On Monday 29 October 2018, the Chancellor of the Exchequer, Phillip Hammond, delivered the Autumn Budget. The Budget was brought forward due to final Brexit negotiations taking place in November 2018 and the prediction of many that it would be a quiet Budget was spot on!
See a summary of key tax points from Budget 2018 below;
- The off-payroll working rules (IR35 reform) which were implemented into the public sector in 2017 will be extended to the private sector and will apply to large and medium sized businesses from April 2020
- Briefing document published along with the summary of responses to the consultation on Off-payroll working in the private sector
- End clients who receive the labour who are smaller organisations will be exempt and Government intend to use similar criteria to define small businesses as found in the Companies Act 2006
- A company is small if it satisfies two or more of the following requirements;
- Turnover – not more than £10.2m
- Balance sheet total – not more than £5.1m
- Number of employees – not more than 50
- A further consultation will be announced in the coming months with legislation expected to be published in Summer 2019
- HMRC will work with stakeholders to improve the CEST tool and employment status guidance
- From April 2020, the Employment Allowance will be restricted to businesses with an Employer’s National Insurance Contributions (“NICs”) Bill of less than £100,000 in their previous tax year
- To benefit from Entrepreneurs’ relief an individual will need to meet the qualifying criteria for a period of two years, increased from the previous 12-month period
- The VAT threshold will remain unchanged at £85,000 for a further two years until April 2022. The summary of responses to the VAT registration threshold consultation has been published
- From April 2020, Digital Services Tax will be introduced to ensure that online giants pay their fair share of UK tax on sales generated in the UK. The new measure will implement a 2% tax on the revenues of certain digital businesses which are linked to UK users
- From April 2020, HMRC will be a preferred creditor in business insolvencies and so, will have greater priority to recover taxes paid by employees and customers – this includes VAT, PAYE Income Tax, employee NICs and CIS deductions
- From April 2019, the National Living Wage Rate will rise again, by 4.9%, from £7.83 to £8.21
- From April 2019, the National Minimum Wage Rates will rise again;
- The rate for 21 to 24-year olds will increase from £7.38 to £7.70
- The rate for 18-20-year olds should increase from £5.90 to £6.15
- The rate for 16-17-year olds should increase from £4.20 to £4.35
- The apprentice rate (for apprentices aged under 19 or in the first year of their apprenticeship) should increase from £3.70 to £3.90
- The Government has an aspiration to end low pay. The Organisation for Economic Co-operation and Development define relative low pay as two-thirds of median earnings. The Government will set out the Low Pay Commission’s remit for the years beyond 2020
- The tax-free Personal Allowance will rise to £12,500 from April 2019
- The Higher Rate tax threshold will rise to £50,000 in April 2019 meaning 1 million fewer people will pay the higher rate of tax than in 2015/16
- From April 2020, there will be a new statutory entitlement to two weeks bereavement leave and pay for employees who suffer the death of a child under 18, or a stillbirth after 24 weeks of pregnancy. Employed parents will also be able to claim pay for this period, subject to meeting eligibility criteria
- Following Royal Assent of Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency
- The Government will publish an updated offshore tax compliance strategy
- As previously announced, the Government will not abolish Class 2 NICs during this Parliament. The Government still intends to legislate for the two remaining measures in the draft NICs Bill published on 5 December 2016: the reforms to the NICs treatment of;
- termination payments, and
- income from sporting testimonials
The Government intends to legislate, and the reforms will have effect from April 2020.
- The Government will increase the Annual Investment Allowance to £1m for all qualifying investment in plant and machinery made on or after 1 January 2019 until 31 December 2020
- The Government will publish secondary legislation on the VAT domestic reverse charge to prevent VAT losses through so-called ‘Missing Trader’ fraud in the construction sector. The new rules will take effect from 1 October 2019
- The Government is responsible for preparing for all possible outcome of the negotiations with EU. The Government is able to make small, essential changes to UK tax law to maintain the effect of tax legislation if the UK leaves the EU without a deal.
- From Royal Assent of the Finance Bill 2018-19, legislation will be introduced to regularise historical arrangements for charging interest in relation to payments and repayments of certain taxes (including Corporation Tax (CT) and Diverted Profits Tax (DPT)) and the Budget 2018 announced that the legislation would extend to cover the charging of interest on unpaid and late paid penalties for PAYE. The legislation will have immediate retrospective (dating back to 18 August 1989 in relation to interest on penalties for failures in regard to CT, DPT, Stamp Duty, Stamp Duty Land Tax, Inheritance Tax and penalties charged under the Promoters of Tax Avoidance Schemes legislation and 6 May 2014 in relation to interest charged on penalties for PAYE failures) and prospective effect from the date the relevant interest was first applied.