Archive for November, 2017

First time buyer bonanza

Tuesday, November 28th, 2017

HMRC have laid out the detail of their budget plans to support first-time home buyers in their quest to buy their first home. There are fears that this strategy will simply drive up prices as demand is stimulated, and that this will replace stamp duty savings with house prices that once again move beyond the reach of younger buyers.

The text is reproduced below:

First-time buyers will benefit from a permanent stamp duty land tax (stamp duty) relief worth £1,660, to someone buying the average first-time buyer property. All first-time purchases below £500,000 will benefit from the relief. This will come into effect on Budget day (22 November 2017) and provides immediate support for first-time buyers while the government’s wider housing reforms take effect.

 

  1. First-time buyers are more cash constrained than other buyers and stamp duty land tax (stamp duty) can represent an upfront cash burden on top of a deposit and conveyancing fees. This will mean 80% of first-time buyers pay no stamp duty, helping them get on the housing ladder.
  2. Previously, first-time buyers paid stamp duty on purchases above £125,000. On and after Budget day, stamp duty will be abolished for first-time purchases up to £300,000 – the largest ever increase in the point at which first-time buyers become liable for the duty – and they will pay £5,000 less on purchases between £300,000 and £500,000. To focus this relief on those who need it most, it will not apply on purchases above £500,000.
  3. As a result of these changes:
  • in every region of England outside London, and in Wales and Northern Ireland, the average first-time buyer property will pay no stamp duty
  • the stamp duty bill of the average first-time buyer in London will nearly halve, from £10,500 to £5,500
  • 95% of first-time buyers who pay stamp duty will benefit, including almost 80% in London
  • Over the next five years, this relief will help over a million first-time buyers get onto the housing ladder

 

       4. To ensure that all first-time buyers purchasing a house on Budget day benefit and               to avoid disruption, the relief will take effect from Budget day (00:01 hours                           November 22nd).

       5. First-time buyers (or their solicitors, who generally complete the stamp duty return)             have to enter a code on their stamp duty return indicating that they are first-time                 buyers, and calculate the stamp duty due according to the new rates.

       6. The definition of a first-time buyer for this relief is in line with the definition for                     previous reliefs. A first-time buyer is someone who has never owned freehold or                 leasehold interest in a dwelling before and who is purchasing their only or main                   residence. Residential property anywhere in the world is counted when                               determining  whether someone is a first-time buyer. Where there are joint                           purchasers, all purchasers would need to be first-time buyers.

       7. Stamp duty is devolved in Scotland and it applies in Wales until April 2018, when it              is devolved, and the Welsh Government’s new Land Transaction Tax is                              introduced. Welsh First Time Buyers will benefit from this stamp duty relief until                  then. It will be for the Welsh Government to make any decisions about introducing              future reliefs in Land Transaction Tax.

Budget Guide Autumn 17

Thursday, November 23rd, 2017

22/11/2017

Here’s the “glossy” booklet for the Budget, and our tables which will be updated after Mr Mackay’s Scottish deliberations!

Autum 2017 Budget Booklet

201718 tax table (pre Scots Budget)

The Autumn Budget 2017

Thursday, November 23rd, 2017

Autumn Budget 2017

Prospects for growth, especially for productivity have been downgraded, but the Chancellor was bullish in his forecasts for investment and the Government’s intention to sort out the slow pace of house building in the UK. A few non-tax comments of note were:

 

• Unemployment at its lowest rate since 1975.

• Chancellor is providing an extra £3bn to prepare for Brexit over the next two years.

• Government to create 5 new garden towns, make better use of land and aim to be building 300,000 new homes a year by the mid-2020s.

• Devolved administrations will have more money to spend. An increase of £2bn for Scotland, £1.2bn for the Welsh Government and £660m for the Northern Ireland Executive.

 

Our summary of a selection of specific tax changes and other budget announcements for 2018-19 and future years follow.

 

Personal Tax and miscellaneous matters

 

Personal Tax allowance

 

The personal allowances for 2018-19 is £11,850 (2017-18 £11,500). According to HMRC, this means that an average taxpayer will pay £1,075 less tax than in 2010-11.

 

Income Tax bands, rates and the dividend allowance

The Income Tax bands for 2018-19 have been increased. They are:

• Basic rate band increased to £34,500 (2017-18 £33,500)

• Higher rate band £34,501 to £150,000 (2017-18 £33,501 to £150,000)

• Additional rate, no change, applies to income of more than £150,000.

There is no change in Income Tax rates, and the tax rates applied to dividend income. Readers should note that the present £5,000 tax-free dividend allowance will, as previously announced, be reducing to £2,000 from April 2018.

The Scottish parliament sets the basic rate limit for Scotland meaning that higher rate taxpayers may pay more tax in 2018-19.

 

Marriage Allowance extended

There is a small increase in this allowance to £1,185 from April 2018. This is the amount of unused personal tax allowance that can be transferred between spouses, or civil partners, if the person receiving the transfer is not a higher rate tax payer.

 

From 29 November 2017, the Government will also allow Marriage Allowance claims on behalf of deceased spouses and civil partners, and for the claim to be back dated four years in appropriate cases.

 

Offshore trusts

Changes will be made to ensure that payments from an offshore trust intended for a UK resident individual do not escape tax when they are made via an overseas beneficiary or a remittance basis user. This will take effect from April 2018.

 

 

Abolishing Stamp Duty Land Tax for certain first-time buyers

With immediate effect, first-time buyers will pay no stamp duty on homes costing no more than £300,000.

First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660‎ on the average first-time buyer property.

80% of people buying their first home will pay no stamp duty, but there will be no relief for those buying properties over £500,000.

National Living Wage (NLW) and National Minimum Wage (NMW) increases

From April 2018, the NLW will increase from the present £7.50 per hour to £7.83 per hour.

 

From the same date, the NMW rates will also increase to:

 

• £7.38 per hour for 21 – 24 year olds

• £5.90 per hour for 18 – 20 year olds

• £4.20 per hour for 16 and 17 year olds

• £3.70 per hour for apprentices

 

Fuel duty no change

For 2018, the fuel duty will remain frozen, for the eighth consecutive year.

 

New railcard for the 26 to 30 age group

No doubt to win back the support of the younger generation, the government will work with the rail industry to introduce a new railcard from Spring 2018.

 

Duty frozen for most alcoholic drinks

The duty on beer, wine, cider and spirits to be frozen. However, cheap, high strength cider will be subject to a new band of duty from 1 February 2019.

 

Duty on tobacco products to increase

The duty on cigarettes will increase by 2% above inflation and hand-rolling tobacco by 3% above inflation, with effect from 6pm, 22 November 2017.

 

Universal Credit (UC) changes

In response to recent adverse publicity the Government has agreed to various changes that are intended to ease the financial hardship for new claimants. They include:

• Households in need, who qualify for UC will be able to access a month’s worth of support within 5 days. This will be funded by an interest free loan that can be repaid over a 12-month period.

• Claimants will be eligible for UC from the day they apply, the present 7-day rule will be scrapped.

• Low-income households affected by areas with higher rent increases will receive an extra £280 on average to meet these higher costs.

 

Pension lifetime allowance increased

The lifetime allowance will increase to £1,030,000 from April 2018.

 

Diesel Vehicle Excise Duty (VED) change

From April 2018, the first year VED (car tax) rate for diesel cars that don't meet the latest standards will go up by one band. The Chancellor emphasises this is cars only, and that the money will go to a new Clean Air Fund.

 

 

Business Tax changes

 

Corporation Tax changes

Although there is no change to the rate of Corporation Tax, maintained at 19%, HMRC is to freeze indexation allowance on corporate capital gains for disposals after 1 January 2018.

 

£64m for construction and digital training courses

The new funding will be split as to:

 

• £34m to teaching construction skills, and

• £30m towards digital courses using Artificial Intelligence.

 

Partnership tax

Legislation has been revised to be more compatible with commercial arrangements for allocating shares of profit, and to avoid additional administrative burdens for taxpayers. The changes will have effect for the tax year 2018-19 and subsequent tax years.

 

 

Business rates changes

From April 2018, business rates will rise by any increase in the Consumer Price Index (CPI) rather than the Retail Prices Index (RPI). The change has been brought forward two years. Historically, the RPI has tended to be higher than the CPI.

 

Rates revaluations will now be undertaken every 3 years rather than the present 5 years. This will start after the next rates revaluation due during 2022.

 

Pubs with a rateable value up to £100,000 will continue to receive a £1,000 discount next year. 

 

Venture Capital Schemes

Changes are to be made to the Enterprise Investments Scheme, the Seed EIS and Venture Capital Trusts. The aim is to target Venture Capital Schemes on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide ‘capital preservation’. 

 

Incentives to encourage VCTs towards higher risk investments will include:

 

• removing certain ‘grandfathering’ provisions that enable VCTs to invest in companies under rules in place at the time funds were raised, with effect on and after 6 April 2018;

• requiring 30% of funds raised in an accounting period to be invested in qualifying holdings within 12 months after the end of the accounting period, with effect on and after 6 April 2018;

• increasing the proportion of VCT funds that must be held in qualifying holdings to 80%, with effect for accounting periods beginning on and after 6 April 2019;

• increasing the time to reinvest the proceeds on disposal of qualifying holdings from six months to 12 months for disposals on or after 6 April 2019;

• introducing a new anti-abuse rule to prevent loans being used to preserve and return equity capital to investors, with effect on and after Royal Assent of Finance Bill 2017-18.

 

EIS and VCTs will also see increased limits for investments in knowledge-intensive companies:

The Government will legislate to:

• double the limit on the amount an individual may invest under the EIS in a tax year to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies;

• raise the annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs to £10 million from the current limit of £5 million. The lifetime limit will remain the same at £20 million;

• allow knowledge-intensive companies to use the date when their annual turnover first exceeds £200,000 in determining the start of the initial investing period under the permitted maximum age rules, instead of the date of first commercial sale.

The changes will have effect on and after 6 April 2018. This measure is subject to normal state aid rules.

R & D expenditure credit increase

The Government will legislate to increase the rate of the R&D expenditure credit from 11% to 12%, to support business investment in R&D.

This change will have effect on and after 1 January 2018.

Diesel car supplement increase

The diesel car supplement is to be increased from 3% to 4% from 6 April 2018. This will increase the company car tax and car fuel benefit charge (for company cars provided with an element of private use).

This change will apply to all diesel cars registered on or after 1 January 1998 that do not meet the Real Driving Emissions (Step 2) standards.

Autumn 2017 Early Reaction

Wednesday, November 22nd, 2017

Autumn Budget 2017

Personal Note from Donald Parbrook, Head of Tax at Milne Craig

This was Mr Hammond’s third attempt at decent financial statement and I must say his delivery and style was greatly improved.  Jokes about Jeremy Clarkson not agreeing with “Hammond and May” were in there as were cough sweets and a few snipes at Labour were cleverly woven in.  All in all, probably enough to distract from the hazardous reduction in OBR productivity and growth forecasts (I’m told).  There was even a joke about Kezia in the Jungle.  Topical too.  That said, I could see MPs behind him on their smartphones.  Perhaps they were tweeting the good news stories.

My early reaction is there’s seemingly nothing that would cause a major widespread political reaction.  However, within the press releases I see reference to rules coming in for 2019 and 2020 which will mean non-residents pay UK tax on gains on all UK property assets.  This, if enacted, would be a major change for many non-UK residents and businesses investing in the UK commercial property sector.  HMRC previously sold their property assets to an offshore investment business.  I suppose it will at least see their gains taxed here.

I was interested to see the removal of the controversial additional VAT costs placed upon Police Scotland as a result of the centralisation of the forces under Scottish Government control (from Local Authority).  This has been a major political campaign for the SNP.  The announcement reverses what must have been a serious political/financial misjudgement by the Scottish Government at the time.

For those readers in Scotland, we are going to have to wait until 14th December to see what Derek Mackay, our finance minister, brings forward in devolved areas such as income tax rates and allowances and LBTT (our version of SDLT).  For the first time, I think his decisions will have a potentially greater impact on my clients than those of the UK Government.

Watch this space…

BUDGET NOVEMBER 2017 – key points

With immediate effect: new announcements

  • From 22 November 2017, Stamp Duty Land Tax (SDLT) abolished for first time buyers on homes costing up to £300,000; no SDLT on first £300,000 of first time buyer’s purchase of homes up to £500,000.
  • From 29 November 2017, Marriage Allowance can be claimed to transfer the benefit of 10% of the personal allowance after the transferring spouse has died.
  • For tax year 2017/18, unincorporated property business landlords will have the option to use simpler fixed rate deductions for miles travelled by car, motorcycle or goods vehicle for business journeys.
  • From 6 April 2017, anti-avoidance measures will tackle ‘disguised remuneration’ schemes used by closely controlled companies to remunerate employees who have a material interest.

From 1 January 2018: new announcements

  • Indexation allowance, which gives companies relief for the effect of inflation on capital gains, will be frozen at January 2018.
  • The rate of the Research and Development Expenditure Credit increases from 11% to 12% with effect from 1 January 2018.

From April 2018: new announcements

  • Tax-free personal allowance rises from £11,500 to £11,850; threshold for 40% tax rises from £45,000 to £46,350. Rates and bands for Scottish taxpayers are still to be confirmed by the Scottish Parliament.
  • Employees will not be charged income tax on benefit of charging an electric car at work.
  • Supplement of 3% in calculating taxable employee benefit of a diesel company car will increase to 4%.
  • Employees with SAYE-related share option schemes will be able to take a 12-month break from saving, up from 6 months at the moment, while on maternity or paternity leave.
  • Abolition of Class 2 National Insurance and reform of Class 4 NIC for self-employed deferred by a year to April 2019 in order to assess impact on contributory benefits.
  • Freezing of VAT registration threshold at £85,000 for two years instead of normal £2,000 increase, but speculation about possible reduction in threshold was unfounded.
  • ISA investment limit for 2018/19 unchanged at £20,000; Junior ISA limit rises in line with inflation to £4,260.
  • Lifetime Allowance for tax-advantaged pension funds rises from £1m to £1,030,000.
  • Increase in Enterprise Investment Scheme investment limit from £1m to £2m, provided any amount over £1m is invested in one or more knowledge-intensive companies.
  • Capital Gains Tax annual exempt amount rises from £11,300 to £11,700.
  • Annual Tax on Enveloped Dwellings to rise by 3% in line with inflation.

From April 2018: confirmation of previous announcements

  • ‘Making Tax Digital’ reforms for income tax reporting will not now be introduced until 2020 at the earliest; VAT-registered traders to operate ‘Making Tax Digital for VAT’ from April 2019.
  • Class 4 National Insurance Contributions increases proposed in March 2017 will not take effect.
  • Dividend Allowance, introduced at £5,000 for tax year 2016/17, reduced to £2,000 for 2018/19.

Other significant announcements

  • CGT charge for non-resident taxpayers extended to cover non-residential as well as residential property in the UK with effect from 1 April 2019 (companies) and 6 April 2019 (individuals).
  • Allocation of £155m in extra resources to HMRC to fund action on the hidden economy, marketed tax avoidance schemes, enablers of tax fraud, non-compliance and collection of debts 9 months overdue.

 

End of year tax planning

Wednesday, November 22nd, 2017

We are moving closer to the end of the current tax year – 2017-18 – and as we have mentioned in previous posts on this blog, the opportunity to take advantage of perfectly legal tax planning opportunities expires once the year end date passes: 5 April 2018.

To capitalise on these opportunities, we need to know if your circumstances have changed since our last conversation on these matters. The sort of information we need to know includes:

If you are in business

 

  • Are your profits increasing or decreasing as compared to the previous trading period?
  • Have you recently committed to, or undertaken a significant investment in new or second-hand plant of other equipment?
  • Have you disposed of existing plant or other equipment?
  • If you run a property business have you purchased or sold property this year?
  • If your property business is intended to benefit from the tax advantages of a Furnished Holiday Lets business, have you checked that your occupancy is on track to qualify for this tax year?
  • Have you, or will you be, acquiring or selling a business during 2017-18?

If you are a higher rate tax payer

  • Is your income approaching £100,000 for the first time?
  • What pension arrangements have you committed to this year?
  • Have you made, or will you be making significant charitable contributions?
  • Has your marital status changed?
  • Have you bought or sold a property in addition to your main residence?
  • Have you bought or sold any other assets that are subject to capital gains tax?

Estate planning:

  • Has the taxable value of your estate increased this year?
  • Do you need to reconsider your Will due to family changes?
  • Do you need to reconsider any existing trust arrangements?
  • Have you made any significant gifts? Should you provide for the possible IHT consequences?
  • Have you taken advantage of the various IHT reliefs available for 2017-18?

Essentially, we need to know what has changed, or is likely to change before 5 April 2018, so that we can assess your options to mitigate any tax consequences. Occasionally, we can also advise on a change in your future intentions to give you a more effective tax result. The purpose of this post is to invite you to keep in touch; if we know what your intentions are, we can advise accordingly.

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