The 29th of October 2018 marked the final Budget before Brexit and the first time since 1962 that a budget has been delivered on any other day than a Wednesday. The budget was also held a few weeks earlier than usual to avoid any clash with the final months of Brexit negotiations. There were the usual announcements on personal allowances and tax thresholds, but other than that, the announcements were not overwhelming, the highlight being the Annual Investment Allowances being increased from £200,000 to £1m and the controversial £420m spent on potholes.
The below sets out some of the key announcements from Chancellor Philip Hammond:
• Tax-free Personal Allowance is set to rise to £12,500 in April (a £650 increase) and the higher rate threshold to £50,000. These 2 rates will continue to rise in line with inflation.
• The Capital Gains Tax (CGT) annual exemption will increase in line with Consumer Prices Index to £12,000 (2018/19: £11,700)
• The rates for income tax and CGT are to remain the same.
• The National Living Wage will increase from £7.83 to £8.21 from April 2019.
• The minimum qualifying period for Entrepreneurs Relief will increase from 12 months to 2 years.
• VAT registration threshold will not be reduced but a consultation will be carried out on the design.
• The Chancellor has stated he will halve the contribution to the apprenticeship levy for smaller firms from 10% to 5% in a £695m package to support apprenticeships.
• From April 2019, the UK will apply income tax to royalties relating to digital retail sales in the UK.
• To prevent abuse of the R&D tax credits scheme from April 2020 the amount of payable credit to loss-making companies will be capped at three times the company’s total PAYE and NICs liability for that year.
• Employment Allowance is set to be targeted at small and medium businesses with an Employer NICs bill under £100,000 a year from April 2020. The threshold for VAT registration is to remain unchanged for a further two years.
• Reforms to IR35 payroll rules are to be extended to large and medium-sized firms in the private sector from April 2020.
• A 2% UK digital services tax will come into force in April 2020 and is expected to raise £400million a year.
• Further to the highlight of the Autumn 2017 Budget of Stamp duty land tax being abolished for all first time buyers, those first time buyers purchasing shared equity homes up to £300,000 will be eligible for the first-time buyer’ relief. Where the purchase price is between £300,001 and £500,000, SDLT is only payable on the value over £300,000.
• From April 2019, any non-resident (whether an individual or an entity) disposing of an interest in UK commercial property will be subject to UK CGT. Currently, only disposals by non-residents of interests in UK residential property have been subject to UK CGT.
• From April 2019 items that qualify for annual investment allowance (AIA) will be greatly increased from £200,000 to £1,000,000 for 2 years.
• Lettings relief is limited to those properties in which the owner has a shared occupancy with the tenant.
Tax Abuse and Insolvency
• Following Royal Assent of Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency
• There aren’t many further details than the above at the moment, and it will be some time before Finance Bill 2019-20 is published (Royal Assent could be as late as Nov 2019). However, it seems that this would constitute a significant extension of the powers HMRC has to transfer liabilities from companies to director/shareholders under the thresholds set by PAYE Reg 80/81.
Other Points of Interest
• Self Employed or Employee – recent reforms were made to the public sector to tighten the rules aimed at treating self-employed contractors as employees. The Government is looking to open a consultation on the expansion of the reforms into the private sector. This will no doubt put greater responsibility on those who hire contractors to decide whether they should be treated as employees.
• Within the Autumn Budget policy paper, the government states their intention to open a consultation on how individuals can still receive Entrepreneur’s Relief (ER) in instances where, as a consequence of further investment in their company, their shareholding is diluted to below 5%. One of the conditions of the current ER rules is that the individual must hold a ‘material stake’ in the business, being 5% or more.