Budget -Overview of the budget
Chancellor Philip Hammond stood up and delivered his 1st and 2017 Spring budget at 12:37. and sat
down at 13:32 just under an hour
announced this will be the last Spring budget, and that in future all budget announcements will be released at
the same time as the Autumn Statement.
What it means to me for me and my
National Borrowing is forecast to be lower than the
Autumn 2016 statement.
Faster Growth of the UK economy 2nd only to
Germany, with 2.7 M people in work than in 2010
Inflation is forecast at 2.4% this year, 2.3% next year
and 2% in 2019
Further measures in tax avoidance
Free school transport extended to all children on free
£260 M extra investment in
Sugar levy on soft drinks industry to be introduced in
2018, and this levy to be spent on sport in schools. Levy will be 18p
and 24p on main and higher brands
£16 for new 5G telephone Hub, £200 for broadband
Mortgage interest relief confirmed restricted to basic
rate on rental properties from 6th April 2017.
Beer duty, cider whisky duties
Personal allowances confirmed as previous budgets
£11,500 from 6th April 2017. Currently
£11,000. By the end of this parliament
Higher tax threshold (40%) confirmed as previous budgets
to £45,000 from 6th April 2017. Currently
£43. By the end of this parliament
Employers National Minimum wage increased to £7.50 from
April 2017 (currently £7.20)
Self employed and small
Class 2 NIC confirmed abolished from 6th
Corporation tax is confirmed to be 19% from
1st April 2017 and 17% by 1st April 2020
Dividend £5000 threshold reduced to £2000 from
6th April 2018
Self employment NIC changes as
Class 2 NIC abolished from
From 2018 class 4 to increase by 1% to 10% from
6th April 2018 and 11% from 6th April 2019
Businesses of Turnover below £83,000 the chancellor will
delay of quarterly reporting from 6th April 2018 to 6th April 2019.
Business rates abolished for all rateable value up to
£15,000 (was £6,000) taking the majority of small businesses out of business rates from 1st April 2017,
£50 cap on business relief for those now no longer
under small business rate relief
Pubs given a £1000 reduction in business
The above are headlines
only. Should you require further details included in the finance
act, please ask a member of staff at R Stride & Co LLP.
So you need a lot more detail
Philip Hammond has delivered his first, and seemingly last, Spring Budget Statement. At the 2016 Autumn
Statement, the Chancellor announced that, following the spring 2017 Budget, the government would be moving to a
single major fiscal event each year. Future Budgets will be delivered in the autumn, which means there will now
be a second Budget before the end of 2017 to switch to the new timetable. The aim of the new system is for the
Finance Bill, which is normally published after the annual Budget, to reach Royal Assent stage in the spring of
each year, before the start of the following tax year. The change in timetable is designed to help Parliament to
scrutinise tax changes before the tax year where most take effect.
In line with pre-Budget speculation, the Chancellor said that, as the government starts
its negotiations to exit the European Union, this Budget would take forward its plan to prepare Britain for a
brighter future, providing a strong and stable platform for those negotiations.
The Office for Budget Responsibility (OBR) has reported that last year, the British economy grew
faster than the United States, Japan, and France. Unemployment in the UK is at an 11 year low with over 2.7 million
more people in work than in 2010. The Chancellor was also pleased to report on International Women's Day, that
there is now a higher proportion of women in work than ever before. But, Mr Hammond said, there is 'no room for
complacency' and 'we must focus relentlessly on keeping Britain at the cutting edge of the global economy'. Whilst
the deficit is down, debt is still reportedly too high. This Budget therefore focused on taking 'the next steps in
preparing Britain for a global future'.
There was much focus on measures designed to promote fairness within the tax system, ensuring that
'those with the broadest shoulders bear the heaviest burden'. The Chancellor said that as a result of the changes
made since 2010, the top 1% of income tax payers now pay 27% of all income tax. However, he went on to say that 'a
fair system will also ensure fairness between individuals, so that people doing similar work for similar wages and
enjoying similar state benefits pay similar levels of tax'. This led on to proposed changes concerning the dividend
allowance (to be reduced from its current level of £5,000 a year to £2,000 a year from April 2018); and increases
in the rate of Class 4 National Insurance Contributions (a proposed increase of 1% to 10% from April 2018 and a
further increase of 1% in April 2019).
The Chancellor said that whilst the government believes that people should have choices about how
they work, those choices should not be driven primarily by differences in tax treatment. That said, he confirmed
that Matthew Taylor, Chief Executive of the RSA, has been asked to consider the wider implications of different
employment practices, with a final report expected this Summer. This may indicate that there will be further
announcements in this area later this year.
Regarding tax, highlights from this Spring Budget Statement, most of which were originally announced
in the 2016 Autumn Statement or earlier, include:
- confirmation that the main
rate of corporation tax will be 19% for the
2017 financial year, reducing to 17% in 2020;
- confirmation that the
tax-free personal allowance will be £11,500 in
and that it will rise to £12,500 before the end of the current Parliament;
September 2017, free childcare for three and four year olds will increase from 15 to 30 hours, worth up to
£5,000 for each child;
rollout of tax-free childcare will be completed by the end of the year;
promised, the R&D tax credit regime has been reviewed and the government has concluded that it is globally
businesses with turnover below the VAT registration threshold, the introduction of quarterly reporting will be
delayed by one year; and
- from 1
April 2017 the VAT registration threshold will rise to £85,000 and the deregistration threshold will be
information provides a summary of the key tax points from the 2017 Spring Budget based on the documents released
on 8 March 2017. It also provides a reminder of some of the main points announced at the 2016 Autumn Statement,
which will be legislated for in Finance Bill 2017. We will keep you informed of any significant
allowance and income tax threshold
allowance for 2017/18 is set at £11,500 (£11,000 in 2016-17), and the basic rate limit will be increased to
£33,500 (£32,000 in 2016-17). The additional rate threshold will remain at £150,000 in 2017/18. The government
intends to increase the allowance to £12,500 by the end of Parliament.
The marriage allowance will rise from £1,100 in 2016/17 to £1,150 in 2017/18.
Blind person's allowance will rise from £2,290 in 2016/17 to £2,320 in 2017/18.
allowance for dividend income is to be reduced from £5,000 to £2,000 from April 2018. The government states that
this change is designed to reduce the tax differential between the employed and self-employed on one hand and
those working through a company on the other, and raise revenue to invest in public services.
'making good' on benefits-in-kind
2017 will include provisions, effective from April 2017, to ensure an employee who wants to 'make good', on a
non-payrolled benefit in kind will have to make the payment to their employer by 6 July in the following tax
year. 'Making good' is where the employee makes a payment in return for the benefit-in-kind they receive. This
reduces its taxable value.
available without transfer of ownership
legislation is to be clarified, with effect from 6 April 2017, to ensure that employees will only be taxed on
business assets for the period that the asset is made available for their private use. This will take effect
from 6 April 2017.
Currently if an asset is made available for private use, the cash equivalent is set at
20% of the market value when the asset was first provided plus the amount of any additional expenses. This rule
will remain. However, new supplementary rules will allow the cash equivalent to be reduced for days when the asset
is not available for private use. There will also be provisions to allow a reduction in the level of the taxable
benefit when the asset is made available to more than one employee for their private use in the same tax year.
This measure will also allow for the reduction in the level of the taxable benefit if the asset is first made
available part way through the year or permanently ceases to be available part way through the
will apply only to assets which do not currently have specific charging provisions elsewhere in the
of termination payments
The rules for
tax and secondary NICs are to be aligned by making an employer liable to pay NICs on termination payments they
make to their employees. The following changes will take effect from 6 April 2018:
An employer will be required to pay NICs on any part of a termination payment that
exceeds the £30,000 threshold. It is anticipated that this will be collected in 'real-time', as part of the
employer's standard weekly or monthly payroll returns and remittances to HMRC.
In addition, the scope of the exemption for termination payments is to be clarified. Broadly, all
payments in lieu of notice (PILONs) will be both taxable and subject to Class 1 NICs. The legislation requires the
employer to identify the amount of basic pay that the employee would have received if they had worked their notice
period, even if the employee leaves the employment part way through their notice period. The amount will be treated
as earnings and
will not be
subject to the £30,000 income tax exemption. All other termination payments will be included within the scope of
the £30,000 termination payments exemption.
Following consultation on the draft legislation, the government has now confirmed that Foreign
Service Relief will be abolished from April 2018.
bands for ultra-low emission vehicles in company car tax
stronger incentives for the purchase of ultra-low emissions vehicles (ULEVs), new, lower bands will be
introduced for the lowest emitting cars. The appropriate percentage for cars emitting greater than 90g CO2/km
will rise by 1 percentage point. The changes, which will take effect from 6 April 2020 are as
graduated table of company car tax bands will include a differential for cars with emissions of 1 to 50 gCO2 per
km based on the electric range of the car;
- For cars
with an electric range of 130 miles or more, the appropriate percentage will be 2%; for cars with an electric
range of between 70 to 129 miles, the appropriate percentage will be 5%; for 40 to 69 miles, the appropriate
percentage will be 8%; for 30 to 39 miles, the appropriate percentage will be 12%, and for less than 30 miles,
the appropriate percentage will be 14%;
- For cars
that can only be driven in zero-emission mode, the appropriate percentage will be 2%.
- For all
other bands with CO2 emissions of 51 gCO2 per km and above, the appropriate percentage will be based on the CO2
emissions only. For cars with emissions of 51 to 54 gCO2 per km the appropriate percentage will be 15%. For cars
with emissions above 54 gCO2 per km, the bands will be graduated by 5g CO2 per km and the appropriate percentage
will increase by 1% for each 5 gCO2 per km band, up to a maximum of 37%. For cars with emissions above 90
gCO2/km, the appropriate percentage will increase by 1% in comparison to 2019/20 levels.
charge and the car and van fuel benefit charges
changes to company car and van benefits take affect from 6 April 2017:
- the car
fuel benefit charge increases from £22,200 in 2016/17 to £22,600;
- the van
benefit charge increases to £3,230 (from £3,170 in 2016/17); and
- the van
fuel benefit charge increases from £598 in 2016/17 to £610.
For vans that do not emit
CO2 when driven, the cash equivalent is calculated based on the tapered appropriate percentage rate, which is
20% for 2017/2018.
of income tax from savings income
on banks and building societies to deduct tax at source from payments of interest on accounts was generally
removed from 6 April 2016. The provisions have now been extended so that, from 6 April 2017, the deduction of
tax at source will also end for interest distributions from open-ended investment companies (OEICs), authorised
unit trusts (AUTs) and investment trust companies (ITCs), and for interest on peer-to-peer
Savings and Investments (NS&I), the government-backed investment organisation, will offer a new three-year
Investment Bond with an indicative rate of 2.2% from April 2017. The bond will offer the flexibility for
investors to save between £100 and £3,000 and will be available to those aged 16 or
of salary sacrifice
The tax and
employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for
arrangements relating to pensions (including advice), childcare, cycle to work and ultra-low emission cars. This
will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals
who buy them out of their post-tax income. The measure will fix the taxable value of those benefits-in-kind
(BiK) provided through salary sacrifice at the higher of the amount of cash forgone or the amount calculated
under the existing BiK rules.
will have effect for all contracts for BiKs involving salary sacrifice arrangements entered into on or after 6
rule will protect employees who are in contractual arrangements before 6 April 2017 until the earlier of a
variation or renewal of the contract or 6 April 2018, except for cars with emissions above 75g CO2 per
kilometre, accommodation and school fees for which the final date is 6 April 2021. Employer-provided pensions
and pension advice, childcare vouchers, employer-provided childcare and workplace nurseries, cycle to work
schemes and ultra-low emissions cars, with emissions not exceeding 75g CO2 per kilometre will be excluded from
announced, the annual subscription limit for Individual Savings Accounts (ISAs) will rise to £20,000 for 2017/18
(from £15,240 in 2016/17). The limit for Junior ISAs and Child Trust Funds will also rise to £4,128 from 6 April
2017 (from £4,080 in 2016/17).
amendments will also be made to the regulations governing the way in which ISAs operate, for example to take
account of changes to other legislation referred to in the ISA regulations concerning the regulation of certain
financial institutions, child protection and terminal illness.
at Budget 2016, the new Lifetime ISA will be launched from 6 April 2017 and will be available to most
UK-resident adults under the age of 40. Account holders will be able to save up to £4,000 each tax year in their
Lifetime ISA until they reach 50, and amounts they pay into their account will be eligible for a 25% government
bonus. Account holders may withdraw their savings at any time, but from 6 April 2018, any withdrawals made other
than in specified circumstances (such as when the account holder reaches 60, is withdrawing their savings for a
first-time residential purchase, or is terminally ill) will be subject to a 25% charge.
held by a saver in a Help-to-Buy ISA on 5 April 2017 can be transferred to a Lifetime ISA during 2017/18,
without this counting towards the £4,000 Lifetime ISA limit. Any type of investments which would currently
qualify to be held in a cash ISA or a stocks and shares ISA can be held in a Lifetime
Funds: 'lifestyling' of accounts, annual subscription limits and other updates
A number of
changes are being made to the rules governing child trust funds (CTFs), which will take effect from 6 April
2017. The changes are:
increase in the annual investment limit to CTFs from £4,080 to £4,128;
requirement on account holders to apply a lifestyling investment strategy for stakeholder STFs will be removed;
minor changes and updates to the CTF rules, such as in relation to the information that account providers are
required to supply on the transfer of an account.
will be launched shortly covering proposals to bring the tax treatment of employer-provided living accommodation
and board and lodgings up to date. This will include proposals for when accommodation should be exempt from tax
and support taxpayers during any transition.
Streamlining the tax-advantaged venture capital schemes
at Autumn Statement 2016, the government will amend the requirements of the Enterprise Investment Scheme (EIS),
the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs). These amendments:
- clarify the EIS and SEIS
rules for share conversion rights
rights to convert shares from one class to another will be excluded from being an arrangement for the disposal
of those shares within the no pre-arranged exits requirements for the EIS and SEIS for shares issued on or after
5 December 2016;
additional flexibility for follow-on investments made by VCTs in companies with certain group structures, to
align with EIS provisions, for investments made on or after 6 April 2017; and
a power to enable VCT regulations to be made in relation to certain share-for-share exchanges to provide greater
certainty to VCTs, which will take effect from the date of Royal Assent to Finance Bill
Employer-arranged pensions advice exemption
A new income
tax exemption is to be introduced with effect from 6 April 2017, to cover the first £500 worth of pensions
advice provided to an employee in a tax year. It will allow advice not only on pensions, but also on the general
financial and tax issues relating to pensions. The changes replace existing provisions which limited the
exemption solely to pensions advice and were capped at £150 per employee per tax year.
2017, non-domiciled individuals will be deemed UK-domiciled for income tax, capital gains tax, and inheritance
tax purposes if they have been UK resident for 15 of the past 20 years, or if they were born in the UK with a UK
domicile of origin and return to the UK having obtained a domicile of choice elsewhere. This means that
anyone deemed UK domiciled by virtue of either condition will not be able to access the remittance basis.
Non-doms who set up a non-UK resident trust before becoming deemed domiciled in the UK
will not be taxed on any income and gains retained in that trust.
As previously announced at Summer Budget 2015 and following further consultation on draft legislation published in
December 2016 on charging inheritance tax on UK residential property, the limit below which minor interests
in UK property are disregarded has been increased from 1% to 5% of an individual's total property
2017 inheritance tax will be charged on all UK residential property even when indirectly held by a non-dom
through an offshore structure.
Non-doms will be able to segregate amounts of income, gains and capital within their
overseas mixed funds to provide certainty on how amounts remitted to the UK will be taxed. Following consultation
on the draft legislation this will be extended by government amendment to income, gains and capital held in mixed
funds from years before 2007/2008, as well as those from subsequent years.
become deemed domicile in April 2017, excepting those who were born in the UK with a UK domicile of origin, will
be able to treat the cost base of their non-UK based assets as the market value of that asset on 5 April
These changes will be introduced in Finance Bill 2017 and will take effect from 6 April
treatment of foreign pensions is to be more closely aligned with the UK's domestic pension tax regime by
bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic
Legislation will take effect from 6 April 2017, so that:
where a foreign pension or lump sum is paid to a UK resident, 100%
of the pension arising will be chargeable to UK tax (to the same extent as if they had been paid from a registered
no new pension schemes can be established under ICTA 1988, s 615
(specialist pension schemes for those employed abroad), and no further contributions can be made to existing
schemes. Funds accrued in a section 615 scheme before 6 April 2017 will continue to be paid out using the existing
the tax treatment of funds in registered pension schemes (RPSs)
based outside the UK will be more closely aligned with that of UK-based RPSs;
UK tax charges can apply to a payment by a relevant non-UK schemes
(RNUKS) to an individual who has been resident outside the UK for less than 10 tax years;
the 70% rule will be removed from the conditions that a pension
scheme has to meet to be an 'overseas pension scheme' or a 'recognised overseas pension scheme' and the pension age
test is revised so that additional payments may be made and the test still be met. As a result if a
non-occupational pension scheme is not regulated and the provider of that scheme is not regulated, it will not be
able to be a QOPS or QROPS.
recognised overseas pension schemes (QROPS): introduction of a transfer charge
A 25% tax
charge will be applied to pension transfers made to QROPS. Exceptions will be made to the charge, allowing
transfers to be made tax-free where people have a genuine need to transfer their pension,
- both the
individual and the pension scheme are in countries within the European Economic Area (EEA);
outside the EEA, both the individual and the pension scheme are in the same country; or
- the QROPS
is an occupational pension scheme provided by the individual's employer.
individual's circumstances change within 5 tax years of the transfer, the tax treatment of the transfer will be
reconsidered. The changes will take effect for transfers requested on or after 9 March 2017.
The government will also legislate in Finance Bill 2017 to apply UK tax rules to payments
from funds that have had UK tax relief and have been transferred, on or after 6 April 2017, to a qualifying
recognised overseas pension scheme. UK tax rules will apply to any payments made in the first five full tax years
following the transfer, regardless of whether the individual is or has been UK resident in that
Investment Tax Relief (SITR)
changes are being made to enlarge the social investment tax relief (SITR) scheme, including an increase in the
amount of money newer social enterprises may raise and provisions to better target the scheme on higher risk
activities and deter abuse. The changes, which will apply retrospectively to qualifying investments made on or
after 6 April 2017 will:
the amount of investment a social investment may receive over its lifetime to £1.5 million for social
enterprises that receive their initial risk finance investment no later than 7 years after their first
commercial sale, the current limit will continue to apply to older social enterprises;
the limit on full-time equivalent employees to below 250 employees;
certain activities, including asset leasing and on-lending, to ensure the scheme is well targeted - investment
in nursing homes and residential care homes will be excluded initially, however the government intends to
introduce an accreditation system to allow such investment to qualify for SITR in the
the use of money raised under the SITR to pay off existing loans:
that individuals will be eligible to claim relief under the SITR only if they are independent from the social
a provision to exclude investments where arrangements are put in place with the main purpose of delivering a
benefit to an individual or party connected to the social enterprise.
governing the disproportionate tax charges that arise in certain circumstances from life insurance policy
part-surrenders and part-assignments are to be amended. Broadly, this will allow applications to be made to HMRC
to have the charge recalculated on a 'just and reasonable' basis. The changes take effect from 6 April 2017 and
are designed to lead to fairer outcomes for policyholders.
the money purchase annual allowance
flexibilities introduced in April 2015 gave savers the ability to access their pension savings flexibly, as best
suits their needs. Once a person has accessed pension savings flexibly, if they wish to make any further
contributions to a defined contribution pension, tax-relieved contributions are restricted to a special money
purchase annual allowance (MPAA). It has now been confirmed that the money purchase annual allowance will be
reduced to £4,000 from April 2017.
Portfolio Bonds: reviewing the property categories
will legislate in Finance Bill 2017 to take a power to amend by regulations the list of assets that life
insurance policyholders can invest in without triggering tax anti-avoidance rules. The changes will take effect
on Royal Assent of Finance Bill 2017.
HMRC are to
undertake a consultation on rent-a-room relief to ensure it is better targeted to support longer-term lettings.
This will align the relief more closely with its intended purpose, to increase supply of affordable long-term
is to be launched covering existing tax reliefs aimed at encouraging investment and entrepreneurship to make
sure that they are effective, well targeted, and still provide value for money as part of the Patient Capital
in Universal Credit taper
Universal Credit system, as a person's income increases, their benefit payments are gradually reduced. The taper
rate calculates the reduction in benefits as a person's salary increases. Currently, for every £1 earned after
tax above an income threshold, a person receiving Universal Credit has their benefit award reduced by 65p and
keeps 35p. The 2017 Spring Budget confirmed that, from April 2017, the taper will be lowered to 63p in the
pound, so the claimant will keep 37p for every £1 earned over the income threshold.
announced, from 6 April 2018 Class 2 contributions will be abolished and Class 4 contributions will be reformed
to include a new Threshold (to be called the Small Profits Limit).
Class 2 NICs
currently give the self-employed access to certain contributory benefits. From April 2018, those with profits
between the Small Profits Limit and Lower Profits Limit will not be liable to pay Class 4 contributions but will
be treated as if they have paid Class 4 contributions for the purposes of gaining access to contributory
benefits. Individuals with profits at or above the Class 4 Small Profits Limit will gain access to the new State
Pension, contributory Employment and Support Allowance (ESA) and Bereavement Benefit. Those with profits above
the Lower Profits Limit will continue to pay Class 4 contributions.
Class 2: For 2017/18, Class
2 NICs will be payable at the weekly rate of £2.85 (rising from £2.80) above the small profits threshold of
£6,025 per year (rising from £5,965 in 2016/17).
Class 3: Class 3 voluntary
contributions will rise from £14.10 to £14.25 per week for 2017/18.
Class 4: For 2017/18, the
lower profits limit for Class 4 NICs will be £8,164 and the upper profits limit will be £45,000.
Contributions remain at 9% between the two thresholds and at 2% above the upper profits
the primary and secondary National Insurance Contributions thresholds
(employee) threshold and the secondary (employer) thresholds for Class 1 National Insurance Contributions are to
be aligned from April 2017. From that date, both the primary and secondary thresholds will be £157 per week,
having been raised from £155 and £156 per week respectively for 2016/2017.
the rate of Class 4 National Insurance contributions
The main rate
of Class 4 NICs will be increased from 9% to 10% with effect from 6 April 2018 and from 10% to 11% with effect
from 6 April 2019. Since April 2016, the self-employed also have access to the same State Pension as employees,
worth £1,800 a year more to a self-employed individual than under the previous system.
Digital for Business
for the government's Making Tax Digital project will be legislated for in Finance Bill 2017. However, the
mandatory start date for unincorporated businesses and landlords with gross income (turnover) below the VAT
registration threshold will be deferred until April 2019. This means that only those businesses, self-employed
people and landlords with turnovers in excess of the VAT threshold with profits chargeable to income tax and
that pay Class 4 NICs will be required to start using the new digital service from April
the cash basis entry threshold
in January 2017, the trading cash basis threshold for unincorporated businesses is to be increased to £150,000
for 2017/18 onwards. For Universal Credit claimants, the entry threshold will be increased to £300,000. The exit
threshold will be increased to £300,000 for all users of the trading cash basis.
cash basis for unincorporated businesses
in January 2017, the government will legislate in Finance Bill 2017 to provide a simple list of disallowed
expenditure in order to simplify the rules for allowable deductions within the cash basis. Following
consultation, the legislation has been revised slightly to make certain that specific items are clearly excluded
from the list, and to ensure the rules for moving between the cash basis and accruals accounting are robust.
Minor amendments have also been made to improve clarity. These changes will have effect from April 2017, though
for the 2017/18 tax year trading profits can be calculated using either the new rules or the existing
cash basis for unincorporated property businesses
From 6 April
2017, most unincorporated property businesses (other than limited liability partnerships, trusts, partnerships
with corporate partners or those with receipts of more than £150,000) will be allowed to calculate their taxable
profits using a cash basis of accounting. Landlords will continue to be able to opt to use Generally Accepted
Accounting Principles (GAAP) to prepare their profits for tax purposes.
both a UK and an overseas property business will be able to choose separately whether to use the cash basis or
GAAP for each. Those with a trade as well as a property business both eligible for the cash basis, will be able
to decide separately for each of these, and persons other than spouses or civil partners who jointly own a
rental property will be able to decide individually.
To align the treatment with those who opt to use GAAP, the initial cost of items used in a dwelling
house will also not be an allowable expense under the cash basis. The existing 'replacement of domestic items
relief' will continue to be available for the replacement of these items when the expenditure is paid. Interest
expense will be treated consistently between those using the cash basis and those using
allowance for property and trading income
Two new income
tax allowances of £1,000 each, are to be introduced for trading and property income. These new allowances will
take effect for 2017/18 onwards. Individuals with trading income or property income below the level of the
allowance will no longer need to declare or pay tax on that income. The trading income allowance will also apply
to certain miscellaneous income from providing assets or services.
allowance will also apply for Class 4 National Insurance contribution purposes.
will not apply in addition to relief given under the rent-a-room relief legislation.
publication of the draft legislation on this measure, it has been confirmed in the 2017 Spring Budget that
revisions will be made to prevent the allowances from applying to income of a participator in a connected close
company or to any income of a partner from their partnership. Minor revisions will also be made to improve
clarity and correct errors.
of land in the UK
legislation is to be amended to ensure that all profits from dealing in or developing land in the UK are brought
into charge to UK tax. The original legislation took effect for disposals made on or after 5 July 2016, with an
exception where the contract for disposal was entered into before 5 July 2016. The intention was to exclude the
standard property disposal arrangement where the parties are committed on making the contract, but the transfer
takes place a short time later. However, some contracts are entered into at an early stage in the development
with transfers being made over an extended period of months or years. The result is that some profits from these
long term contracts are not within the charge. This was not the intention when the legislation was enacted and
the measure announced in the Spring 2017 Budget ensures that the rules set out in FA 2016 work as
the PAYE Settlement Agreement process
for applying for and agreeing Pay as You Earn Settlement Agreements (PSAs) is to be simplified. Broadly, a
PSA allows an employer to make one annual payment to cover all the tax and National Insurance due on small or
irregular taxable expenses or benefits for employees. Finance Bill 2017 contains provisions which will enable
HMRC to accept a PSA without the need for prior agreement. In turn, this will allow HMRC to design and implement
a new automated process for employers to apply for a PSA. Consequential changes will be made to the 'PAYE
Regulations' covering the making, form and timing of a PSA. The changes will have effect in relation to
agreements for the 2018/19 tax year and subsequent tax years.
disguised remuneration - restricting tax relief for contributions to avoidance schemes
at Autumn Statement 2016, the government will continue with its pledge to tackle existing and prevent future use
of disguised remuneration avoidance schemes. Legislation in Finance Bill 2017 is designed to ensure that scheme
users pay their fair share of income tax and NICs and the future use of schemes will be prevented by
strengthening the current rules. The existing use of schemes will be tackled by the introduction of a new charge
on disguised remuneration loans that were made after 5 April 1999 and remain outstanding on 5 April 2019.
Legislation will also be introduced to ensure there is no double taxation.
consultation, the legislation has been revised to ensure the loan charge and the exclusions operate as intended.
Broadly, the close companies' gateway will now be introduced in Finance Bill 2017 to commence from 6 April 2018
and this will allow for further consultation to ensure it is appropriately targeted at disguised remuneration
schemes. Proposals on how the tax and NICs arising from the changes will be collected will be set out in a
technical consultation later in 2017.
will also be introduced in Finance Bill 2017 to tackle existing and prevent future use of similar schemes used
by the self-employed.
Finally, legislation will be also introduced to prevent employers claiming a deduction
when computing their taxable profits for contributions to a disguised remuneration scheme unless income tax and
NICs are paid within a specified period. This will have effect for contributions made on or after 1 April 2017 for
corporation tax purposes, or 6 April 2017 for income tax purposes.
tax: reform of loss relief
announced at the time of the 2016 Budget and following a period of consultation, Finance Bill 2017 contains
provisions to reform the tax treatment of certain types of carried-forward loss for corporation tax purposes
with effect from 1 April 2017.
from 1 April 2017, when carried forward, will have increased flexibility and can be set against the total
taxable profits of a company and its group members (referred to as the 'loss
carried-forward losses, whenever they arose, companies will be able only to use the losses against up to 50% of
profits (known as the 'loss restriction'). Each standalone company or group will be entitled to a £5 million
annual allowance. Profits within the allowance will not be restricted, ensuring 99% of companies are unaffected
by the restriction.
Both the loss
restriction and loss relaxation will apply to:
non-trading deficits on loan relationships;
UK property losses; and
non-trading losses on intangible fixed assets.
pre-April 2017 trading losses will not be relaxed, companies will have the flexibility to choose whether or not
to use pre-April 2017 trading losses before other available losses.
If a company's
trade ceases and the company has unused carried-forward losses of that trade, those losses can be set without
restriction against profits arising in the final 36 months of the trade. Post-April 2017 losses will be able to
be set against total profits, whilst pre-2017 losses trading losses will only be able to be set against profits
of the same trade. The profits on which losses can be carried-back against will be limited to those generated
from 1 April 2017.
The legislation contains loss buying rules which will mean that where a company or group
of companies is acquired, any post-April 2017 carried-forward losses that arose before the company or group's
acquisition will not be available to the purchaser's group for five years.
legislation also contains a targeted anti-avoidance rule which will prevent any arrangements being entered into
with a main purpose of obtaining a benefit from the loss reform rules.
treatment of appropriations to trading stock
A new measure
will remove the option for businesses to elect for capital losses, which would otherwise arise where an asset is
appropriated to trading stock to be treated as trading deductions which can be offset against the total trading
profits of the business. This measure will have immediate effect by preventing the election being made for
appropriations into trading stock made on or after 8 March 2017.
other mismatches - permitted taxable periods of payees and deductions for amortisation
changes will be made to the hybrid and other mismatch regime introduced by Finance Act 2016. The first change
removes the need to make a formal claim in relation to the permitted time period rules for mismatches involving
financial instruments. The second change provides that deductions for amortisation are not treated as relevant
deductions for the purposes of these provisions. The measure will have effect from the commencement of the
hybrid and other mismatch regime, which came into effect on 1 January 2017.
deductibility of corporate interest expense
From 1 April
2017, the government will introduce rules that limit the tax deductions that large groups can claim for their UK
interest expenses. These rules will limit deductions where a group has net interest expenses of more than £2
million, net interest expenses exceed 30% of UK taxable earnings and the group's net interest to earnings ratio
in the UK exceeds that of the worldwide group. The provisions proposed to protect investment in public benefit
infrastructure are also to be widened. Banking and insurance groups will be subject to the rules in the same way
as groups in other industry sectors.
tax deduction for contributions to grassroots sport
circumstances in which contributions to grassroots sports can be deducted from the taxable profits of
corporation tax payers will be extended in relation to qualifying expenditure incurred on or after 1 April 2017.
Companies will be able to make deductions for all contributions to grassroots sports through recognised sport
governing bodies, and deductions of up to £2,500 in total annually for direct contributions to grassroots
sports. Sport governing bodies will be able to make deductions for all their contributions to grassroots sports.
The Spring 2017 Budget confirmed that the treatment of a sport governing body will be extended to its 100%
provisions are being added to the Finance Act 2016 Patent Box rules, covering the case where Research and
Development (R&D) is undertaken collaboratively by two or more companies under a 'cost sharing arrangement'.
The provisions will ensure that such companies are neither penalised nor able to gain an advantage under these
rules by organising their R&D in this way. The Spring 2017 Budget confirmed that the draft legislation for
this change will be revised to narrow the definition of a cost-sharing arrangement and to better align the
treatment of payments into, and payments received from, a cost-sharing arrangement by the company. These changes
will have effect for accounting periods commencing on or after 1 April 2017.
Co-ownership authorised contractual schemes: reducing tax complexity
at Budget 2016 and following a period of consultation, amendments are to be made to the legislation to reduce
tax complexity in relation to co-ownership authorised contractual schemes (CoACS). Broadly, the measures
clarify the process for calculating any capital allowances which
may be claimed by investors in CoACS;
introduce new requirements for information which the operator of a
CoACS must provide to investors and to HMRC;
introduce new rules to clarify what is to be treated as an
investor's income when a CoACS has invested in an offshore fund; and
- clarify the rules
for investors to calculate capital gains arising from the disposal of units in a CoACS.
The new rules
on calculating capital allowances will apply for those electing to apply them on or after Royal Assent to
Finance Bill 2017 for accounting periods beginning on or after 1 April 2017. The new rules on information to be
provided to investors and to HMRC and on investments in offshore funds will come into force at Royal Assent to
Finance Bill 2017. The streamlined rules for investors to calculate capital gains on disposal of units in a
CoACS will apply to disposals on or after an operative date in summer 2017.
the substantial shareholdings exemption
at Autumn Statement 2016 and confirmed at Spring Budget 2017, the government will legislate in Finance Bill 2017
to simplify the rules, remove the investing company requirement within the substantial shareholdings exemption,
and provide a more comprehensive exemption for companies owned by qualifying institutional investors. Following
consultation, certain amendments have been made to provide clarity and certainty. The changes take effect from 1
are to be given a greater role in administering Gift Aid, with the aim of simplifying the Gift Aid process for
donors making digital donations. Currently a donor has to complete a Gift Aid declaration (GAD) each time they
give to a new charity when giving through an intermediary. A new process will allow a donor to give permission
to an intermediary to create GADs on their behalf for all subsequent donations made in that tax year. The
changes, which take effect from 6 April 2017, will require intermediaries to:
keep a record of the donor's authorisation allowing them to
complete declarations on the donor's behalf;
keep a record of the date on which the Gift Aid regime was
explained to the donor;
keep a record of any cancellations of the donor's
issue an annual statement to donors who use the new process;
keep a record of an annual statement sent to donors who use the new
be imposed on intermediaries for any breaches of these obligations.
of Tax Avoidance Schemes: associated and successor entities rules
legislation is to be amended to ensure that promoters of tax avoidance schemes cannot circumvent the POTAS
regime by re-organising their business so that they either share control of a promoting business or put a person
or persons between themselves and the promoting business.
Broadly, the amendments introduce the term 'significant influence' to ensure promoters
cannot reorganise their business so that they put a person or persons between themselves and the promoting
business. The amendment also ensures that the control definitions apply where two or more persons together have
control or significant influence over a business.
takes effect from 8 March 2017.
machinery leasing – response to lease accounting changes
will consult in summer 2017 on the legislative changes required following the announcement of the International
Accounting Board's new leasing standard – IFRS16, which comes into effect on 1 January 2019. The tax treatment
of a lease, in some important respects, is determined by its treatment in the accounts. Following the discussion
document published in summer 2016, the government intends to maintain the current system of lease taxation by
making legislative changes which enable the rules to continue to work as intended.
and development (R&D) tax review
changes are to be made to research and development (R&D) tax credits to increase the certainty and
simplicity surrounding claims.
tax exemption for debt traded on a multilateral trading facility
is to consult on proposals for an exemption from withholding tax for interest on debt traded on a multilateral
trading facility, removing a barrier to the development of UK debt markets.
Management Incentives: continued provision of the relief
will seek State Aid approval to extend provision of this tax relief beyond 2018.
of High-end TV, animation and video games tax reliefs
will seek State Aid approval for the continued provision of the reliefs beyond 2018.
registration and deregistration thresholds will be increased in line with inflation with effect from 1 April
2017 to £85,000 and £83,000 respectively.
at Budget 2016, the government is considering alternative methods of collecting VAT. This is in addition to the
measures it has already introduced to tackle the problem of overseas businesses selling goods to UK consumers
via online marketplaces without paying VAT. At Spring Budget 2017, the government confirmed that it will consult
on the case for a new VAT collection mechanism for online sales. This would harness technology to allow VAT to
be extracted directly from transactions at the point of purchase. This type of model is often referred to as
and enjoyment provisions for business to consumer mobile phone services
has announced that the VAT use and enjoyment provision for mobile phone services provided to consumers is to be
removed. The measure will bring those services used outside the EU within the scope of the tax. It will also
ensure mobile phone companies can't use the inconsistency to avoid UK VAT. This will bring UK VAT rules in line
with the internationally agreed approach.
in the provision of labour in the construction sector
is to be launched on a range of policy options to combat supply chain fraud in supplies of labour within the
construction sector. Options include a VAT reverse charge mechanism so the recipient accounts for VAT. It will
also consider other changes including to the qualifying criteria for gross payment status within the
Construction Industry Scheme.
customs and excise powers of inspection are to be extended enabling officers to examine goods away from approved
premises such as airports and ports, to search goods liable for forfeiture and open or unpack any container.
This will take effect from Royal Assent of the Finance Bill 2017.
House Due Diligence Scheme
will introduce a new Fulfilment House Due Diligence Scheme from 1 April 2018, which is designed to ensure that
fulfilment houses play their part in tackling VAT abuse by some overseas businesses selling goods via online
marketplaces. Broadly, fulfilment businesses in the UK will have to register with HMRC, keep certain records and
carry out robust due diligence checks on their overseas customers. HMRC will publish the register to allow
businesses to check whether they are dealing with compliant fulfilment businesses.
fulfilment house businesses should apply to register with HMRC by 30 June 2018. New fulfilment house businesses,
established after 30 June 2018, will need to apply to register 45 calendar days in advance of the date they
intend to commence trading.
on Enveloped Dwellings
The annual charges for the Annual
Tax on Enveloped Dwellings (ATED) will rise in line with inflation for the 2017/18 chargeable period.
- Property value £500,001 to £1 million - £3,500 (£3,500)
- Property value £1,000,001 to £2 million - £7,050 (£7,000)
- Property value £2,000,001 to £5 million - £23,550 (£23,350)
- Property value £5,000,001 to £10 million - £54,950 (£54,450)
- Property value £10,000,001 to £20 million - £110,100 (£109,050)
- Property value £20,000,0001 and over - £220,350 (£218,200)
at Autumn Statement 2016 and confirmed at Spring Budget 2017, the government will legislate in Finance Bill 2017
to increase the standard rate of Insurance Premium Tax (IPT) by 2% from June 2017. It will also repeal existing
anti-forestalling legislation as it is no longer required.
As announced at
Budget 2016 and confirmed at Autumn Statement 2016, the government will legislate in Finance Bill 2017 for the
Soft Drinks Industry Levy. The two thresholds, at 5g and 8g of sugar per 100ml, have been designed so that, by
taking reasonable steps to reduce sugar content, UK producers and importers of soft drinks can pay less or
escape the charge altogether. The rates were announced at Spring Budget 2017 and will be 18 pence per litre
(ppl) for the main rate and 24ppl for the higher rate. The levy will take effect from April 2018 and evasion of
it will be a criminal offence.