The Chancellor, Philip Hammond, presented his second Spring Statement to Parliament on Wednesday 13th March 2019.
Within his speech, he provided an update on our “remarkably robust” economy, mentioning its ongoing growth, increasing wages and historically low levels of unemployment. Mr Hammond highlighted that there have been nine consecutive years of growth and announced GDP growth in 2019 is forecasted at 1.2%, with further growth predicted over the next 5 years.
The Chancellor also addressed wider economic issues, such as violent crime, and how the Government intend to tackle this.
Maintaining the tax system
In this Spring Statement, the Chancellor announced very few tangible changes to the tax system, although he did launch a number of consultations on various aspects of tax, announced calls for evidence for potential future changes and confirmed changes that have already been announced in previous Budgets.
We have outlined a number of key points that may affect you, both imminently and in the coming months, although more comprehensive information can be found on the government website by clicking here.
- Making Tax Digital (MTD) – In the first step to modernise the tax system, all businesses over the VAT threshold (with turnover exceeding £85,000) must maintain digital records as of April 1st 2019 subject to a 6 month deferral for certain more complex businesses. In the Spring statement, the government confirmed a ‘light touch’ approach to penalties in the first year such that where businesses are doing their best to comply, no filing or record keeping penalties will be issued. As a firm, we are prepared for Making Tax Digital and have already assisted a number of our clients with submitting their information online who have voluntarily opted in to the pilot scheme.
- Structures and Buildings Allowance (SBA) – originally announced in the 2018 Budget, the SBA came into effect from 29 October 2018. The new allowance provides a 2% annual deduction for expenditure on constructing or altering non-residential structures and buildings.
In the Spring Statement, the Chancellor announced a consultation on a number of technical points regarding the allowance with final legislation due in the summer.
The coming months
- Employment Allowance – The Chancellor announced a consultation on the amendment proposed in the 2018 Budget to restrict the Employment Allowance to businesses with an Employers’ NIC bill below £100,000 from April 2020.
- VAT Partial Exemption and Capital Goods Scheme – Following recommendations from the Office of Tax Simplification, the Chancellor announced a call for evidence on the potential simplification of partial exemption and the capital goods scheme to assess whether they are as simple and efficient for taxpayers as possible.
- Review of Time Limits – A report comparing the time limits for the recovery of lost tax involving offshore matters with other time limits will be published by 30th March 2019.
- Social Investment Tax Relief (SITR) – SITR allows investors in certain social enterprises tax relief on their investment. However, the relief has not had the uptake expected and as such the Chancellor announced a call for evidence to try to explain this low uptake level and examine the impact the relief has had on social enterprises.
- Enterprise Investment Scheme (EIS) – Draft guidelines and legislation are to be released for comment on HMRC’s proposed policy and practice for approving EIS funds. The new legislation will include powers for HMRC to set appropriate conditions and approve funds.
- CGT Private Residence Relief – At the 2018 Budget, the Chancellor announced two amendments to the Private Residence Relief available on disposal of an individual’s only or main residence. The first of these is to reduce the final period exemption from 18 months to 9 months and the second to restrict lettings relief to periods where the owner is in joint occupation with the tenant. Both of these changes are due to come in from April 2020. In the Spring Statement, the Chancellor announced a consultation on these changes.
- Research & Development (R&D) Tax Relief – The Chancellor announced a consultation on the measure announced in the 2018 Budget to restrict R&D tax credit repayments to 3 x a company’s PAYE & NIC bill with effect from April 2020.
With the current tax year drawing to a close, taking action now may give you the opportunity to take advantage of any remaining reliefs, allowances and exemptions. We have collated the following document, which outlines a number of areas you may wish to consider, and also highlights a few of the additional upcoming changes which may affect you.
If you have a question regarding any of the issues covered in the Spring Statement, would like advice on a particular area, or have any concerns regarding any other tax related issues, please do not hesitate to get in touch with your usual Smith Cooper contact or one of our Tax Team.