On 6 July 2018 the Treasury issued the Finance Bill 2018/19, ahead of the Budget later on in the Autumn. The idea of which, is to allow time for consultation, to assist with the smooth implementation of the Act.
Some of the main highlights include:
- The exemption for benefit of providing electric charging points for employees’ cars or vehicles used by employees at their place of employment
- The introduction of payments on account for Capital Gains Tax (CGT) from April 2019 for disposal of UK property for non-residents and April 2020 for UK residents
- Amendments to the rules for cars and vans under the Optional Remuneration Arrangements (OpRA)
- Additional election to claim Entrepreneurs’ Relief where holding dips below 5%
- Stamp duty land tax reporting deadline reduced from 30 days to 14 days
- Introductions of points based penalties for failure to make returns, deliberately withhold information and failure to pay tax
- Deferral of exit charges for Trusts becoming non-resident
Exemption for Benefit
This clause is being introduced to encourage employers to provide charging facilities for all-electric and plug-in hybrid vehicles at or near the workplace.
The exemption removes the liability to income tax, where employees charge non-company cars or vans at, or near their workplace.
Previously, a benefit in kind would be levied where employees charged their own privately owned vehicles. This discouraged the use of such vehicles, which the Government is keen to promote.
Payments on Account for Capital Gains Tax
It has long been publicised that the sale of UK residential property or land by non-residents will, from 6 April 2019, will trigger a need to report and pay capital gains tax (or corporation tax) within 30 days of completion. This will impact non-resident individuals, trust and corporations who may have an indirect holding of 75% or more.
This Finance Bill confirms that from 5 April 2020, this will be extended to UK resident individuals.
If a gain is reported under this new legislation, then it can be ignored for determining whether there is a requirement to register for Self Assessment. These returns will have their own status and enquiry regime. If a gain is exempt, for example, the sale of your main residence, then a return will not be required.
From 6 April 2019 through to 6 April 2020, where a non-resident disposes of a UK residential property or land and is already within the Self Assessment regime, they are not required to comply with the 30 day payment on account deadline.
Changes to OpRA rules
The Finance Bill expands on the existing Optional Remuneration Arrangements for company cars and vans, to ensure that when calculating the amount forgone for tax and national insurance purposes, it includes connected costs. These costs can be items such as the provision of insurance.
In addition, where a capital contribution is paid by the employee towards the provision of the vehicle and that vehicle is only available for paid of the year, the deduction will be restricted on a pro-rata basis.
Entrepreneurs’ Relief where Shareholding Diluted Below 5%
This measure allows entrepreneurs whose shareholding is diluted below the 5% threshold for entrepreneurs’ relief to claim relief for events which occur on or after 6 April 2019.
It has been introduced to ensure entrepreneurs are not discouraged from seeking external investment to finance business growth.
Two elections are being proposed.
Where a company has issued new shares for cash consideration, for a genuine commercial reason and the individual’s shareholding has fallen below 5%, they can choose to submit an election to treat their holding as being sold and required at that time. This will trigger a gain on which entrepreneurs’ relief can be claimed.
The alternative election defers the gain until an actual disposal of the shares occurs. Entrepreneur’s relief will be restricted to the shares that had been held and the gain apportioned accordingly.
Stamp Duty Land Tax Filing and Payment Time Limits
For all land transactions after 1 March 2019 the proposal is to reduce the time limit for filing stamp duty land tax returns and settling the tax due from 30 days to 14 days.
This is not considered to be a significant adjustment as many forms are already completed in this time.
New Penalty Regime – Failure to Make Returns
The Government wishes to encourage taxpayers to comply with regular return submission deadlines by introducing a points based system for penalties. The aim is to cover all taxes with regular filing obligations, including the new Making Tax Digital reporting.
Initially, these penalties will be levied on VAT and Income Tax Self Assessment charges, with other taxes to follow.
Each time a taxpayer fails to make a return on time, they will receive a point. Once a certain number of points have been reached, a financial penalty will be levied (these are to be confirmed). For example, if the obligation is to file an annual return, then two penalty points will need to be incurred before a charge is levied, 4 for quarterly or Making Tax Digital and 5 for monthly reporting.
After a period of compliance, the old penalty points will be dropped.
New Penalty Regime – Failure to Pay Tax
A consultation has taken place to seek feedback on the proposed penalties and the draft legislation now confirms those proposals.
Where tax is paid within 15 days of the due date, no penalty will be levied or where a time to pay arrangement has been agreed.
If tax remains unpaid after this date, but is settled before 30 days, the penalty will be halved.
The rate of penalty levied will be based on an annual percentage, similar to the current regime for interest. This is the first penalty.
A second penalty will be levied where tax remains unpaid at 30 days.
Interest will continue to be levied on unpaid tax in accordance with the current regime and will be charged in addition to any penalties.
Deferral of Payment of Exit Charges for Capital Gains Tax
Both Trusts who cease to be UK resident and certain non-residents that trade through a branch in the UK, could be affected by these changes.
Normally, capital gains tax exit charges should be paid to HMRC where a trust ceases to be resident or an asset ceases to be used in the trade. However, these new rules allow, in certain circumstances, for these charges to be deferred.
Where a UK resident trust with trading activities or non-UK residents who trade through a branch move to another EU or EEA country, they can choose to defer the exit charge from 6 April 2019. This measure has been introduced following a European Court of Justice ruling but may change following the outcome of the Brexit negotiations.
We do not, as yet, have a date for the Budget but it is likely to be in November 2018 when the Finance Bill will be introduced to the House.
At Lambert Chapman LLP, we follow legislative updates and provide regular updates via our website and social media accounts. If you have any queries regarding the above or think that you or your business could be affected, please get in touch.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.