In this, the second of five articles on the autumn budget, we cover announcements relating to tax.
Income tax – the personal allowance for income tax will rise to £11,850 and the higher rate threshold to £46,350. Claims for the marriage allowance will now be permitted on behalf of deceased partners, backdated by up to four years. The government will consult on reforms to the off-payroll working rules (IR35) in the private sector, based on reforms in the public sector already implemented. There will be a consultation on how to make the taxation of trusts simpler, fairer and more transparent.
Income tax reliefs – a call for evidence will examine the use of rent-a-room relief, with the aim of targeting longer-term lettings. Individuals operating property businesses will have the option of using mileage rates. No benefit-in-kind charge will be levied on employers charging employees’ electric vehicles. There will be a consultation on extending tax relief to work-related training costs. From April 2019, employers will no longer have to check receipts when reimbursing employees for subsistence using benchmark scale rates, and the concessionary accommodation and subsistence overseas scale rates will be made statutory. HMRC’s guidance on employee expenses will be improved. Armed forces personnel renting private accommodation will be entitled to exemption from income tax and national insurance contributions on certain allowances, and the income tax deduction of foreign earnings for members of the Royal Fleet Auxiliary will be made statutory. The scope of qualifying care relief will be extended to cover self-funded shared-lives care payments.
National insurance – A discussion paper on employment status will be published in response to the Taylor review of modern working practices. As previously announced, the proposed changes to national insurance contributions, including the abolition of class 2 NICs, will be delayed by a year, and the proposed increase in class 4 NICs will not proceed.
Capital gains tax – the proposed 30-day payment window between a capital gain arising on a residential property and payment will be deferred to April 2020.
Charity tax – with effect from April 2019, the three monetary thresholds for gift aid donor benefit will be reduced to two, and all extra-statutory concessions will be legislated.
Pensions and savings tax – the band of savings income subject to the 0% starting rate will remain at £5,000. The annual ISA subscription limit will remain at £20,000; that for junior ISAs and child trust funds will be increased in line with CPI to £4,260. The lifetime allowance for pension savings will rise to £1,030,000. Employees on maternity and parental leave will be able to take a pause of up to twelve months from saving into their save as you earn employee share scheme (currently six months). From April 2019, tax relief for employer premiums for life assurance or overseas pension schemes will cover policies where an individual or charity is nominated as the beneficiary.
Business rates – a further £2.3 billion will be provided to support businesses. The switch in indexation from RPI to CPI will be brought forward to 1 April 2018. The staircase tax will be addressed by recalculation of valuations so that bills are based on previous practice backdated to April 2010. The £1,000 business rate discount for public houses with a rateable value of up to £100,000 will be continued for a further year. The frequency with which non-domestic properties are valued will be increased to every three years from 2022.
Stamp duty land tax – higher rates for additional properties will be amended with immediate effect so as to benefit those increasing their share of their own home, families affected by a court order relating to divorce, and cases where properties are held in trust for children subject to orders of the Court of Protection.
Gains made by non-residents – to remove an advantage which non-residents have over UK residents, all gains on non-resident disposals of UK property will be brought within the scope of UK tax with effect from April 2019, with exemptions for certain institutional investors.
Corporation tax – the corporate indexation allowance will be frozen from 1 January 2018. From April 2020, the income of non-resident companies from UK property will be chargeable to corporation tax rather than income tax, and gains on disposal will be charged to corporation tax rather than capital gains tax. A position paper sets out the government’s proposed approach to the challenges posed by the digital economy to the international corporate tax framework. Withholding tax obligations will be extended to royalty and certain other payments made to low-tax jurisdictions in connection with sales to UK customers with effect from April 2019.
Corporate capital gains – the substantial shareholding exemption legislation and share reconstruction rules will be amended to avoid unintended chargeable gains where foreign branch assets are incorporated in exchange for shares in an overseas company.
Hybrid mismatch rules – these rules, relating to differences in tax treatment between jurisdictions, will be clarified to ensure they operate as intended.
Intangible fixed asset regime – the government will consult on the tax treatment of intellectual property to consider whether there is an economic case for targeted changes.
Stamp taxes on shares – transfers to public bodies and affected creditors when resolving failing financial institutions will be exempted from stamp duty. The 1.5% charge to stamp duty and stamp duty reserve tax on the issue of shares and transfers integral to capital raising to overseas clearance services and depositary receipt systems will not be reintroduced after Brexit.
Energy and transport tax
Fuel duty – this will continue to be frozen in 2018–19, as will the LPG rate. The rates for alternatives to petrol and diesel will be reviewed.
Air quality – £220 million will be provided for a new clean air fund, paid for by a supplement to vehicle exercise duty for new diesel cars registered from 1 April 2018 (apart from next-generation clean diesels certified as meeting RDE2 standards), so that their first-year rate will be calculated as if they were in the VED band above, and by a rise in the company car tax diesel supplement from 3% to 4%, again not applicable to next-generation clean diesels.
Vehicle excise duty – rates for cars, vans and motorcycles registered before April 2017 will increase in line with RPI, as will the first-year rates for cars registered after April 2017. The heavy goods vehicle VED and road-user levy rates will be frozen, with a call for evidence on updating the road-user levy so that it rewards hauliers who plan their routes efficiently. Zero-emission capable taxis will be exempted from the VED supplement applicable to expensive cars from April 2019.
Company cars – the fuel benefit charge and van benefit charge will increase by RPI.
Air passenger duty – short-haul rates will remain frozen for 2019–20; the long-haul rate for economy passengers will also be frozen, at the 2018–19 rates; the rates for premium economy, business and first-class passengers will increase by £16 and the rates for those travelling by private jet by £47.
Total carbon price – a similar total carbon price will be targeted until unabated coal is no longer used.
Climate change levy – the CCL rate for LPG will be frozen at the 2019–20 level until 2022, and the CCL exemptions for businesses that operate mineralogical and metallurgical processes will be clarified.
Enhanced capital allowances – the list of designated energy-saving technologies qualifying for enhanced capital allowances will be updated.
First-year tax credits – the first-year tax credit scheme will be extended until the end of the Parliament, with the credit rate set at two thirds of the rate of corporation tax.
Reducing plastics waste – there will be a call for evidence on how single-use plastics waste could be reduced, by analogy with the existing plastic bag charge.
Landfill communities fund – this will be set at £33.9 million for 2018–19.
Aggregates levy – this will be frozen at £2 per tonne for 2018–19, but will return to being index linked in the longer term. There will not be an exemption for aggregates extracted when laying underground utility pipes.
Transferable tax history for oil and gas – the government has published a paper on enabling oil and gas companies to transfer tax histories and will bring forward legislation in 2018.
Late-life oil and gas assets – there will be a consultation on allowing a petroleum revenue tax deduction for decommissioning costs incurred by a previous licence holder.
Tariff receipts – legislation will clarify that all tariff income earned by petroleum licence holders is within the ring-fence corporation tax regime.
Alcohol duty rates and bands – duty on beer, cider, wine and spirits will be frozen. From 2019, a new duty band for still cider and perry with an alcohol content between 6.9% and 7.5% abv will be introduced, to target white ciders.
Tobacco duty rates – with effect from 22 November 2017, duty rates on all tobacco products will increase by two percentage points above RPI, and on hand-rolling tobacco by one percentage point above RPI. The minimum excise tax for cigarettes will rise to £280.15 per 1,000 cigarettes, with effect from 22 November 2017.
VAT – the government will maintain the VAT threshold at £85,000 for two years from 2018, but will consult on the design of the threshold. It will seek to mitigate any impact of Brexit on the benefits of postponed accounting for VAT for businesses importing goods from the EU. Legislation will be amended to ensure UK combined authorities and certain fire services in England and Wales will be eligible for VAT refunds. A grant will help accident rescue charities meet the cost of irrecoverable VAT. There will be a consultation on proposals to ensure that businesses account for the same amount of VAT when customers pay with vouchers as when other means of payment are used.
Evasion, avoidance and compliance
Requirement to notify HMRC of offshore structures – the government will publish a consultation response on the proposal for designers of certain offshore structures to notify HMRC.
Extending offshore time limits – the time limit for non-deliberate offshore non-compliance with tax legislation will be extended so that HMRC will be able to assess at least twelve years of back taxes.
VAT fraud in construction labour supply chains – to prevent losses, the government will introduce a VAT domestic reverse charge, shifting responsibility for paying VAT along the supply chain, with effect from 1 October 2019.
Hidden economy – there will be a further consultation on making some public sector licences conditional on proper tax registration, making it more difficult to trade in the hidden economy.
NICs employment allowance – HMRC will require upfront security from employers with a history of abusing the employment allowance to avoid paying national insurance contributions, for example by using offshore arrangements.
Disguised remuneration – disguised remuneration schemes used by companies with five or fewer participators will be addressed by introduction of the close companies gateway and measures to ensure liabilities are collected from the appropriate person.
Profit fragmentation – there will be a consultation on how to prevent traders and professionals avoiding tax by fragmenting their income between unrelated entities.
Intangible fixed assets – the intangible fixed asset rules will be updated with immediate effect so that intellectual property licences between companies and related parties are subject to the market value rule and to ensure that the tax value of a disposal of intangible assets is correct where there is non-cash consideration.
Depreciatory transactions – the six-year time limit within which companies must adjust for transactions that have reduced the value of shares disposed of in a group company will be removed in relation to disposals of shares made on or after 22 November 2017.
Carried interest – to prevent avoidance, the transitional commencement provisions relating to the requirement that asset manages receiving carried interest pay capital gains tax on their full economic gain are removed, with immediate effect.
Double taxation relief – to ensure companies do not get double tax relief for the same loss, a restriction will be introduced to the relief for foreign tax incurred by an overseas branch of a company which has already received relief overseas. The double taxation relief targeted anti-avoidance rule will be amended to remove the requirement for a counteraction notice to be issued.
Double taxation arrangements – the powers giving effect to double taxation arrangements will be amended to allow implementation of the multilateral convention on base erosion and profit shifting.
Online VAT fraud – online marketplaces will be held jointly and severally liable for the unpaid VAT of UK (as well as overseas) traders on their platforms. They will also be jointly and severally liable for any VAT that a non-UK business selling goods on their platforms fails to account for where the business was not VAT-registered in the UK and the online marketplace knew or should have known that it should have been. Online marketplaces will be required to ensure VAT numbers displayed for business on their website are valid, and to display a valid VAT number when provided with one by a business operating on their platform. A split payment model is being considered to reduce online VAT fraud and improve collection. A call for evidence will explore what more digital platforms could do more to ensure their leaders are compliant with tax rules generally.
Making tax digital – as previously announced, no business will be mandated to use the MTD platform until April 2019, and then only for VAT obligations; the system will not be widened until April 2020 at the earliest.
Late submission penalties and late payment interest – the penalty system for late or missing tax returns will be reformed using a new points-based approach, and there will be a consultation on harmonising penalties and interest due on late payments and repayments.
Certificate of tax deposit scheme – the certificate of tax deposit scheme will be closed for new certificates from 23 November 2017; existing certificates will be honoured for six years.
Recovery of self-assessment debt – new technology will recover additional self-assessment debts more quickly by adjusting tax codes for those with PAYE income with effect from 6 April 2019.
Security deposit legislation – this will be expanded to corporation tax and construction industry scheme deductions, with effect from 6 April 2019.
Investing in HMRC – a further £155 million will be invested in HMRC to enable it to improve measures aimed at addressing the hidden economy through new technology, tackling those engaging in marketed tax avoidance schemes, dealing with enablers of tax fraud and holding intermediaries accountable using the corporate criminal offence, targeting non-compliance among medium-sized businesses and wealthy individuals, and recovering more tax debt through a new task force.