The government is to move forward with plans to charge Corporation Tax to non-UK resident companies with property income. Currently, these companies are chargeable to Income Tax and not UK Corporation Tax.
This change is part of the government’s aim to ensure that all companies are subject to the same tax treatment and to limit some of the reliefs claimed by foreign companies on UK rental income. Whilst the Corporation Tax rate continues to fall, the benefit of the falling tax rate may not offset the tighter restrictions faced by non-resident companies claiming tax relief on rental income.
The change is expected to take effect from 6 April 2020, when any non-UK resident companies that carries on a UK property business or has any other UK property income will become liable to Corporation Tax rather than Income Tax as at present.
This measure is expected to affect approximately 22,000 non-resident company landlords. The restriction on interest relief could have a significant impact on non-UK companies that receive UK rental income as well as some entities that seek to reduce their tax bill on UK property through offshore ownership.
A new measure to remove the requirement for employers to check receipts for expense claims made by employees using the HMRC benchmark scale rates or overseas scale rates is to be introduced.
The benchmark scale rates can be used by employers to reimburse staff for subsistence expenses when they are travelling on business away from their normal workplace. HMRC lists maximum rates but employers can choose to pay less if they so wish.
The change will be legislated for in Finance Bill 2018-19 and will remove the onerous requirement for employers to check evidence, such as receipts, of the amounts spent when using benchmark scale rates to pay or reimburse qualifying subsistence expenses when employees travel for work.
The new legislation will also place the concessionary accommodation and subsistence overseas scale rates on a statutory basis and the same rules will apply. The overseas scale rates are similar but take into account the cost of subsistence overseas, including hotel accommodation etc, and are calculated on a country-by-country basis.
From April 2019, employers will only be asked to ensure that employees are undertaking qualifying business travel when claiming the benchmark scale rates and / or overseas scale rates. This measure was first announced at Autumn Budget 2017 and should create ongoing administrative savings for many businesses.
The Finance Bill 2018-19 draft legislation was published on 6 July 2018. The Bill which runs to 226 pages (with a further 143 pages of explanatory notes) contains the legislation for many of the tax measures that had previously been announced by the government as well as new initiatives.
The publication of the draft Finance Bill is in line with the approach to tax policy where the government committed to publishing most tax legislation in draft for technical consultation before the legislation is laid before Parliament.
The Bill is open for comment until 31 August 2018 and the draft legislation is subject to change. The final Finance Bill will be published shortly after Budget 2018 which is expected to take place in November this year. The Bill, colloquially known as Finance Bill 2018-19, will become Finance Act 2019 after Royal Assent is received.
Supporting documentation for 33 separate measures have been published. This includes changes to rent-a-room relief, simplification of donor rules for Gift Aid, Corporation Tax reform of loss relief rules, changes to the VAT grouping eligibility requirements and a new points-based penalty regime for certain regular tax filings.
Commenting on the publication of the draft Finance Bill, Mel Stride, Financial Secretary to the Treasury, said:
‘Britain is one of the best places in the world to do business, and we’re determined to see that continue. This legislation illustrates our commitment to creating an environment in which innovation and enterprise can thrive, while ensuring that everyone plays by the same rules.’
The Finance Bill 2018-19 draft clauses include new measures that will address two anomalies in the Optional Remuneration Arrangements (OpRA) rules.
These measures will:
The proposed legislation will ensure that the OpRA rules work as intended.
The Finance Bill 2018-19 will also introduce another car related measure that will see the introduction of legislation to remove any tax liability for charging electric cars or plug-in hybrids at or near a workplace. This measure will have retroactive effect from 6 April 2018.
The draft Finance Bill includes a new measure that will help modernise the tax treatment of employer paid premiums for the provision of death in service life assurance products for their employees.
Currently, these premiums are only tax-exempt if the named beneficiary is a member of the employee’s family, or a member of their household. This includes the employees spouse or civil partner, parents, children and members of the employee’s household (such as domestic staff). As the law stands, if the beneficiary is not a member of the employee’s family or household, the premiums paid by the employer are treated as a taxable benefit in kind.
This new measure will see the tax exemption modernised and extended to include any individual or registered charity as a beneficiary. The inclusion of registered charities is in line with the government’s policy of providing tax relief on charitable donations and has been welcomed by the charity sector.
The changes will also apply to employer contributions to qualifying recognised overseas pension schemes (QROPS). The government has said that these changes are being made to ensure the tax system remains relevant and fair and to reflect societal changes. The new measures are expected to take effect from 6 April 2019.
The publication of the draft Finance Bill 2018-19 includes legislation to change the way the rent-a-room relief scheme works. Following last year’s Budget, a consultation was launched by HM Treasury to examine the design of the rent-a-room scheme.
When the relief was first launched it was intended to be used where one bedroom in a house was rented out to a lodger for medium to long-term lets, however this has changed as more and more people rent out rooms online for short term lets using property portals and apps (such as AirBnB).
The new legislation will introduce a new test that must be satisfied in order to be eligible for the relief. The test requires that the individual or individuals in receipt of rental income, need to share occupancy of the residence for all, or part of the period, of occupation which gives rise to the receipts. This change will mean that the relief will not be available if the owner is absent for the whole period that they sub-let rooms.
If an individual lets their house and is away for only part of the rental period, then the rental would be eligible for rent-a-room relief. The initial consultation also suggested the removal of relief for rentals of less than 30 days. However, this measure has not been included in the new legislation. The changes are expected to come into force from April 2019.
The Bereavement Allowance was a weekly benefit that was payable to certain widows, widowers, or surviving civil partners whose spouse or civil partner died before 6 April 2017. Prior to that date, it was also possible for qualifying applicants to claim the Widowed Parent’s Allowance and Bereavement Payment.
The new Bereavement Support Payment was launched on 6 April 2017. The Bereavement Support Payment replaced Bereavement Allowance, Widowed Parent’s Allowance and Bereavement Payment. If you lose your spouse or civil partner on or after 6 April 2017 you may be eligible to claim the Bereavement Support Payment.
You could be eligible to claim if your partner either paid National Insurance contributions for at least 25 weeks or died because of an accident at work or a disease caused by work. You must also be below the State Pension Age in order to claim Bereavement Support Payment. The new system of state bereavement payments usually means a more generous initial bereavement payment, but further support payments may be less than under the old system.
HMRC has a specialist bereavement services team that deals with PAYE and Self Assessment issues which arise when a taxpayer dies. In most cases, the team provides family members or personal representatives with a single point of contact when finalising the PAYE and Self Assessment affairs of the deceased.
There are a number of VAT issues to consider if you are selling digital services from the UK to consumers based in other EU countries. Since 1 January 2015, the place of supply rules for these types of service is determined by the location of the customer who receives the service rather than the location of the supplier.
Digital services include things like radio and television broadcasting, telecommunications services and electronically supplied services such as video on demand, downloadable music, games, apps, software and ebooks.
The definition of digital services does not include the sale of goods where the order and processing is done electronically, services of lawyers and financial consultants who advise clients through email or advertising services, supplies of physical books and advertising services in newspapers, on posters and on television.
If you are deemed to be suppling digital services to consumers in other EU countries you must either register for VAT in each country where you are supplying digital services or sign up to use the VAT Mini One Stop Shop (MOSS) service.
The MOSS scheme is an electronic system that allows businesses to register in only one EU member state and submit a single VAT return and payment each quarter for all their cross-border supplies of digital services. If you are unsure as to the correct VAT liability of the digital services you are providing, we can help.
Business Asset Rollover Relief allows taxpayers to delay paying Capital Gains Tax (CGT) on gains when they sell or dispose of certain assets and use all or part of the proceeds to buy new assets. The relief means that the CGT due on the gain of the old asset is postponed. The amount of the gain is effectively rolled over into the cost of the new asset and any CGT liability is deferred until the new asset is sold.
Where only part of the proceeds from the sale of the old asset is used to buy a new asset a partial rollover claim can be made. It is also possible to claim for provisional rollover relief where you expect to buy new assets but haven’t done so yet. Interestingly, rollover relief can also be claimed if you use the proceeds from the sale of the old asset to improve assets you already own. The total amount of rollover relief is dependent on the total amount reinvested to purchase new assets.
There are qualifying conditions to be met to ensure entitlement to any relief. These include ensuring that you purchase the new assets within 3 years of selling or disposing of the old ones (or up to one year before). Under certain circumstances, HMRC has the discretion to extend these time limits. In addition, both the old and new assets must be used by your business and the business must be trading when you sell the old assets and buy the new ones.
It may be more beneficial to claim entrepreneurs’ relief (if eligible) and pay the CGT due at the lower 10% rate at the time of the disposal of the old asset.
Planning for significant CGT disposals is recommended and we would be happy to help advise you on the best course of action to take.
In a unanimous decision, the Supreme Court has decided that the law preventing opposite sex couples from entering into a civil partnership breaches the European Convention on Human Rights (ECHR). The appellants in this long running case are an opposite sex couple with a conscientious objection to marriage.
The crux of this case centred on the issue that when the law was changed in 2013 to allow same-sex couples to marry the older civil partnership rules remained the same. This meant that only two people of the same sex could enter into a civil partnership whilst both same-sex and opposite sex couples could both choose to marry. This created a new inequality affecting opposite sex couples, who for whatever reason, would prefer to enter into a civil partnership rather than marry. Interestingly both the High Court and Court of Appeal had already dismissed the couples claims of discrimination.
Although the couple have won their case, it remains to be seen exactly how the government will remedy this inequality. This may take some time and we are likely to see the eventual widening of the civil partnership rules that will allow all unmarried couples to benefit. The civil partnership rules effectively provide for the same tax reliefs as for married couples together with many other legal protections.
Cohabiting (same-sex and opposite sex) couples currently have limited legal rights and they should carefully consider their position especially when purchasing property together or building a family.