Archive for October, 2018

Did Philip Hammond save the High Street?

Wednesday, October 31st, 2018

In his Autumn Budget delivered 29 October 2018, Philip Hammond made a number of promises. One of these was measures to improve the lack-lustre retail sector in our city centre areas.

There is no doubt that the major online retailers, Amazon and the like, have caused a major shift in the way we shop. As faster broadband has become more commonplace, and the use of computers a regular home fixture, then this drift away from viewing and buying goods on the shelf to viewing pictures and click and buy on the internet, will likely continue.

Which is fine if you have established a thriving internet retail business, but not so good if you have committed to the use of expensive retail premises in city centre locations.

At present, online retailers have a massive competitive advantage over their High Street competitors. They don’t have to pay:

  • business rates or rent for shop front property or
  • salaries to sales staff.

And in the case of the mega online retailers, who can afford to exploit the use of tax havens to shelter their trading profits, they do not pay comparable tax on their trading profits.

Did Philip Hammond save these failing, High Street retail outlets when he delivered his budget speech on the 29th October?

Well, he made a start…

He offered a one-third reduction in business rates for retailers with shop premises with a rateable value below £51,000. Although this reduction is for a limited period, two years from April 2019.

He has committed what seems to be a modest sum, £675m, to rejuvenating city centre areas. This will support the cost of:

  • improving traffic flows to shopping areas,
  • the renovation of empty retail premises to provide residential accommodation, and
  • the repurposing of older or historical property.

City centre shops depend on foot-fall, if shoppers don’t pass by, then it’s unlikely they will become customers. In this respect, the above investment should encourage an increase in foot-fall.

Mr Hammond also committed to start the process of increasing the UK tax take from online retailers, social media outlets and search engines, who sell goods and services to UK users. A new digital services tax will commence April 2020 and will levy a charge of 2% on the revenues generated by these concerns to customers in the UK.

Did Philip Hammond save the High Street? The above changes will have some impact, but whether this will slow or stop the movement away from window shopping to browsing the internet, remains to be seen.

Tax Tables 20192020 (exc Scottish changes)

Tuesday, October 30th, 2018

Although these will require to be updated after the Scottish Budget, next years provisional tax table is to be found here:

Click here- 1920 exc Scottish Budget

BUDGET 2018 NEWSLETTER

Tuesday, October 30th, 2018

Our Summary of the 29th October 2018 Budget can be found here:

2018 Oct Budget

If you have any questions please get in touch with your normal Milne Craig contact or with our head of tax, Donald Parbrook. 0141 887 7811.

Autumn Budget 2018

Tuesday, October 30th, 2018

Personal Tax and miscellaneous matters

 

Personal Tax allowance

The personal Income Tax allowance for 2019-20 will be increased to £12,500 (2018-19 £11,850). It will remain at this increased level for two years.

Changes to personal tax allowances will apply to the whole of the UK.

 

Income Tax bands, rates and the dividend allowance

 

The Income Tax bands for 2019-20 have been increased. They are:

  • Basic rate band increased to £37,500 (2018-19 £34,500)
  • Higher rate band £37,501 to £150,000 (2018-19 £34,501 to £150,000)
  • Additional rate, no change, applies to income of more than £150,000.

 

As a result, the higher rate threshold will increase to £50,000 from April 2019. There is no change in Income Tax rates, and the tax rates applied to dividend income.

Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings.

 

Earlier payments of Capital Gains Tax (CGT)

UK residents will be required to make a payment on account for CGT due on a residential property sale. The new regulations will also affect disposals by non-UK residents.

The changes will apply from April 2019 for non-UK residents and April 2020 for UK residents.

 

Capital Gains Tax Private Residence Relief changes

From April 2020, the government intends to make two changes to the private residence relief:

  1. The final exempt period will be reduced from 18 months to 9 months, with no change to the 36 months available for those who are disabled or in care homes, and
  2. Lettings relief will be reformed so that it only applies in certain circumstances where the property owner is in shared occupancy with the tenant.

 

CGT Entrepreneurs’ relief

Two changes are coming into effect:

  1. Claimants must have a 5% interest in the distributable profits and the net assets of the company to qualify, and separately
  2. That the minimum period during which certain conditions must be met to qualify for the relief is being increased from one to two years.

The first measure will have effect for disposals on or after 29 October 2018.

The second measure will have effect for disposals on or after 6 April 2019, unless a business ceased before 29 October 2018.

 

Inheritance Tax: changes to the nil-rate band

From 29 October 2018, amendments to the residence nil-rate band will provide certainty as to when a person is treated as “inheriting” property and clarify the “downsizing” rules.

 

Rent-a-room relief change cancelled

The expected change to require shared occupancy to qualify for rent-a-room relief is not to be introduced.

 

ISAs

For 2019-20, the ISA limit will remain at £20,000. The limit for Junior ISAs and the Child Trust Fund is to be increased to £4,368.

 

Limit on pensions’ savings to be increased

The life time limit on pension savings is to be increased in line with inflation to £1,055,000 for the 2019-20 tax year.

 

Stamp duty first time buyers’ relief in England

This relief is being extended to cover the purchase of qualifying shared ownership property and will be effective for transactions on or after 29 October 2018 and will be backdated to 22 November 2017.

The first £300,000 of an initial share purchased will not be liable to SDLT based on the market value of the property. The remainder of the value over £300,000 will be charged at 5%. No SDLT will be chargeable on the associated lease. Relief is not extended to further shares purchased and will not apply to purchases of property valued at over £500,000.

 

Tobacco duty increases confirmed

The rates for duty for all tobacco products increased by inflation plus 2% from 6pm, 29 October 2018.

Hand-rolling tobacco also rose by an additional 1% above this increase, to 3% above the RPI from the same date.

 

Vehicle excise duty

The VED rates for cars, vans and motorcycles is due to increase by reference to the RPI from 1 April 2019.

 

Duties on beer, wine and spirits

There are to be no increases to the duty charged on beers, spirits or cider, except for certain ciders treated as high strength for duty purposes.

Wines and high strength sparkling cider drinks will see duty increased in line with inflation from 1 February 2019.

 

Fuel duty increase frozen

Duty increase is frozen for the ninth consecutive year.

 

Air passenger duty (APD) increases

Travellers should note that APD will increase in line with inflation for long-haul flight passengers only. The new rates will apply from 1 April 2020.

 

Business Tax changes

 

Corporation Tax

Corporation Tax rates to remain at 19% for the financial year beginning 1 April 2019.

 

Employment Allowance reform

From 2020, the government is to legislate to restrict access to the £3,000 NIC Employment Allowance, to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers will have their contributions aggregated for this purpose.

 

Annual Investment Allowance increased

The Annual Investment Allowance (AIA) is to be increased from the present £200,000 to £1m from 1 January 2019 to 31 December 2020. It is then presumed that this will return to the £200,000 limit. This should provide a welcome boost to business investment during the Brexit transition period.

Please note that not all capital purchases qualify for this relief. Please call for clarification of what is covered if you are considering a significant acquisition.

 

R&D tax credit claims to be restricted

From 1 April 2020, the amount of payable tax credit that can be claimed under the R&D SME tax relief scheme will be limited to three times the company’s total PAYE and NIC payments for the period. Any loss that cannot be surrendered can be carried forward and used against future profits.

The government will consult with interested parties on this issue.

 

IR35 changes

The changes recently made to IR35 arrangements in the public sector are to be rolled out to the private sector. The changes will come into effect from April 2020 and small firms will be exempt. Firms that have concerns that they may be affected should contact us for more details.

 

Car and van fuel benefit charge increases

For 2019-20, these will increase by reference to the September 2018 retail prices index.

 

A new 2% digital services tax

From April 2020, the major social media, search engine and online retailers will be subject to a 2% tax on revenues generated from UK users of their services. The Chancellor did indicate that if an internationally recognised levy was introduced, that the UK may fall into line in place of this 2% UK tax.

 

At last, rates relief for High Street retailers

In a much anticipated announcement, smaller retailers in England, occupying shop premises with rateable values under £51,000, should benefit from a cut of one-third in their business rates bills for 2 years from April 2019.

They should also benefit from £675m to be spent on improvements by councils to help transform high streets, the redevelopment of empty shops as homes and offices and the repurposing of old and historic buildings.

In a humorous exchange, the Chancellor also announced 100% business rates relief for public lavatories.

 

Plastics tax

For those readers who are concerned about the environment they will be pleased to note that the government is to consider introducing a tax on the production and importing of plastic packaging from April 2022.

The charge will apply to plastic packaging that does not contain at least 30% recycled plastic.

 

Changes to the apprentices’ levy

From April, larger employers will be able to invest up to 25% of their apprenticeship levy to support apprentices in their supply chain. Additionally, some smaller employers will pay half what they currently pay for apprenticeship training: a reduction from 10% to 5%. The government will fund the remaining 95%.

 

Charities small trading exemption increase

he limits that exempt small scale trading by charities from UK tax are to be increased from the current £5,000 – where turnover is under £20,000 – and £50,000 where turnover exceeds £200,000. These £5,000 and £50,000 exemptions are to be increased to £8,000 and £80,000 respectively.

The changes will apply from 6 April 2019 for unincorporated charities and from 1 April 2019 for incorporated charities.

 

A new structures and buildings allowance (SBA)

This will provide tax relief for qualifying capital expenditure on new non-residential buildings where all contracts for the physical construction works are entered into on or after 29 October 2018.

Relief will not include the cost of land or dwellings.

 

Tax relief for electric charge points to be extended

The present first year allowances available for the installation of electric charge points is to be extended for four years, until the end of the financial year 2022-23.

 

Reduction in tax writing down allowance

The special rate of writing down allowance is being reduced from 8% to 6% from April 2019.

Supposedly, this is intended to closer align tax depreciation with commercial depreciation rates.

 

Anti-avoidance measures

The Finance Bill will contain a number of measures that will continue to improve HMRC’s campaigns to reduce the impact of tax avoidance schemes.

 

Tax to be protected in insolvency

From 6 April 2020, the government will change the insolvency rules so that taxes collected on behalf of employees and customers, primarily employees PAYE and NIC and customers VAT, will be treated as a preferential creditor on winding up rather than distributed to other creditors.

 

Company loss relief loop-holes to be closed

Most of the changes will apply from April 2019 and will prevent relief for carried forward losses being claimed in excess of that intended by legislation.

The changes will include:

  • the definition of “relevant profit”,
  • the computation of life assurance and annuity business profits,
  • the deductions allowance in group situations,
  • the calculation of terminal relief,
  • the cap on profits against which certain losses may be allowed,
  • and other minor considerations.

 

VAT: reverse charge process to be extended to construction services

This change, to extend the reverse charge process to the building and construction industry is due to come into effect from 1 October 2019.

This will place the onus for dealing with the VAT charge due on subcontractors’ bills to the main contractor.

This will cause accounting rather than cash flow issues for main contractors as they will add entries to their VAT returns to pay the subcontractors VAT, but then deduct the same amount as input VAT on the same return.

The aim is to stop subcontractors adding VAT to their bills and then disappearing without remitting the VAT to HMRC.

 

VAT registration threshold – no change

The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

Budget October 2018 – Initial Reaction

Monday, October 29th, 2018

Our sensible glossy commentary will follow along but we can provide the immediate reaction by Donald Parbrook, our head of tax here:

“Budget 2018 was tellingly accompanied by a promise that the Spring Statement will be upgraded to a full Budget if the terms of Brexit require it. Listening to Mr Hammond today you’d be forgiven for thinking the world was a largely stable place and his forecasts of tepid but stable growth and reducing national debt as a percentage of GDP reminded me of Mr Brown’s era around 2006.

The big announcement for most UK citizens is that basic rate tax will apply up to £50,000 of income from April 2019. Many Scottish people will know that the Green party forced the SNP to deny us last year’s increase and because national insurance is not devolved Scottish taxpayers have a nasty effective combined tax and NI rate of 53% on a slice of income between £43,430 and £46,350. If there is no change in the Scottish basic rate band then this differential will get worse again even if the Scottish Government can say “Nobody is worse off than last year” by freezing the band again just for Scots.

Amongst the changes is the welcome news that the Annual Investment Allowance (a tax write down of 100% for qualifying business capital expense) is going to be increased from £200,000 to £1m for the calendar years 2019 and 2020.

There’s a host of other little changes but nothing scary on pensions. The threats of the VAT registration limit falling were not carried out and instead they are freezing this at £85,000, gradually bringing more people into VAT through “fiscal drag” by not increasing with inflation.

There’s a host of other little changes to taxation. He’s enhanced the SDLT first time buyer’s relief and the SNP will have to decide if LBTT should get the same treatment or not. For those selling businesses the Entrepreneur’s Relief which gives people a 10% tax rate on gains will require two years ownership.

A number of years ago HMRC lost their preferential status as creditors during insolvency. This is making a form of comeback in so far as “deductions” for tax will get preferred status. This means VAT, Employee NI, CIS and PAYE (not Employer’s NI) will get first call during insolvencies.

The speech was long but for most of our clients the outcome modest. It is, perhaps, a reflection of the amount of devolution now in force that many of the spending aspects on hospitals and schools are not relevant to Scotland. In terms of the increases in the personal allowance (From £11,850 to £12,500) and the increase in the basic rate band (£50,000) it is now very much “over to you” in Holyrood. At least this time Derek Mackay and his team have a few weeks to come up with some ideas and see if they think they can get the Greens, or other parties, to support them.

The Green party have already said they won’t support the Budget in Scotland in December unless the SNP agree to replace Council Tax. Rumour is they want a charge of 1% of your home’s value instead (with a cap I hope) each year. Talk of council tax bills on large homes under a new scheme of as much as £7,000 frighten us. If the Greens are serious about that idea then let’s hope the SNP don’t succumb to tax strategy ransom notes this year and find other more widely supported parties in Holyrood to back their Budget.

So, for now, a relatively long but low key Budget. There’ll be more analysis in the morning. And a slight feeling that Brexit and the Scottish Budget are likely to create more headlines for Scots in the weeks ahead.”

Written by Donald Parbrook CTA
Director, Milne Craig
6pm on 29th Oct 2018.

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