The Budget and You

Jeffrey Webber proffers some post-Budget action points for the small accountancy practice;

Autumn Budget proposals affecting accountants and their clients will be implemented in the next Finance Bill, and future Budgets and Bills will address other areas. We list below some action points.

Business taxes

  • Advise companies carrying out R&D of improvements to R&D relief: the R&D expenditure credit (RDEC) rate will increase from 11% to 12% from 1 January 2018, and HMRC will offer a new Advanced Clearance Service for RDEC claims.
  • Emphasise tax advantages of buying zero-emission goods vehicles: first-year allowances for zero-emission goods vehicles and gas refuelling equipment will be extended to 31 March/5 April 2021.
  • Notify clients of annual tax on enveloped dwellings (ATED) increase: the annual ATED charge for 2018/19 (payable by 30 April 2018) will increase by 3%. Properties held at 1 April 2017 are required to be revalued at that date, and the ATED charges for the five years beginning 2018/19 will be based on the new valuation.
  • Prepare for change to corporate indexation allowance: the corporate indexation allowance will be frozen from 1 January 2018, ending relief for inflation accruing after that date in calculating chargeable gains.
  • Assist non-resident companies to prepare for future changes: gains on direct or indirect disposals of all immovable UK property will be subject to UK tax from April 2019, with rebasing to market value at that date. Detailed rules and anti-forestalling measures will apply. All non-resident companies will become chargeable to corporation tax (instead of, where applicable, income tax and capital gains tax) from April 2020.
  • Watch for possible extension to anti-phoenixing rules: in 2018 the government will explore further means to prevent taxpayers abusing the insolvency regime to avoid or evade tax liabilities, including through using phoenixism.
  • Note possible change to intangible fixed asset regime: in 2018 the Government will consider making targeted changes to improve the intangible fixed asset (intellectual property) regime.



Personal and trust taxes

  • Assist affected clients to make backdated marriage allowance claims: from 29 November 2017 widows and widowers can submit marriage allowance claims (backdated by up to four years) on behalf of deceased spouses/civil partners.
  • Alert larger personal clients to venture capital investment changes: from 6 April 2018 the maximum annual investment by individuals in EIS companies investing in at least one knowledge-intensive company has been doubled to £2m per year. However, a new ‘risk to capital’ condition will apply to EIS, SEIS and VCT companies where there is a low risk to investors’ capital.
  • Note increase to pension lifetime allowance: the pension lifetime allowance (reduced from £1.8m to £1m in recent years) will increase in line with the CPI to £1,030,000 for 2018/19.
  • Watch for possible entrepreneurs’ relief relaxation: in 2018 the Government will consult on allowing relief to entrepreneurs whose shareholding is reduced below the 5% qualifying level due to the company issuing new shares to raise funds for commercial purposes.
  • Keep an eye on rent-a-room relief: in 2018 the Government will review whether this relief is being used for its original purpose of supporting longer term lettings – and so may restrict its use for some short-term lettings.

 

Employment taxes

  • Emphasise continuing tax advantages of using low-emission vehicles: CO2 emissions will continue to be the basis for company car benefit in kind charges, with a move to a new worldwide emission measuring system in 2020.
  • Alert clients to possible further off-payroll working and employment status changes: in 2018 the Government will consult on employment status and also on how to tackle non-compliance with the intermediaries legislation (IR35) in the private sector. A possible next step would be to extend the recent public sector off-payroll reforms to the private sector.
  • Note effects of NIC Bill delay: the NIC Bill will not take effect until April 2019, delaying the abolition of Class 2 NICs and changes to NICs on termination and testimonial payments.



Indirect taxes and duties

  • Advise clients of SDLT changes. From 22 November 2017:

– First-time buyers paying £300,000 or less for a (single dwelling) residential property will pay no SDLT. Those paying £300,000–£500,000 will pay SDLT at 5% on the excess over £300,000. This will not apply in Scotland and will only apply in Wales until 1 April 2018.

– Minor amendments to the 3% charge on the purchase of additional residential properties will remove some anomalies and clamp down on avoidance.

– The reduction in SDLT return filing and payment deadlines from 30 days to 14 days is deferred until 1 March 2019.

  • Note VAT registration threshold frozen: VAT registration and deregistration thresholds are frozen at £85,000 and £83,000 respectively until 31 March 2020.
  • Inform online marketplace users of anti-VAT avoidance action: joint and several liability rules will be extended from the date of Royal Assent to the 2017-18 Finance Bill to prevent avoidance of VAT on sales.
  • Advise construction industry clients of new VAT reverse charge: a domestic reverse VAT charge on the supply of labour in the construction industry will apply from 1 October 2019.

 

Anti-tax avoidance

  • Note that the anti-tax avoidance drive continues: consultations will address:

– The extension of HMRC assessment time limits in respect of offshore tax matters from four or six years to 12 years.

– Tackling the hidden economy by making access to some trading licences conditional on proving tax registration.

  • Jeffrey Webber is a Tax Director with BDO LLP and a consultant on BDO’s Tax Support for Professionals Taxline. Email jeffrey.webber@bdo.co.uk

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