The first Autumn Budget was delivered this week by Mr Hammond amidst immense pressure to deliver something ‘spectacular’ and with some deeming it to be a ‘make or break’ Budget for the Chancellor. Whilst some of the announcements were expected in the days leading up to the speech, a number of new measures announced were rather surprising.
As ever however, the devil is in the detail and so we await publication of the detailed rules to have a better understanding of who the real winners and losers are.
We have summarised below the main points of interest which will be of relevance to our clients. This release is not intended to be a full review of the Budget and you should refer to the supporting and related documents for an in-depth review noting that many of the changes are subject to the outcome of a consultation.
Here is a summary of the principal tax changes announced:
Autumn Statement Budget
- STAMP DUTY LAND TAX – No SDLT payable by first time house buyers up to £300k
- ENTERPRISE INVESTMENT SCHEME – Doubling of investment limit to £2m, potentially attracting income tax relief of £600k
- INDEXATION ALLOWANCE – Indexation allowance will be freeze from 1st January 2018
- NON-RESIDENT CAPITAL GAINS TAX – Extending to commercial properties situated in the UK
- RESEARCH & DEVELOPMENT CREDIT – Available to large companies is Increasing to 12%
- PERSONAL ALLOWANCE – Set to increase to £11,850 in April 2018
- HIGHER RATE BAND – Set to increase to £46,350 in April 2018
- ROYALTIES – From April 2019, the government will introduce additional obligations to pay withholding taxes on payments of Royalties to no or low tax territories.
Personal Allowance & Annual Exemption
The personal allowance will rise to £11,850 from April 2018 with future increases expected up to £12,500 by 2020. The capital gains tax annual exemption will increase to £11,700.
Income Tax – Higher Rate Banding
The higher rate threshold (currently set at £45,000) is scheduled to increase to £46,350 from April 2018. Future increases are expected with a final threshold expected at £50,000 by the end of the current parliament.
Marriage Allowance – Extension
The marriage allowance permits certain individuals who are married or in a civil partnership to elect to transfer some of their personal allowance to their spouse or civil partner. The government will now extend this allowance to situations where the partner has died, with claims allowed to be backdated for up to 4 years.
Changes previously announced (the abolition of Class 2 NICs from April 2018 and the treatment of termination payments in excess of £30,000) will be delayed in being implemented by one year.
The government will no longer proceed with an increase to Class 4 NICs from 9% to 10% in April 2018 and to 11% in April 2019.
The Chancellor announced that the ‘Living’ wage will increase from £7.50 to £7.83 per hour from April 2018 (a 4.4% rise).
Benefits in Kind
- From April 2018, there will be no benefit in kind charge where employers provide electricity to employees to charge their electric vehicles;
- Also, diesel cars will attract an increased benefit in kind supplement of 4% (up 1% from the current rate); and
- The fuel benefit charge and van benefit charge will increase in line with inflation. The multiplier for cars will be £23,400 and the charge for vans will be £633. The van benefit charge will increase to £3,350.
Employee Business Expenses
- The government will undertake a consultation in 2018 on extending the scope for tax relief on employee expenses incurred in self-funding training.
- From April 2019, employers will no longer be required to check receipts when reimbursing employees;
- HMRC will work closely with relevant stakeholders to improve the guidance on employee expenses (particularly travel and subsistence)
Capital Gains Tax
Previous discussions to introduce a 30-day window between the gains arising on the disposal of a residential property and the payment of the tax will be deferred until April 2020.
The lifetime allowance for pensions will increase in line with inflation to £1.03m for 2018-19
Enterprise Investment Scheme
From April 2018, individuals who invest in EIS qualifying companies will be able to do so up to a maximum limit of £2m (double the current limit), potentially attracting an income tax relief of up to £600k. The increased relief may only apply where investment is made in companies which meet specific conditions but more details will follow in due course.
BUSINESS & CORPORATE TAX
Corporation Indexation Allowance
Corporate indexation allowance will be frozen from 1st January 2018 and so no relief will be available for any period after this date for any future corporate disposals.
Research & Development – Credit
Large companies incurring qualifying research & development expenditure will be eligible for credit at 12% (an increase of 1% from the existing rate) and a new advance clearance mechanism for RDEC will be introduced.
Non-Resident Capital Gains Tax
From April 2019, all gains made on the disposals of UK property will be subject to UK capital gains tax (or corporation tax on gains). At present, gains are only taxable in respect of disposals of residential properties, so the provisions will extend to commercial properties when they come into force.
The measures will also apply to disposals of UK property interests held indirectly (i.e. via corporates). Rebasing provisions will apply so that only gains made after April 2019 will be chargeable.
Non-Resident Companies – UK Property Income
From April 2020, income received by non-resident companies from UK properties will be subject to corporation tax (as opposed to income tax at 20%). The provisions will mean profits are likely to be subject to the expected corporation tax rate of 17% to be introduced in 2020.
Withholding Tax – Royalties
From April 2019, withholding tax obligations will be imposed to royalty payments made to low or no tax jurisdictions in connection with sales to UK customers (irrespective of where the payer is located). If enacted, these rules will add to the existing measures recently put in place imposing withholding obligations on payments of royalties.
Annual Tax on Enveloped Dwellings
The ATED charge will increase by 3% from April 2018. The new charges will apply to the April 2018-19 period.
INDIRECT TAX, AVOIDANCE & OTHER MATTERS
Stamp Duty Land Tax
- First Time Buyers – No SDLT will be payable by first time house buyers on values up to £300k. Those buying homes worth up to £500k will not be required to pay SDLT on the first £300k.
- Compliance – From March 2019, an SDLT return and the payment of the duty will need to be made within 14 days (reduced from the current time limit of 30 days)
- Surcharge Rates – Relief from the surcharge rate (3%) will apply in particular circumstances (e.g. spousal transfers, additional interest in existing property)
The government will maintain the current registration limit of £85k for two years from April 2018.
VAT & Online Markets
Three new measures will be introduced to extend the joint and several liability provisions applying to online market places such as Amazon and Ebay with a view to tackling VAT evasion via such platforms.
- Notification of Offshore Structures – Designers of offshore structures implemented to evade taxes, will be required to notify HMRC of these structures.
- Offshore Time Limits – HMRC will be able to assess for back taxes for at least 12 years in matters of non-deliberate offshore tax non-compliance.
- Disguised Remuneration – Disguised remuneration schemes implemented by close companies will be tackled through new measures and the rules surrounding the new loan charge will ensure that the liabilities are collected from the appropriate person.
- Profit Fragmentation – The government will consult on ways to tackle UK traders who fragment their income through the use of unrelated entities.
- Double Taxation Relief – With immediate effect, a restriction will be introduced to the relief for foreign tax incurred by overseas branches of a company where losses have been incurred to ensure relief is not obtained twice.
- Depreciatory Transactions – With immediate effect, the government will lift the 6-year window on depreciatory transactions which result in a capital loss on a share disposal. Previously, only transactions taking place immediately 6 years prior to the share disposal were subject to an adjustment.
For further information, please get in touch with your usual Animo contact or one of the following: