@pkf-littlejohn.com Property Taxes Jonathon Collins t: +44 (0)20 7516 2226 e: jcollins@pkf-littlejohn.com US/UK Expatriate Taxation Jonathan Boyfield t: +44 (0)20 7516 2255 e: plett@pkf-littlejohn.com Trusts and Capital Taxes Barry Luscombe t: +44 (0)20 7516 2204 e: bluscombe@pkf-littlejohn.com Wealth Management Mark Quaye t: +44 (0)20 7516 2220 e: mquaye@pkf-littlejohn.com Not for Profit Sarah Kelsey t: +44 (0)20 7516 2298 e: skelsey@pkf-littlejohn.com VAT and IPT Luigi Lungarella t: +44 (0)20 7516 2228 e: llungarella@pkf-littlejohn.com Business Tax - International Tom Gareze t: +44 (0)20 7516 2212 e: tgareze@pkf-littlejohn.com Business Tax - Owner Managed Catherine Heyes t: +44 (0)20 7516 2237 e: cheyes@pkf-littlejohn.com Business Tax - Insurance Mimi Chan t: +44 (0)20 7516 2264 e: mchan@pkf-littlejohn.com Business Tax - Employment Ian Gadie t: +44 (0)20 7516 2256 e: igadie@pkf-littlejohn.com VAT and Customs Duties Nick McChesney t: +44 (0)20 7516 2262 e: nmcchesney@pkf-littlejohn.com Private Clients Karen Ozen t: +44 (0)20 7516 2273 e: kozen@pkf-littlejohn.com Private Clients Diana Lancaster t: +44 (0)20 7516 2278 e: dlancaster@pkf-littlejohn.com Private Client and Trusts Shaharan Deen t: +44 (0) 20 7516 2396 e: sdeen@pkf-littlejohn.com AUTUMN BUDGET - 22 NOVEMBER - PKF LITTLEJOHN 11
PKF Littlejohn LLP, 1 Westferry Circus, Canary Wharf, London E14 4HD Tel: +44 (0)20 7516 2200 Fax: +44 (0)20 7516 2400 www.pkf-littlejohn.com This document is prepared as a general guide. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author or publisher. This information is in accordance with legislation announced 22 November. PKF Littlejohn LLP, Chartered Accountants. A list of members names is available at the above address. PKF Littlejohn LLP is a limited liability partnership registered in England and Wales No. 0C342572. Registered office as above. PKF Littlejohn LLP is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. PKF International Limited administers a network of legally independent firms which carry on separate business under the PKF Name. PKF International Limited is not responsible for the acts or omissions of individual member firms of the network. November