Capital Allowance
The 100% Enhanced Capital Allowances (ECAs) and first year tax credit for loss making companies for purchases of energy or water-saving plant and machinery will be abolished from April 2020. Annual Investment Allowance (AIA) increase to £1 million, this time limit is 1 January 2019 – 1 January 2022 ( suppose to end 31 December 2020). The main pool capital allowance rate remains at 18% writing down allowance per year and capital allowance special rate allowance reduced from 8% to 6% per year from April 2019.
The structures and buildings allowance (SBA) is a new relief available on the construction of non-residential structures and buildings (land and dwellings will not be eligible for relief). The relief provides a flat rate 3% per year allowance based on the original building expenditure (previously 2%). The relief applies from when a building is first brought into use. There are no balancing allowances or balancing charges in relation to the SBA on a future disposal of the building.
Off-Payroll Working in the Private Sector
From April 2021 off-payroll working in the Private Sector in medium and large business (previously April 2020, it has been delayed by 12 month). Similarly to off-payroll in the public sector which start from 6 April 2017, any medium or large private sector businesses hiring contractors or freelancers will be responsible for determining the IR35 status of their workers. The ‘fee-payer’ (the client or agency) will be responsible for National Insurance and PAYE deducted at source from their income before paying the contractor their net salary.
Digital Services Tax (DST)
From 1 April 2020, a proposal for a completely new tax of 2% on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. The DST is a departure from most corporate taxes as it applies to revenues not profits. It would only apply where the annual revenues of the group exceeded £500m and more than £25m of that was in the UK. Only revenues earned from 1 April 2020 would be taxed and HM Treasury would have to review the operation of DST by 31 December 2025. The DST does not seek to tax digital sales more generally.
Corporation Tax loss relief: Restriction and Relaxation
Legislation will be introduced in Finance Bill 2019. From 1 April 2020, the loss restriction will have the effect that the amount of chargeable gains that can be relieved with carried-forward losses will be restricted to 50%.
From 1 April 2017, a restriction on the amount of brought forward losses which can be offset in any one year. The restriction should only impact the largest companies and groups, an annual deduction allowance enables up to £5m of profits per company or group to be offset by brought forward losses each year before any restriction. Beyond this, profits can only be relieved by up to 50% using brought forward losses. A requirement to specify the amount of the deduction allowance in the corporation tax return. Further requirements for groups to nominate a company to prepare and file a group allowance allocation statement.
From 1 April 2017, a relaxation allowing carried forward losses to be used more flexibly. Trade losses and Non-trading loan relationship deficits (NTLRDs) can be carried forward against total profits of the company, and not just profits of the same trade.
Making Tax Digital for VAT
From 1 April 2019, VAT registered traders with turnover in excess of the VAT registration limit (currently £90,000), will have to keep digital record and need to submit their VAT returns using Making Tax Digital compatible software which linked to HMRC’s Making Tax Digital (MTD) systems.
