Insights

Following the delays caused by the general election, and with the House of Commons currently in summer recess, the ‘’summer’’ finance bill will not be published until later in the autumn.

The main measures everyone is waiting for in this bill are those which were previously announced but were subsequently dropped from the pre-election finance bill, especially those which were due to take effect from April 2017, the ‘dropping’ of which has left people in limbo.

In this bill, we can expect over 30 detailed measures from HMRC, covering a wide range of areas. Some will have a greater impact than others. For instance, two that are most likely to cause a stir for large companies are new restrictions to tax relief available on loan interest and financing costs, plus the changes to the treatment of corporate losses. These are likely to mainly affect larger companies with profits across a group exceeding £5m, or those facing interest charges in excess of £2m.

Smaller companies and individuals, including those who are non-UK domiciled, will be particularly interested in the following changes:

Making Tax Digital

The original Making Tax Digital (MTD) proposals, under which all taxpayers would be required to calculate their tax liabilities quarterly and pay HMRC through a single digital account have been amended and simplified significantly. It is now proposed that only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records, and these will only be for VAT purposes. The start date for those impacted is April 2019.

Originally, MTD was due to come into force for Income Tax and Class 4 NIC purposes from April 2018, so the amendment VAT payments only is a significant simplification.

All other unaffected businesses (anyone with a turnover below the current VAT threshold of £85,000) will not be asked to keep digital records, or to update HMRC quarterly for any other taxes, until at least 2020. Before this time, businesses wishing to follow the MTD proposals can opt to do so if they wish. This relaxation is a very welcome move and means that the proposals can be fully tested by business owners before they are implemented in full.

Relaxation to SSE legislation

The proposed relaxation to the substantial shareholding exemption (SSE) legislation, again previously dropped, is expected to be included. This was a simplification originally proposed by Phillip Hammond in his first budget as Chancellor and then placed on hold until after the June Election. It is now back on the agenda and its introduction will mean that less stringent criteria are required to be met by holding companies in order to qualifying for relief on the sale of shares in a trading subsidiary.

SSE is a very valuable relief but there are strict qualifying criteria. Read about qualifying for SSE relief and the implications of their relaxation in our earlier blog.

Final chance to repay outstanding EBT loans

New anti avoidance rules will impact the treatment of outstanding loans from employee benefit trusts (classified as disguised remuneration schemes by HMRC). This has been on the agenda for some time, following the closure of a final EBT amnesty announced by George Osborne, which gave anyone with an EBT until 30^th November 2016 to settle their affairs in full in return for a reduced penalty.

The issue of EBTs has been topical since Rangers Football Club lost its appeal against HMRC’s ruling that its ‘side payments’ to players, made through a complex structure of EBTs, were actually disguised income and fully taxable. Currently, all companies that use this form of remuneration to pay employees are being urged to ensure that any outstanding loans are repaid in full before 5^th April 2019.

Any loans that remain outstanding after this time will be subject to a PAYE charge on that date on the full value of the loan, regardless of when it was taken out. It will also be possible for HMRC to collect the PAYE on this liability from the employee rather than the company. Learn more about the implications of this in our earlier blog on the risk of using EBTs.

Changes to tax treatment of non-UK domiciled individuals

One of the most complex changes coming into effect relates to the tax treatment of people who are non-domiciled in the UK. There are many technical aspects to these changes and our advice to anyone who is non-domiciled in the UK, is to seek advice from their tax adviser and ensure that their tax affairs have been arranged to comply with the new rules.

If you want advice on how the finance bill legislation may affect you, please email Lesley Stalker at partners@rjp.co.uk.