UK Budget 29 October 2018 - Simmons & Simmons' expert commentary

Simmons & Simmons' expert commentary on those tax aspects of the 2018 UK Budget, released on 29 October 2018, which are of particular interest to the business community.

Budget overview

Despite the Chancellor’s best efforts to avoid this late October Budget being tainted by its association with Halloween, the first Monday Budget since 1962 seems set to be seen as the “phantom” Budget if the UK’s negotiations with the EU fail to bear fruit.

The Chancellor has candidly admitted that a no-deal Brexit would require a new Budget that “set out a different strategy for the future”. The admission – that some will no doubt dismiss, not inappropriately at this time of year, as part of Project Fear – compounded by the very real uncertainties surrounding the Brexit negotiations, means that the Budget may well be a very temporary indication of the Government’s fiscal planning for 2019 and beyond.

In terms of immediate measures, there was the announcement of extra money for housing, transport, education and infrastructure projects, such as road building and pot hole repairs – perhaps the Chancellor is hoping to ensure it is not too bumpy a road to Brexit! The wider issue of Governmental Department budgets, and whether austerity is really at an end, will have to wait until the Spending Review in 2019 once the final Brexit deal – if there is one – is known. However, fears over major tax rises in the near future to pay for any fiscal loosening foisted on the Chancellor by No. 10 appear to have receded due to the better than expected OBR figures. In fact, the Chancellor was able to announce that the Conservative pledge to increase the personal allowance to £12,500 and the higher rate threshold to £50,000 would be met a year early in 2019.

Probably the most eye-catching tax measure – though one likely to affect very few businesses in practice – was the announcement that the UK would go it alone with the introduction of a digital services tax. The “painfully slow” process at the international level meant that the UK would introduce the new levy from 2020 following consultation on the detail. A number of other measures also tackle the challenges presented by multinational businesses operating in the UK, a constant theme for this Chancellor. More broadly, there were a range of announcements on capital allowances, including a temporary increase in the annual investment allowance to £1m to stimulate business investment in the economy.

Tax raising measures were mostly limited to environmental tax measures and the usual plethora of anti-avoidance and anti-evasion measures, without which no Budget would be complete and which are projected to raise £2bn over 5 years.

Ultimately, however, this was a Budget overshadowed by the spectre of Brexit. The Chancellor has made it abundantly clear that he regards it as essential that the UK avoids the nightmare of a no-deal Brexit and his predictions for the public finances are highly dependent on a smooth transition. In the meantime, this potentially “phantom” Budget holds out the prospect of better times ahead should the UK avoid being haunted by a disorderly Brexit in the years to come.

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Company taxation
  • Tax rates and allowances

    The rate of corporation tax will remain at 19% in 2019/20. The Government has previously announced its intention to reduce the rate to 17% in 2020/21, although the Chancellor took the opportunity to reconfirm this reduction in Budget 2018.

    For a table of the main tax rates and allowances for 2019/2020, see below.

    Digital services tax

    The Government has announced plans to unilaterally introduce a digital services tax (DST) from April 2020. Draft legislation is expected in the 2019/2020 Finance Bill. The measure will apply to companies with in-scope revenues of greater than £25m in the UK and £500m globally. Where multilateral reform of the international corporate tax framework is achieved prior to 2025 then the Government will disapply the DST. This will create uncertainty for affected businesses.

    The DST is intended to be narrowly-targeted at specific digital business models where the revenue is linked to the participation of UK users. The revenue streams that the tax will apply to are: advertising from search engine results; advertising on social media platforms; and the facilitation of transactions via online marketplaces. The direct sale of goods and services (including goods, software, online content and broadcasting services) is excluded.

    The DST rate on in-scope revenue will be 2%. An alternative basis of calculation will be available for businesses operating on a low profit margin. Under this calculation, loss making companies will not have any DST liability and those with very low profit margins will have a reduced rate. The DST will be an allowable expense for UK corporate tax purposes; however, it will not be within the scope of the UK’s double tax treaties.

    The Government will be issuing a consultation on the design of the measure, the specific exemptions and the alternative calculation basis in the next few weeks, prior to the issue of draft legislation.

    Extension to permanent establishment definition

    As part of its package of measures targeting multinational businesses, the Government has announced that it will extend the scope of a “permanent establishment” (PE) under UK domestic law, with effect from 01 January 2019.

    Under the current definition, certain preparatory or auxiliary activities carried on in the UK, such as the storage of goods or the collection of information for the non-resident company, are deemed not to give rise to a PE. The Government is concerned that multinationals have taken advantage of this exemption by splitting their activities between related companies or locations, with a view to minimising their UK tax footprint. The legislation will therefore be changed to deny the exemption from PE treatment where activities form part of a fragmented business operation, for example where:

    • a company, either alone or with related entities (whether UK or non-UK), carry on a cohesive business operation from one or more locations in the UK;
    • at least one of the entities concerned has a PE where complementary functions are carried on; and
    • the activities together would create a PE if undertaken in a single company.

    The Budget 2018 announcement costs the Exchequer impact of these proposals as negligible, which is perhaps surprising given the strength of the tax avoidance rhetoric used in the release, but no doubt reflects the low value attributable to the (future) non-exempt functions that will be included within the UK PE. However, despite this apparent limited impact, the Government notes that the new measures will be an additional aspect for HMRC to consider when undertaking its annual Large Business risk review. The changes complement international tax developments, in particular the introduction of anti-fragmentation rules to double tax treaties through adoption of the Multilateral Instrument (MLI).

    Offshore receipts in respect of intangible property

    Few will mourn the passing of the Royalties Withholding Tax proposals from December 2017. Budget 2018 confirms that the Government has listened to feedback on the impact that such a withholding tax would have, including the significant risk of economic double taxation. The proposals have been recast, therefore, as a new primary income tax charge, coming into effect from 06 April 2019, and which will bring income from cross border arrangements adopted by certain multinationals within the charge to UK tax.

    The UK income tax charge will apply to owners of intangible property (IP) or those that are otherwise entitled to income from IP that is referable to the sale of goods or services in the UK in relation to that IP and who are not resident in a full treaty territory, i.e. a jurisdiction that has a double tax treaty with the UK that contains an appropriate non-discrimination provision. The scope of the charge is narrowed through a number of exemptions, including where the value of UK sales is less than £10m in a given tax year; where all, or substantially all, of the business activity in relation to the IP has always taken place in the relevant territory; and where the tax paid in relation to the relevant income is at least 50% of the UK income tax that would otherwise arise under this measure. It should be noted, however, that the charge will apply to gross income referable to the sale of goods or services in the UK, so that the 50% exemption may be less generous than it may initially seem (particular where a jurisdiction offers an IP box or similar regime to mitigate local taxation). The charge will cover income referable to UK sales made through both related and unrelated parties, to prevent the use of third party distribution arrangements to circumvent the charge.

    Whilst the proposed UK income tax charge would typically be displaced where a full double tax treaty applies, the measures also contain a targeted anti-abuse rule, effective from 29 October 2018, that will protect against arrangements designed to avoid the charge, for example through the transfer of relevant IP to a group entity in a full treaty jurisdiction. Given the potential difficulty in imposing the charge on a non-resident IP owner, the measure will also provide for any person within the same control group during the relevant tax year to be jointly and severally liable for the UK income tax, and it will be interesting to see whether this may catch certain joint venture arrangements, a point flagged to the Government in the consultation responses. More interesting, however, will be whether the proposed charge leads multinationals to onshore relevant business activities to the UK, particularly when combined with measures such as the diverted profits tax and the proposed digital services tax.

    Diverted profits tax

    A number of administrative amendments will be made to the diverted profits tax provisions, which will take effect on and after 29 October. These will:

    • prevent a planning opportunity which allows a company’s tax return to be amended (presumably to reflect reduced taxable profits due to DPT arrangements) which HMRC can no longer challenge on the basis that the review period has ended and the time limits for a DPT assessment have expired;
    • make clear that diverted profits will be taxed either under the DPT code or the corporation tax code but not both;
    • extend the review period, being the period during which HMRC and the taxpayer are intended to work collaboratively to determine the amount of diverted profits, from 12 to 15 months;
    • extend a company’s right to amend the corporation tax return during the first 12 months of the 15 month extended review period, but only to include the additional diverted profits into a corporation tax charge; and
    • make clear that the diverted profits (liable to DPT at 25%) can be reduced and taxed at the current corporation tax rate by amendment to the corporation tax return during the first 12 months of the review period.
    Taxing gains by non-residents from UK residential and non-residential property

    The Government has confirmed it will be implementing previously announced proposals to bring non-UK residents into the charge to UK tax on gains from direct, and certain indirect, disposals of UK immovable property – whether residential and non-residential – from 06 April 2019. The announcements accompanying the Budget add nothing significant to the detailed proposals published in July this year, except to confirm that funds, other than partnerships, which meet the definitions of a “collective investment scheme” or an “Alternative Investment Fund” under applicable regulatory definitions will be treated as companies for capital gains purposes. Detailed further rules specific to funds have been developed by the Government in consultation with stakeholders since July, but not yet published. The outcome of this exercise is expected to be made public on 07 November 2018.

    Bringing UK property income of non-residents into UK corporation tax

    The Government has confirmed that it will be implementing previously announced proposals to bring non-UK resident companies into the charge to UK corporation tax on UK property income from 06 April 2020. A number of transitional arrangements have also been announced today, including the confirmation that some form of non-resident landlord scheme will continue after April 2020, with income tax being withheld on gross rental income.

    Amendments to the hybrid mismatch rules

    Pending the UK leaving the EU, the Government has announced two changes to the UK hybrid and other mismatches rules to ensure they are aligned with the EU Anti-Tax Avoidance Directive (ATAD) with an implementation date of 01 January 2020. These changes will be introduced by Finance Bill 2018-2019 and relate to certain mismatches involving disregarded permanent establishments and the treatment of regulatory capital.

    The first will counteract a scenario where a company in an EU Member State makes a deductible payment to a foreign permanent establishment of a UK company that is not included in the charge to tax (because the UK company recognises the permanent establishment but claims the foreign branch exemption and the permanent establishment is not recognised by the jurisdiction in which it is located). The mismatches that arise in relation to ‘disregarded’ permanent establishments are counteracted by bringing amounts back into charge for corporation tax purposes. The second change gives the power to amend the scope of the exemption for regulatory capital (which are not treated as financial instruments for the purpose so of the UK hybrid and other mismatches rules) by regulations to cover certain requirements of ATAD.

    Taxation of hybrid capital instruments

    Finance Bill 2018/19 will introduce new rules for the taxation of hybrid capital instruments to ensure that they are taxed in line with their economic substance. Hybrid capital instruments are debt instruments with certain limited equity-like features, including features enabling the debtor to defer or cancel the interest payments. The changes are intended to provide tax certainty to all issuances of hybrid regulatory capital that meet the relevant conditions, that they will be treated as genuine debt instruments.

    The main measures ensure certainty that interest on such hybrid capital instruments are deductible by the issuer and taxable for the holder, and no stamp duty or stamp duty reserve tax will be payable on the transfer of such instruments. The new rules will also eliminate mismatches between the tax treatment of instruments used to raise funds externally and those used to lend funds internally within a group. The rules cover issues of hybrid capital instruments by companies in any sector and replace current rules covering regulatory capital instruments issued by banks and insurers, prompted by new Bank of England loss absorbency requirements that take effect from 01 January 2019. Most of the measures will have effect for accounting periods beginning on or after 01 January 2019, with accounting periods straddling that date split into two periods and the latter accounting period treated as starting on that date. The provisions relating to stamp taxes and certain transitional provisions relating to the duty to deduct income tax will take effect from Royal Assent to the Finance Bill.

    R&D tax relief anti-avoidance

    Broadly, where a “small or medium-sized enterprise” (SME) is loss-making after deduction of R&D tax relief, it can choose to surrender to HMRC all or part of the loss relating to the R&D expenditure and SME tax relief, and then take the credit as an immediate cash repayment from HMRC. HMRC has identified fraudulent attempts to claim this SME payable tax credit, worth £300m in total.

    As such, from April 2020, the amount that a qualifying loss-making SME can receive in R&D payable tax credit in a given year will be capped at three times its total PAYE and National Insurance contributions (NICs) liability for that year. The cap aims to ensure that the relief goes to companies that have a real UK presence.

    Where a genuine company with UK R&D activity has low PAYE and NICs liability relative to its R&D spend, it will still be able to claim this payable credit from HMRC up to the cap, with any unused losses carried forward to be set against future profits.

    The Government will consult on the application of the cap in due course.

    Changes to the corporation tax loss relief rules

    Corporation tax loss relief rules changed from 01 April 2017, increasing the flexibility over the profits against which carried forward losses can be offset, while restricting (generally to 50%) the proportion of profits in an accounting period that can be offset by carried forward losses. The Budget announced that the Government will extend the scope of the restriction to carried forward capital losses with effect from April 2020. A “consultation on delivery” document was published which considers how (but not whether) to implement the additional restriction. In particular, from 2020, there will be one single £5m allowance for the relief of up to £5m of carried forward losses (both capital and income). Anti-forestalling measures will be included in the eventual legislation, having effect from the Budget announcement and covering “bed and breakfast” arrangements and sales to connected parties, as well as anti-avoidance rules to prevent the restriction being side-stepped during the operation of the new regime. The consultation runs until 25 January 2019 and businesses likely to be affected by the changes, such as investment companies and property holding entities, should consider responding before the deadline.

    Budget 2018 also announced the introduction of various technical amendments in Finance Bill 2018/19, with effect from 01 April 2019. These include, among other things, preventing acquisition by a group of a new member, boosting the amount of deductions that group can claim for carried forward losses and changing the terminal relief rules so that where a 3 year terminal relief period begins part way through an accounting period, the terminal relief can only be offset against a proportionate part of the profits for that period. The Budget also confirmed some specific changes to carried forward losses in the context of Basic Life Assurance and General Annuity Business (BLAGAB) profits, which were previously announced and apply from 06 July 2018.  

    Capital allowances

    This year's Budget included a bumper crop of changes to the UK’s capital allowances regime. Some of the announced changes favour the taxpayer and some are detrimental, so it is appropriate to view the measures as a package.

    The eye-catching headline is that Government will legislate in Finance Bill for introduction of a “Structure and Buildings Allowance” or SBA, which those with longer memories might rightly conclude represents the return of the old Industrial Buildings Allowance in a new guise. There will be a technical consultation on the detail of the new allowance, but it will apply where written contracts for physical construction are entered into on or after 29 October 2018 (subject to the various qualifying criteria and anti-avoidance provisions). The key features of the SBA are that it will be a straight line 2% per year relief on the original construction costs of commercial buildings and other “commercial” structures (not land nor dwellings and other similar buildings used primarily for long-term residence), with no uplift reflecting increases in market value or balancing charge/allowance system where there is a change of ownership. The stated intention is to increase the attractiveness of the UK as a place to do business, and to offer tax relief where accounting relief is often already given. The proposed scope of the SBA is described in more detail below.

    The remainder of the capital allowances changes are a rag bag of changes to existing capital allowances measures:

    • The rate of allowances that can be claimed on plant and machinery in the “special rate pool” will reduce from 8% to 6% with effect from 01 April 2019 for corporation tax payers and 06 April 2019 for income tax payers. For businesses with a chargeable period straddling the date of change a hybrid rate will apply to unrelieved expenditure in the pool, calculated on the basis of the proportion of the period falling before and after the change.
    • It will be clarified that allowances for the cost of altering land for the purposes of installing plant and machinery will only be available where the plant and machinery in question itself qualifies for capital allowances. The amendment to the relevant provisions will be treated as always having had effect, but only actually have effect in relation to claims for capital allowances made on or after 29 October 2018 (i.e. the retrospective effect does not affect claims made before the clarification was announced.
    • Enhanced capital allowances providing 100% first year allowances for specified energy and water efficient plant and machinery will be withdrawn from April 2020, as will the tax credit available to loss-making businesses investing in the same items. The delay in implementation is intended to allow businesses to prepare; the Government states that the revenue raised from these changes will fund the Industrial Energy Transformation Fund.
    • There will be a temporary two-year increase in the rate of the annual investment allowance (AIA), from the current permanent limit of £200,000 to £1,000,000. This will apply from 01 January 2019 to 31 December 2020, with specific arrangements for calculating a hybrid AIA where a chargeable period straddles either the date of the introduction of the temporary increase or its later withdrawal. This measure should, in the short term, offset some of the negative impact of the “bad news” measures outlined above.
    • The existing 100% first year allowance for electric charge point equipment, which was due to expire on 31 March 2019 for corporation tax payers and 05 April 2019 for income tax payers, will be extended for another four years and will now expire on 31 March / 05 April 2023.

    SBAs - the detail

    The principal features of the new relief will be as follows:

    • SBA is a flat rate relief of 2% per year over a 50-year period;
    • the claimant must have an interest in the relevant land;
    • for a business whose chargeable period is less than one year, relief will be reduced on a proportionate basis;
    • assets within the scope of the relief include buildings (offices, retail and wholesale premises, factories, warehouses) and other structures such as walls, bridges and tunnels;
    • SBA will be applicable to new commercial structures and buildings, but will also extend to the costs of conversions and renovations (where the expenditure will be relievable over a separate 50-year period from the date of the works, even where this overlaps with relief being claimed for original construction);
    • there is no “pool”: costs which qualify for relief will be calculated separately for each building or structure;
    • relief is limited to physical costs of construction, including demolition or land alterations, but will not extend to planning costs or the cost of land;
    • the 50-year period for claiming relief will commence when the building or structure first comes into use for a qualifying activity, but relief will not be available if the expenditure was incurred more than seven years before the qualifying use commences;
    • where relief is not claimed at the point at which the building or structure first comes into use for a qualifying activity, this relief cannot be carried forward to a later period and will be lost;
    • relief will be available on a pro rata basis for mixed use developments;
    • the relevant commercial building or structure can be outside the UK, as long as the business claiming relief is within the charge to UK tax: the relief will apply to the extent that profits of the qualifying activity are subject to UK tax (this aspect is subject to consultation);
    • all the contracts for physical construction works must be entered into on or after 29 October 2018, including where the contract relates to preparatory work on the land (unless the preparatory work is not connected to the eventual structure or building). Anti-avoidance measures will apply to ensure that projects which commenced before Budget Day cannot come within the scope of the relief, for example by amending contracts;
    • expenditure on integral features which would under existing rules qualify for plant and machinery writing down allowances will remain within the existing capital allowances regime (including the AIA) and will not be within the scope of the SBA;
    • where there is a change of ownership, the acquirer has the right to claim 2% relief per year for the remainder of the 50-year period assuming that the asset remains in use for a qualifying activity, including where the original owner was not a taxpayer (the original owner is deemed to have claimed 2% per year even where this was not factually the case); and 
    • where an unused asset is acquired from a developer, the qualifying expenditure is the price paid, less the cost of land.

    There will be specific rules governing both (a) disuse or change of use, and (b) leasing transactions.

    The Government will consult on the detail around aspects including:

    • the meaning of “dwelling”, which it is proposed will not include hotels and care homes but will include long-term residential accommodation such as university or school accommodation, military accommodation and prisons
    • any issues regarding overseas assets
    • the detail of when lessors and lessees will be entitled to relief, and
    • periods of disuse

    The SBA is likely to be welcomed by many, and can no doubt be seen as one of many manoeuvres being made with an eye on impending Brexit.

    Exit charges on unrealised capital gains

    The rules applying exit charges to companies on unrealised capital gains when companies cease to be UK tax resident or transfer assets out of a UK permanent establishment are being revisited in the light of the EU Anti-Tax Avoidance Directive. The changes are largely technical and focus principally on replacing the current system for deferral of payment of exit charges on moves within the EU or EEA with a single deferral system allowing exit charges to be paid over a maximum of 5 years (or earlier if an asset is sold or ceases to be used in the relevant business). These changes apply from 01 January 2020.

    Exit charge deferral rules are also being introduced for the capital gains tax charge on trusts ceasing to be UK tax resident or non-resident individuals trading in the UK through a branch or agency removing capital assets from that branch or agency, again where the move is to elsewhere in the EU or EEA. The new deferral regime gives these persons the option of paying the exit charge over six years in equal instalments (with interest on the deferral). This change applies from 06 April 2019.

    Intangible fixed assets

    Following a review of the tax treatment of acquired intangible assets, the Government has announced that it will seek to introduce targeted relief for the cost of goodwill (the amount paid for a business that exceeds the fair value of its individual assets and liabilities) in the acquisition of businesses with eligible intellectual property from April 2019.

    In addition, with effect from 07 November 2018, the Government will also reform the de-grouping charge rules, which apply when a group sells a company that owns intangibles, so that they more closely align with the equivalent rules elsewhere in the tax code.

    Lease accounting changes

    After a lengthy consultation process concerning the impact of IFRS 16 and the impact of lessees ceasing to recognise the difference between operating and finance leases, the broad outcome of that process is to maintain the tax status quo.

    A finance lease and an operating lease will continue to be taxed depending on their legal and contractual terms not by reference to the accounting treatment. There will be some modifications to the definition of a long funding lease and the long funding lease rules themselves where capital allowances are claimed by the lessee rather than the lessor.

    The requirement for businesses to prepare their tax calculations based on old accounting treatment will be repealed. Where this leads to a change in the basis of taxation, any additional profits and tax will be spread over the average remaining life of the leases that gave rise to the adjustment.

    Consequential amendments are also to be made to other areas of legislation where the leasing rules have an impact, including the corporate interest restrictions rules, REITs and the sale of lessor company rules.

    The changes will take effect for accounting periods beginning on or after 01 January 2019.

Income Tax and NICs
  • Income tax rates and allowances

    No changes were announced to the income tax rates so that the basic rate of income tax for 2019/2020 will remain at 20%, the higher rate at 40% and the top (or additional) rate of income tax at 45%.

    The personal allowance for those aged under 65 will rise to £12,500, and the higher rate threshold will rise to £50,000 in 2019/2020. In doing so, the Government has met its 2017 manifesto commitment to raising the income tax personal allowance to £12,500 and the higher rate threshold to £50,000 a year early. These thresholds will then rise in line with the Consumer Prices Index (CPI).

    For a table of the main tax rates and allowances for 2019/2020, see below.

    National insurance contributions

    No changes to national insurance contribution (NICs) rates were announced for 2019. Accordingly, the main rates of NICs from April 2019 will be 12% for Class 1 employee contributions, 13.8% for Class 1 employer contributions and 9% for Class 4 contributions. The additional rate that applies over the Upper Earnings Limit will be 2%. In addition, Class 2 contributions will not be abolished.

    IR35 / off-payroll working in the private sector

    The Chancellor confirmed in today’s Budget that the widely-anticipated changes to the private sector off-payroll working rules (known as IR35) will not come into effect until April 2020 and will only apply to “large and medium-sized” businesses. There had been concern that this reform would come into effect in April 2019, with businesses understandably anxious about having insufficient time to prepare.

    The key change will be to put the PAYE risk onto the private sector end client by making them responsible for determining whether a contractor whose services are engaged via a personal service company (or other intermediary) should be treated as the end client’s deemed employee. If they are a deemed employee, the “fee-payer” (which will often be the end client) would be responsible for deducting and accounting for PAYE on relevant payments for the worker’s services. This will align the private sector rules with those applicable in the public sector.

    We understand that HMRC will continue to work with stakeholders to improve further the “Check Employment Status for Tax” tool (which has been the subject of criticism) and guidance before the reform comes into effect. HMRC has also stated that it will not carry out targeted campaigns into previous years when individuals start paying employment taxes under IR35 for the first time following the reform and businesses’ decisions about whether their workers are within the rules will not automatically trigger an enquiry into earlier years – it will be interesting to see how this plays out in high value cases.

    Short term business visitors

    Following a consultation on the tax and administrative treatment of short term business visitors from overseas branches of UK headquartered companies, the Government has announced that it will widen eligibility for the Pay As You Earn (PAYE) special arrangement and extend its deadlines for reporting and paying tax. This will reduce administrative burdens on UK employers with effect from April 2020.

    NICs on termination payments

    The Budget unexpectedly announced that legislation to introduce employer’s NICs on termination payments over £30,000 will be further delayed. It now appears that this reform will not be effective until April 2020.

Capital Gains Tax
  • Tax rates and allowances

    The annual exemption for 2019/2020 will increase to £12,000.

    No changes were announced to the rates of capital gains tax with the higher rate remaining at 20% and the basic rate at 10%. The former 28% and 18% rates continue to apply to chargeable gains made on the disposals of residential property and the receipt of carried interest, however. A 28% rate of capital gains tax also applies to ATED-related chargeable gains.

    For a table of the main tax rates and allowances for 2019/2020, see below.

    Entrepreneurs’ relief

    It has arguably been an anomaly of the entrepreneurs’ relief regime for shares that an individual shareholder need only hold shares entitling them to 5% of the voting rights and 5% of the ordinary share capital of the relevant company excluding share premium, irrespective of the economic value of that shareholding i.e. there was no corresponding requirement to an entitlement to 5% of the profits or assets of the relevant company. The Government has today changed this aspect of the rules, rather surprisingly describing it as a “loophole” which was being “abused”. It was always a strange way to have drafted the relevant tests, but having done so it seems rather unfair to describe the original regime in this way. The change applies to disposals on or after 29 October 2018, and requires a shareholder to be entitled to both 5% of the company’s distributable profits and 5% of its assets available for distribution to equity holders in a winding up (in addition to meeting the voting and nominal capital tests) in order for a disposal to attract entrepreneurs’ relief. Given that there is no equivalent economic test for businesses conducted through partnerships, it does create a rather uneven playing field, although the economic ownership tests arguably have less relevance to partnership agreements. 

    In a slightly less surprising turn, the qualifying period for shareholdings to qualify for entrepreneurs’ relief has been extended from 12 months to 2 years. This measure will apply from 06 April 2019, save where a business ceased before 29 October 2018, where the existing 12 month rule will continue to apply.

    Capital gains tax payment windows for residential property gains

    As originally announced in the Autumn Statement 2015, but subsequently deferred until April 2020, the reporting and tax payment windows for UK residents realising capital gains from residential property are to be substantially shortened.

    With effect from 06 April 2020, UK residents disposing of residential property will need to report their disposals via prescribed returns within 30 days of completion and to make a payment on account of tax due at the same time. This substantially brings forward the reporting and payment obligations for gains from residential property; for a disposal within a tax year ended 06 April, a UK individual would currently have until the following 31 January to report the gain, i.e. approximately 10 months.

    The new reporting and payment obligations will not apply where the gain realised by the UK resident is not chargeable to capital gains tax – most obviously, where private residence relief is available because an individual is disposing of their main residence. However, it will impose an additional tax compliance burden and impact on cash requirements where disposals are taxable, such as disposals by individuals who are not owner-occupiers.

    Except, broadly, for certain widely held funds and companies, non-UK residents are currently already required to report disposals of UK residential property and to make payments on account of tax due within 30 days of the disposal being completed. However, an exception from the obligation to make a payment on account applies where the non-UK resident is already within the scope of self-assessment, for example, a landlord registered under the non-resident landlord scheme.

    As announced in the Budget 2017, from 06 April 2019, existing exemptions for gains from disposals of UK residential property by non-residents, which are widely held funds and companies will cease to apply. For disposals before 06 April 2020, a non-UK resident within self-assessment will need to comply with the reporting obligation, but not the payment on account obligation, within 30 days. However, for disposals after 06 April 2020, the obligation to make a payment on account within 30 days will also be extended to non-UK residents within self-assessment. Inconsistencies in today’s announcements leave some uncertainty as to whether non-resident companies will be outside the 30 day reporting and/or payment on account obligations.

    Changes to private residence relief

    Changes will be made from April 2020 to restrict the availability of private residence relief from capital gains tax on disposals of residential property. The purpose of these changes is to better focus the relief on owner-occupiers, trimming certain reliefs that can benefit those not living in their residential properties.

    Private residence relief exempts gains from an individual’s only or main residence. Where the residence has not been used as the individual’s main residence throughout the individual’s period of ownership, effectively only a proportion of the gain is exempt. Prior to April 2014, the last 36 months of ownership counted as a period for which the property was a main residence (so counting towards exemption), regardless of the actual status of the property. From April 2014, this 36 month period was reduced to 18 months, except in limited circumstances. The Government has now announced that from April 2020 this period will be reduced to only 9 months. The Government considers the 9 month period sufficient to benefit owner-occupiers who find themselves moving into a new property but who are unable to sell their old property immediately.

    For individuals who let or licence out their main residence for part of their period of ownership and, as a result cannot qualify for private residence relief on some or all of their gain, lettings relief can assist in reducing the gain on which capital gains tax is due. Currently lettings relief can exempt up to £40,000 of any gain from capital gains tax and applies whether or not the owner remains in occupation of the property. As a further refocussing of private residence relief on owner-occupiers, lettings relief will be narrowed to apply only to properties in which the owner shares occupancy with the tenant.

Stamp Duty and SDLT
  • Rates

    The main rates and thresholds for stamp duties and stamp duty land tax (SDLT) on both residential property and non-residential property remain unchanged for 2019/2020.

    For a table of the main tax rates and allowances for 2019/2020, see below.

    Reforming the consideration rules for stamp taxes on shares

    The Government has announced that it will consult on aligning the consideration rules for stamp duty and stamp duty reserve tax as well as on introducing a general market value deeming provision for transfers between connected persons. Ahead of any such broader reform, from 29 October 2018, a targeted market value rule will be introduced for listed shares transferred to connected companies to prevent forestalling.

    Under the targeted market value rule, where listed securities are transferred between connected companies, the chargeable consideration for stamp duty and stamp duty reserve tax purposes will be the higher of (i) the actual consideration for the transfer, and (ii) the value of the listed securities. For these purposes, two companies are connected if the companies are under common control. The value of listed securities is to be taken to be the price which they might reasonably be expected to fetch on a sale in the open market at the date of transfer.

    Securities are often transferred between connected companies for no consideration as part of group or fund restructurings. Prior to today’s Budget, such transfers would not have been subject to stamp duty or stamp duty reserve tax. This will no longer be the case, at least in relation to listed securities. Group relief will continue to be available for stamp duty purposes (requiring the creation of an instrument which, when adjudicated not chargeable to stamp duty, will cancel any SDRT liability) provided the appropriate conditions are met, though companies which are connected for the purposes of the targeted market value rule may not qualify for relief. In particular, group relief requires a transfer between two bodies corporate where the relationship between the bodies corporate can be traced via 75% ownership of ordinary share capital and economic rights, and that no arrangements are in place for this group relationship to be broken.

    Changes to the higher rates of stamp duty land tax for additional dwellings

    Minor amendments have been made to the higher rates of stamp duty land tax (SDLT) for additional dwellings. These amendments make it clear that an undivided share in a dwelling held as a tenant in common is a major interest in a dwelling for these purposes (and therefore within the scope of the higher rates charge). They also extend the time for filing a return to claim back the higher rates surcharge in circumstances where a taxpayer is replacing their main home but the acquisition of their new home takes place before the disposal of their old home.

    Stamp duty relief for share incentive plans

    A minor correcting amendment has been made to the provisions dealing with stamp duty and stamp duty reserve tax relief for share incentive plans. The amendment clarifies that no stamp duty or stamp duty reserve tax is due on transfers to employees under share incentive plans meeting the requirements of the share incentive plan code. This puts HM Revenue and Customs’ existing practice on a statutory basis.

    Consultation on SDLT charge for non-residents

    The Budget announced that the Government will publish a consultation in January 2019 on an SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland. It is unclear whether similar proposals will in due course be announced in respect of Scottish LBTT or Welsh land transaction tax.

    Stamp duty exemption for financial institutions in resolution

    A new exemption from stamp duty, stamp duty reserve tax and stamp duty land tax is being introduced where the Bank of England exercises resolution stabilisation power to manage a distressed financial institution. If the Bank of England arranges a transfer of securities or real estate of the distressed financial institution to a temporary holding entity or a temporary public body, this transfer will be exempt from such stamp taxes. Similarly, a transfer of securities in exchange for temporary certificates issued to bondholders identifying their entitlement to the securities will also be exempt. In the case of securities, this can apply both to transfers of securities owned by the distressed financial institution or shares in the distressed financial institution itself. However, it cannot apply to a transfer to a third-party purchaser on exercise of a private sector purchaser stabilisation power, or where the stabilisation involves onward transfer from a temporary resolution holding entity or public body to a third party purchaser. This measure applies from Royal Assent of the 2018/19 Finance Bill.

Pensions and investments
  • Lifetime allowance for pensions

    The lifetime allowance for pension savings will increase in line with CPI for 2019/20, rising to £1,055,000.

    ISAs

    The ISA annual subscription limit for 2019/20 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2019/20 will be uprated in line with CPI to £4,368.

Inheritance Tax
  • Tax rates and allowances

    The Government has previously announced that the inheritance tax (IHT) threshold will remain frozen at £325,000 until 2021/2022.

    The rate remains at 40%. However, a reduced rate of IHT of 36% applies where a person leaves 10% or more of their net estate to charity.

    For a table of the main tax rates and allowances for 2019/2020, see below.

Value Added Tax and indirect taxes
  • Thresholds

    The standard rate of VAT remains at 20%. For a table of the main tax rates and allowances for 2019/2020, see below.

    The VAT registration and deregistration thresholds will remain at £85,000 and £83,000 respectively from April 2019. In particular, the Government announced that, on the basis of the recommendations of the Office of Tax Simplification concerning the distortions created by the high registration threshold in the UK, the registration threshold would be frozen for a further two years until April 2022 pending further consideration of the issue.

    VAT reverse charge anti-avoidance

    VAT reverse charges work by transferring the requirement to account for VAT on a supply of goods or services from the supplier to the recipient. Where a reverse charge applies, the recipient must account for VAT on the supply as its output tax and, to the extent that it is able to do so, reclaim the VAT as its input tax.

    Value Added Tax Act 1994 section 55A(3) requires a recipient of supplies that is subject to a reverse charge to aggregate the value of those supplies with the value of its own supplies for the purpose of establishing whether it is liable to register for UK VAT.

    Following an announcement in Autumn Budget 2017, HMRC published draft legislation applying a reverse charge to supplies of certain construction services, thereby requiring the recipient rather than the supplier to account for VAT on the affected supplies. The measure is designed to combat the situation where a supplier collects VAT from its customers but goes missing without accounting for the VAT to HMRC.

    Consultation on the draft legislation has highlighted that the interaction between the proposed new reverse charge and section 55A(3) might have the unintended consequence of forcing small businesses that are otherwise operating below the VAT threshold to register for UK VAT. The measure proposed today will allow for the section 55A(3) requirement to be disapplied in circumstances that may be specified by statutory instrument. The measure will have general application and will not necessarily be limited in its application to the new construction industry reverse charge.

    The measure will have effect from the day after the date of Royal Assent to the Finance Bill 2018/19, but will have no practical effect unless and until a Statutory Instrument is made to disapply section 55A(3) in any particular circumstances.

    VAT and vouchers

    From 01 January 2019, the Government will implement an EU Directive on the VAT treatment of vouchers. We do not expect Brexit to have an impact on the introduction of these new rules. HM Treasury has been closely involved in drafting the new EU Directive and therefore it would be surprising if it was to diverge from the agreed EU position.
    The new rules will refer to a voucher issued for consideration in physical or electronic form in relation to which a number of conditions must be met:

    • One or more persons are under an obligation to accept it as consideration or part-consideration for the supply of goods or services
    • The identities of those goods or services and of their potential suppliers are limited and expressly indicated, and
    • The voucher is transferable by gift.

    The new rules will refer to single purpose vouchers and multi-purpose vouchers. A single purpose voucher will be one where, at the time of issue, both the liability to VAT and the place of supply of the underlying goods or services are known. Any VAT due on those underlying goods or services is paid at the point of issue of the voucher and at the point of each transfer of it, where these are done for payment. Where the voucher is accepted as payment by a different business from the issuer, there will be a deemed supply of the goods or services to the issuer. A multi-purpose voucher will be one which is not a single purpose voucher. Any VAT due is only payable when the voucher is redeemed for goods or services. The consideration for that supply will be the amount last paid for the voucher or, in the absence of this information, its face value.

    HMRC and HM Treasury have also been in consultation with affected businesses for some time. Issues arising from these discussions include the following:

    • Businesses will suffer one-off costs relating to familiarisation with the new rules such as setting up new systems and processes in order to ensure correct VAT accounting from 01 January 2019.
    • On-going costs are expected to include separating vouchers between single purpose vouchers and multi-purpose vouchers to ensure correct VAT accounting and issuing VAT invoices.
    • Businesses who issue single purpose vouchers which were previously treated as credit or retailer vouchers, may have a cash flow impact as the tax will be due on these vouchers at the point of issue and not redemption.
    • Businesses primarily engaged in buying and selling multi-purpose vouchers will no longer be able to deduct input tax on the costs of operating that activity because no taxable supply will be made. Business models may need to be changed to take this into account.
    • Businesses that are unable to establish if a multi-purpose voucher was last sold for less than the face value have to account for the VAT on that face value rather than the sales price.
    VAT grouping of overseas entities

    HMRC will be issuing draft guidance next month to (a) amend the definition of ‘bought in services’ to ensure that such services are subject to UK VAT and (b) provide clarity on HMRC’s ‘protection of the revenue’ powers and the treatment of UK fixed establishments.

    Bought in services

    When a UK VAT group acquires services via an overseas member of the same VAT group, Value Added Tax Act 1994 section 43(2A) requires the VAT group to account for reverse charge VAT on the value of the supply that the VAT group is deemed to have acquired through the overseas member.

    HMRC’s current guidance set out in VAT Notice 700/2 explains that the reverse charge will apply to any cost components of the intra-VAT group supply that are classed as ‘bought in’ by the overseas VAT group member. A ‘bought in service’ is defined as a supply of services that is received by the supplier company and which forms a cost component of its onward supply to other members of the VAT group. Costs which are either general overheads of the supplier company or which are the own resources of the supplier company are not currently classed as ‘bought in services’ and as such fall outside the scope of the reverse charge rule in section 43(2A).

    HMRC’s intention appears to be to extend the scope of the section 43(2A) reverse charge to catch a wider range of costs incurred by the overseas supplier, by ‘clarifying’ what will amount to a ‘bought in service’ (and presumably, by extension, what will not amount to an overhead cost or part of the own resources of the supplier).

    Protection of the revenue

    HMRC can decline a taxpayer’s application to treat an entity as a member of a VAT group and / or give notice terminating VAT group treatment where it appears to HMRC to be necessary for the protection of the revenue (see Value Added Tax Act 1994 sections 43C(1) and (2) and 43B(5)(c)).

    The Budget Document indicates an intention to clarify how HMRC considers these powers should apply in the situation where an overseas company seeks VAT group treatment through a UK fixed establishment.

    Although the draft guidance is not yet available for comment, it is to be assumed that both proposals relate to HMRC’s ongoing challenge to the VAT status of supplies made by overseas service companies in the financial services and insurance sectors in circumstances where those overseas service companies have joined the UK VAT group through a UK branch or fixed establishment.

    In the event that HMRC is unsuccessful in arguing that the UK branches do not constitute fixed establishments for VAT grouping purposes, it appears to be positioning itself to: (a) argue for a broader than currently accepted application of its power to deny or terminate VAT group treatment for protection of the revenue; and (b) failing that to seek to extend the scope of the section 43(2A) reverse charge mechanism to catch more of the cost components of the intra-VAT group supplies.

    It should be borne in mind, however, that the new guidance will do no more than record HMRC’s policy position on how it considers the protection of the revenue and reverse charge rules should apply in the context of VAT grouping. The guidance will not have the force of law and the legal tests for the application of these rules will remain as set out in the relevant European and domestic legislation and case law.

    The guidance will be issued in draft in November 2018 and is intended to take effect from 01 April 2019.

    Changes to the VAT specified supplies anti-avoidance

    The Value Added Tax (Input Tax) (Specified Supplies) Order 1999 (the Specified Supplies Order) allows companies which export certain financial services to customers belonging outside the European Union to reclaim the VAT they incur while providing those services. When these services are supplied inside the EU, this VAT cannot be reclaimed.

    At present, certain intermediary services that are supplied to a person outside of the EU are specified in the Specified Supplies Order, allowing recovery of input VAT no matter who the final consumer of those supplies is. Currently, some providers of intermediary services therefore reduce their VAT liabilities by routing supplies to UK customers through an offshore entity.

    The description of specified supplies in the Specified Supplies Order will be amended so that insurance intermediary services made in respect of a principal supply which is made to a customer located in the UK will no longer be specified, and therefore no longer have a right to recover input tax. The Government hopes this amendment will “level the playing field” by removing the advantage users of the “offshore looping avoidance arrangement” have over wholly UK based insurers.

    The implementation date of the measure will be 01 March 2019.

    Landfill tax

    There were no announcements in respect of landfill tax in Budget 2018 as the annual increases in the standard and lower rates of Landfill Tax were set out in Budget 2014 to be line with inflation (based on Retail Prices Index (RPI)) rounded to the nearest 5p. Therefore, the new rates will be announced in the new year.

    The Government has announced a £10m fund to clear up illegal waste sites.

    Climate change levy (CCL)

    The Government has set the rate of CCL for 2020/21 and 2021/22 CCL which reflects the Government’s commitment to rebalance the main rates paid for gas and electricity.

    The electricity rate will be lowered in 2020/21 and 2021/22. The gas rate will increase in 2020/21 and 2021/22 so it reaches 60% of the electricity main rate by 2021/22. Other fuels, such as coal, will continue to align with the gas rate. The discount for sectors with Climate Change Agreements will change to reflect the change in CCL main rates.

    In addition, and to ensure better consistency between portable fuels for commercial premises not connected to the gas grid, the Government has also announced that it will freeze the CCL main rate for LPG at the 2019/20 level until April 2022. This is to help ensure a better consistency between portable fuel used for commercial premises that are not connected to the national gas grid.

    Carbon Price Support (CPS)

    The price of the EU Emissions Trading System (ETS) allowance have seen a significant increase over the last few months. The Government has announced that they will freeze the CPS rate at £18/tCO2 for 2021 and from 2020/21 will seek to reduce the CPS rate if the Total Carbon Price remains high.

    UK Carbon Tax EU ETS Replacement

    In the event of a no-deal Brexit, the Government has announced a contingency replacement for the EU ETS. This new Carbon Tax would apply to all “stationary installations” currently caught by EU ETS rules. This would be based on a rate of £16 per tonne of carbon dioxide produced over and above the installations emissions free allowances under the current EU ETS regime.

    The Government also announced that it will further consider other long-term carbon pricing options.

    Aggregates levy

    The Government announced that it will continue to freeze the rate of the aggregates levy for 2019/20 at £2/tonne but confirmed that in the longer term increases in the levy will be index index-linked.

    Reducing plastics waste

    In a widely anticipated move in response to recent high-profile media campaigns and the success of the plastic bag charge, the Government will introduce a new tax from April 2022 on the manufacture and import of plastic packaging that contains less than 30% recycled plastic.

    The Government has also announced that they will reform the Packaging Producer Responsibility System with the objective of providing the producer with an incentive to design packaging that is easier to recycle and penalise the packaging that is difficult to recycle.

    The Government will consult on the detail and implementation timetable.

    The Government has also announced funding schemes for plastic and waste innovation which will be welcomed by the capital expenditure heavy sector.

    Despite widespread speculation, the Government has confirmed that they have no plans to introduce an incinerator tax in the immediate future. However, they did state that they will continue to monitor the situation and may act if their wider recycling policies do not deliver the desired result.

Tax Administration
  • Legislation to reflect EU exit

    A measure will be introduced, with affect from Royal Assent of Finance Bill 2018/19, to introduce a power which permits the government to make minor amendments to ensure that tax law continues to operate as it does now if the UK leaves the EU without a deal.

    The measure will allow the government to make minor technical amendments, including: replacing references to the ‘EU’ with references to the ‘EU and UK’ in legislation, amendments consequential to other changes to the law in preparation for EU Exit; and amendments to change values in euros into values in sterling. It also provides for technical changes to an existing power which permits the government to bring international tax agreements into effect in UK law, mirroring a provision currently contained in legislation that gives effect to EU law; and removes references to EU legislation when HMRC are considering whether, and to the extent which, a taxpayer may be unjustly enriched by repayment of Insurance Premium Tax, Landfill Tax, or Excise Duty.

    Profit fragmentation

    The Government has confirmed that it will legislate in Finance Bill 2018/19 to introduce targeted legislation that aims to prevent UK businesses from avoiding tax by arranging their UK taxable business profits to accrue to entities resident in low tax jurisdictions. The anti-avoidance provisions will come into force from 06 April 2019.

    Extension of offshore time limits

    The Government will legislate in Finance Bill 2018/19 to increase the assessment time limit for offshore tax non-compliance to 12 years for income tax, capital gains tax and inheritance tax. Where there is deliberate behaviour the time limit remains at 20 years.

    Dispute resolution

    On 10 October 2017, the European Council adopted Directive 2017/1852 EU on Tax Dispute Resolution Mechanisms in the European Union.

    The Directive was intended to fill gaps in the mechanisms for resolving disputes relating to double taxation left by the Convention on the Elimination of Double Taxation in Connection with the Adjustment of Profits of Associated Enterprises and existing bilateral tax treaties.

    The Convention established a procedure for resolving disputes where double taxation occurs between enterprises of different Member States as a result of an upward adjustment of profits of an enterprise of one Member State, including if necessary by reference to the opinion of an independent advisory body. The new Directive is more extensive in its scope than the Convention and seeks to apply harmonised and transparent dispute resolution procedures to all disputes arising from the interpretation and application of agreements and conventions that provide for the elimination of double taxation of income and capital.

    Member States are required to implement the Directive by 30 June 2019 at the latest.

    The measure announced today introduces the primary legislation needed to allow implementation of the Directive in the UK. Finance Bill 2018/19 will do this by introducing new provisions into TIOPA 2010 that will permit HM Treasury to make regulations concerning the implementation of the Directive. The measure will have effect on the date of Royal Assent to Finance Bill 2018/19.

    International tax enforcement: disclosable arrangements

    Legislation in the 2018/19 Finance Bill will enable the Treasury to make regulations to give effect to international rules on the disclosure of cross border tax arrangements, specifically a new EU directive (Directive 2018/822) and the new Organisation for Economic Co-operation and Development model mandatory disclosure rules, which the EU Directive largely mirrors.

    The regulations will require certain information to be notified to HMRC by individuals and businesses in line with the Directive, which requires information about certain cross border tax planning arrangements to be notified to EU Member States’ tax administrations. The information collected will be automatically shared between all EU Member States.

    The Government hopes the rules will help control and disrupt cross border tax avoidance and evasion which relies on secrecy.

    The enabling legislation will have effect on and after the Royal Assent to the Finance Bill 2018/19. The UK will bring forward legislation to implement the Directive by 31 December 2019.

    Protecting taxes in insolvency

    The order of distribution for assets from insolvent companies will be amended so that HMRC will have greater priority to recover taxes paid by employees and customers which the business collects and holds temporarily before passing them on to the government. These taxes include Value Added Tax, Pay-As-You-Earn Income Tax, employee National Insurance contributions and Construction Industry Scheme deductions.

    HMRC will become a preferential creditor in respect of these taxes, ranking behind certain secured creditors (holders of fixed charges) and insolvency practitioners, but ahead of other secured creditors (holders of floating charges), unsecured creditors and shareholders. However, HMRC will remain below other preferential creditors such as the Redundancy Payment Service and the rules will remain unchanged for taxes owed by the businesses themselves, such as Corporation Tax and employer National Insurance contributions (in respect of which HMRC will continue to be ranked with other unsecured creditors).

    The Government’s stated purpose in introducing this measure is to ensure that when a business enters insolvency, more of the taxes paid in good faith by its employees and customers will go to fund public services rather than being distributed to creditors other than HMRC. The Government estimates that this measure will ensure that an extra £185 million in taxes already paid each year reaches the Government.

    The implementation date of the measure will be 06 April 2020.

HM Revenue & Customs tax rates and allowances for 2019/20
  • Income tax allowance 2018/19 (£) 2019/20 (£) 
    Personal allowance 11,850 12,500
    Higher rate threshold 46,350 50,000
    Income limit for personal allowance1 100,000 100,000
     Transferrable marriage allowance2 1,190 1,250
    Blind person's allowance 2,390 2,450

    1 The individual’s personal allowance is reduced where their income is above this limit. The allowance is reduced by £1 for every £2 above the limit.

    2 The marriage allowance cannot be transferred to a recipient spouse liable to income tax at the higher or additional rate.

    Other allowances/thresholds  2018/19 (£) 2019/20 (£)
    Capital gains tax annual exempt amount for individuals etc. 11,700 12,000
    Inheritance tax threshold 325,000 325,000
    Income tax bands 2018/19 (£)  2019/20 (£)
    Starting savings rate 0%3 5,000 5,000
    Basic rate 20% 1 - 34,500 1 - 37,500
    Higher rate 40% 34,501 - 150,000 37,501 - 150,000
    Additional rate 45% Over 150,000 Over 150,000

    3 If non-savings taxable income exceeds the starting rate limit, the starting savings rate will not apply to savings income.

    Corporation tax profits4
    Main rate 2018/19 (£)  Main rate 2019/20(£) 
    19% Whole of profits 19% Whole of profits

    4 The Government plans to reduce the corporation tax profits main rate to 17% for the 2020/21 period.

     Stamp duty land tax
     Rate  Residential 5, 6
    Non-residential or mixed-use property
       2018/19 (£)  2019/20(£)  2018/19 (£)  2019/20 (£)
     Total value of consideration
    0% 0 - 125,000 0 - 125,000 0 - 150,000 0 - 150,000
    2% 125,001 - 250,000 125,001 - 250,000 150,001 - 250,000 150,001 - 250,000
    5% 250,001 - 925,000 250,001 - 925,000
    Over 250,000 Over 250,000
    10% 925,001 - 1,500,000 925,001 - 1,500,000
    N/A N/A
    12% Over 1,500,000 Over 1,500,000 N/A N/A
    15%7 Over 500,000 Over 500,000 N/A N/A

    5 Stamp duty land tax will be charged at a rate of 3% above the current stamp duty land tax residential rates from 01 April 2016 on purchases by individuals of additional residential properties (such as second homes and buy-to-let properties), and by non-natural persons (companies, partnerships including companies or collective investment schemes) of a residential property, even if they do not own another residential property.

    6 For purchases by first-time buyers of property worth £500,000 or less from 22 November 2017, the stamp duty land tax rate for a property valued £0 – 300,000 is 0% and for a property valued £300,001 – 500,000 is 0% on the consideration up to £300,000 and 5% on the remainder.

    The 15% rate applies to certain acquisitions of residential property by “non-natural persons” (a company, a partnership including a company or a collective investment scheme).

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.