Jason Fayers Tax Partner at Scrutton Bland looks into the future to identify some of the most significant tax changes which you may want to prepare for. A Crystal Ball to Taxation? A whole raft of new tax changes came into effect following March’s Budget. However, a notable aspect of the current Government’s approach to taxation is its enthusiasm to announce changes well in advance, and in some cases years ahead of their actual implementation.
APRIL 2020 Corporation Tax Rates
Here is a snapshot of some of the key tax changes which are due to come into effect over the coming years April 2017 Inheritance Tax nil rate band for residential property For deaths on or after 6 April 2017, an additional inheritance tax free allowance will be available in relation to property which has been an individual’s main residence and that is left to a direct descendant. The additional inheritance tax free allowance will also be available where an individual downsizes or ceases to own a home after 7 July 2015. The additional allowance will initially be set at £100,000 and will rise to £175,000 per person by tax year 2020/2021. However, the allowance will be restricted by £1 for every £2 by which a deceased person’s estate exceeds £2 million. Restriction of loan interest relief for individual residential landlords Private landlords will be unable to deduct their full interest costs on borrowings in calculating the taxable profits of their property business. The changes will be phased in over a four year period but by 2020/2021, relief will be restricted to basic rate tax relief on the entire interest costs. The basic rate relief on interest will be given as a tax reduction in the individual’s tax calculation for the year rather than as a deduction against the business profits.
Automatic UK domicile Non UK domiciled individuals will automatically be treated as UK domiciled for all tax purposes after they have been UK resident for 15 out of the past 20 tax years. In addition, individuals with a UK domicile at birth who have lived abroad for a number of years and who under general law have acquired a domicile in another country will be treated as UK domiciled if they resume residence in the UK. Corporation Tax Rates The rate of corporation tax which companies pay on their profits will be reduced from 20% to 19% with effect from 6 April 2017. Reform of loss relief rules The way in which companies can use losses will be relaxed. Company losses arising on or after 1 April 2017 will be available to be carried forward to set against different types of income and/or against the profits of other group companies. At present, companies can only offset losses which are carried forward against income from the same trade. In addition, losses can only currently be offset against profits of other group companies arising in the same tax year. Business, self employed people and landlords who keep their records digitally and provide regular digital updates to HMRC will be able to adopt pay as you go tax payments. The mechanism for how taxpayers will provide regular digital updates to HMRC has yet to be decided. However, the proposed changes represent a move away from the current annual tax payment deadline of 31 January and towards a method of tax payments much more closely aligned to receipts. APRIL 2018 Payment of Tax
Jason Fayers is a Tax Partner at Scrutton Bland and specialises in all aspects of business and corporate taxation. jason.fayers@scruttonbland.co.uk call 01206 838 400 and building a relationship with him or her well in advance of any changes being implemented allows your adviser time to prepare and identify the right solution for your individual needs. The rate of corporation tax which companies pay on their profits will be reduced further to 17%. In addition to all of the above tax changes, there are a number of ongoing government consultations in place which may herald much more fundamental changes to the UK tax system. These include a review of the way in which small companies are taxed so that such companies are looked-through and tax is imposed directly on the individual shareholders. There is also the possibility of some revisions being made to the planned changes before they are implemented. However, the announcements do at least allow time for people to prepare for those changes and if necessary to re-structure their affairs. What should you do if you think any of these changes could affect you? Getting the right advice early is critical to finding the right solution for any aspect of tax planning, whilst this might sound like common sense, it is important that you work with a tax adviser who understands your tax affairs and what you are trying to achieve. Finding an adviser you can trust
T A X | S C R U T T O N B L A N D | 1 1
Made with FlippingBook HTML5