Oc October 2018 Bu Budget Po Post-bu budge dget br brie iefin ing & g & t tax u x upda pdate Oc October 30, 2018
Ag Agenda • Corporation tax • Personal tax • Capital gains tax • HMRC operational update • Making tax digital (MTD) • Brexit
poration ta tax Co Corpo • Rates • R&D tax credits • Capital allowances • Intangible assets regime
Co Corpo poration tax tax Rat Rates Year ended 31 March UK main rate % 2016 20 2017 19 2018 19 2019 19 2020 17
Co Corpo poration tax tax Rat Rates UK main UK patent US rate US FDII rate rate box rate Year ended 31 % % % % March 2016 20 10 35 N/A 2017 19 10 35 N/A 2018 19 10 35 N/A 2019 19 10 21 13.125 2020 17 10 21 13.125
poration ta tax Co Corpo R& R&D ta tax cre redits ts • PAYE / NI cap to be reintroduced for SME R&D tax credits, BUT only to tackle avoidance • Cap will be 3 times the company’s total PAYE plus NI for the year • HM Treasury will run a consultation to avoid harming genuine businesses • Cap applies to accounting periods beginning on or after 1 April 2020
poration ta tax Co Corpo Capital allowances • Special rate pool Ø Applies to integral features, thermal insulation, long life assets Ø Falls from 8% to 6% from 1 April 2019 • Structures and Buildings Allowance Ø New flat rate allowance at 2% of original cost of construction or renovation Ø Excludes land and dwellings, includes offices Ø Effective from 29 October 2018
poration ta tax Co Corpo Capital allowances continued • Annual investment allowance Ø Increases from £200k to £1m, for 2years Ø Begins on 1 January 2019
poration ta tax Co Corpo Intangible assets regime • Existing regime broadly allows corporation Parent tax profits and losses on intangibles / IP to follow accounting treatment IP transfer • 2 changes have been announced, with law Sub to follow in the Finance Bill 2018-19 • Partial reinstatement of relief for acquired goodwill for acquisition of businesses with IP Ø Should reduce the cost of acquiring businesses • Improve degrouping rules
Personal ta tax Pe Rat Rates an and ba bands ds 2018/2019 2019/2020 Band (£) Rate (%) Band (£) Rate (%) Personal allowance 11,850 - 12,500 - Dividend allowance 2,000 - 2,000 - Lower rate 0 - 34,500 20 0 – 37,500 20 Higher rate 34,501 – 150,000 40 34,501 – 150,000 40 Additional rate Over 150,000 45 Over 150,000 45 CGT annual exempt 0 - 11,700 0 0 – 12,000 0 allowance Personal allowance continues to taper off for earnings over £100k •
Ca Capi pital gains s tax ax Ent Entreprene neurs’ relief • An existing relief, in order to reduce capital gains tax rate to 10% (compared to 20% for higher rate taxpayers) • Applies to shareholders with at least a 5% holding • Also applies to EMI optionholders, but without the 5% holding requirement • Minimum qualifying period to be increased Ø Existing rules require shares to be held for 12 months to qualify Ø Holding period increased to 24 months for disposals from 6 April 2019 Ø EMI options held for less than 24 months will still be income tax, PAYE and NI free
Ca Capi pital ga gain ins tax ax Ent Entreprene neurs’ re relief • Anti-avoidance measure for shareholders (NOT EMI optionholders) Ø Existing rules require a holding of 5% of share capital, which is measured based on nominal value, plus 5% of votes Ø New additional requirement to have a 5% interest in profits and assets Ø Effective for disposals from 29 October 2018
Ca Capi pital ga gain ins tax ax Ent Entreprene neurs’ re relief • Proposed law has been released for a change to Entrepreneurs’ Relief when a holding falls below 5%: ‒ At the point of the diluting investment, the individual can make a deemed disposal and reacquisition of their shares at market value Ø This is intended to lock in the gain at the 10% rate ‒ Tax can be paid when the shares are finally sold or disposed of ‒ Applies to dilution events from 6 April 2019 NO RELIEF OR ABILITY TO AVOID TAX ON THE LOCKED-IN GAIN IF THE COMPANY FAILS, OR FALLS IN VALUE
HM HMRC C op operation onal upda pdate • EIS/SEIS/VCT advance assurance Ø HMRC turnaround times are 4-6 weeks (previously 10-12 weeks) Ø Identities of potential investors and other law changes need to be addressed in submissions Ø Older companies get closer scrutiny • R&D tax credits Ø Being turned around more slowly by HMRC. Sometimes 10- 12 weeks from submission to payment Ø Enquiries are being raised without any pattern (e.g. size of claim, history of accepted claims) dependent upon particular Inspectors Ø R&D advance assurance for new companies remains attractive
HM HMRC C op operation onal update Co Continued • EMI share valuations Ø No change in types of valuation being agreed Ø Turnaround times are typically 2-6 weeks • Employment related securities/EMI returns Ø Penalties and enquiries (especially for AIM companies) more common Ø No ability for taxpayer to review submissions, so screenshots required
Ma Making ng Tax Digital (MT MTD) • Government project to increase electronic collections and submission of tax information to HMRC Ø E.g. income tax returns pre-populated with bank interest income data Ø Reduce taxpayers’ time collecting information; increase accuracy • Rollout has been deferred many times • VAT will be the first tax to go into MTD Ø Requirement to keep and submit electronic VAT records from 1 April 2019 Ø Accounting software developers are interacting with HMRC Ø For more information see VAT Notice 700/22
Br Brexit it • Government published guidance on what will happen if ‘no-deal’ Brexit • Customs changes are beyond this presentation, but essentially for a UK taxpayer trading with the EU, this becomes the same as trading with a non-EU country • VAT changes Ø VAT system will remain in place in the UK, despite being an EU wide system, as it is a fundamental part of the UK tax raising system Ø Import VAT on EU and non-EU goods into the UK will be paid via the VAT return (not at the border) Ø Low Value Consignment Relief will not apply, so all parcels will be liable for VAT Ø VAT place of supply rules will remain the same Register for HMRC’s EU Exit update service on GOV.UK •
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