Budget Seminar Robert Maas, Tom Adcock, Toby Hermitage 30 November 2017
Income tax - 1 Rates for 2018/19 • Personal allowance £11,850 Basic rate band 34,500 So can earn before hitting 40% rate 46,350 • Dividend allowance £2,000 • (Down from £5,000)
Income tax - 2 Partnerships • Partnership must look through nominees • In a chain of partnerships the partnership profit from the bottom partnership must be “ring - fenced” • Partnership shares must be calculated as per the partnership agreement and then converted to a percentage
Income tax - 3 Partnerships (continued) • The bottom partnership must calculate its profits in four alternative ways UNLESS it knows the identity of everyone in the chain, so knows which is the appropriate calculation • Partners MUST put the partnership return figures on their tax returns – even if they think it is wrong. • A partner will be given a right of appeal to the tax tribunal against the division of partnership profits; but not against the amount to be divided.
Income tax - 4 Consultations planned • Rent a room relief • Does it support long term lettings? • Withholding tax on royalties • In what circumstances ought royalties paid to people outside the UK attract UK tax
Income tax - 5 Venture capital schemes – EIS, SEIS, VCTs • Can invest £2 million each year provided excess over £1 million is invested in Knowledge Intensive Companies • A Knowledge Intensive Company will be able to raise £10 million pa (instead of £5 million) but the total EIS money it can raise is limited to £20 million • For a Knowledge Intensive Company the 7 year period within EIS funds must be raised, starts from the time turnover reaches £200,000 (instead of when turnover is first generated)
Income tax - 6 Venture Capital Schemes (continued) • Consultation on a possible new Knowledge Intensive EIS fund structure • Streamlining the advance assurance service • Anomalies on commercial mergers to be removed • Will only be able to use EIS in future where there is a real risk to the capital being invested • Companies will have to take all tax advantaged investments (including before 2012) into account in arriving at its £12 million lifetime maximum
Income tax - 7 Trusts • Consultation in 2018 on making trust taxation “simpler, fairer and more transparent” • From 6 April 2018 capital distributions from offshore trusts will be taxed on settlor if received by a close family member • Payments to a non-resident beneficiary will be ignored for matching purposes • May be a window of opportunity
Employee taxation – 1 • Consultations on employee status and on employer-provided accommodation and on self-funded training • Better guidance on expenses • Higher benefit charges on diesel cars • Standard benchmark scale rates will no longer need to be vouched • Overseas benchmark scale rates will become statutory • Exemption for employer provided electricity
Employee taxation - 2 • Reform of tax treatment of termination payments • Abolition of foreign service relief • Will need to watch timing of return to the UK • Disguised remuneration; correction of mistakes in last month’s legislation • Save-as-you-earn pause for up to 12 months during pregnancy/paternity leave • Lifetime pensions allowance becomes £1,030,000 from 2018/19
Corporation tax - 1 • Rate remains 19% for 2017/18 to 2019/20 • Changes to corporate interest restriction • Disincorporation relief not to be extended • Increased large company R & D tax credit to 12% • Restriction on DTR for losses • Amendments to hybrids and other mismatches regime • Anti-avoidance on related party step=up schemes for tangible fixed assets
Corporation tax - 2 Corporate capital gains • Freezing of indexation allowance at 1 January 2018 • Depreciatory transactions: adjustment needed for transactions back to 31 March 1982 • Correct anomaly on transfer of assets to overseas subsidiary and subsequent group re-organisation
Corporation tax - 3 • Non-resident companies to be moved from income tax/CGT to corporation tax regime • Will explore ways to further reduce phoenixism risks • Explore with digital platforms opportunities to promote better tax compliance by users • Consultation on intangible fixed asset regime
Business tax • Scale mileage rates for unincorporated businesses • Extension of FYAs for zero emission vehicles/gas refueling equipment until March 2021 • Extension to March 2023 of tax credits for water or energy efficient equipment • Consultation on tax effect of new accounting rules for leases • Double tax relief: changes to TAAR and implementation of the Multilateral Instrument
Capital gains tax - 1 • Annual exemption £11,700 for 2018/19 • Bringing forward payment date deferred until at least 2020 • Consultation on retaining entrepreneurs relief when holding diluted by later issue of shares • Removal of transitional rules on carried interest
Capital gains tax - 2 Taxing gains made by non-residents on UK immovable property • From 1/5 April 2019 • NRCGT will apply to commercial as well as residential property • Will apply to interests in widely-held entities even for residential property • Will apply to a disposal of shares in an overseas company (or other entity) where taxpayer owns at least 25% and 75% of gross assets of the company is UK immovable property • Immediate forestalling rule to prevent treaty shopping • Rebasing to 6 April 2019 (except for residential property already within NRCGT or ATED related CGT)
Capital gains tax - 3 Taxing Gains of non-residents (continued) • In considering the 25% test include shares held by connected persons and shares disposed of in previous 5 years • In applying the 75% must include assets of subsidiaries and investee companies • Must report disposal within 30 days of completion • UK professional advisors to a transaction that could attract NRCGT must notify HMRC of the transaction within 60 days of disposal unless satisfied that someone else has notified
Value added tax • Registration threshold frozen at £85,000 for 2018/19 and 2019/20 • Extension of joint and several liabilities to online marketplaces • Government is still thinking about a split payment model • Consultation on VAT groups • Reverse charge from 1 October 2019 for subcontractors in the construction industry • Change in tax treatment of vouchers • Will consider cash flow problems of imports from EU after Brexit
Stamp Duty Land Tax - 1 • Exemption from SDLT for first time buyers buying homes for up to £300,000 • With a relief for first £300,000 on those costing up to £500,000 • A first time buyer is an individual or individuals who have never owned an interest in residential property in the UK or elsewhere and who intends to occupy the property as their main residence • Where there are joint purchasers all must be first time buyers who intend to occupy • It is not clear if a person intends to occupy as his main residence if he intends to flat-share with tenants
Stamp Duty Land Tax - 2 Amendments to the 3% surcharge to • Prevent abuse of replacement property relief by selling to one’s spouse or retaining some interest in the property • Disapply the 3% on a purchase from one’s spouse • Disregard certain interests retained by a former spouse under a court order made on a divorce or other dissolution • Disregard a property owned by a child’s parents where a property is bought by the child’s trustee appointed by eg the Court of Protection
Stamp Duty Land Tax - 3 • The filing and payment deadline will reduce to 14 days from completion (from 30) from 1 March 2019 • The ATED rates increase by 3% for 2018/19 in line with inflation
Administration • Further consultation on conditionality and the hidden economy • Simplifying late submission and late payment sanctions • Further consultation on a penalty points model • Scrapping of certificates of tax deposit • Extending assessing time limits to 12 years for offshore non-compliance
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ROBERT MAAS THOMAS ADCOCK TOBY HERMITAGE TAX CONSULTANT TAX PARTNER TAX PARTNER +44 (0)20 7309 3800 t: +44 (0)20 7309 3856 +44 (0)20 7309 3972 e: robert.maas@cbw.co.uk e: thomas.adcock@cbw.co.uk e: toby.hermitage@cbw.co.uk DFK International provides co- ordinating and other services to its member firms in connection with such firms’ practices in the fields of accounting, auditing, tax and management advisory services. DFK International does not practice in such fields. Each member firm is independent and is a separate legal, financial and administrative entity, practising under the laws in the country where it is based. Member firms are locally owned, operated and managed and each is responsible for its own liabilities. No single firm is responsible for the services or activities of any other.
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