Business owners across Britain from the start of April must file
VAT returns online using government-approved software. It is the first phase in
the flagship Making Tax Digital policy — and has been beset by delays and
business bosses say the new requirements, which apply (with some
exceptions) to those with a turnover above £85,000, coincide with an
unprecedented cocktail of cost pressures. A hike in the national living wage
and an increase in employer contributions to auto-enrolment pensions also start
in the first week of April.
The measures all come into force days after
Britain is due to leave the EU — and Brexit heaps further uncertainty on the
future of companies, forcing entrepreneurs to change how they keep tax records
feels to many like another unnecessary obstacle put in their way by the
“It was not supposed to
be like this. Making Tax Digital was hailed as a revolution in the tax system
when it was unveiled four years ago by George Osborne, then chancellor, but the
programme has struggled to live up to its billing. Plans to have all individual
and business tax returns submitted digitally by 2020 were scrapped last year,
with officials admitting their targets had been too ambitious.
The 2018 Budget has caused significant concerns for shareholders
in companies that have multiple share classes carrying different rights and
entitlements (also known as alphabet shares).
The new proposed rules change the definition of ‘personal company’
in the ER legislation in such a way as to prevent shareholders in a company
with alphabet shares from claiming ER.
On 21 December 2018, the Government proposed a significant
amendment to the Finance Bill rules defining what constitutes a ‘personal
company’ for ER purposes.
legislation retains the old qualifying criteria (that the shareholder must have
at least 5% of the ordinary share capital of the company and 5% of the
voting rights) but adds in two new conditions, at least one of which will need
to be met:
- The shareholder must
be entitled to 5% of the profits available for distribution to equity holders and
5% of the assets available for distribution on a winding up (these were the
changes originally announced in the 2018 Budget);
- In the event of a disposal
of the ordinary share capital of the company the shareholder would be entitled
to 5% of the disposal proceeds.
Additional provisions set out the process for determining whether
the second test is met at any one time. The legislation does not define
the term ‘proceeds’, which implies that it may extend to some payments made to
debt-holders on a sale of a company.
In its rationale for making the changes, the Treasury has stated that it has laid these amendments to ensure that the conditions for benefitting from the relief operate as intended and to continue ‘supporting enterprise creation and growth in the UK.’
The Government announced plans to reform the off-payroll working rules – known as IR35 – in the private sector from April 2020. Responsibility for operating the off-payroll working rules will move to the firm engaging the worker. Small organisations will be exempt to ease the administrative burden for the vast majority of engagers, while medium and large organisations will be given support and guidance by HMRC.
In order to provide support to the high street, the Government is to reduce business rates by one-third for many retail properties with a rateable value below £51,000 for two years from April 2019, subject to state aid limits. The move is expected to save these struggling businesses £900m. Support for British high street will be supported by a £675m Future High Streets Fund to redevelop empty shops as homes and offices. There will be a new mandatory 100% business rates relief for public lavatories.
…will be extended in
England and Northern Ireland to apply to all first-time buyers purchasing
residential property worth up to £500,000 through a qualifying shared ownership
scheme. The relief will also apply to shared ownership property buyers who have
already paid SDLT on the initial equity stake and rental amount since the
introduction of the relief on 22 November 2017. They will have a year to make a
backdated claim for the relief. This measure will be effective from 29 October
lettings relief can be claimed by
individuals who let out a property that is, or has in the past been, their main
residence. From April 2020, the government will reform lettings relief so that
it is only available to individuals in shared occupancy with a tenant.
the final period exemption means
that people do not have to pay CGT on gains made in the final 18 months of
ownership. From April 2020, the exemption will be reduced to 9 months. There
will be no changes to the 36 months final period exemption available to
disabled people or those in a care home.
who replace their main residence can reclaim
the SDLT where the new home was purchased before selling the old, subject
to the old residence being sold within 3 years of the new home purchase.
The residence nil-rate band (RNRB)
increases to £150,000 from £125,000 from 6 April 2019 and to £175,000 from 6
April 2020; allowing some couples to leave up to £950,000 to
future generations free of IHT.
Incorporation relief applies where a person, who is not a company, transfers a business to a company as a going concern, together with the whole assets of the business (or together with the whole of such assets other than cash) and the transfer is made wholly or partly in exchange for shares issued by the company. In such a case, a chargeable gain on disposal of the old assets does not arise, as there is deemed to be no disposal, but the cost of the new assets is that of the old assets. The legislative provisions are included in section 162 TCGA 1992.
Continue reading “Incorporation Relief. What it is and when it applies.”