As Brexit continues to dominate the news headlines, Philip Hammond delivered his Spring Statement to Parliament yesterday. As he acknowledged, Government had ‘other pressing matters’ that it is currently dealing with and therefore it was no surprise that there were no new specific tax measures contained in the Statement.
The Chancellor did announce a Spending Review pre-summer with a full Budget in the Autumn. However, many anticipate that there will be a full Budget much earlier in the year once the outcome of the Brexit negotiations is known.
In addition to the Spring Statement, HMRC also issued three new documents:
- A consultation on draft legislation detailing a new capital allowance for new non-residential structures and buildings (“SBA”)
The government is inviting views by April 24, 2019 on the changes to the treatment of SBA where the structures or buildings are in:
- Disuse – relief will continue to be available in the period of disuse to avoid onerous calculations and significant record keeping obligations for businesses as there is little commercial incentive for businesses to keep buildings unoccupied.
- Demolition – any unrelieved expenditure to be claimed as a deduction in arriving the capital gains computation to avoid “shadow” SBA claims.
- Leases – separate rules for wasting and non-wasting leases.
Responses to the consultation will be published in May 2019.
- A policy paper entitled ‘No Safe Havens 2019’ which details how HMRC will ensure offshore tax compliance was also published. HMRC are undertaking a three-pronged approach as part of this endeavor.
The first step involves increasing international tax transparency and collaborating with international tax authorities, this is strengthened by initiatives such as the OECD’s Base Erosion and Profit Shifting project and the Common Reporting Standard. The second step involves assisting customers with their compliance by increasing awareness and designing new systems and processes to make tax easier, the Making Tax Digital (“MTD”) initiative is aimed at achieving this along with an analytical tool used by HMRC called ‘Connect’ which cross references customers tax returns, property and financial data and identifies over 500,000 cases for HMRC to enquire into each year. The final step is taking appropriate action based on customer behavior, from simple mistakes to avoidance and evasion, the Corporate Criminal Offences legislation is a step in this direction.
The policy paper states that currently HMRC are using information they have on around three million UK taxpayers who have offshore financial interests to review their compliance affairs and take action where needed.
- A policy paper entitled ‘Tackling tax avoidance, evasion and other forms of non-compliance’. This paper details the Government’s approach to tax compliance for different types of tax payer and their achievements in addressing non-compliance so far.
The paper states that the ‘Tax Gap’ (i.e. the difference between what the Government believes is due and the amount it has collected) is at a record low. However, it notes that the tax system must keep pace with modern ways of working, most notably online trading. This links in with its modern approach to data and tax collection with the introduction of MTD.
The paper also lists the 100 measures the Government has introduced since 2010 to tackle tax avoidance and evasion.
It was also announced yesterday that the Government’s initiative to MTD will not be rolled out to other taxes beyond VAT in 2020, which will be welcomed by many companies and businesses.
Changes taking effect from April 2019
As a reminder, the following tax changes tax effect from April 2019;
- Income tax personal allowance increases to £12,500 and the basic rate band is increased to £37,500. This means that the higher rate band will start at £50,000; and
- Profit fragmentation rules take effect from April 1, 2019. These seek to tax profits that would otherwise have been diverted from the UK and taxed in a lower tax jurisdiction
The Economic and Financial Affairs Council (ECOFIN) has updated its list of non-cooperative jurisdictions, which now most notably includes Bermuda. The Bahamas, British Virgin Islands and Cayman Islands continue to be monitored and have until the end of 2019 to amend their legislation to avoid being included in the list of non-cooperative jurisdictions from 2020 onwards.