Click on the headlines below to navigate our international corporate tax analysis from the Autumn Budget:
Tax on plastics
Tax abuse and insolvency
SDLT charge for non-residents
Reforming stamp taxes on shares consideration rules
Stamp Duty Land Tax and first-time buyers relief
Reclaim of 3% higher rate for additional dwellings
Land value uplifts
For the next two years all retail properties in England with a rateable value of up to £51,000 will receive a one third reduction in their business rates. This relief will then be superseded by the rates revaluation due to take place in 2021. In addition, special reliefs will apply for local newspapers and public lavatories.
The background to this measure is an acceptance that retailers, particularly on local high streets and in town centres, are experiencing a period of significant commercial difficulty. Government subsidy will be provided in the form of a reduction in business rates. This represents an annual saving of up to £8,000 and is expected to apply to up to 90% of independent shops, pubs and restaurants. Local newspapers will also continue to benefit from a business rates discount of £1,500 for their office space and there will be a new 100% relief for all public lavatories.
In view of these reliefs, a consultation will take place on the criteria whereby businesses providing self-catering accommodation and holiday lettings become chargeable to business rates rather than council tax, to ensure that only genuine businesses benefit from business rates and the reliefs that apply to them.
As part of the Government’s strategy to reduce plastic waste, a new tax on the production and import of plastic packaging is to be introduced. The new tax is intended to encourage a change in behaviour so that plastic packaging that contains less than 30% recycled content is no longer utilised. Subject to consultation, packaging that does not contain enough recycled content will be taxed from 1 April 2022. Any revenues raised are intended to support research into better methods of recycling. Details of how the new tax will work will be the subject of consultation.
The new tax forms part of the Government’s wider strategy to address plastic waste, with further details to set out in the Resources and Waste Strategy later this year. There will also be a reform of the Packaging Producer Responsibility System. This is intended to increase producer responsibility for the costs of their packaging waste, including plastic, by providing an incentive for producers to design packaging that is easier to recycle and penalise the use of difficult to recycle packaging, such as black plastics.
The Chancellor has held back from announcing any Government action on disposable cups while he monitors the effectiveness of the actions the takeaway drinks industry has been taking to reduce single-use plastics.
The Government has also announced that it will spend £10m on plastics research and development and £10m to pioneer new approaches to boosting recycling and reducing litter such as ‘smart bins’.
The Government is aiming to raise an additional £35m by 2023-24 through the introduction of a measure designed to make directors liable for business taxes owed where there is a risk of a company deliberately entering insolvency to avoid or evade tax.
Following Royal Assent of Finance Bill 2019-20, directors, as well as other persons involved in a company’s or LLP’s tax avoidance, evasion or phoenixism, will be jointly and severally liable for the business’s tax liabilities that are outstanding.
In addition, from 6 April 2020, when a business enters insolvency, HMRC will act as the preferred creditor for taxes paid by the business’s employees and customers. This will result in taxes which are temporarily held in trust by the business, going to fund public services rather than being distributed to other creditors. This reform will apply to taxes collected and held by businesses on behalf of other taxpayers, including PAYE income tax, employee NIC, VAT and Construction Industry Scheme deductions. The rules will remain unchanged for taxes owed by businesses directly to HMRC, such as corporation tax and employer NIC.
The Government has announced that it intends to publish an updated offshore tax compliance strategy. This is expected to set out how HMRC will in future tackle tax evasion and non-compliance related to income, profits and assets located outside the UK on which UK tax is payable.
The new strategy will replace HMRC’s ‘No Safe Havens’ strategy published in 2014. After that strategy was published, the Government introduced several measures such as asset-based penalties, offshore asset moves penalties and the strict liability criminal offences. It also introduced a requirement for taxpayers to tell HMRC by 30 September 2018 about any offshore tax non-compliance that existed at 5 April 2017 for income tax, capital gains tax and inheritance tax. Failure to do so will result in ‘Failure to Correct’ penalties of up to 200% of the tax unless the person had a reasonable excuse for the failure, plus other penalties and publishing of their details.
HMRC now receives annual disclosures from overseas tax authorities under the Common Reporting Standard (CRS). The CRS data will be analysed by HMRC’s connect computer, identifying discrepancies for further investigation. While many of those investigations will use HMRC’s civil powers, some of them may be criminal investigations with a view to prosecution. It is quite possible that under the new strategy HMRC will take a tougher approach to non-compliance.
HMRC is still accepting voluntary disclosures of offshore non-compliance via its Worldwide Disclosure Facility (WDF) as well as through other methods such as its Contractual Disclosure Facility. Making a full disclosure unprompted, before HMRC opens an enquiry or investigation, is the best way to minimise tax-geared penalties although Failure to Correct penalties are a minimum of 100% of the tax.
A surcharge of 1% to SDLT rates is proposed for the purchase of residential property in England and Northern Ireland by non-residents.
This proposal will be subject to a consultation to be published in January 2019. Until then, the detail of how this measure will work and the date it will be introduced is uncertain. However, it might be assumed that the 1% surcharge is in addition to the existing 3% surcharge on the purchase of residential property by all corporate entities and individuals who already own a residential property. Given that consultation will not be published until January 2019, it seems unlikely that legislation would be implemented in time for it to take effect in April 2019 and it seems more likely that the surcharge would come into force from April 2020.
The Government will consult on aligning the consideration rules of Stamp Duty and Stamp Duty Reserve Tax and introducing a general market value rule for transfers between connected persons. Reforming the consideration rules will simplify Stamp taxes on shares and prevent contrived arrangements being used to avoid tax.
From 29 October 2018, a targeted market value rule will be introduced for listed shares transferred to connected companies, to prevent forestalling.
The Government will extend first-time buyers relief in England and Northern Ireland so that all qualifying shared ownership property purchasers can benefit, whether or not the purchaser elects to pay Stamp Duty Land Tax on the market value of the property. This change will apply to relevant transactions with an effective date on or after 29 October 2018. It will also be backdated to 22 November 2017 so that eligible purchasers who have not previously claimed first-time buyers relief will be able to amend their return to claim a refund.
A technical correction was made to extend the time limit in which you can reclaim the 3% higher stamp duty land tax rate where an individual sells their old home within three years of making the replacement purchase. The change took effect from 29 October 2018.
It has been announced that a simpler system will be introduced for local authorities to obtain contributions from developers towards local infrastructure.
The current system whereby local authorities receive contributions towards local infrastructure from property developers includes the community infrastructure levy and Section 106 agreements entered into as part of the planning process. These can include financial contributions towards infrastructure such as roads and utilities, and commitments to incorporate beneficial characteristics into a development, such as a certain percentage of affordable housing. It is considered that neither of these systems gives local authorities a fair share of the uplift in the value of land arising from development. They also give rise to uncertainty for developers and local authorities. The Government has announced that the system is to be reformed to enable local authorities to capture a greater share of the uplift in land values to fund infrastructure and affordable housing.
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