Budget Measures Scrapped!

So, you regularly read our newsletters and our Budget updates and think you know what tax rules/changes are taking place.  Well think again! As a result of the election announcement, a number of the Budget announcements in March have been canned, together with measures unveiled in earlier Budgets.  It is not clear whether the measures have been permanently dropped, for some they will hope they are, or if this is just a short-term delay. Government Ministers advised that certain measures were removed from the draft finance act before the Government ran out of Parliamentary time to get the act passed and into law.  The measures cut were viewed as controversial or complex and would have involved a lot of debate for which there was no time.  Therefore, what should have been the longest finance bill in history, has been cut in half. The following is a summary of the measures which were due to be introduced in either April 2017 or April 2018 and are now on the shelf.

Dividend allowance

The plan to reduce the dividend tax free allowance from £5,000 to £2,000 in April 2018. This was an unpopular change impacting both business owners and those individuals who rely on income from share investments.

Reform on non-domicile regime

George Osborne announced in his emergency Budget in July 2015 significant changes to the non-UK domicile tax regime, which were due to take effect from 6 April 2017. A significant number of individuals impacted by the proposed changes had already undertaken planning in readiness. The following are now all on the backburner.

  • Introduction of deemed domicile status for income tax and capital gains tax purposes.
  • Reducing deemed domicile status from 17 out of 20 years to 15 out of the previous 20 tax years.
  • A UK born individual who left the UK and became non-UK domiciled, becoming automatically UK domiciled on returning to the UK.
  • Treatment of offshore trusts settled by non-domiciled settlors who have retained an interest.
  • Rebasing of foreign assets – to allow non-domiciles who have previously paid the remittance basis charge to rebase their foreign assets for capital gains tax purposes as at 5 April 2017.
  • Inheritance tax on overseas assets (eg foreign shares) owning UK residential property – due to be treated as UK property from 6 April 2017.

Tax Going Digital

Measures being phased in for businesses and landlords to file quarterly returns which meant taxpayers having to use software systems have been suspended, although HMRC have stated that they wish to see this re introduced at the earliest opportunity. Our view is that tax going digital will take place, although the deadline which was already tight, has to be pushed back.  We are still of the view that businesses should still plan to go digital now, as there are some great advantages from moving to cloud based accounting systems, including the ability to track costs in virtually real time, and to monitor profitability and adapt strategies accordingly.

Pension money purchase allowance

The reduction in the amount that an individual was able to re-introduce to a pension fund having accessed their pension fund at the age of 55, from £10,000 to £4,000 stopped.

Corporation tax losses and the substantial shareholdings exemption (“SSE”)

New rules for companies in respect of the interest restriction, a new corporation tax loss regime and planned amendments to the SSE regime due to take effect from 1 April 2017 are currently in limbo.

£1,000 tax breaks for online sellers and room renters

Announced in the March 2016 Budget, the tax-free allowances of £1,000 a year were supposed to apply to “micro-entrepreneurs”, including those making extra cash selling on eBay, renting a room out on Airbnb or through odd jobs. The guidance for these allowances had been posted on the Government website, but has now been removed.

Increase in probate fees

Not really a tax, but due to the increase, (ranging from nothing for estates valued at up to £50,000, to £20,000 for estates worth more than £2m, replacing the current flat rate of £215), viewed as a tax by many, is now on hold.

It is now really a case of waiting to see who wins the election, but if the Conservatives win itis highly likely that the majority of the above measures will be introduced, probably as a part of a Finance Bill later this year.

+44 (0) 1452 713277

reception@harbourkey.com