A summary of the key new measures announced by the chancellor in his Spring 2017 budget.
Subscribers: see also our Finance Bill 2017: tax update and 2017/18 rolling planner for a full run down of what's new combined with all previously announced key measures.affecting you and your clients for the next tax year.
Income tax & Self employed
- It was originally announced that Class 4 NICs will increase from 9% to:
- 10% from 6 April 2018, and
- 11% from 6 April 2019.
- UPDATE 15/03: Following press and party backlash the Chancellor announced on 15 March 2017 that these rises will not go ahead.
- See NICs rates
- Trading and property allowances: the new allowances will not apply to income of a participator in a connected close company or to any income of a partner from their partnership.
Making Tax Digital
- Simplifying the cash basis: the legislation on the treatment of capital assets has been revised slightly to:
- make it clear that certain items are excluded, and
- ensure the rules for moving between the cash basis and accruals accounting are robust.
- Digital reporting:
- The start date for unincorporated businesses and landlords with turnover below the VAT registration threshold will be deferred until April 2019.
- Minor and consequential amendments have also be made to the draft legislation.
- See Making Tax Digital (index)
Dividend Tax
- The dividend allowance will reduce from £5,000 to £2,000 from April 2018.
- See Dividend tax
NICs
- Proposals to remove NICs from the effects of the Limitation Act 1980 and align the time limits for recovery of NICs debts with those for other taxes will be deferred to allow for further consultation.
- See Finance Bill 2017 tax update & rolling planner
Savings & Pensions
Reforms to the taxation of foreign pensions:
- Draft legislation will be revised to clarify that all lump sums paid out of funds built up before 6 April 2017 will continue to be subject to existing tax treatment.
- New legislation will:
- apply a 25% tax charge for pension transfers made to a QROPS, subject to exceptions where there is a genuine need to transfer the pension.
- apply UK tax rules to payments from funds that have had UK tax relief and have been transferred, on or after 6 April 2017, to a QROPS.
- See Pensions: Tax rules and planning
Other pensions announcements
- The government will amend the tax registration process for master trust pension schemes from October 2018 to align with the Pension Regulator’s new authorisation and supervision regime.
- Following consultation, the money purchase allowance will reduce to £4,000 from April 2017.
Life insurance partial surrenders
- The draft Finance Bill 2017 legislation will be revised to clarify who can apply, when and how the recalculation is given effect.
- See Investment bonds: a tax guide
Overseas
- A consultation will be published on 20 March on exemption from withholding tax for interest on debt traded on a multilateral trading facility.
- The government will renew and extend the Double Taxation Treaty Passport scheme so that it applies to all types of overseas lenders and UK borrowers.
- See Withholding tax
Land & Property
- Profits from Trading and Dealing in UK land: the exception for contracts entered into before 5 July 2016 is removed with immediate effect, meaning all profits recognised in accounts on or after 8 March 2017 will now be subject to UK tax.
- See .
- There will be a consultation on rent a room relief to ensure it is better targeted to support long term letting.
- IHT on UK residential property: following consultation the limit below which minor interests in UK property will be disregarded will be increased from 1% to 5% of an individual’s total property interests. See Non-domicile status & tax
- Proposals to reduce the SDLT filing and payment window from 30 days to 14 days will be delayed until after April 2018. See Finance Bill 2017 tax update & rolling planner
Creative industries & R&D
- Administrative changes will be made to improve the R&D tax credits system.
- State Aid approval will be sought to extend High-end TV, animation and video games tax reliefs beyond 2018.
- Museums and galleries tax relief: following consultation the draft legislation will be revised to allow for exhibitions which have a live performance as part of the exhibition, but where the live performance is not the main focus.
- Patent Box: following consultation there will be changes to narrow the definition of a cost sharing agreement and better align the treatment of payments into and from cost sharing arrangements.
- See Patent Box
Companies
- Off payroll working and the public sector: the draft legislation will be amended to:
- make it optional for the agency / public sector body to take account of a worker’s expenses when calculating the tax due.
- Clarify the application to statutory auditors.
- See Personal service companies & tax
- There will be a consultation in summer 2017 on the legislative changes needed following the announcement of the new lease accounting standard IFRS 16 which comes into effect on 1 January 2019.
- A consultation will be published on 20 March 2017 on tax for late relief oil and gas assets.
- Grassroots sports relief: the legislation has been amended to extend the treatment of a sport governing body to its 100% subsidiaries.
- Restriction on large company interest deductions: minor amendments will be made to the draft legislation to avoid unintended consequences.
Employers
- HMRC will publish guidelines in spring 2017 for employers who make payments for image rights to improve the clarity of the existing regime.
- Disguised remuneration
- The close companies gateway will be delayed until 6 April 2018 and will appear in a 2017/18 Finance Bill.
- There will be a new technical consultation later in 2017 on how tax and NICs arising from the changes will be collected.
- See Disguised remuneration
- HMRC are actively monitoring compliance with the Employers' NIC Allowance following reports that some businesses are using avoidance schemes to exploit this. Further action will be taken if this avoidance continues.
- Consultations will be published on 20 March on:
- The use of income tax relief for employee’s expenses, including those not reimbursed by the employer.
- Proposals to bring the tax treatment of employer provided living accommodation up to date.
- Exemptions and valuation methodology for benefits in kind.
- State Aid approval will be sought to extend EMI relief beyond 2018.
Compliance & anti-avoidance
- Appropriation to trading stock: new legislation will be introduced in Finance Bill 2017 to prevent businesses with loss making capital assets converting those losses into trading losses by appropriating the assets to trading stock. The changes take immediate effect from 8 March 2017.
- Enablers of tax avoidance: the legislation has been revised to:
- Provide further detail of when and how the GAAR Advisory panel will consider enabler cases.
- Apply the regime to arrangements seeking to avoid NICs.
- Provide further detail on when enablers will be named.
- See Penalties: enablers of tax avoidance
- Requirement to correct: the draft legislation will be revised to ensure that the reasonable excuse provision doesn’t apply where advice is received from an adviser who is not independent.
- Further action will be taken to tackle the hidden economy by:
- Developing proposals on conditionality (i.e. making access to certain licences conditional on tax registration).
- Consider the design of stronger ‘failure to notify’ penalties.
- Strengthen the monitoring of taxpayers found to be operating in the hidden economy.
- A consultation will be published on 20 March on proposals for simplifying and harmonising late submission penalties and late payment interest across the taxes.
- Proposals to restrict the Employers' NIC Allowance where illegal workers are employed have been dropped following consultation due to concerns about complexity.
VAT
- From 1 April 2017:
- The registration threshold will increase from £83,000 to £85,000
- The de-registration threshold will increase from £81,000 to £83,000
- The registration and de-registration thresholds for relevant acquisitions from other EU member states will increase from £83,000 to £85,000.
- Consultations will be launched on 20 March 2017 on:
- The case for a new VAT collection mechanism for online sales (the so called ‘split payments’ model).
- Policy options to combat supply chain fraud on supplies of labour in the construction industry.
- The VAT use and enjoyment provision for mobile phone services provided to consumers will be removed, bringing services used outside the EU within the scope of the tax.
Business Rates
The current revaluation is going ahead however the government says that it will look at reform of future revaluation metrics.
- Any business coming out of small business rate relief will have its rate increases capped to £50 per month.
- Pubs: given a £1,000 discount if rateable value is lower than £100,000
- Local Authorities given a discretionary fund to assist businesses adversely affected by revaluation.
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