Draft clauses for Finance Bill 2019-20

On 11 July, the government published draft legislation for the next Finance Bill. This gives tax advisors the opportunity to comment and also gives a preview of what can be expected in the field of taxation over the coming year. For those wishing to comment it should be noted that the consultation window closes on 5 September.

Of particular note, the draft legislation includes measures on the following areas.

Off-payroll working in the private sector

As expected, it is envisaged that revised rules will apply from April 2020, to cast a wider net over not just public sector bodies but certain private sector entities as well. The entities in question are those that buy in employment type services through intermediaries (e.g. the worker’s personal service company). Private sector businesses who are not small (see revised test basis) should prepare for the changes now. Similarly, where individuals are providing services through an intermediary, they would be best advised to consider whether the engager may look to change terms or arrangements from April 2020 and whether there is merit in opening a dialogue now.

If you would like to communicate these changes to your clients and help them prepare, please see our new template client letter, helping you do this quickly and easily.

If you would like to know more about the topic, please refer to these upcoming September 2019 courses running online and in London and Solihull. If you have business clients wanting to know more,  our sister company Quorum has a webinar devoted to the subject.

Private residence relief

Following consultation this Spring, changes are proposed to the Private Residence Relief (PRR) regime from April 2020. For properties that have not been occupied throughout the period of ownership, available deductions for capital gains tax purposes will be limited as follows:

  • The final period exemption will be reduced from 18 months to 9 months (there are no changes to the 36 months that are available to disabled persons or those in a care home); and
  • Lettings relief will be reformed so that it only applies in those circumstances where the owner of the property is in shared-occupancy with a tenant. Despite concerns raised during the consultation about periods of letting prior to April 2020 (and “accrued lettings relief”), the government is proceeding as planned and lettings reliefs will be restricted or curtailed for disposals on or after 6 April 2020, regardless of when the period of letting took place.

This topic will be considered further in our webinar “Residential Property – Capital Gains Tax” which is being live streamed on 5 September, shortly thereafter available as a recording.

Corporation tax loss relief

The rules that potentially limit the use of brought forward losses will be extended from 1 April 2020 to include brought forward capital losses. Companies (and corporate groups) will continue to have a £5m “deductions allowance” before restrictions apply but the inclusion of capital losses mean that it is now more likely to be exceeded for some.

Digital Services Tax

From April 2020, the government will introduce a new 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. However, this only applies when the group’s worldwide revenues from these digital activities are more than £500m and more than £25m of these revenues are derived from UK users.

Insolvency

From 6 April 2020, insolvency legislation will be amended to move HMRC up the creditor hierarchy for the distribution of assets in the event of insolvency by making HMRC a secondary preferential creditor in respect of certain tax debts held by a business (this includes individuals and partnerships) on behalf of their customers and employees. This includes VAT, PAYE income tax and CIS deductions.

The rules will remain unchanged for taxes owed by businesses themselves, such as Corporation Tax and employer National Insurance contributions.

Further, directors and other persons connected to companies subject to an insolvency procedure will be made jointly and severally liable for amounts payable to HMRC by the company in certain circumstances.  This is mainly for cases where the company has engaged in avoidance, evasion or ‘phoenixism’.

What’s missing?

Areas that we would potentially have expected draft legislation on (following Spring consultation) include “Taxation of Trusts” and “Preventing abuse of R&D relief for SMEs”. We await further news as to the future of these initiatives.

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