Autumn Budget 2018

This was a budget that is poorly timed given the substantial changes that could unfold before the spring statement, so much so that the chancellor suggested he may revert to a full budget in the spring should circumstances demand. As usual I will not repeat the more mundane aspects of the budget that have been well reported but will concentrate on what I believe will become the significant announcements. As before this is a synopsis and cannot be used to conclude on any matter.

Firstly and most important is the move to bring the IR35 changes made in the public sector into the private sector from April 2020 which will affect more businesses than imagined. This will require all medium and large businesses to assess whether any company they contract with should fall within the rules as a disguised employment. Whilst in theory this is a welcome change that is fairer and what was envisaged back in 1998, before the then government changed their mind, the changes in the public sector have caused problems so the wider application to the private sector is likely to be very disruptive. In theory if IR35 is currently interpreted correctly there should be no impact but the experience in the public sector is highlighted by the two following links!

https://www.icaew.com/-/media/corporate/files/technical/icaew-representations/2018/icaew-rep-91-18-off-payroll-working-in-public-and-private-sectors.ashx

http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/digital-culture-media-and-sport-committee/bbc-pay/oral/80791.pdf

The tax implications are debateable but any “employer” that engages an “employee” through a personal service company will be on very uncertain ground when it comes to employment law.

Secondly the changes to payment and reporting of all capital gains on most residential property within 30 days of sale from April 2020 is a huge change. This would conveniently tie in with the SDLT reporting except this is being shortened from 30 days to 14 days next March! Further changes to the lettings relief on mixed use houses and PPR reductions from 18 months to 9 months for a final period which will increase gains from April 2020 mean that a sale before April 2020 may mean a lower bill and longer to pay!

Thirdly there are welcome relaxations to the rules on Entrepreneurs Relief for Capital Gains Tax, where shareholdings are diluted. However an extension from one year to two years that shares have to be held to qualify for relief and tightening of the rules on the 5% share of assets and profit is less welcome.

Fourthly, as a consultation, changes to the Research and Development tax credits regime to reduce the abuse in this area are overdue. The changes will restrict relief to a three times PAYE paid, so this is unlikely to affect any valid claims. There were additional changes to combat tax avoidance primarily through artificial fragmentation of profits and assets.

Finally moves to make directors liable for abuse of insolvency rules where tax avoidance is an issue will make winding up a company a more risky process especially where HMRC will now be a preferential creditor for PAYE and VAT.