Here are some of the selected key budget announcements from a tax adviser’s perspective:
Annual Investment Allowances (AIA): AIA have been increased from £200,000 to £1 million from 1 January 2019. This increase is being allowed for a period of 2 years. The AIA gives 100% tax relief on plant and machinery in the year of acquisition instead of the normal capital allowances that reduce each year. Transitional rules will apply for periods spanning 1 January and any periods ending after 1 January 2019 will receive a proportionate increase. This relief can be very useful for companies that invest in plant and machinery each year or are planning to incur significant costs in the coming two years.
Entrepreneur’s Relief: There will be two important changes to Entrepreneur’s Relief:
a. The qualifying period of 12 months ownership has been extended to 24 months from 1 April 2019. Entrepreneur’s relief allows individuals to be taxed at a reduced rate of 10% instead of the normal capital gains tax rates on disposal of an interest in a business or shares in a trading company.
b. To qualify for the relief, an individuals must be an employee or a director of company and own 5% or more of the voting rights and share capital of the company. From 29 October 2018, they must also be entitled to 5% of the company’s distributable profits and net assets.
Principal Private Residence Relief: There will be two important changes to PPR relief with effect from 6 April 2020
a. Currently, the final 18 months of ownership of a property which had previously been used as a main residence were deemed as the period of residence. The final period of deemed residence will now be restricted to 9 months
b. The letting relief which allows up to £40,000 of the gain (relating to a period the property was let) to be exempted will be restricted to the periods where the owner jointly occupies the property
Non resident landlords:
a. Currently non resident landlords are chargeable to capital gains tax on sale of residential properties only. This will be extended to commercial properties from 6 April 2019
b.Non resident corporate landlords will be subject to corporation tax at 17% instead of the normal 20% from 6 April 2020
Research & development tax relief:
Currently small and medium businesses that are not paying any tax can surrender their tax losses to HMRC in exchange for an unrestricted cash credit. Under the proposed changes, this cash credit will be limited to three times the PAYE and NICs liabilities of the business for the accounting period in which the qualifying research and development cost has been incurred. This change is proposed to come into effect from 1 April 2020.