Autumn Budget 2017- What does it Mean for Northern Ireland?
Whilst yesterday's Budget announcement was met with optimism from the Northern Ireland business community, with an extra £650m boost for Northern Ireland, a commitment to reducing corporation tax and talks to open over a "City Deal" for Belfast, finding more immediate benefits for Northern Irish manufacturers is more difficult.
The reductions in stamp duty for first time buyers should have follow on impacts for many of our members involved in construction industries and with a renewed focus on R&D spend.
PWC NI have kindly supplied a complete summary of what the budget implications are:
- Position paper: corporate tax and the digital economy - A position paper has been published setting out the challenges posed by the digital economy for the international corporate tax framework and the UK Government’s proposed approach for addressing those challenges.
- Research & Development expenditure credit (RDEC) - The RDEC rate will increase from 11% to 12% effective from 1 January 2018. Also, a new Advanced Clearance Service will be introduced for RDEC.
- Withholding tax: royalties - With effect from April 2019, withholding tax obligations will be extended to royalty payments, and payments for certain other rights, made to low or no tax jurisdictions in connection with sales to UK customers. The rules will apply regardless of where the payer is located.
- Corporate capital gains - The Government will amend the Substantial Shareholding Exemption legislation and the Share Reconstruction rules to avoid unintended chargeable gains being triggered where a UK company incorporates foreign branch assets in exchange for shares in an overseas company.
- Hybrid mismatch rules - Some aspects of the corporation tax rules which apply to arrangements involving hybrid structures and instruments will be amended to clarify how and when the rules apply, and to ensure that the rules operate as intended.
- Intangible Fixed Asset regime - The Government will consult in 2018 on the tax treatment of intellectual property.
- Transferable tax history for oil and gas - The government has published a paper on enabling oil and gas companies to transfer tax histories to facilitate the transfer of late life oil and gas assets. Draft legislation will be published in spring 2018 and will legislate to make transferable tax histories available from 1 November 2018.
- Corporate indexation allowance - The corporate indexation allowance on chargeable gains will be frozen from 1 January 2018.
- Taxing gains made by non-residents on immovable property - All gains on non-resident disposals of UK property will be brought within the scope of UK tax. This will apply to gains accrued on or after April 2019. Targeted exemptions will be introduced for institutional investors such as pension funds.
- UK property income and certain gains for non-resident companies - From April 2020, income that non-resident companies receive from UK property and gains that arise in the disposal of UK property by non-resident companies will be chargeable to corporation tax.
- Stamp duty land tax - The price at which a property becomes liable for SDLT will rise to £300,000 for first-time buyers. The relief will not apply for purchases of properties worth over £500,000.
- Personal allowance and higher rate threshold - In 2018-19 the personal allowance and higher rate threshold will increase, to £11,850 and £46,350 respectively.
- Off-payroll working in the private sector - Off-payroll working rules (often known as IR35) was reformed for engagements in the public sector in April 2017. The Government will consult on extending the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company.
- Employment status discussion paper - A new discussion paper will be published as part of the response to Matthew Taylor’s review of employment practices in the modern economy, exploring the case and options for longer-term reform to make the employment status tests for both employment rights and tax clearer.
- Pensions lifetime allowance - The lifetime allowance for pension savings will increase in line with CPI to £1,030,000 for 2018/19.
- National living wage (NLW) - The NLW will increase from £7.50 to £7.83 from April 2018.
- Enterprise investment scheme (EIS) & Venture Capital Trusts (VCTs) - The annual allowance will be doubled for people investing in knowledge-intensive companies. The changes will apply to shares issued on or after 6 April 2018. Also new rules will be introduced to EIS and VCT’s to focus on long-term investment in higher risk companies.
- VAT registration threshold - The threshold will be maintained at the current level of £85,000 for two years from April 2018. A consultation will be released on the design of the threshold.
- Online VAT fraud - A range of measures are to be introduced covering:
- Extending powers to UK businesses - legislation in Finance Bill 2017-18 will enable HMRC to hold online marketplaces jointly and severally liable for the unpaid VAT of overseas traders on their platforms to include all (including UK) traders.
- Extending powers on overseas businesses - legislation in Finance Bill 2017-18 will enable HMRC to hold online marketplaces jointly and severally liable for any VAT that a non-UK business selling goods on their platforms fails to account for, where the business was not registered for VAT in the UK and that online marketplace knew or should have known that the business should be registered for VAT in the UK.
- VAT number display - Legislation in Finance Bill 2017-18 will require online marketplaces to ensure that VAT numbers displayed for businesses operating on their website are valid and they display a valid VAT number when they are provided with one by a business operating on their platform.
- Split payments - To reduce online VAT fraud and improve how VAT is collected, the Government is looking at a split payment model. Taxation of single use plastics - A call for evidence will be launched in 2018 on how the tax system or charges could reduce single use plastic waste.
Avoidance and evasion provisions
- Intangible fixed assets: related party step-up schemes - With immediate effect the Intangible Fixed Asset rules will be updated, so that a licence between a company and a related party in respect of intellectual property is subject to the market value rule, and to ensure that the tax value of any disposal of a company’s intangible assets is correct, even if the consideration is in something other than cash.
- Depreciatory transactions - The 6-year time limit will be removed within which companies must adjust for transactions that have reduced the value of shares being disposed of in a group company. This change will take effect for disposals of shares or securities in a company made on or after 22 November 2017.
- Carried interest - With immediate effect, the transitional commencement provision are removed. This means that asset managers receiving carried interest pay CGT on their full economic gain.
- Double Taxation Relief - From 22 November 2017 a restriction will be introduced to the relief for foreign tax incurred by an overseas branch of a company, where the company has already received relief overseas for the losses of the branch against profits other than those of the branch. This ensures the company does not get tax relief twice for the same loss. The Double Taxation Relief targeted anti-avoidance rule will also be amended to remove the requirement for HMRC to issue a counteraction notice, and extend the scope to ensure it is effective.
- Double taxation arrangement: multilateral instrument - With effect from the Royal Assent of the Finance (No. 2) Act 2017, the powers giving effect to double taxation arrangements will be amended to allow the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting to be implemented.
- NICs Employment Allowance - Due to some employers abusing the Employment Allowance to avoid paying the correct amount of NICs, often by using offshore arrangements, HMRC will require upfront security from employers with a history of avoiding paying NICs in this way.
- Disguised remuneration - A new close companies’ gateway and measures to ensure liabilities from the new loan charge are collected from the appropriate person will be introduced to tackle disguised remuneration avoidance schemes used by close companies.
- Profit fragmentation - A consultation will be released on the best way to prevent UK traders or professionals from avoiding UK tax by fragmenting their UK income between unrelated entities.
- Tax evasion and the hidden economy - Consultations and consultation responses will be published in 2018 regarding: offshore structures; offshore time limits; VAT fraud in labour provision in the construction sector; and conditionality for public sector licences.
- Making Tax Digital (MTD) - As legislated no business will be mandated to use MTD until April 2019, and even then it is only those with turnover over the VAT threshold at that point and only for VAT obligations. The system will need to show it works before MTD scope is widened, and this will not be before April 2020 at the earliest.
- Investing in HMRC - Funds of £155 million will be invested in additional resources and technology for HMRC. HMRC will utilise these funds to tackle:
- the hidden economy through new technology;
- those who market tax avoidance schemes;
- enablers of tax fraud and hold intermediaries accountable for the services they provide using the Corporate Criminal Offence;
- non-compliance among mid-sized business and wealthy individuals;
- and tax debts more than nine months old.
PWC have a range of material that is relevant to the Budget, which is available here: