The government has published the draft Finance Bill 2018/19, in good time for the Autumn Statement later in the year.
The draft Bill is a mere 40 clauses and 16 Schedules, with roughly a third of it dealing with changes to property taxation; although much of this relates to non-resident entities holding UK land, there are some quite important changes to the way that UK residents will in future have to account for and pay CGT on residential property disposals. There are also changes to the penalty and interest regimes across the main heads of tax.
Brace yourselves, because the government has ignored the warnings and will proceed with applying the appalling NRCGT regime, (inasmuch as it requires those affected to report and pay their CGT on account) to disposals of residential property by UK residents. Regular readers and contributors to TW will be aghast. As will, no doubt, some tribunal judges.
This means that UK residents will be required to notify HMRC of a residential property disposal within 30 days of sale, (completion), and to make a payment on account of the CGT that is still assessed on an annualised basis.
UK residents who self-assess will still need to account for such disposals in their tax returns. Because this is not about making anyone’s life easier, and no government should ever forego an opportunity to raise penalties for failing to report and/or pay for the same event, on multiple occasions.
While the new regime will allow reductions for capital losses and for exemptions (only or main residence relief, or where the residential property is overseas and also eligible for Double Taxation Relief, etc.) it will undoubtedly create a mountain of work for what will only ever be a nominal cashflow benefit to the Exchequer. Except for the penalties, of course: declarations of Trust and gifts are likely to prove expensive in ignorance, from 6 April 2020.
The NRCGT regime is itself getting a makeover as well: it will apply more widely to capture all corporate entities, and will no longer apply only to UK residential land but to ALL land (and property) in the UK, even where held indirectly thanks to measures to catch “property-rich” disposals of entities which owe 75% of their gross asset value to UK land (with exceptions for trading entities in some cases).
On the plus side, the ATED-related gains regime is to be abolished.
Non-resident corporate landlords will be moved from Income Tax to Corporation Tax. This is apparently a logical reform which, purely by coincidence, is forecast to raise over £1billion in revenue to the Exchequer in the first few years following its introduction.
The payment and filing window for SDLT will be reduced from 30 days to just 14 days, from 1 March 19. The logic is apparently that most people pay within 14 days anyway, so it might as well be made mandatory.
Rent-a-Room Relief will no longer be available unless both landlord and tenant share the dwelling as sleeping accommodation (but not, necessarily, share the sleeping accommodation itself) during at least part of the tenant’s occupation. This is to prevent landlords* making at least £7,500 in gross income while letting out their entire homes, tax-free. (*Strictly, it has to be a member of the landlord’s household, so if your spouse is being a pain and you didn’t want to take them on holiday anyway, it could be a win-win).
Workplace charging of all-electric and plug-in hybrid vehicles – as part of the government’s commitment to clean air, etc., both the facilities and the ‘juice’ will no longer be a taxable benefit from 6 April 2018 (not a typo) once the government can find the time to draft the legislation. But don’t hold your breath… This change effectively applies only to employee-owned vehicles, since “company cars”, etc., would already include such ancillary provisions as free charging, as part of the statutory benefit charge.
The calculation of the benefit in kind for “company cars” and vans, etc., in the context of Optional Remuneration Arrangements, will be re-drafted so that it works as intended.
The tax treatment of emergency vehicles available for private use will also be re-worked to remedy an unexpectedly punitive consequence of changes to the "use of assets" legislation introduced in FA2017.
Zero-emissions-capable taxis (broadly) registered on or after 1 April 2017 will have the VED expensive car supplement removed from 1 April 2019.
HGVs that meet the new EuroVI emissions standard will enjoy a 10% reduction in the HGV levy, while those that do not will suffer up to a 20% hike in the levy (or the maximum currently allowed under EU legislation, if less).
The new Corporation Tax loss relief rules will sometimes give more relief than was intended, so are being re-worked. The fundamental principles remain but the detail of some of the calculations is being ‘refined’.
Changes to accounting for leasing, in accordance with IFRS16, are being accommodated in the tax legislation, effectively so as to ensure that leases continue to be taxed as before. Transitional adjustments will be ‘spread’ over the average remaining life of the leases giving rise to the adjustment.
VAT grouping arrangements should be made easier now that non-corporates with corporate subsidiaries will be able to join a VAT group.
Benchmark scale rates for reimbursing employees free of tax and NICs will be improved by removing the requirement to ensure that the employee has actually incurred some expense before they can be paid. Takeup of the benchmark rates has been hindered by the requirement for the employer effectively to scrutinise employee expenses first, before paying a simple fixed amount against an expense they then knew the value of, rather than ignore the scale rate regime completely and just repay the amount itself. In future, the employer has only to be able to confirm that the employee has undertaken a qualifying journey – which they would practically have to do anyway.
Employers’ contributions to overseas pension schemes currently may be made tax-exempt only when the beneficiary is an employee, or a member of the employee’s family or household. The class of eligible/qualifying beneficiary is to be widened to any individual or charity.
The minimum shareholding requirement for Entrepreneurs’ Relief (ER) to be granted is currently 5% and there are concerns it may work to prevent eligible shareholders from wanting to raise further equity finance, at the point where it might reduce their relative share below the 5% minimum qualifying level. New provisions will work to allow affected shareholders to elect to trigger a nominal ER-qualifying disposal just prior to the ‘diluting event’ and they can then separately elect to defer any CGT that then arises, until a real disposal event later on.
The existing security deposit legislation, which allows HMRC to require a business to provide a deposit or ‘bond’ against anticipated VAT and PAYE/NI liabilities, will be extended to cover Corporation Tax and Construction Industry Scheme obligations from 6 April 2019.
Income Tax (Self Assessment), Corporation Tax, and VAT, are to be harmonised in terms of late payment interest, and penalties for late payment and/or late submissions. As previously mooted, there will be a points system for late submissions, so that taxpayers should not be charged on their first failure, but be given an opportunity to get “back on track”.
Legislation is being introduced to defer the CGT charge arising when a non-resident individual with a UK branch moves assets overseas or ceases to trade in the UK, or when a UK-resident trust becomes non-UK resident, into 6 equal instalments (albeit still subject to interest). The relaxation is to cover moving to another EU or EEA member state.