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UK Budget 2018

MACO businessThe Chancellor has laid out details signalling the end to austerity in a statement delivered between key meetings in the Brexit negotiations. Expectation leading up to the Budget had been for tax rises, with various revenue raising options discussed ahead of the statement.

However, not many of the rises and cuts mooted were delivered yesterday. Philip Hammond also signalled that the Government may have to look at a different strategy and change its promise that the end of austerity is in sight if the UK leaves the EU without a deal. The Chancellor said that an emergency budget would have to be drawn up in the event of a no-deal scenario.

It is also worth noting that the Scottish Budget will be published on 12 December 2018 when income tax plans for 2019/20 will be announced. A full update will be published on these pages shortly after the announcement.

Click on the links below for the key summaries

We're on hand to help if you would like to discuss any of the issues raised in the budget. Give your usual contact at MACO or MAFS a call or clink on the link: Contact us

Idea

Key Highlights

MACO business

Personal Tax

MACO performance

Business Taxes

MACO saving

Pensions & Savings

MACO invest

Tax Compliance

MACO buying selling

Property Taxes

MACO project

Capital Taxes

TimeMgt

Valued Added Tax

 

Some of the key highlights for the forthcoming 2019/20 tax year include:

 

  • The annual investment allowance will increase to £1 million for all qualifying expenditure on plant and machinery made between 1 January 2019 and 31 December 2020.
  • The minimum period throughout which the qualifying conditions for entrepreneurs’ relief must be met will be extended from 12 months to 24 months from 6 April 2019.
  • From April 2020, the final period capital gains tax (CGT) exemption for owner-occupied residential property will be reduced from 18 months to 9 months.
  • The pension lifetime allowance will increase to £1.055 million for 2019/20, with no change to the annual allowances.
  • The personal allowance will be raised to £12,500 from April 2019, one year earlier than previously planned. At the same time, the higher rate will rise to £50,000, in England, Wales and Northern Ireland also a year ahead of schedule. We will have to wait until 12 December 2018 when the Scottish Budget is announced to find out if these changes will be adopted in Scotland.
  • For two years from April 2019, business rates for retail properties with a rateable value below £51,000 will be cut by a third in England & Wales.
  • Making Tax Digital (MTD) for VAT will start to apply to certain businesses from 1 April 2019 >Find out more
  • Dates for your diary: 1 & 19 November Budget Briefings. 5 December MTD for VAT seminar >Find out more

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Personal Tax

Income tax

The personal allowance will increase to £12,500 and the higher rate threshold will rise to £50,000 for 2019/20*. From 2021/22, the personal allowance and higher rate threshold will increase in line with inflation. *The Scottish tax bands and rates for non-savings, non-dividend income will be announced in the Scottish Budget, due on 12 December.

Private sector off-payroll workingMACO saving

Following consultation and the roll-out of reform in the public sector, responsibility for operating the off-payroll working rules in the private sector will move from individuals to the organisation, agency or other third party engaging the worker. The change will take effect from April 2020, with an exemption for small organisations.

Employment allowance

From April 2020, the employment allowance of £3,000 a year will be restricted to employers with an employer national insurance contributions (NICs) bill below £100,000 in their previous tax year.

National insurance contributions

As announced in September, Class 2 NICs will not be abolished during this Parliament. Reforms to the treatment of termination payments and income from sporting testimonials will be legislated for in the National Insurance Contributions Bill, with changes taking effect from April 2020.

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Business Taxes 

 

Corporation tax rate

The government has confirmed that the rate of corporation tax will fall to 17% in 2020.

Annual investment allowance

The AIA will be increased from £200,000 to £1 million for all qualifying investments in plant and machinery from 1 January 2019 until 31 December 2020.

Special rate writing down allowance

The capital allowances special rate for qualifying plant and machinery (and integral features), such as long-life assets, will be reduced from 8% to 6% from April 2019.

Structures and buildings allowance

A 2% capital allowance will apply to qualifying capital expenditure on new non-residential buildings and structures where all the contracts for the physical construction works are entered into on or after 29 October 2018. Relief will not be available for the costs of land or dwellings.

Corporate losses

The tax treatment of corporate capital losses will be brought into line with the treatment of income losses from 1 April 2020. The proportion of annual capital gains that can be relieved by brought-forward capital losses will be limited to 50%. However, companies will have unrestricted use of up to £5 million capital or income losses each year.

Amendments will be made to the existing loss relief legislation to ensure that it works as intended and prevents relief being claimed for excessive carried-forward losses.


Digital services taxCloud technology

A new 2% tax will be charged from April 2020 on the revenues of certain digital businesses that derive value from their UK users. The tax will apply to revenues generated from the provision of search engines, social media platforms and online market places where those activities are linked to the participation of UK users, subject to an annual allowance of £25 million.

The tax will only apply to groups that generate global revenues from in-scope business activities of more than £500 million a year. It will include a safe harbour provision that will exempt loss-makers and reduce the effective rate of tax on businesses with very low profit margins.

Company vehicles

Fuel benefit charges will increase in line with the retail prices index (RPI) and the van benefit charge will increase in line with the CPI from 6 April 2019. The fuel multiplier for 2019/20 will be £24,100 for cars. For vans, the fuel chargeable amount will be £655.

Intangible fixed assets regime

A targeted relief will be introduced from April 2019 for the cost of goodwill in the acquisition of businesses with eligible intangible property. With effect from 7 November 2018, a de-grouping charge will not arise where the de-grouping is the result of a share disposal that qualifies for the substantial shareholding exemption.

Offshore receipts in respect of intangible property

From April 2019, income from intangible property held in low-tax jurisdictions will be taxed to the extent that it can be referred to UK sales. The tax will be collected by directly taxing offshore entities that realise intangible property income in low-tax jurisdictions. There will be a de minimis UK sales threshold of £10 million and exemptions for income that is taxed at appropriate levels or supported by sufficient local substance.

Enhanced capital allowances (ECAs)

The ECA for companies investing in electric vehicle charge points will be extended to 31 March 2023. ECAs and first-year tax credits for technologies on the Energy Technology List and Water Technology List will end in April 2020. The savings will be reinvested in an Industrial Energy Transformation fund to support significant energy users to cut their energy bills and move UK industry to a low-carbon future.

Charity taxes

The upper limit for trading that charities can carry out without incurring a tax liability will rise from £5,000 to £8,000 where turnover is under £20,000, and from £50,000 to £80,000 where turnover exceeds £200,000.

Charity shops using the Retail Gift Aid Scheme will be allowed to send letters to donors every three years when their goods raise less than £20 a year, rather than every tax year.

The individual donation limit under the Gift Aid Small Donations Scheme will increase from £20 to £30. This applies to small collections where it is impractical to obtain a Gift Aid declaration.

These changes will take effect from April 2019.

think ahead

Your business might be entitled to a valuable research and development (R&D) tax credit – even if it doesn’t make a taxable profit. Check out the position; you might be surprised what expenditure can qualify and how much it could be worth to you.

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Pensions, Savings and Investments

 

Individual savings account (ISA) subscription limitsmoney pot icon

The ISA annual subscription limit for 2019/20 will remain at £20,000. The annual subscription limit for junior ISAs (JISAs) and child trust funds (CTFs) for 2019/20 will rise to £4,368.

Lifetime allowance for pensions 

The lifetime allowance for pension savings will increase to £1.055 million for 2019/20. There is no change to the annual allowances.

Venture capital trusts (VCTs) and enterprise investment schemes (EISs)

The rules for approved EIS funds will be amended to require approved funds to focus on knowledge-intensive companies with effect from April 2020. The funds will also have a longer period in which to invest capital. Investors in these funds will be allowed to set this income tax relief against their liabilities in the year before the fund closes.

The venture capital limits and reliefs remain unchanged.

Pensions for the self-employed

This winter the Department for Work and Pensions will publish a paper setting out the government’s approach to increasing pension participation and savings persistency among the self-employed. The paper will focus on expanding evidence through a programme of targeted interventions and partnerships.

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Tax Compliance 

 

Profit fragmentation

As announced in last year’s Budget, the Finance Bill will legislate to prevent UK businesses from avoiding UK tax by arranging for their UK-taxable business profits to accrue to entities resident in territories where significantly lower tax is paid than in the UK. The taxable UK profits will be increased to the actual, commercial level.

R&D tax relief for small and medium-sized enterprises

From 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year.

Stamp taxes on shares: consideration rules

The government will consult on aligning the consideration rules of stamp duty and stamp duty reserve tax (SDRT) and introducing a general market value rule for transfers between connected persons. The aim will be to simplify stamp taxes on shares and to stop contrived arrangements being used to avoid tax. To prevent forestalling, from 29 October 2018, a targeted market value rule will be introduced for listed shares transferred to connected companies.

VAT grouping

Certain non-corporate entities will become eligible to join a VAT group from 1 April 2019. In addition, revised VAT grouping guidance will be issued:
to amend the definition of ‘bought-in services’ to ensure that such services are subject to UK VAT; and to provide clarity to businesses on HMRC’s protection of revenue powers and treatment of UK fixed establishments.

Unfulfilled supplies

The VAT treatment of prepayments will change from 1 March 2019 to bring all prepayments for goods and services into the scope of VAT, where customers have been charged VAT but have not collected what they have paid for and have not received a refund.

VAT Regulation 38

Stricter rules will be introduced on how and when adjustments to VAT should be made following a price reduction and will ensure customers are issued with credit notes.

Electronic sales suppressioncalculator hm revenue

The government will consult later in the year on the misuse of electronic point of sale functions (i.e. till systems) to hide or reduce the value of individual transactions and the corresponding tax liabilities.

HMRC preferential creditor status 

From 6 April 2020, when a business enters insolvency, HMRC will be treated as a preferential creditor in respect of taxes collected and held by businesses on behalf of other taxpayers (VAT, PAYE income tax, employee NICs, and construction industry scheme deductions). The creditor rules will remain unchanged for taxes owed by businesses themselves, such as corporation tax and employer NICs.

Tax abuse and insolvency

Following Royal Assent of Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixing will be jointly and severally liable for company tax liabilities where there is a risk that the company may deliberately enter insolvency.

Conditionality: hidden economy

Following consultation, the government will consider introducing in Finance Bill 2019-20 a tax registration check linked to renewal processes for some public sector licences. Applicants would need to provide proof they are correctly registered for tax in order to be granted licences.

International tax enforcement: disclosable arrangements

Legislation is being enacted to allow the introduction of international disclosure rules about offshore structures that could avoid tax or could be misused to evade tax.

Offshore tax compliance strategy

The government will publish an updated offshore tax compliance strategy

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Property Taxes 

 

Business rates – retail

Business rates bills will be reduced for two years in England & Wales from April 2019 by one-third for retail properties with a rateable value below £51,000, subject to state aid limits. This will benefit up to 90% of retail properties.

Business rates – self-catering and holiday let accommodationMACO buying selling

The government will consult on the criteria under which self-catering and holiday lets become chargeable to business rates rather than council tax.

Business rates – public lavatories

A 100% business rates relief will be introduced for all public lavatories to help keep these amenities open.

Stamp duty land tax (SDLT)

First-time buyers’ relief in England and Northern Ireland will be extended so that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay SDLT on the market value of the property. The change will apply to transactions with an effective date of 29 October 2018 and will also be backdated to 22 November 2017.

The government will publish a consultation in January 2019 on an SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.

Non-UK residents’ gains

Gains that accrue to non-UK residents on non-residential property will be subject to tax, in line with the current NRCGT charge on residential property gains. Non-UK residents will also be subject to tax on gains in diversely-held companies, those widely-held funds not previously included, and life assurance companies. They will also be taxed on gains on interests in UK property-rich entities, such as shares in companies that derive at least 75% of their value from UK land. The measures which have been previously announced will take effect for disposals made after 5 April 2019 and there will be an anti-forestalling rule for arrangements entered into after 21 November 2017.

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Capital Taxes 

 

Capital gains tax: annual exempt amount

The annual exempt amount for individuals and personal representatives will rise to £12,000 for 2019/20, while the amount for most trustees will increase to £6,000 (minimum £1,200).

Entrepreneurs’ relief

From 6 April 2019, the minimum period throughout which the qualifying conditions for the relief must be met will increase from 12 to 24 months.

From 29 October 2018, shareholders claiming entrepreneurs’ relief must be entitled to at least 5% of the distributable profits and net assets of a company, in addition to the current requirements on share capital and voting rights.

As announced at the 2017 Autumn Budget, individuals can qualify for entrepreneurs’ relief where their shareholding is diluted below the 5% qualifying threshold by fund-raising events after 5 April 2019.

Private residence relief

From April 2020, lettings relief will only apply where the owner of the property is in shared occupancy with the tenant.

The final period exemption will be reduced from 18 months to 9 months. There will be no changes to the 36-month final period exemption available to disabled individuals or to those in a care home.

Inheritance tax (IHT)

The IHT nil rate band remains at £325,000 for 2019/20.

The residence nil rate band (RNRB) will increase to £150,000 from 6 April 2019 as already legislated. From 29 October 2018, minor technical amendments to the RNRB will take effect relating to downsizing provisions and the definition of ‘inherited’ for RNRB purposes.

IHT simplification is on the agenda. Now may be a good time to review making lifetime gifts before the tax rules are ‘simplified’ into something less generous.

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Valued Added Tax

 

Registration and deregistration thresholds

The taxable turnover threshold for registration for value added tax (VAT) will remain at £85,000 until April 2022, two years longer than previously announced. The deregistration threshold will stay at £83,000 for the same period. The government will look again at the possibility of introducing a smoothing mechanism once the terms of Brexit are clear.

Vouchers

The Finance Bill 2018-19 will implement EU legislation to ensure that the correct amount of VAT is charged on what the customer pays, irrespective of whether payment is with a voucher or by other means.

Labour provision in the construction sector

A VAT domestic reverse charge will be introduced to prevent VAT losses through ‘missing trader’ fraud when traders collect VAT on their sales but go missing before passing the VAT onto HMRC. The new rules will shift responsibility for paying VAT along the supply chain and will take effect from 1 October 2019.

Alternative method of VAT collection

The government is considering a ‘split payment’ model to reduce online VAT fraud by third country sellers and to improve how VAT is collected on cross-border e-commerce. An industry working group will be established to address some of the main challenges associated with this policy.

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Dates for your diaryCloud meeting

Brewing Up Business: Budget Briefing and Tax Opportunities - Thursday 1 November 2018

A tax update for business owners and directors including highlights and impacts of the latest Budget announcements, tax changes and tax planning opportunities. Click to find out more about the event.

Funding Growth and Ambition in Scotland's Food & Drink Industry - Wednesday 14 November 2018

If you are looking to raise funds for your business in the next 12 months and are keen to find out more about the potential options available, and how to go about attracting investors, then this session is for you. > more

FSB Glasgow - Tax update including highlights and impacts of the latest Budget announcements - Monday 19 November 2018 5.30pm, Savoy Tower, Glasgow.  If you would like to attend this event, send an email to This email address is being protected from spambots. You need JavaScript enabled to view it.

MTD for VAT 5 December 2018, 9am-10.30am Martin Aitken & Co's Glasgow Office.

Join our cloud accounting team at our Making Tax Digital seminar on 5 December 2018.

Making Tax Digital will impact all VAT registered businesses trading above the £85,000 VAT threshold in the UK from 1 April 2019 >find out more.

What's on the agenda and who should attend?

      • Find out more about Making Tax Digital and the requirements: what is changing, who is affected and when will I have to be ready to submit my VAT returns digitally to HMRC?
      • How should I prepare for the changes?
      • What software is available? 
      • How can Martin Aitken & Co assist you to ensure that you are ready and fully compliant by 1 April 2019?
      • Who should attend: owner-managers, directors, finance directors, finance managers and bookkeepers.

To attend the session, please send an email to This email address is being protected from spambots. You need JavaScript enabled to view it. and indicate how many places you will require.

We will keep you posted on the likely impacts of the changes announced in the Autumn Budget 2018 and any future Scottish Government announcements released in the Scottish Budget on 12 December 2018.  

If you have any questions about the summary’s contents or how any aspects of your tax and financial planning may be affected by the Autumn Budget 2018, please get in touch with your usual Martin Aitken & Co or Martin Aitken Financial Services Ltd contact to discuss. We will be pleased to hear from you. 

This summary has been prepared very rapidly and is for general information only. All statements within this document are based on our understanding of the changes within the 29 October 2018 Autumn Budget.

You are recommended to seek professional advice before taking any action on the basis of the contents of this summary. Publication date: 30 October 2018.

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MTD for VAT: Are you ready for 1 April 2019?

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