Budget 2016: summary of key new measures announced this week by the chancellor.

Subscribers: see our Finance Bill 2016: tax update and rolling planner for a full run down of all previously announced Finance Bill 2016 and other measures that apply from April 2016 onwards.

Income tax

From April 2017

  • The personal allowance increases to £11,500.
  • The basic rate limit will be increased to £33,500.
  • The simplified reporting requirement (3 line accounts) for the Income Tax self-assessment return will continue to be aligned with the VAT registration threshold. 

Sporting testamonials

  • Confirmation that all income from sporting testimonials and benefit matches for an employed sports person will be chargeable to tax, and National Insurance contributions (NICs) subject to a ‘one-off’ exemption of £100,000 (£50,000 was originally proposed) of the income received from events held during a single testimonial or testimonial year.

Uberisation allowance

  • From 6 April 2017 a tax-free allowance of £1,000 for people who have minor trading, property or income from micro activities ('uberisation') such as "air b & b', ebay sales, life sharing etc.

Pensions, savings and ISAs

  • A number of minor changes are being made to the pensions tax rules to ensure that they operate as intended following the introduction of pension flexibility in April 2015.

ISAs

From 6 April 2017

  • A new lifetime ISA allowance for the under 40s to fund pension/savings. Save up to £4,000 per year, Government will top up with the addition of a 25% credit. 
  • An increase in the annual ISA limit from £15,240 to to £20,000.

Property taxes

Stamp Duty Land Tax

From 16 March 2016

  • Reform of charging provisions for non-residential and mixed use properties.
  • New guidance on the higher rate for additional residential dwellings. No discount for large scale investors.

Property profits and losses

From 6 April 2016

  • Trade tools s68 ITTOIA 2005: the replacement cost basis is repealed (as already announced). Confirmation that normal repairs and renewals rules to apply to trade tools.

From 6 April 2017

  • Finance costs restriction for landlords: a clarification that the basic rate tax reduction is available to beneficiaries of deceased persons’ estates, and adjustments to the legislation to ensure that the new rules work as intended.

Capital gains tax (CGT)

CGT Rates

From 6 April 2016 

  • The higher CGT rate reduced to 20%
  • The basic rate of CGT is reduced to 10%
  • No changes for CGT on chargeable gains on the disposal of residential property and carried interests.

Entrepreneurs Relief (ER)

Measures that are backdated to apply to disposals on or after 18 March 2015

  • Goodwill on incorporation: ER will apply when the seller holds less than a 5% interest in the acquiring company.
  • Associated disposals: ER to be claimed on an ‘associated disposal’ of a privately-held asset when the accompanying disposal of business assets is to a family member
  • Joint ventures and partnerships: new definitions of ‘trading company’ and ‘trading group’ for ER purposes

Acquisitions of shares on or after 17 March 2016

  • ER is extended to long-term investors

CGT exemption: Employee Shareholder Status shares

From 16 March 2016

  • There is to be a £100,000 lifetime CGT exemption limit on Employee Shareholder Status shares exemption

See Budget 2016: Capital Gains Tax

Employment taxes

Disguised remuneration: e.g.EBT and EFRB loans

  • From 16 March 2016: a TAAR to combat abuse of the disguised remuneration rules. 
  • From April 2019: a PAYE/NICs charge on third party loans created prior to the disguised remuneration rules where no settlement has been agreed with HMRC

EMI option schemes

  • A rights issue which takes place on or after 6 April 2016 in respect of shares received on exercise of an EMI option will be treated in the same way for share identification purposes as other rights issues.

Benefits and expenses

  • Voluntary payrolling extended to non-cash vouchers and credit tokens. 
  • A change to the benefits wording to ensure that a "fair bargain" does not apply where there are specific charging rules.
  • Van benefit: the 20% tapered rate of the van benefit charge for zero-emissions vans will remain (it had been set to increase to 40% in 2016 to 2017). The 20% will be extended to 2017 to 2018 tax year.
  • Childcare: the Tax-Free Childcare (TFC) scheme, originally due to start in Autumn 2015, will roll out in early 2017. Parents of the youngest children will enter the scheme first and it will be open to all eligible parents by the end of 2017. The Government also confirmed today that the existing scheme, Employer-Supported Childcare, will close to new entrants from April 2018.
  • Pensions advice: from April 2017 employers will be able to fund up to £500 of pensions advice for employees.

Termination payments

From April 2018

  • Employers NICs will apply to termination payments in excess of the £30,000 limit.

IR35

From April 2017

  • Personal service companies working in the publich sector: liability to pay the correct employment taxes will move from the worker’s own company to the public sector body or agency / third party paying the company.

Travel & subsistence reforms

  • Proposals to reform the temporary workplace and subsistence rules for workers and replace them with a detached duty rule are not to go ahead. 
  • Measures affecting tax relief for travel for Personal Service Companies (PSCs) will go ahead as planned from April 2016.

Alignment of income tax and NICs

  • The OTS is to undertake an impact assessment following the publication of its report into this subject in March 2016.

Corporation tax

  • A new roadmap will be published to level the playing field between big multinationals and small companies. 
  • Close company loans to participators: the s455 CTA 2010 charge to increase to 32.5%. 

Anti-avoidance: profit shifting and multinationals

From 16 March 2016

  • Trading income received in non-monetary form: ITTOIA 2005 and CTA 2010 are amended to clarify
  • Royalty withholding tax: new measures insert anti-treaty shopping provisions ITA 2007.
  • Property developers prevented from using offshore structures to avoid UK tax on their profits from trading in property in the UK.

Other measures

  • Restrict interest deductions from April 2017, restricted to 30% with a group limit
  • Hybrid mismatch rules amended 
  • Modernisation of loss relief: 50% restriction of carried forward losses (25% for banking companies)
  • Clarification that ‘residual payments’ made by securitisation companies will not be treated as annual payments, and so can be paid without withholding tax.
  • A power to make statutory instruments to deal with the treatment of insurance linked securities issued in the UK
  • From 1 April 2016 the definition of “transfer pricing guidelines” incorporates the revisions to the Organisation for Economic Co-operation and Development transfer pricing guidelines.

Rates

  • Corporation tax to be reduced to 17% from 2020

See Budget 2016: Corporation Tax

R & D

  • Minor changes to R & D relief to prevent an unintended reduction when the Large Company relief expires on 31 March 2016.
  • The expiry of vaccine research relief, in respect of expenditure incurred on or after 1 April 2017

Investment reliefs

EIS and VCT

  • Amendments to the rules to ensures that the EIS and VCT legislation introduced by the Finance (No.2) Act 2015 works as intended.

Capital allowances

From July 2016

  • The period in which businesses investing in new plant and machinery in ECA sites in Enterprise Zones can qualify for 100% capital allowances is increased to eight years.

Inheritance Tax

  • Measures affecting the heritage asset exemption, including a tax charge on asset which have been lost by their owners.
  • Deemed domicile rules: where individuals become deemed UK domiciled from April 2017, their non-UK assets will be rebased to their market value on 6 April 2017.

VAT

From April 2016

  • Registration limit set to £83,000 and deregistration to £81,000.
  • HMRC given new powers to tackle the non-compliance from some overseas businesses that avoid paying UK VAT on sales of goods made to UK consumers, via online marketplaces. 
  • There will be a consultation on a new penalty for participation in VAT fraud.

Stamp Duty/ Stamp Duty Reserve Tax

From 16 March 2016

  • Changes to deep In the money options (previously indicated)

Tax avoidance sanctions

The government says that it will consider:

  • The case for clarifying what constitutes reasonable care in avoidance penalty cases
  • Options to address the issue of those who “enable” tax avoidance schemes 
  • Updating the VAT Disclosure of Schemes Regime (VADR), including by extending coverage to other indirect taxes and by alignment with the Disclosure of Tax Avoidance Schemes regime. 

 The government will introduce a new legal requirement to correct past offshore non-compliance within a defined period of time with new sanctions for those who fail to do so. 

There will be a consultation on new powers to enable HMRC to gather data held by Money Service Businesses for tax compliance purposes 

 

Soft Drinks Levy

  • New tax on sugary drinks

 

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