Budget 2018 is expected not to be of changes but rather of confirmations.
A cautious fiscal policy that will help to take us through Brexit, increasing tax revenues and reducing the UK’s borrowing, but at the same time needing to remain competitive from both a personal and corporate tax perspective.
UK is the number 1 destination for inward investment in Europe, according to the campaign promoted by the Department for International Trade. After Brexit fiscal policy should continue to attract businesses, skilled workers, High Net Worth Individuals and Entrepreneurs.
Business taxes
UK need entrepreneurial spirit over the coming months. This is likely to mean that we will see further proposals aimed at using the tax system to reward innovation and the development of workers’ skills to achieve higher productivity.
- Corporation Tax: to stay at the current level (19%). No future cuts until the Brexit position is finalised.
- Further consultation is expected on taxing digital economy. Government is more likely to wait for final OECD proposals in 2020.
- EIS: Expected a fund structure to encourage longer term investment in ‘Knowledge Intensive Companies’ . We would like to see that the qualifying periods for all investor tax reliefs should be five years – in line with the recently introduced investors’ relief from CGT and the long established VCT reliefs. Currently the holding period for the EIS and SEIS rules is three years and AIM company shares can qualifying for IHT business property relief after a two year holding period.
- ER, BIR: It is not expected any extension of the application of these reliefs
- Capital Gains for non-UK resident owners: additional technical clarifications are expected to take effect from April 2019
- Reform of tax relief for Intangible Fixed Assets to ensure it better rewards Companies for being innovative.
- Apprenticeship scheme to be reformed with increased ability to use funds across the supply chain which was announced by the Chancellor at the recent Conservative Party Conference.
- Capital Gain tax for residential properties:It is expected a reduction of the rate for residential properties to 20%, but but also combined with CGT being paid 30 days after sale (rather than the following tax year).
Indirect taxes
- Stamp Duty: The Government has also announced that there will be a consultation on a further stamp duty land tax charge (an additional 1% to 3%) for non-UK residents buying UK residential property.
- VAT: Businesses trading above the VAT registration threshold will comply with the Making Tax Digital (MTD) rules from 1 April 2019.
- VAT avoidance can be expected for shopping platforms to ensure users pay the right amount of VAT through the VAT collection split payment rules.
- Duties on alcohol and cigarettes can be expected to increase with the funds raised being spent on the NHS. The Chancellor may also consult on introducing a low rate of duty on vaping fluids that contain nicotine.
Employment taxes
- NIC: are not expected changes but Government is committed to a further anti-avoidance policy attacking extreme planning arrangements undertaken by some employers.
Personal Taxes
- Budget 2018 will have to include a few tax raising measures to increase spending on the NHS by £20bn. Extra borrowing over the summer has made the task easier. However polls show the option of creating a package of small measures that, in theory, could raise the required funding for the NHS.
- Delaying the promised increases in the personal allowance and higher rate tax threshold could save significant sums for the Chancellor in the short term. However, it is likely that the promised £12,500 allowance and £50,000 threshold will be in place by the due date of the next election in 2022.
- The Chancellor may be tempted to cut back on pensions tax relief cutting down the annual contributions allowance from £40,000 to £30,000 (this would affect far fewer taxpayers).
Let’s go green
- Single-use plastic: UK taxes are often used to drive behaviours and educate. Single-use plastic is the new tax expected to encourage manufacturers to use more recycled and recyclable plastic in their products.
- Electric cars: Companies are better to wait. The planned increase in benefits in kind for electric cars should be postponed until 6 April 2020 There is a draft proposals for employees to be exempt from Income Tax and National Insurance on the provision of charging facilities for electric and hybrid vehicles at the workplace.