Finance Act 2019 Rebecca Benneyworth MBE FCA
Business and Corporation Tax
Annual Investment Allowance T emporary increase in annual limit Currently £200,000 T o be increased to £1 million Change effective for expenditure between 1 January 2019 and 31 December 2020 Allowance then reverts to £200,000
Capital allowances – plant & machinery Rate of writing down allowance on main pool unchanged at 18% Rate of writing down allowance on special rate pool (including higher emission cars) reduced to 6% Change effective 1 or 6 April 2019 ◦ Time apportion rate for periods spanning that date
Capital allowances – new structures and buildings allowance Flat rate allowance of 2% per annum Qualifying expenditure on the construction of new non-residential buildings and structures (SBA) Contracts entered into on or after 29 October 2018 No allowance on cost of land
SBA Qualifying expenditure Building in qualifying use Not residential nor used in conjunction with residential Like old IBA’s – second and subsequent owners gain benefit too – no clawback on first owner See Draft Treasury Order - consultation
Capital allowances – ECA’s Provide 100% relief on energy efficient and water efficient plant and machinery Items listed on the Energy T echnology List and Water T echnology List In addition companies can surrender related losses for cash payment of 2/3 the rate of CT Lists to be updated for 2019/20 Then abolished from April 2020
R & D relief for SME’s Restriction to be re-introduced where R & D losses are surrendered for cash payment The maximum payable tax credit will be three times the total PAYE and NIC payment for the relevant period This more generous than the original restriction Commences April 2020
Charity trading Limit on turnover for small amounts of trading within a charity Rather than carried on through a trading subsidiary Non primary purpose trading turnover limits ◦ £5,000 limit becomes £8,000 ◦ £50,000 becomes £80,000
Charities – gift aid Permitted to regard small cash donations as gift aided without the normal formalities ◦ Limit rises to £30 per gift from April 2019 ◦ Secondary legislation only Retail gift aid scheme – letters to donors can be once every three years where value of donation does not exceed £20 per annum
Electric vehicle charging points 100% FYA for installing charging points extended to 2023 Would be covered by AIA in any event so only relevant to major businesses ◦ Might mean more charging points at supermarkets etc Be aware of the huge increase in sales of electric vehicles
Tax relief on goodwill (?) Returns for some companies after a short absence Must be related to the purchase of a business 1 April 2019 There must be Intellectual Property as part of the acquisition
Off payroll working Widely expected that this measure would be extended from the public to the private sector T wo developments in the Budget ◦ This will not affect smaller businesses using outsourced labour ◦ The change will not commence until 2020 Consultation now live – small = CA definition
Affected clients – off payroll End user of contractor services Will have to carry out status checks If paying directly add individual to payroll ◦ Employer NIC ◦ Also affects apprenticeship levy Affected contractors – the IR35 risk has gone ◦ Moved to the engager ◦ Except when working for a small entity
Employment allowance Amount unchanged New legislation to restrict the allowance to employers whose previous year’s NIC bill (secondary liability only) was no more than £100,000 Where employers are connected this will apply to the total liability Change takes effect April 2020
Corporation tax losses New regime for carried forward losses from 1 April 2017 ◦ Some amendments now necessary ◦ These will be included in Finance Bill ◦ Note that the cap on group relief for carried forward losses is backdated to April 2017 Also – a similar restriction on set off of capital losses carried forward from April 2020 - £5 million plus 50% of remaining gains
Non resident companies Property income currently charged to income tax T o move to corporation tax in 2020 Losses carry forward intact
Large companies / groups Diverted profits tax amendments CGT exit charges – modify provisions about payment by instalments Definition of “UK related” company for group relief purposes – backdated to 5 July 2016
HMRC a preferred creditor? Where tax has been deducted or received by a business it is to be regarded as effectively held on trust for HMRC HMRC will have preferential status in relation to PAYE, employee NIC, VAT and construction industry scheme deductions No preferred status in respect of taxes due by the business – employer NIC, income or corporation tax
Director liability for taxes New legislation will make “ .. directors and other persons involved in tax avoidance, evasion or phoenixism jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency.” No sign in Finance Act so delayed until 2020
Class 2 NIC No longer to be abolished Problems for the low earners who will have no option but to pay Class 3 contributions to maintain their pension record Under Class 2 they can voluntarily pay that instead
Personal Tax Measures
Income tax – the basics Personal allowance £12,500 from 6 April 2019 ◦ Reaching the manifesto commitment one year early ◦ Frozen in 2020/21 ◦ Increase by CPI thereafter Higher rate threshold £50,000 ◦ Same comments as for personal allowance
Scottish income tax Devolved taxes to be an increasing complication Due on non-savings non-dividend income Scottish only for present ◦ Prefix “S” Welsh income tax from April 2019 ◦ Prefix “C” !
Scottish tax rates A desire to differentiate more Starting rate 19% on £2,050 Basic rate 20% on £10,395 Intermediate rate 21% on £18,485 Higher rate 41% up to £150,000 Additional rate 46% Personal allowance and related withdrawal not devolved 25
Higher rate starts Additional rate 41% £43,430 starts £150,000 0 Personal Higher rate Additional rate allowance starts £50,000 starts £150,000 £12,500 NIC Upper Earnings limit £50,000
Welsh rates of income tax New from 2019 Prefix C on tax code RoUK rates reduce by 10% Welsh rates – 3 separate rates But all set at 10% until Welsh assembly elections 27
NIC Table 2019/20 2018/19 2019/20 Lower earnings limit £116 £118 Primary threshold £162 £166 Secondary threshold £162 £166 Upper earnings limit* £892 £962 Primary main rate 12% 12% Primary residuary rate 2% 2% Secondary rate 13.8% 13.8%
Benefits in kind Charging private electric cars at employers’ premises will not attract a benefit in kind tax charge (FA 19 but 18/19) Diesel supplement is now 4% unless car meets RDE2 Car fuel benefits increased by RPI from April 19 Van benefit & fuel benefit increases by CPI from April 2019
Electric & Hybrid cars Reduction in BIK from 2020 Wholly electric 2% Increasing scale for hybrids depending on electric range ◦ Starting at 2% for >130 miles ◦ Increasing to 14% for under 30 miles 30
Company cars? The future of motoring?
Running repairs Salary sacrifice rules in FA 2017 – repairs related to expenses paid by the employer on company cars and vans Provision of Assets rules in FA 2017 – some amendments for drivers of emergency service vehicles
Reimbursed expenses exemption Commenced 6 April 2016 Expenses which would attract a deduction under current legislation T wo qualifying conditions: ◦ Payer operates a system to check that the employee is incurring and paying for the expenses which are qualifying expenses ◦ Neither the payer nor anyone operating the system knows / could reasonably know or suspect that expenses not incurred / not deductible
Exemption for expenses Providing an exemption for expenses paid at the HMRC quoted travel and subsistence rates Requirement to check will change to checking that “the employee has undertaken the qualifying travel” Designed to reduce compliance costs for employers From 2019-20
Pension schemes Death or retirement benefit lump sums can now be donated to charity So no tax charge – otherwise would be an unauthorised benefit payment attracting 40% tax
Social security benefits Long list of new benefits which are predominantly not subject to income tax
Rent a room relief Changes were planned to ensure that the relief is only given as intended Which is to provide accommodation for “lodgers” who occupy the property at the same time as the claimant(s) But to maintain simplicity this measure has not been proceeded with after consultation
Capital Taxes
Routine changes Annual exempt amount up to £12,000 Amount for trustees is £6,000 No other changes to basic rules
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