DAC Beachcroft's Autumn Budget 2018
Published 29 October 2018
Historically Budgets are on a Wednesday but the Chancellor has chosen Monday for the first time in 56 years for his Budget speech to avoid any Hammer House of Horrors references.
Bearing in mind he also started later than at any time since 2009, our Budget Update on what may be interesting from a tax point of view to the business-community will this year be a bullet point update to ensure it reaches you in good time:
- Capital Allowances: the annual investment allowance will be increased to £1m from 1 January 2019 to 31 December 2020;
- CGT Principal Private Residence: from April 2020 the special lettings relief will be withdrawn (unless the Landlord lives there) and the final 18 months advantage which deem certain properties still to be a PPR will be reduced to 9 months;
- Entrepreneur's Relief: from 6 April 2019 the one year holding period will be extended from one year to two years and from today shareholders must also be entitled to at least 5% of the distributable profits and net assets when selling shares in a company to claim the relief;
- VAT registration limit: this is currently £85,000 and will be retained at that level for the next two years, but HMRC will investigate issues caused by this cliff edge;
- IR35 rules: as predicted the present rigorous public sector rules will be extended to the private sector with effect from 6 April 2020 (but only where engaged by large and medium sized businesses);
- Digital Platform businesses: a new 2% UK digital services tax will be introduced with effect from April 2020 relating to UK generated turnover where the entity has at least £500m global revenue p.a.;
- Insolvency: HMRC will once again become a preferred creditor on insolvencies (but only PAYE, VAT and CIS);
- Overseas branches: the use of overseas branches by insurance companies which has given rise to VAT advantages will be attacked (effectively rowing back on the tax tribunal decision in Hastings Insurance Services);
- SDLT: the first time buyers' relief is extended to buyers under shared ownership lease or shared ownership trust schemes and this is backdated to the last budget;
- House builders: it was reported that the house builders are not land banking;
- New non-residential buildings: so long as all the contracts for the physical construction works are entered into on or after today owners will be eligible for a new and generous 2% capital allowance relief based on the cost of construction or renovation (which will track to subsequent owners);
- Corporation Tax: no changes were announced so this will be 17% with effect from April 2020;
- Income Tax: the personal allowance & higher rate thresholds from April 2019 will be £12,500 and £50,000 respectively (i.e. the Conservative manifesto pledge one year early).
- Private sector pensions: the government will support greater long term investment in UK businesses, and help defined contribution pension providers explore options for pooled investment in long term capital (whilst the FCA and DWP will consult on various related issues).
- Public service pensions: the Budget confirms a reduction of the discount rate for calculating employer contributions in unfunded public service pension schemes, leading to additional costs for employers. As a consequence the Treasury has made provision for increased NHS pension costs until 2023-24, and the Department of Education has also provided additional funds for State schools for a shorter period.
If you would like to discuss in depth any of the above please contact one of the tax team.