It has been a busy year for the Government with the first Finance Act in spring, with parts of this being subject to a hiatus while the general election was contested. Summer saw the second Finance Act of the year which received Royal Assent last week.
For professional service firms who have a partnership in their structure, we have had the partnership consultation moving forward in the background. It is widely expected that the detail of this consultation will be released on 1 December.
With muted expectations, did we learn anything new from the Chancellor on Budget day?
Innovation and technology are on the minds of many leaders of professional service firms and technical innovation was a key theme in the Chancellor’s speech. His comments about being willing to embrace a new technical age will resonate with many firms who have been considering similar themes in their own businesses for some time.
Tax changes that have been announced include an increase in investment limits for Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) investments that are focused on knowledge-intensive companies. While this change might not impact professional service firms themselves, an increase in the research and development tax credit from 11% to 12% might help those firms who are using corporate entities within their structure to invest internally in change.
For partners, the spring Budget saw the highly debated increase in Class 4 National Insurance contributions (NIC) to 10% and 11% which was followed shortly after by a change which reversed the decision. A few weeks ago it was also announced that the planned scrapping of Class 2 NIC from April 2018 will be postponed. Many had not picked up on this as news of the increase in the Bank of England interest rate stole the headlines. The Treasury has now released documents which confirm this and detail the expected impact on the Exchequer.
The commitment to help increase the number of new homes built in the UK might be of interest to professional service firms in the construction industry, while there are no particular tax points, the implications for the industry no doubt will be widely debated. However, today saw the launch of the consultation on taxing gains made by non-residents on UK immovable property. In summary, this proposes bringing all immovable property into UK capital gains tax for non-residents - an extension of rules that currently only apply to residential property. For businesses whose clients are non-UK resident this may be of some concern especially if their clients invest in commercial property. At this stage it is just a consultation, however, it is expected that there will be changes in the rules from April 2019.
In summary, while there are a few points of interest today many will be keen to find out what wasn’t said. For many professional service firms the devil will be in the detail of the proposed partnership changes. There has been much debate in recent weeks about the commercial impact of the suggested changes to taxable allocations to partners and many will be waiting with bated breath for the further information we are expecting on 1 December.
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