ICAS delivers Spring Tax Updates

Spring Tax Updates 2019, From left to right - Ian Donaldson from Markel Tax, Charlotte Barbour from ICAS and Philip McNeill from ICAS
Donald-Drysdale By Donald Drysdale for ICAS

28 May 2019

The efforts involved in providing the ICAS Spring Tax Updates are significant, and Donald Drysdale finds that these events are greatly appreciated by those who attend them.

Annual roadshow

The ICAS tax team has been busy. Through April and May, this year’s presenters Charlotte Barbour, Susan Cattell and Philip McNeill have delivered Spring Tax Updates at 11 different centres across the UK in association with ICAS Partner Markel Tax. As always, these have been well received by members and others.

With Philip Hammond’s annual tax cycle based on the Autumn Budget of 29 October 2018 as the main fiscal event, other key points were the Finance Act 2019 which received Royal Assent on 12 February 2019 and the Chancellor’s Spring Statement of 13 March 2019.

For taxpayers with interests in Scotland, another key event was the Scottish Budget of 12 December 2018 – setting income tax rates and thresholds for Scottish income tax (SIT) which differ from those in the rest of the UK (rUK).

The ICAS Spring Tax Updates focused primarily on tax changes being introduced with effect from April 2019 – combined with a look-ahead at changes expected from April 2020. Below are just a few of the tax developments covered.

Income tax

For income tax, the UK-wide personal allowance was set at £12,500 for both 2019/20 and 2020/21. For 2019/20, rUK tax rates have remained at 20%, 40% and 45%, with the higher and additional rate thresholds at £50,000 and £150,000. The dividend allowance stays at £2,000.

Scottish taxpayers pay income tax at rUK rates on savings and dividend income. On other income – earnings, pensions and property income – the rates of SIT they pay in 2019/20 have remained unchanged but the thresholds have been held down compared with those in rUK.

Where owner-managed companies pay dividends rather than salary, the saving for rUK higher rate taxpayers is around 4%, rising to almost 5% in April 2020. The difference is greater for Scottish taxpayers, with an added impact for governments as SIT due to Holyrood is replaced by corporation tax due to Westminster.

ICAS takes a lead on Scottish taxes. It publishes Scottish Budget commentary in conjunction with the Fraser of Allander Institute. It participates as a member of the Scottish Taxes Policy Forum. With other professional bodies, it holds regular policy meetings with the Scottish Government and provides quarterly evidence to their Finance and Constitution Committee.

Capital gains tax

From April 2019 the CGT annual exempt amount has increased to £12,000 for individuals and personal representatives. From April 2020, UK residents disposing of non-exempt residential property will have to make a return and a payment on account within 30 days of completion.

Changes have been made to entrepreneurs’ relief. From 29 October 2018, two new tests were introduced when defining a ‘personal company’, subject to a further alternative test. From 6 April 2019, the 12-month minimum holding period was increased to 24 months.

In a recent case, Dieno George v HMRC, the First-tier Tribunal rejected the taxpayer’s claim to £1.8m entrepreneurs’ relief in circumstances where an agreement to change his non-voting shares into voting shares had not been implemented.

HMRC have been consulting on proposed changes to the CGT principal private residence (PPR) relief. From April 2020 the final period of exemption is to be reduced to 9 months in most cases, and lettings relief will apply only where there is shared occupancy with the tenant. HMRC have successfully challenged PPR claims in a number of recent cases.

From April 2019, in a widening of the UK tax base, non-UK residents are subject to CGT (or corporation tax on chargeable gains) on direct disposals of UK residential and non-residential property and indirect disposals of entities predominantly deriving their value from UK land.

Corporate tax

The rate of corporation tax remained at 19% from April 2019 but is due to be cut to 17% from April 2020.

Since April 2017, carried-forward losses may only be set against 50% of profits in excess of a ‘deductions allowance’ of £5m for each standalone company. Each company (however small) must specify the amount of its deductions allowance in its tax return, and many may have overlooked this.

From April 2019, very large companies and groups (broadly, those with taxable profits above £20m) must pay their corporation tax quarterly instalments 4 months earlier than before.

Finance Act 2019 re-introduced tax relief under the intangible fixed assets regime for business acquisitions from 1 April 2019 that include goodwill, customer information or relationships, unregistered trademarks and licences. Relief is given at a fixed rate of 6.5% per annum.

After 6 November 2018, no de-grouping charge or allowance arises on intangible fixed assets when a company leaves a group as a result of a share disposal that qualifies for the substantial shareholding exemption.

From April 2020 the amount of carried-forward capital losses a company can offset is likely to be restricted to 50% of chargeable gains arising in a later accounting period. The 2017 deductions allowance of £5m would also apply to capital losses.

HMRC have been consulting on a unilateral digital services tax (DST) to be imposed from April 2020 until an international agreement is reached. It would apply at 2% on revenues (not profits) of search engines, social media platforms and online marketplaces where those revenues are linked to the participation of UK users.

Capital allowances

For all businesses, the annual investment allowance (AIA) has been increased to £1m a year for two years from 1 January 2019, with transitional rules applying to straddling periods.

The special rate allowance has been cut from 8% to 6%. Enhanced capital allowances for energy-saving plant will end on 31 March 2020, except for car-charging points which will remain eligible until 2023.

Capital allowances for new structures and buildings are available from 29 October 2018, but costs eligible for these can no longer qualify for plant and machinery allowances.

Other tax developments

Last but not least, two massive change projects are occupying the attention of practitioners and their clients.

However misguided it may seem at a time when HMRC are leading on many aspects of Brexit, they are pressing ahead with Making Tax Digital (MTD) for VAT. For further details see 'MTD for VAT: fact or fiction?' and 'MTD for VAT: Latest update'.

HMRC have been consulting on reforms to the tax treatment of off-payrolling in the private sector, to be implemented from April 2020. These reforms threaten to have a massive impact on contractors and on private sector organisations who engage them.

ICAS member involvement

Membership of the ICAS Tax Board and its Committees, and rotation of these roles, is vital to the success of the tax function at ICAS. Please contact the ICAS tax team if you are interested in becoming a Tax Board member or Committee member.

Tax consultations, calls for evidence and policy papers are published from time to time. It is the aim of ICAS, both in the interests of its members and in the public interest, to respond to the most significant of these, so please share your views by emailing the ICAS tax team.

Article supplied by Taxing Words Ltd


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