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Budget Report 2017

Budget Report 2017

Chancellor Philip Hammond said he’d take a “balanced approach” to his second Budget of 2017.

Once again the speech was light on headline-grabbing inance changes and there were no ‘giveaways’ or major surprises.

Instead, the chancellor focussed on measures to prepare the economy for post-Brexit life.

Raising productivity is key to boosting economic growth and wages, but growth has “remained stubbornly lat” and continues to be an issue.

In light of this, the Ofice for Budget Responsibility revised down its forecasts for growth.

It expects GDP to grow by 1.5% in 2017 (down from 2% predicted at the Spring Budget in March) and 1.4% in 2018 (down from 1.6%).

To help address the problem, the National Productivity Investment Fund, which supports innovation and infrastructure, will be extended by a year and expanded to more than £31bn.

The chancellor also announced a range of investments, including:

  • £3bn over 2 years to prepare for Brexit
  • £30m to develop digital skills distance
    learning courses
  • funding to support building 300,000 new homes a
    year by the mid-2020s.

Signiicant announcements for businesses include the VAT thresholds remaining unchanged for 2 years, while business rates will increase using the CPI measure of inlation from April 2018.

For individuals, stamp duty has been abolished for most irst-time buyers while increases to the personal allowance and the national living and minimum wage will be welcomed by many.

This report summarises the announcements made by Hammond during Autumn Budget 2017 on 22 November 2017.

However, these are subject to change following the Finance Bill and the Spring Statement.

Read more

www.mclintocks.co.uk
info@mclintocks.co.uk
INTRODUCTION
Chancellor Philip Hammond said he’d take a
“balanced approach” to his second Budget of 2017.
Once again the speech was light on headline-grabbing
inance changes and there were no ‘giveaways’ or
major surprises.
Instead, the chancellor focussed on measures to
prepare the economy for post-Brexit life.
Raising productivity is key to boosting economic
growth and wages, but growth has “remained
stubbornly lat” and continues to be an issue.
In light of this, the Ofice for Budget Responsibility
revised down its forecasts for growth.
It expects GDP to grow by 1.5% in 2017 (down from
2% predicted at the Spring Budget in March) and
1.4% in 2018 (down from 1.6%).
To help address the problem, the National
Productivity Investment Fund, which supports
innovation and infrastructure, will be extended by a
year and expanded to more than £31bn.
The chancellor also announced a range of
investments, including:
• £3bn over 2 years to prepare for Brexit
• £30m to develop digital skills distance
learning courses
• funding to support building 300,000 new homes a
year by the mid-2020s.
Signiicant announcements for businesses include
the VAT thresholds remaining unchanged for 2
years, while business rates will increase using the
CPI measure of inlation from April 2018.
For individuals, stamp duty has been abolished
for most irst-time buyers while increases to the
personal allowance and the national living and
minimum wage will be welcomed by many.
This report summarises the announcements made
by Hammond during Autumn Budget 2017 on
22 November 2017.
However, these are subject to change following the
Finance Bill and the Spring Statement.
IMPORTANT INFORMATION
The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual
circumstances and may be subject to change in the future. The information in this report is based
upon our understanding of the 2017 Autumn Budget, in respect of which speciic implementation
details may change when the inal legislation and supporting documentation are published.
This document is solely for information purposes and nothing in this document is intended to
constitute advice or a recommendation. You should not make any investment decisions based upon
its content.
Whilst considerable care has been taken to ensure that the information contained within this document
is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information.
AT A GLANCE
BUSINESS
Business rates
Increases to be determined by
CPI, not RPI, from April 2018
Staircase tax
Businesses can have their original
bill reinstated and backdated
R&D expenditure credits
R&D expenditure credit rises to
12% from 1 January 2018
INFRASTRUCTURE FINANCE
Devolution deals
Second devolution deal for the
West Midlands
Regional transport
6 metro mayors to share half of
£1.7bn transport fund
PERSONAL
Personal allowance
Basic rate threshold rises to
£11,850, higher rate up to £46,350
National living wage
Increase of 4.4% brings NLW to
£7.83 an hour for over-25s
Pension lifetime allowance
To rise to £1.03m for 2018/19
tax year
VAT
Threshold frozen
Threshold to remain at £85,000
for 2 years from April 2018
Anti-fraud measure
All online marketplaces are jointly
and severally liable for unpaid
VAT of their sellers
DUTIES
Stamp duty
Abolished for irst-time buyers on
all homes worth up to £300,000
Diesel cars
Tax for diesel cars that fail to
meet latest standards rise a band
Cigarettes and alcohol
Tobacco rises by 2% above RPI;
‘white ciders’ face new duty
OTHER
EIS
Investment limit to double to £2m
for knowledge-led companies
Capital gains indexation allowance
Indexation for companies no longer
calculated up to month of disposal
Company van beneit
To be increased from £3,230 to
£3,350 from 6 April 2018
4 | Business
BUSINESS
CAPITAL ALLOWANCES
The annual investment allowance will remain at
£200,000 for 2018/19 and 2019/20. The main rate
and special rate writing down allowance on plant
and machinery will be 18% and 8%, respectively.
The 100% irst-year allowance for businesses purchasing
zero-emission goods vehicles or gas refuelling
equipment will be extended for a further 3 years.
For zero-emissions goods vehicles, the scheme will
end on 31 March 2021 for corporation tax and
5 April 2021 for income tax.
For gas refuelling equipment, the scheme will end on
31 March 2021 for both corporation tax and income tax.
The list of technologies and products covered by the
energy saving irst-year allowances has been updated.
It adds 3 new products, which include evaporative air
coolers, saturated steam to electricity conversions and
white LED lighting modules to the list. The measure also
modiies 9 and removes 2 items from the list.
The scheme allows 100% of the cost of an investment in
qualifying plant and machinery to be written off against
the taxable income of the period in which the investment
was made.
R&D EXPENDITURE CREDIT
From 1 January 2018, the rate of tax relief available to
companies that carry out qualifying R&D and claim the
research and development expenditure credit (RDEC) will
increase from 11% to 12%.
The RDEC is a standalone and above the line credit
that is brought into account as a receipt in calculating
proits, which allows companies to claim an enhanced
corporation tax deduction or payable credit on their
R&D costs.
COMPANY VAN BENEFIT AND FUEL
BENEFIT CHARGE
From 6 April 2018, the van beneit charge will
increase from £3,230 to £3,350 and the van fuel
beneit charge will increase from £610 to £633.
COMPANY CAR FUEL BENEFIT AND
COMPANY CAR DIESEL SUPPLEMENT
Employees provided with fuel for private mileage in
a company car will see the value of the multiplier
used for calculating the cash equivalent of the fuel
beneit increase from £22,600 to £23,400. This
measure will apply from 6 April 2018.
The diesel supplement used to calculate the
company car beneit and company car fuel beneit
will increase from 3% to 4% for all diesel cars
registered on or after 1 January 1998 that do not
meet real driving emissions step two standards.
(RDE2). Diesel cars which are certiied to RDE2
standard will not be liable to the diesel supplement.
The maximum appropriate percentage applied for cars,
including any diesel supplement, will remain at 37%.
ANNUAL TAX ON ENVELOPED DWELLINGS
The annual chargeable amounts for the annual tax
on enveloped dwellings (ATED) will increase in line
with inlation for the 2018/19 chargeable period,
which begins on 1 April 2018.
The increase will see the annual chargeable amount
for a property with a value in the range of £500,001
to £1m rise from £3,500 a year to £3,600 a year.
Business | 5
CORPORATION TAX RATE
The main rate of corporation tax will remain at 19%
from 1 April 2018.
REMOVAL OF CAPITAL GAINS
INDEXATION ALLOWANCE
For a capital gain made by a company on or after
1 January 2018, the indexation allowance which
is applied in order to determine the amount of
the chargeable gain will only be calculated up to
December 2017.
This change means that for disposals made after this
date, the indexation will no longer be calculated up to
the month in which the disposal of the asset occurs.
AMENDMENTS TO CORPORATE INTEREST
RESTRICTION RULES
The corporate interest restriction rules for large
companies which incur net interest expense and other
inancing costs above £2m a year will be amended.
A number of technical changes will be made, with
some having effect from 1 April 2017 when the
corporate interest relief restriction rules commenced.
The remainder will have effect from 1 January 2018.
Some of these measures include amendments to:
• the calculation of group-EBITDA to align the
treatment of R&D expenditure credits with the
approach taken in the calculation of the tax-EBITDA
• the infrastructure rules to ensure insigniicant
amounts of non-taxable income do not affect
their operation
• the deinition of a group to align it with accounting
standards and to ensure asset managers do not
cause unrelated businesses to be grouped together.
DOUBLE TAXATION RELIEF AND
PERMANENT ESTABLISHMENT LOSSES
Legislation will be introduced to restrict the amount
of credit allowed or deduction given for foreign tax
where the company has received relief for losses
against non-permanent establishment proits in the
foreign jurisdiction.
The purpose of the policy is to ensure that relief for
foreign tax is only given where proits have been
taxed both in the UK and the foreign jurisdiction.
The measure will have effect for accounting
periods ended on or after 22 November 2017 with a
transitional rule applying for accounting periods that
straddle 22 November 2017.
OTHER MEASURES
A variety of other complex corporation tax changes
were introduced which legislate to ensure:
• technical changes are made to the hybrid and
other mismatches regime
• license arrangements between a company and a
related party in respect to intangible ixed assets
are subject to the market value rule
“R&D expenditure
credit rises to 12%
from 1 January 2018”
6 | Business
• all activities by UK petroleum license holders that
give rise to tariff income in relation to UK oil and
gas assets are subject to ring fenced corporation
tax and supplementary charge
• the time limit of 6 years within which companies
must adjust for any depreciatory transactions is
removed when claiming a capital loss on disposal
of shares in a group company
• an anomaly is corrected whereby a postponed tax
charge may become payable when a new holding
company is inserted directly above an overseas
company to which a UK company has previously
transferred trade and assets of a foreign branch in
return for shares.
PARTNERSHIP TAXATION: PROPOSALS TO
CLARIFY TAX TREATMENT
To provide more clarity over aspects of the taxation
of partnerships, a number of measures have been
proposed, affecting:
• partners in nominee or bare trust arrangements
• partnerships with partnerships as partners
• investment partnerships
• partnerships that are partners in another partnership.
OFF-PAYROLL WORKING REFORM
The government will consult in 2018 on tackling
non-compliance with the intermediaries’ legislation
(commonly known as IR35) in the private sector.
The purpose of the legislation is to ensure individuals
who effectively work as employees, but structure their
work through a company, are taxed as employees.
The consultation will explore the possibility of
extending the recent public sector reforms to the
private sector.
DISINCORPORATION RELIEF
The government will not extend disincorporation relief
beyond the current 31 March 2018 expiry date.
ELECTRIC CARS
Employer-provided electricity at workplace charging
points for electric and hybrid cars owned by
employees will be exempt from being taxed as a
benei t-in-kind from April 2018.
SAVE-AS-YOU-EARN
From 6 April 2018, the government will allow
employees on maternity and parental leave to take
a pause of up to 12 months from saving into their
save-as-you-earn employee share scheme, which is an
increase from the current limit of 6 months.
SUBSISTENCE BENCHMARKING
With effect from April 2019, employers will no longer be
required to check receipts when making payments to
employees for subsistence using benchmark scale rates.
Employers will still be required to ensure employees
are undertaking qualifying business travel.
BUSINESS RATES
Major reforms were announced to business rates worth
approximately £9bn by the end of this parliament.
There are a number of measures, which include:
• bringing forward the planned switch in indexation
from RPI to CPI to 1 April 2018
“Employer-provided electricity at
workplace charging points for electric
and hybrid cars owned by employees will
be exempt from being taxed as a benefitin-kind
from April 2018.”
Business | 7
• continuing the £1,000 business rate discount
for public houses with a rateable value of up to
£100,000, subject to state aid limits for businesses
with multiple properties, for 1 year from 1 April 2018
• legislating retrospectively to address the so-called
‘staircase tax’ to enable affected businesses to
ask the Valuation Ofice Agency to recalculate
valuations so bills are based on previous practice
backdated to April 2010
• moving to revaluations every 3 years following the
next revaluation, which is currently due in 2022.
WITHHOLDING TAX: ROYALTIES
From April 2019, withholding tax obligations will
be extended to royalty payments, and payments
of certain other rights, made to low or no tax
jurisdictions in connection with sales to UK
customers. This measure will apply regardless of
where the payer is located.
INVESTMENT THROUGH VENTURE
CAPITAL TRUSTS
A series of measures were announced which are
intended to ensure that tax-advantaged venture
capital trusts (VCTs) continue to focus on long-term
investment in higher-risk companies.
These measures change certain rules on
investments made by VCTs that will:
• insert a inal date of 6 April 2018 in relation to the
applicability of certain ‘grandfathering’ provisions
• double the time VCTs have to reinvest gains from
investments from 6 to 12 months
• require 30% of funds raised in an accounting
period to be invested in qualifying holdings within
12 months after the end of the accounting period
• require qualifying loans to be unsecured and
ensure returns on loan capital above 10%
represent no more than a commercial return on
the principal
• increase the proportion of VCT funds that must be
held in qualifying holdings from 70% to 80%.
VENTURE CAPITAL SCHEMES
RELEVANT INVESTMENTS
The deinition of a ‘relevant investment’ is amended
to ensure that all investments, including all risk
inance investments made before 2012, are counted
towards the lifetime funding limit for companies
receiving investment under tax advantaged venture
capital schemes.
The limit is £12m for most companies and £20m for
knowledge-intensive companies.
This measure will affect companies, social enterprises,
fund managers and individuals using the enterprise
investment scheme (EIS), VCTs and social
investment tax relief. The changes will apply to
qualifying investments made on or after
1 December 2017.
Financial year from 1 April 2018 2017
Corporation tax rate 19% 19%
Loans to participators 32.5% 32.5%
Diverted proits tax 25% 25%
Table 1 – Business taxation
CONTACT US TO DISCUSS
YOUR BUSINESS
8 | Infrastructure inance
INFRASTRUCTURE FINANCE
The Budget contained a range of public expenditure announcements that could result in funds being
accessed, or contracts bid for. These infrastructure announcements include (in no particular order):
INDUSTRY
The National Productivity Investment Fund will
be extended for a further year with total funding
increased to £31bn.
There will be an additional £23bn for investment in R&D.
REGULATORS’ PIONEER FUND
Plan to unlock £20bn for new investment in UK
scale-up businesses, through:
• a new fund in the British Business Bank, seeded
with £2.5bn of public money
• facilitating pension fund access to
long-term investments
• doubling EIS investment limits for knowledge
intensive companies from £1m to £2m.
ELECTRIC VEHICLE TECHNOLOGY
The chancellor announced:
• £400m charging infrastructure fund
• £100m in plug-in car grant
• £40m in vehicle charging R&D.
ENVIRONMENT
£220m Clean Air Fund to support implementation of
local air quality plans.
EDUCATION
A range of spending commitments to support
education including £20m to support further
education colleges to prepare for T-levels.
Boosting digital skills via £30m in the development
of digital skills distance training courses.
HOUSING
• £28m in 3 new ‘Housing First’ pilots in West
Midlands, Manchester and Liverpool
• £630m small sites fund to facilitate delivery of
40,000 homes
• £2.7bn to more than double the Housing
Infrastructure Fund
• £400m for estate regeneration
• £1.1bn to unlock strategic sites
• £8bn of new inancial guarantees to support
private house building and purpose-built private
rented sector
• £34m to develop construction skills.
REGIONAL
• £30m on digital connectivity on trains on
Trans-Pennine route, £337m investment in
replacement rolling stock for Tyne & Wear.
Personal | 9
PERSONAL
PERSONAL ALLOWANCE
The tax-free personal allowance will increase from
£11,500 to £11,850 from 6 April 2018.
HIGHER RATE THRESHOLD
The basic rate threshold will increase from £33,500
to £34,500 as of 6 April 2018. This means for most
people the higher rate threshold will increase
to £46,350.
Different thresholds may apply in Scotland.
CAPITAL GAINS TAX
The capital gains tax (CGT) annual allowance will
increase from £11,300 to £11,700 for individuals
and from £5,650 to £5,850 for most trustees of a
settlement from 6 April 2018.
The government’s intention to introduce a 30-day
payment window for CGT payments due on the
disposal of residential property will be deferred until
April 2020.
With effect from 22 November 2017, the transitional
provision which excluded sums of carried interest
arising after 8 July 2015 and in connection with
the disposal of a partnership will be removed,
irrespective of any connection with disposals
made prior to 22 October 2015. This means asset
managers will pay CGT on their full economic gain.
NATIONAL INSURANCE CONTRIBUTIONS
The implementation of the proposed reforms to the
national insurance contributions (NICs) system, to
include the abolition of class 2 NICs, will be delayed
by a year and will now take effect from April 2019.
As previously announced, the proposal to increase
class 4 NICs from 9% to 10% in April 2018 and then
to 11% in 2019 will no longer proceed.
NATIONAL LIVING WAGE AND NATIONAL
MINIMUM WAGE
The national living wage will be increased from
£7.50 to £7.83 per hour from April 2018, for those
aged 25 and over.
The national minimum wage rates will also increase
as follows:
• apprentices: £3.70 per hour
• 16 and 17-year-olds: £4.20 per hour
• 18 to 20-year-olds: £5.90 per hour
• 21 to 24-year-olds: £7.38 per hour.
10 | Personal
MARRIAGE ALLOWANCE
Legislation will be introduced in the forthcoming
Finance Bill to enable individuals whose spouse or
civil partner is deceased to make a claim for
the allowance.
Provided the entitlement conditions are met, the
claim can be backdated for up to 4 years.
SAVINGS AND PENSIONS
The 0% starting rate for savings will be maintained
at the current level of £5,000 for 2018/19.
The annual subscription limit for an individual
savings account (ISA) remains unchanged at
£20,000 for the 2018/19 tax year. The annual
subscription limit for junior ISAs and child trust
funds will increase from £4,128 to £4,260 from
6 April 2018.
The pension lifetime allowance will increase to
£1.03 million for the 2018/19 tax year.
GIFT AID DONOR BENEFITS
The current mix of monetary and percentage
thresholds that determine the value of beneit a charity
can give to donors will be changing as of 6 April 2019.
The new thresholds will be as follows:
• the beneit threshold for the irst £100 of the donation
will remain at 25% of the amount of the donation
• charities will be able to offer an additional beneit of
up to 5% on donations on the amount in excess
of £100.
The total value of beneit a donor can receive from the
charity will remain at £2,500.
MILEAGE RATES FOR LANDLORDS
Landlords running unincorporated property
businesses made up of only individuals will be able
to use mileage rates to calculate a deduction for
motoring expenses from 6 April 2017.
Previously, landlords could only technically claim
a deduction for actual motoring expenses incurred
and capital allowances for the cost of the vehicle.
VENTURE CAPITAL SCHEMES
An increase to the annual amount an individual can
invest under the enterprise investment scheme (EIS)
in knowledge-intensive companies will take effect
from 6 April 2018.
Provided that anything above £1m is invested in
knowledge-intensive companies, an individual can
invest up to £2m in total.
A knowledge-intensive company is regarded as a
smaller innovative company carrying out research
and development and other activities to develop
intellectual property for its own trading purposes.
A new ‘risk to capital condition’ will be introduced
for investments made on or after 6 April 2018 when
deciding whether an investment qualiies for tax
relief using the EIS, seed enterprise investment
scheme (SEIS) and venture capital trusts (VCTs).
The condition has 2 elements. First, the company
should have entrepreneurial objectives to grow and
develop. Second, there should be a signiicant risk
of a loss of capital to the investor greater than the
net return. The net return is considered to be income
or capital growth and any income tax relief.
Personal | 11
TERMINATION PAYMENTS
Individuals who have their employment contract
terminated on or after 6 April 2018 will no longer
be able to claim foreign service relief if they are UK
resident in the tax year of termination.
The statutory residency test will be used to
determine an employee’s residency status and the
existing £30,000 income tax exemption will continue
to be available, where applicable.
The withdrawal of the foreign service exemption will
not apply to seafarers.
QUALIFYING CARE RELIEF
A carer previously excluded from the qualifying care
relief scheme because the person they look after
self-funded their care, will be entitled to use the
simpliication scheme for 2017/18 onwards, instead
of only being entitled to claim for expenses they
actually incur.
The person funding the care will be required to pay
the carer through an approved shared lives scheme.
VENTURE CAPITAL TRUSTS
A measure is announced that seeks to limit the
scope of an anti-abuse rule relating to share buybacks
by VCTs.
The rule restricts income tax relief for investors who
sell shares in a VCT and subscribe for new shares
in the same or another VCT within a 6-month period,
where those VCTs merge.
This rule will no longer apply if those VCTs merge
more than 2 years after the subscription, or do so
only for commercial reasons.
The change will have effect for VCT subscriptions
made on or after 6 April 2014.
Lifetime allowance limit £1.03m
Annual allowance limit £40,000*
Money purchase annual allowance £4,000
Individuals £3,600 or 100% of net relevant earnings to £40,000*
Employers £40,000* less employee contributions
Minimum age for accessing beneits 55
On cumulative beneits exceeding £1.03m
Table 2 – Registered pensions
*Tapered at a rate of 50% of income to £10,000 if threshold income over £110,000 and adjusted income over £150,000.
Subject to certain conditions, the unused amount of the annual allowance can be carried forward up to 3 years and used
once the current year annual allowance has been fully utilised.
GET IN TOUCH TO SEE
HOW THESE CHANGES
MAY AFFECT YOU
12 | Personal
2018/19 2017/18
Starting rate* of 0% on savings up to £5,000 £5,000
Basic rate band £34,500 £33,500
Higher rate band £34,501 – £150,000 £33,501-£150,000
Additional rate band Over £150,000 Over £150,000
Basic rate 20% 20%
Higher rate 40% 40%
Additional rate 45% 45%
Dividend ordinary rate 7.5% 7.5%
Dividend upper rate 32.5% 32.5%
Dividend additional rate 38.1% 38.1%
2018/19 2017/18
Personal allowance* £11,850 £11,500
Personal savings allowance:
Basic rate taxpayer £1,000 £1,000
Higher rate taxpayer £500 £500
Dividend allowance £2,000 £5,000
Marriage allowance** £1,185 £1,150
Trading allowance*** £1,000 £1,000
Property allowance*** £1,000 £1,000
Rent a room allowance £7,500 £7,500
Blind person’s allowance £2,390 £2,320
Table 3 – Taxable income bands and tax rates
Table 4 – Allowances that reduce taxable income or are not taxable
* The starting rate does not apply if taxable non-saving income exceeds the starting rate limit.
* The personal allowance is reduced by £1 for each £2 of income from £100,000 to £123,700 (2017/18, £123,000).
** Any unused personal allowance maybe transferred to a spouse or civil partner who is not liable to higher or additional
rate tax.
*** Note that landlords and traders with gross income from this source in excess of £1,000 can deduct the allowance
from their gross income as an alternative to claiming expenses.
VAT | 13
VAT
REGISTRATION AND DEREGISTRATION
THRESHOLDS
There has been pressure on the government to review
the rules for VAT registration because thresholds in
the UK are signiicantly higher than those of any other
member state of the EU and OECD.
The chancellor stressed the advantage to small
businesses whose taxable turnover levels are below
the thresholds and conirmed the existing limits will
remain in place for 2 years from 1 April 2018.
However, in response to recommendations from
the Ofice of Tax Simpliication, the government will
consult on the design of the thresholds.
Therefore, the current thresholds will remain until
31 March 2020:
• a person must be VAT-registered when their taxable
turnover in the last 12 months has exceeded
£85,000 or is expected to exceed £85,000 in the
next 30 days
• a person does not need to register if the above
limit has been exceeded, but they do not expect to
exceed £83,000 in the next 12 months
• a person may apply for deregistration if taxable
turnover falls below £83,000 in the preceding
12 months.
The registration and deregistration threshold for
relevant acquisitions from other EU member states
will also remain at £85,000, although all
intra-community rules are likely to change once the
UK leaves the EU.
There are around 4.4 million businesses with taxable
turnover below the registration threshold, although
23% of those have registered voluntarily.
There are arguments that non-registered businesses
have an unfair advantage over those that have grown
and therefore had to register, and that those who
arrange their affairs so as not to exceed the threshold,
whether legally or otherwise, suppress SME growth.
However, the government has chosen to consult, rather
than take immediate action to address those arguments.
IMPORT VAT
The term ‘imports’ currently refers to the purchase and
bringing into the UK of goods from outside the EU.
The existing postponed accounting system provides
a cashlow beneit to businesses in that they do not
have to account for VAT at the point of entry.
The government will now consider what changes
are necessary following exit from the EU so that any
cashlow implications are mitigated.
VAT MITIGATION
Current legislation will be amended, through the
forthcoming Finance Bill to ensure UK Combined
Authorities and certain ire services in England and
Wales will be able to receive VAT refunds.
This applies to the following authorities:
• The Scottish Police Authority
• The Scottish Fire and Rescue Service
• Combined Authorities
• Fire and Rescue Service Bodies, which become a
function of Police and Crime Commissioners.
Accident rescue charities will become eligible for a
grant under a new scheme designed to cover the cost
of otherwise irrecoverable VAT.
14 | VAT
PAYMENT WITH VOUCHERS
The government is to consult on plans to ensure
that when customers pay with vouchers, businesses
will account for the same amount of VAT as they do
for other means of payment.
This would align the UK with similar changes being
made across the rest of the EU.
A consultation paper will be published on
1 December 2017, with a view to legislation being
introduced in the forthcoming Finance Bill.
THE CONSTRUCTION INDUSTRY
A new reverse charge will be introduced to
tackle VAT fraud in labour supply chains in the
construction industry.
As with other reverse charges, the responsibility for
VAT accounting will shift to the recipient of services,
in this case to ensure the tax cannot be stolen. The
changes will take effect from 1 October 2019.
The period of nearly 2 years before the changes
come into effect will give the government time to
respond to representations and allow businesses
adequate time to prepare.
ONLINE VAT FRAUD
Online VAT fraud has been partly addressed already
in that online marketplaces are jointly and severally
liable for any unpaid VAT of overseas traders, but new
measures will be introduced to address the
hidden economy.
The i rst change will extend the powers of HMRC to hold
all traders jointly and severally liable, including those
from the UK. In effect, this will stop overseas traders
forming UK shell companies, just to avoid the joint and
several liability provisions. From the effective date, the
extended rules will hold online marketplaces jointly and
severally liable for any future VAT that a UK business
selling goods via the online marketplace fails to account
for after HMRC has issued a notice to the online
marketplace, ensuring that all sellers are in scope.
It will also apply to any VAT that a non-UK business
selling goods via the online marketplace fails to account
for, where the business was not registered for VAT in
the UK and that online marketplace knew or should
have known that that business should be registered
for VAT in the UK.
The second change will require online marketplaces
to display a valid VAT number when they are provided
with one by a business operating on their platform and
to ensure those numbers are valid. These changes will
come into force on Royal Assent in the spring.
SPLIT PAYMENT MODEL FOR
ONLINE TRANSACTIONS
As a further means of reducing online fraud and
improving how VAT is collected, the government is
considering options for a split payment model.
Evidence was called for at Spring Budget 2017,
and the government has announced it will publish
a response in December, after which it will issue
a call for evidence from online platforms in spring
2018 regarding what further steps can be taken to
reduce fraud.
A split payment structure would enable VAT to be
extracted from online payments in real time.
The government is aware of the complexities associated
with this model and therefore, the response document
will announce plans for further engagement with
relevant parties prior to the full consultation in 2018.
“All online marketplaces are
jointly and severally liable for
unpaid VAT of their sellers”
Duties | 15
DUTIES
STAMP DUTY LAND TAX
A new relief is to be introduced for i rst-time-buyers
within England, Wales and Northern Ireland that will
raise the price at which a property becomes liable
for stamp duty land tax (SDLT) to £300,000.
Those claiming the relief will pay no SDLT on the
i rst £300,000 of the consideration and 5% on any
remainder. No relief will be available for i rst-time
buyers paying more than £500,000.
The new relief will apply to transactions with an effective
date on or after 22 November 2017. However, from
1 April 2018, Wales will assume responsibility for
setting its own land transaction tax rates.
The rules do not apply in Scotland.
SDLT HIGHER RATE CHANGES
Minor changes to the operation of the SDLT are
introduced to grant relief from tax due under the
higher rates and will have effect for transactions on
or after 22 November 2017.
These are announced in the Budget as follows:
• a court order issued on a divorce or dissolution
of a civil partnership prevents someone from
disposing of their interest in a main residence
• a person buys property from their spouse or
civil partner
• a person buys a property in a child’s name or on
a child’s behalf, where they are doing so in their
capacity as the deputy of that child
• a purchaser adds to their interest in their
main residence.
A new rule to prevent abuse of relief for replacement
of a purchaser’s only or main residence is introduced,
by requiring the purchaser to dispose of the whole of
their interest in their former main residence and to do
so to someone who is not their spouse.
TOBACCO MINIMUM EXCISE TAX
The new minimum excise tax is £280.15 per 1,000
cigarettes. The change took effect from 6pm on
22 November 2017.
TOBACCO PRODUCT DUTY RATES
With effect from 6pm on 22 November 2017
tobacco rate increases will apply that will see
product costs increasing by 2% above RPI inl ation
each year until the end of the parliament. It was also
announced that hand-rolling tobacco will rise by an
additional 1% to 3% above RPI inl ation rate.
16 | Other announcements
OTHER ANNOUNCEMENTS
OFFSHORE TRUSTS
New anti-avoidance rules that relate to the taxation
of income and gains accruing to offshore trusts are
to be introduced.
These rules will mean that payments from an
offshore trust intended for a UK resident individual
do not escape tax when they are made via an
overseas beneiciary or a remittance basis user.
To this effect draft legislation was published on
13 September 2017.
Minor changes have been made to the legislation,
including to ensure that the onward gift rules can
apply if the close family member rule applies, to
clarify the position in the year of the settlor’s death
and in relation to onward gifts to multiple recipients.
The changes will have effect on and after
6 April 2018.
DOUBLE TAXATION RELIEF
A measure that makes 2 changes to the double
taxation relief (DTR) targeted anti-avoidance rule.
The irst change will remove the need for HMRC to
give a counteraction notice before the DTR targeted
anti-avoidance rule (TAAR) applies.
The second change will extend the scope of one
of the categories of prescribed schemes to which
the TAAR applies, to include tax payable by any
connected persons.
The irst change will have effect for returns with a
iling date on and after 1 April 2018 and the second
change will have effect for payments of foreign tax
made on and after 22 November 2017.
AIR PASSENGER DUTY
From 1 April 2019 the following rates apply, see
table 5.
INSURANCE PREMIUM TAX
From April 2018 the following rates continue to apply:
• standard rate – 12%
• higher rate – 20%
LANDFILL TAX
Tax on the disposal of waste on operators of landill
sites calculated according to the weight and to the
type of waste deposited for England and
Northern Ireland.
Band and distance of capital city of
destination country in miles from the UK
In the lowest class of
travel (reduced rate)
In other than the lowest class
of travel (standard rate)
Higher rate
Band A (0-2,000) £13 £26 £78
Band B (more than 2,000) £78 £172 £515
Table 5 – Air passenger dusty
Notes | 17
NOTES
18 | Notes
Notes | 19

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