A breakdown of the Autumn Budget 2017Blog Home
On 22nd November 2017, Phillip Hammond presented his 2nd budget to the House of Commons. Met with mixed reviews, from shock over the potential Brexit ‘divorce bill’ to joys from first time house buyers who won’t pay stamp duty, it came across as a cautious budget with the political uncertainties ahead. Despite that, we saw an ambitious future for the construction industry, with a fair chunk of money put towards training new construction workers with the mid-term goal of delivery 300,000 new homes per year. Ambitious, because the UK hasn’t built new homes in that volume in quite some time, let alone year in, year out.
So let’s delve into the budget and pull out some of the key facts that you need to know.
Now, it’s not the most important point, but it’s the one that everyone checks for first: Alcohol
The major news in terms of alcohol is that duty on beer, wine, spirits and most ciders will be frozen – yes, beer prices aren’t going up. The only exception is “White Cider”, where duty will increase from 2019 in a move to target the low cost/high strength drinks market.
So with that out the way, now on to the real nitty gritty.
By 2020, the Government is committed to raising the personal tax allowance to £12,500, with the Higher Rate Threshold for tax set at £50,000. In the short term, the Personal Allowance has risen £350 from £11,500 to £11,850 with the Higher Rate Threshold rising from £45,001 to £46,350.
The National Living Wage
From April 2018, The National Living Wage and the National Minimum wage will see some increases:
The National Living Wage
25+: £7.83 per hour
21 – 24: £7.38
18 – 20: £5.90
16 – 17: £4.20
The Government will be looking to consult on how to tackle any non-compliance in the private sector. After the IR35 reformations of off-payroll working rules for engagements in the public sector in April 2017, the next possible step is to extend the reforms into the private sector. The Government hope that these measures will help to ensure that those effectively working as employees get taxed as employees, even if they choose to structure their work through a company.
Taxation of Employee Business Expenses
Following the March 2017 taxation of employee expenses call for evidence, the Government have pledged to make several changes.
Self-Funded Training: In 2018, the Government will look in to extending the scope of tax relief for work-related training for both the employed and self-employed.
Subsistence benchmark scale rates: In a measure to alleviate the burden on employers, as of April 2019 employees will be able to get reimbursed for expenses without having to check receipts for subsistence using benchmark scale rates. The existing concessionary accommodation and subsistence overseas scale rates will be placed on a statutory basis, to provide greater certainty for businesses.
Guidance and claims process for employee expenses: Working with external stakeholders, HMRC aim to improve the guidance and understanding on employee expenses. In particular, the areas of travel and subsistence and claiming tax relief on non-reimbursed employment expenses.
The Matthew Taylor Report
In response to the Matthew Taylor report into employment practices in the modern economy, the Government will be publishing a discussion paper to explore options for longer term reformations to make employment rights, status and tax a lot clearer.
The VAT registration threshold is remaining at £85,000 for two years from April 2018. In an aim to simplify the process, the Government will consult with the recommendations from the Office of Tax Simplifications – the full policy paper is available here.
VAT in Labour Provision in the Construction Sector
To prevent VAT fraud, the Government will introduce a VAT domestic reverse charge. This measure will move the responsibility to pay VAT along the supply chain, removing opportunities for it to be stolen. These changes come into effect on the 1st October 2019.
You may remember that the Government had previously announced a series of NICs policies. These were to scrap the Class 2 NICs, reforms to the NICs treatment of termination payments and changes to the NICs treatment of sporting testimonials. These have been postponed for a year, until April 2019.
As for Class 4 contributions, the Government have scrapped planned increases to 10% in April 2018, then up again to 11% in April 2019. This announcement will be welcomed by the self-employed.
Following the Government’s evidence of some employers abusing the Employment Allowance, mostly by using offshore arrangements, from 2018 HMRC will need upfront security from any employers with a history of avoiding paying the right Employers NICs in this way.
Capital Gains Tax
The introduction of the 30-day payment window between a capital gain arising on a residential property and the payment, aka the capital gains tax payment window, will be deferred until April 2020.
Electric Vehicles: From April 2018, any electricity used to charge employee’s electric vehicles will face no “benefit in kind”.
Diesel Company Cars: As of April 2018, in an effort to clean up the air, company cars fuelled with diesel will see a rise from 3% to 4% in the Company Car Tax Diesel Supplement. This will only be applicable to (mostly older) diesel cars that don’t meet the Real Driving Emissions Step 2 standards.
These measures are put in place to fund the new £220 million Clean Air Fund to improve the air quality around the UK.
Company Cars: From April 2018, both the Fuel Benefit Charge and the Van Benefit Charge will increase by RPI (Retail Price Index).
For the eighth year running there is continued freeze on fuel duty.
The Government will also be reviewing existing fuel duty rates for alternatives to petrol and diesel, to make sure they are appropriate, ahead of any decision within the budget for 2018. In the meantime, duty on Liquefied Petroleum Gas (LPG) will be frozen in 2018-19, alongside the main rate of fuel duty.
Evasion, Avoidance and Compliance
Along with the budget came a full policy paper on evasion, avoidance and compliance. It shows that over 100 Government introduced measures have claimed an additional £160bn since 2010.
Another proposed publication, this time a consultation in response to the proposed requirement for designers of applicable offshore structures that could be misused to evade taxes, to let HMRC know about them, and the clients using them.
Following a consultation planning for Spring 2018, HMRC will be able to assess at least 12 years of back taxes, without the need to establish any deliberate non-compliance, for cases of offshore tax non-compliance.
Taxation of Trusts
A consultation report is planned for 2018 for the Government to make taxation of trusts fairer, simpler and more transparent.
Close companies – companies with five or fewer participators – using disguised remuneration avoidance schemes will be targeted by the Government. By introducing the close companies’ gateway, revised following consultation, and measures to ensure liabilities from the new loan charge are collected from the appropriate person.
Making Tax Digital (MTD)
Announce in July 2017, and legislated for in the Finance (No. 2) Act 2017, no business will be mandated to use Making Tax Digital until April 2019. Those companies whose turnover is above the VAT threshold will be required to at that point, and only for VAT purposes. Once the system is shown to work successfully, MTD will roll out, but not before April 2020 at the earliest.
A further £155m will be invested in additional resources and new technology for HMRC
Late Submission Penalties and Late Payment Interest
By adopting a new points-based approach, the Government will reform the penalty system for late or missing tax returns. The Government also plans to consult on measures to simplify and harmonise penalties and interest due on late payments and repayments. These measures are to insure that the system is fair, simple and effective across different taxes.
HMRC’s continued embrace of new technologies will be continued in efforts to recover additional Self-Assessment debts in real-time. This will be done by adjusting the tax codes of individuals with PAYE (Pay as your earn) income.
Extension of Security Deposit Legislation
Taking effect from the 6th April 2019, the Government will expand on existing security deposit legislation to corporation tax and CIS (Construction Industry Scheme) deductions. These changes will be legislated for in Finance Bill 2018-19.
See all the papers from the Autumn Budget 2017 here.
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