The Chancellor of the Exchequer this afternoon delivered what has been widely considered to be a very positive budget; austerity is ending, the Government are investing more money into public finances, and the personal allowance increase has been brought forward to April 2019, together with increases in the National Living Wage.
This evening we have provided an overview of the more technical aspects of the Budget; a more in depth analysis will follow tomorrow whilst our tax team review the details surrounding the main headline announcements:
Annual Investment Allowance:
An increase in the Annual Investment Allowance of up to £1 million on qualifying expenditure comes into effect on 1 January 2019 for a period of two years. This should hopefully encourage further capital investment in businesses.
Capital Allowances:
The Chancellor announced a new allowance for structures and buildings at 2% per annum – further information to follow in our more detailed briefing.
Changes to taxation of the main residence:
The final exempt period has been reduced from 18 months to 9 months on the sale of UK properties for main residence relief.
Lettings relief in respect of the main residence will only now be available if the individual is in shared occupation with the tenant.
Cross Border Tax Changes:
There is still the perceived view of non-disclosure of assets offshore, and it is anticipated that HM Revenue & Customs will give further consideration to their strategy which could ultimately lead to another disclosure facility.
Extending non-resident capital gains tax to all UK land and property. Previously, non-residents were potentially subject to Capital Gains Tax on residential property only.
Change in the definition of “permanent establishment” for companies, which could mean that more profits will become chargeable to corporation tax – further in depth analysis will be provided on this shortly.
Entrepreneur’s Relief:
The definition of “personal company” for Entrepreneurs’ Relief has changed and there are now two new tests that need to be met. The individual must have a real material stake in the company. Simply having 5% of the shares (in terms of voting rights) will no longer be sufficient as this, HM Revenue & Customs felt, led to a misuse and abuse of the rules.
Also the holding period for shares and business interests has been increased from one year to two years to again ensure that true Entrepreneurs’ are entitled to the relief.
IR35:
It’s key to note that small businesses will be exempt from the extension of the rules to the private sector, but business and contractors alike will need to plan for these changes to ensure their contracts meet the obligations.
R&D:
New restrictions on small companies from April 2020 means that R & D cash credits, instead of being unlimited, will be capped. In effect, refunds arising from R & D claims will be restricted to the PAYE paid by the company. This will restrict the benefit of R & D claims by companies that do not have employees.
VAT:
The VAT registration threshold remaining at £85,000 will be a relief to many small businesses due to the financial and administrative burden of complying with VAT. With Making Tax Digital for VAT less than six months away a reduction in the threshold would have brought a number of businesses that were not impacted by these changes within the scope of the new rules with little time to prepare. Therefore the threshold remaining at £85,000 is a good result.
There are other more significant changes – for example, VAT on vouchers and also the reverse charge on construction service, as well as VAT changes to specified supplies.
Further information will be provided in our full Budget briefing that will follow tomorrow. Use the form to the right to sign up to receive our full Budget briefing.
