Due to the December General Election, the Autumn Budget was delayed and we now know that the Chancellor should deliver his first Budget on the 11th March which is when the Budget used to be!
We are expecting that tax measures in the party manifesto will be announced again together with confirmation that changes consulted on last year will be put in place.
Key tax updates include leaving the rate of corporation tax at 19% and an increase in the national insurance threshold. It is unlikely that the planned roll out of the “off-payroll” working (IR35) rules to the private sector will be delayed.
The Chancellor is expected to again announce a U-turn on the 2019 loan charge following a review of the legislation
Off Payroll Working Rules
In January the government launched a four-week review of the changes to IR35 “off-payroll” working rules scheduled as the result of mounting criticism about the way they will operate. The review is scheduled to conclude shortly and will see the government hold a series of meetings with stakeholders affected by the changes.
It is unlikely there will be a significant U-turn, but there may be scope for the impact of the legislation to be reduced in terms of the range of contractors to whom it will apply, or the size of businesses who will have to operate it. The new rules are currently scheduled to apply to large and medium-sized businesses as defined by the Companies Act.
The government will also carry out a further review of the enhanced CEST tool designed to assist businesses in checking employment status.
Disguised Remuneration Loan Charge
The independent loan charge review was published on the 20th December, after being delayed due to the general election. The loan charge was introduced to collect tax from individuals who had benefited from schemes devised to avoid PAYE and national insurance. The date that the loan was made to the individual is critical in determining whether the loan charge will apply.
The major change, which will become legislated in the next Finance Act, is that taxpayers who took loans before the 9th December 2010 will not now be subject to the loan charge.
This was the day when draft legislation was published, alongside a ministerial statement, to make it clear that disguised remuneration arrangements, including loans, would be specifically taxed as earned income. The current legislation will be repealed.
Those taxpayers who took loans between 10th December 2010 and 5th April 2016 and who fully disclosed the use of the loan scheme will not be subject to the loan charge if HMRC failed to take action because of disclosure.
Loans taken out on or after 6th April 2016 and which were still outstanding on 5th April 2019, remain within the loan charge. Taxpayers can elect to spread the tax charge over three tax years from 2018/19 to 2020/21.
CGT On Residential Property From 6th April
From 6th April 2020 there is a major change in the reporting and payment of CGT (Capital Gains Tax) on residential property disposals. It will be necessary to report the disposal of the property within 30 days of completion of the disposal, and pay the CGT due to HMRC within the same time frame. CGT is currently payable with income tax on 31st January following the end of the tax year.
Why Sell Property Before 6th April 2020
If draft legislation issued for consultation in 2019 is enacted in the next Finance Act there will be important changes to private residence relief for disposals after 5th April 2020.
The exemption for the final period of ownership will be reduced from 18 to 9 months. This applies where a former main residence is disposed of and is intended to give relief where the owner has moved to another main residence until the former residence is sold i.e. “bridging”. For many years this additional allowance was 3 years that led to a tax planning strategy referred to as “second home flipping” which HMRC are seeking to counteract.
The second change will be the removal of letting relief except for situations where the taxpayer lives with the tenant. This generous relief currently provides an exemption of up to £40,000 per owner where the former main residence is rented out.
Pensions For High Earners
There have been many stories in the press about GPs and senior hospital doctors refusing to work extra shifts and/or additional responsibilities due to the additional tax they are required to pay on the extra pension contributions paid by the NHS. There are now strong rumours that the tapering of the annual pension allowance for those with income over £150,000 may be abolished or amended for all taxpayers, not just those working in the NHS.
An announcement is expected about this in the Spring Budget, together with other changes to pension tax relief.
Inheritance Tax Update
The Office of Tax Simplification (OTS) has suggested simplifying inheritance tax (IHT) on lifetime gifts including reducing the period of potential exemption from 7 to 5 years. Such a change would mean that the donor would only be required to survive for 5 years following a gift for the transfer to be exempt from IHT.
The OTS also suggested that the conditions for Business Property Relief might be tightened up by aligning the rules with the definition of a trading company for CGT. This relief currently provides 100% relief on the transfer of shares in an unquoted company.
The suggested change would mean that more transfers of shares would potentially be liable to IHT and may require a careful review of your plans if you are looking to pass on your business.
Hear From The Experts
The tax team at Kay Johnson Gee will be listening and analysing the Spring Budget on the 11thMarch, as soon as we can we will then be releasing a tax update webinar to go through the announcements, changes, and any recommendations to ensure you and your business remain as tax efficient as possible.
As always we recommend everyone speaks to a qualified tax expert when it comes to personal and business tax as every case is different and there may be circumstances that affect each individual. To find out more contact the KJG tax team on 0161 832 6221 for a no obligation chat.