PERSONAL TAX
The personal allowance was £11,850 for 2018/19 and increases to £12,500 for 2019/20.
In 2018/19 the 20% basic band was £34,500 so that the threshold for the application of the 40% was £46,350 for those entitled to the full personal allowance.
In 2019/20 the basic rate band increases to £37,500, with the 40% band also increased to £50,000, for those who are entitled to the full personal allowance. Taxpayers will continue to pay tax at 45% on their income over £150,000.
Gift Aid tax relief procedure on donations are simplified from 6 April 2019. The benefit threshold for the first £100 of the donation remains at 25% of that and 5% of the amount of the donation that exceeds £100 up to a maximum of £2,500.
CORPORATION TAX RATES
The main rate of corporation tax will remain at 19% in 2019/20. The rate will fall to 17% from 1 April 2020.
BUSINESS TAX
The Making Tax Digital (MTD) regime will be applicable to businesses’ first prescribed accounting period beginning after 1 April 2019. The regime will require businesses with a taxable turnover above the VAT threshold (i.e. £85,000) to keep digital records for VAT purposes and submit their VAT return information to HMRC using MTD functional compatible software.
The government has confirmed that where businesses are doing their best to comply, no filing or record keeping penalties will be issued taken in the first year of implementation.
CAPITAL ALLOWANCES
Plant and machinery
As per the Autumn Budget, the Annual Investment Allowance has been increased for a period of two years from £200,000 to £1 million in relation to qualifying expenditure incurred from 1 January 2019.
From April 2019 the rate of writing down allowance on the special rate pool is reduced from 8% to 6%. This category includes long-life assets, integral features and cars with CO2 emissions of more than 110g/km.
A new capital allowance, named Structures and Buildings Allowance is available across a fixed 50-year period, at an annual flat rate of 2% regardless of changes in ownership for new structures and buildings intended for commercial use, the improvement of existing structures and buildings and the conversion of existing premises to qualifying use. The new allowance is intended to encourage investment in construction for commercial activity.
INTANGIBLE FIXED ASSETS
Since 8 July 2015, the amortisation of goodwill has not been eligible for relief. Companies that acquire goodwill on or after 1 April 2019 will receive relief for goodwill up to a limit of six times the value of any qualifying intellectual property assets in the business being acquired. The categories of qualifying assets include: patents, registered designs, copyright and design rights and plant breeders’ rights. Relief will be given at a fixed rate of 6.5% in all cases.
The restriction on relief will continue to apply in relation to internally-generated goodwill acquired in a related party incorporation. Goodwill acquired prior to 1 April 2019 will continue to be subject to the tax treatment
EXEMPTION FOR TRAVEL EXPENSES
With effect from April 2019 employers will only be asked to ensure that employees are undertaking qualifying travel, removing the requirement for employers to check receipts when making payments to employees for standard meal allowances paid in respect of qualifying travel.
CGT ANNUAL EXEMPTION
The CGT annual exemption was £11,700 for 2018/19 and will be £12,000 for 2019/20.
ENTREPRENEURS’ RELIEF (ER)
Minimum qualifying period
The minimum period to be met to qualify for ER is being increased from one year to two years for disposals on or after 6 April 2019. To qualify for ER, an individual must throughout the relevant qualifying period:
- be a company employee or office holder
- hold at least 5% of the company’s ordinary share capital and
- be able to exercise at least 5% of the voting rights.
GAINS FOR NON-RESIDENTS ON UK PROPERTY
From 6 April 2019 all non-UK resident persons will be charged on gains on disposals of interests in any type of UK land, whether residential or non-residential. CGT charge relating to the Annual Tax on Enveloped Dwellings is therefore abolished.
Also indirect disposals of UK land will be taxable where a person makes a disposal of an entity that derives 75% or more of its gross asset value from UK land, with exemptions for investors who hold less than 25% interest.
STAMP DUTY LAND TAX (SDLT)
Consultation on SDLT charge for non-residents
The government has recently published a consultation on the introduction of a SDLT surcharge for non-UK residents. The surcharge will apply to purchases of residential property made by non-UK resident individuals and certain non-natural persons. The surcharge will apply to freehold and leasehold purchases of residential property and will be at a rate of 1% on top of existing SDLT rates, including the rates applicable to the rental element of leasehold property.
No date has been set for the introduction of the surcharge.
EXTENSION OF OFFSHORE TIME LIMITS
Assessment time limits are ordinarily four years (six years in the case of carelessness by the taxpayer).
The assessment time limits have been increased for offshore income and gains to 12 years. Similarly the time limits for proceedings for the recovery of inheritance tax are increased to 12 years where the lost tax involves an ‘offshore matter’. Where an assessment involves a loss of tax brought about deliberately the assessment time limit is 20 years after the end of the year of assessment
The justification for the extension of time limits is the longer time it can take HMRC to establish the facts about offshore transactions, particularly if they involve complex offshore structures.
NON-UK DOMICILED
A new publication was released named “No Safe Havens 2019” as an update to HMRC strategy for offshore tax compliance.
HMRC confirms that in 2018 received information about the offshore financial interests of around 3 million UK resident individuals, or entities they control and 5.67 million records of UK taxpayers’ offshore bank accounts.
HMRC is using these data to detect possible non-compliance through their software named Connect, capable of processing 22 billion lines of data, correlating these data within a taxpayer’s return and property information with financial data and offshore account information. HMRC confirms that each year Connect spots 500,000 cases (onshore and offshore) to investigate.
Wealthy non-doms can legitimately keep their wealth offshore and claim the remittance basis, but HMRC warns that common mistakes committed by taxpayers such as omitting foreign income taxed abroad in a tax return without claiming the remittance basis or not reporting untaxed foreign income remitted to the UK in a tax return when a wrong debit card is used, will be heavily scrutinized by HMRC. In accordance with this new approach, the new time limits on investigations in relation to offshore accounts, now extended to 12 years and tougher penalties.
We have noticed in practice that many clients have been contacted by HMRC, asking them to confirm that they have declared everything they ought. Alternatively, HMRC can chose to use their formal powers to launch either a civil or a criminal investigation.
We suggests clients to consider insurances to cover for the additional expenses of professionals that may assist with reference to these enhanced queries from HMRC.
