Finance Act 2019 Rebecca Benneyworth MBE FCA Business and - - PowerPoint PPT Presentation

Finance Act 2019

Rebecca Benneyworth MBE FCA

Business and Corporation Tax

Annual Investment Allowance

 T

emporary increase in annual limit

 Currently £200,000  T

• 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

• wners 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

• nly 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
• utsourced 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

• 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

Personal allowance £12,500 Higher rate starts 41% £43,430 Additional rate starts £150,000 Additional rate starts £150,000 Higher rate starts £50,000 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

• n 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

Capital gains of non residents

 New provisions extending CGT to non

resident individuals, companies etc on

• ther real property from 6 Apr 2019
• Already liable on residential property
• Both direct and indirect holdings

 Companies will pay corporation tax on

their gains

 Extend the NRCGT provisions to cover

this

 Abolish ATED related charge

CGT on residential property sales

 Sale of UK residential property - tax to

be paid within 30 days of the date of sale

 Legislation sets out reporting

requirement with 30 day deadline

 Set off capital losses that have been

realised to date

 Recalulate liability on second or

subsequent sale

 But still complete on SA return

EEA residents disposals

 Where an exit charge arises individuals

and trustees can adopt payment by instalments

 This mirrors the existing provision in

corporation tax

Entrepreneurs’ relief - 1

 Increase the minimum ownership period  Up from one year to two years  For disposals on or after 6 April 2019

except for business cessations before 29 October 2018

• One year will continue to apply in that case

Entrepreneurs’ relief - 2

 Ownership criteria amended to require :  An entitlement to 5% of the votes by

virtue of owning 5% of the shares capital, and

 Ownership of 5% of the net assets and

entitled to 5% of the distributable profits

• f the company

 Throughout the necessary holding period  Separate test for alphabet shares

Alphabet shares

 If all of the company’s share capital were

to be sold, individual would be beneficially entitled to 5% of the proceeds of sale

 For this purpose assume a market value

disposal

 The proportion to which an individual is

beneficially entitled is to take into account all of the circumstances that existed at that time

Entrepreneurs’ relief - 3

 Extending relief to include those whose

previous 5% shareholding has been diluted below 5% as a result of the company raising additional equity finance

 Measure previously released for

consultation now amended to improve computation and clarify

 Finance raising events from 6 April 2019

CGT on main residence

 Final period reduced to 9 months (from

18 months)

 Letting relief will only apply when the

tenant is in shared occupancy

• Is this not abolition of letting relief?
• Or does it apply where a property has been

subdivided in practical terms?

 Changes from 2020 – will be consulted

• n

SDLT

 Extend first time buyers relief to shared

• wnership purchases

 Backdated – so look to claim relief  Reclaim of premium – period extended to

12 months after the sale of main home

 Time limit for returns & payment now 14

days – down from 30 days

IHT

 Changes to clarify some aspects of

residential nil rate band and downsizing relief

VAT

VAT changes

 Threshold remains frozen at £85,000 until

2022

 New rules on vouchers commenced in

January

• Generally – issue of voucher is a supply
• Single purpose vouchers - business making

the supply for the voucher is making the supply to the voucher issuer

 Construction scheme reverse charge

commences in October 2019

Tax Administration

Offshore tax defaults

 New time limit of 12 years  Income tax,  Where the lost tax is an offshore matter  Or involves an offshore transfer which

makes the lost tax significantly harder to identify

Security Deposits

 Existing legislation extended to CIS and

corporation tax

 Real problem for new businesses as it

affects funding requirements

 Voluntary returns – deemed to be returns

in response to a Notice to make a return

• This then extends the powers and safeguards

to voluntary returns