The Spring Statement did not herald any major tax announcements, and with the focus on the Brexit vote’s and the 2016 announcement that significant changes would only be made in the Autumn, this was as expected.
However, Mr. Hammond did make a commitment to pledge £26.6 bn in the form of a ‘deal dividend’, to comprise of tax cuts and increased spending, if MP’s voted to leave the European Union smoothly with a deal. The proceeds from this would be detailed in the Autumn review, but it was indicated that it would be spread between funding public services, lowering taxes and capital investment.
Once the current Brexit uncertainty has been clarified, Mr. Hammond also promised a three year spending review in advance of the Autumn Statement. Here we have outlined the few changes that were announced.
Private Client Tax
As expected, there were no major upheavals, with the usual capital gains tax or pension options not even mentioned.
Capital Gains Tax and Private Residence Relief
It was announced at the 2018 Autumn Budget that changes were to be put in place to reduce lettings relief and the final period exemption. Properties sold after April 2020, that have previously been a main residence, but are now generating rental income, could see their CGT liability raised by tens of thousands and a consultation is now in force to manage this.
Stamp Taxes on Shares Consideration Rules
In family owned companies, shares are frequently given to the younger family members as they become involved in the business. Currently this would not generate a Stamp Duty liability, but the government is now considering applying the Stamp Duty charge to these shares. A consultation has been launched to consider the rules for Stamp Duty and Stamp Duty Reserve Tax and to implement a market value rule for transfers to family members.
Corporate and Business Tax
With the current uncertainties, Mr. Hammond reported on the developments of previous announcements rather than introducing anything new.
Structures and Buildings Allowance
A permanent allowance for business investments in non-residential buildings has been released as a draft legislation to provide a more competitive tax regime.
Research and Development tax relief for SMEs
In 2018 the issue of companies abusing the research and development tax relief for SME’s was addressed as part of the push on tax avoidance. Focusing on how the measure will be applied, a consultation is working to ensure that genuine businesses are not adversely impacted, and from 2020 the amount that a qualifying company can receive through R&D is to be capped at three times the company’s total PAYE and NICs liability for that year.
Digital Services Tax
The government is keen to ensure that that the correct tax is paid by the very large digital businesses and a consultation is now formulating the details, before implementation of the Digital Services Tax takes effect on 1 April 2020.
Corporate Capital Loss Restriction
From 1 April 2020, the amount of carried-forward capital losses a company can offset, will be no more than 50% of the chargeable gains arising in a later accounting period. The consultation to move this forward is now in place but this restriction is only expected to impact on companies with large losses if the original £5m threshold is retained.
Indirect Tax and VAT
The Spring statement focused on Tax avoidance issues and we can expect some further VAT reforms following the Brexit outcome.
Simplification of the VAT Partial Exemption and Capital Goods Scheme
The Office of Tax Simplification requested that this area was reviewed and made clearer. As a result, a call for evidence will take place on the VAT Partial Exemption regime and the Capital Goods Scheme, with a view to make it simpler and more efficient.
Isle of Man importation of yachts and aircraft, VAT administration review
The Isle of Man Government requested that HMRC review its processes and VAT administration for the importation of yachts and aircraft.
No new announcements were made for Employment Tax, but measures made in the 2018 Autumn statement were clarified.
The Apprenticeship Levy
The Apprenticeship Levy which taxes employers and may be used to fund apprenticeship training will take effect from April 2019. The co-investment rate is to be reduced from 10% to 5%, but the amount employers may be transfer to their supply chains is to increase to 25%.
National Insurance Contributions (NICs) Employment Allowance
The government is pushing through a restriction to this policy that will reduce the availability of this allowance to smaller employers from April 2020. Draft regulations are in place, and technical comments have been requested, regarding the proposed NICs Employment Allowance restriction for to businesses with an employer NICs bill below £100,000.
Not for Profit
Social Investment Tax Relief (SITR)
SITR has not been used in the volumes expected and as a result a review will be taking place to either improve it or remove it. This scheme is akin to the very popular Enterprise Investment Scheme and a request has been made for evidence to track its usage.