There have been a number of recent tax changes culminating in last months’ new Finance Bill, bringing together proposals from the Government’s announcements of the past year, including the Budget 2014, Autumn Statement on 3 December 2014 and the Budget 2015. The Bill is more than 600 pages incorporating a number of volumes, clauses and schedules and, as such, is a complex and challenging read.
We have, therefore, summarised below those items which appear to have more significance for you, and the legal sector as a whole, with regards to both your professional and personal life.
Company cars: Most employers avoid providing their staff with motor vehicles due to the high benefit in kind charges, but the accelerated rate of banding charges introduced in this Bill will make even the remainder think again.
Corporation Tax: The long heralded full corporation tax charge at only 20% now has effect for the second year running (2016/17), bringing more certainty for international businesses.
Benefits in Kind: Minor changes have now been implemented affecting small benefits, which no longer need to be reported if provided to your employees.
Remittance Basis charge: If you have non-UK domiciled clients (or indeed are non-UK domiciled yourself), be aware of the new bandings and charges based upon the length of UK residence. Care in calculating the number of years will be particularly needed for those that have previously left the UK and returned.
Intangible fixed assets: If you are involved with client mergers and acquisitions, or indeed the incorporation of your own practice, be aware that post 2002 goodwill acquired by a company from a related party no longer qualifies for intangible assets relief.
Carry forward losses: When advising your clients on reconstructions, be aware of the further anti-avoidance measures restricting the use of carry-forward losses, whether trade related or otherwise.
Pensions: The new flexibility rules affecting how funds may be drawn down will undoubtedly be an issue close to home for most solicitors. Also being able to pass on annuities tax-free like pension funds following a death are to be welcomed.
Residential property: In addition to the new stamp duty land tax rates, be aware of the restriction to the Principle Private Residence Relief for Capital Gains Tax (CGT) as well as the new CGT rules affecting disposals by non-residents and the new lower bandings of the ATED (annual tax on enveloped dwellings) charge.
CGT wasting assets: Following the recent Castle Howard case that hit the headlines, it was no surprise HMRC introduced new regulations. Nevertheless, most private client solicitors will be looking to structure the ownership of old masterpieces so they are not caught.
CGT Entrepreneurs’ relief: Most private client solicitors will welcome the clarification of when the disposal of an associated asset will qualify for 10% CGT for their clients, but will be disappointed by the new restriction for goodwill disposals to connected parties. This will also have a direct effect if you have not already incorporated and are considering doing so.
Finally, the door has been closed on structures used to create the 5% qualifying holding through joint ventures etc. where individuals had an indirect involvement of less than 5%.
Plant and machinery allowances: Whilst the Chancellor muddied the waters by promising a review, the law says the Annual Investment Allowance, whereby firms and their clients can obtain 100% capital allowances for capital expenditure of up to £500,000 pa, is due to reduce on 31 December 2015 and become a mere £25,000 pa. Now is the time to implement plans to qualify for the enhanced relief and those with year ends straddling 31 December need to be aware of the potential restriction.
Inheritance Tax: Perhaps many will have breathed a sigh of relief that the introduction of a single settlement nil-rate band will no longer be implemented, but await further anti-avoidance rules on the use of multiple trusts. Hopefully the further review on the use of deeds of arrangement will not get far, as before.
Diverted Profits Tax: This new regime came into effect on 1 April of this year for large groups or companies and as well as an additional 25% tax this spells further administrative burden.
National Insurance Constributions (NIC): Have you claimed your £2,000 employer allowance and considered employing under 21 year olds to benefit from their NIC exemption?
No doubt with the impending General Election on 7 May this year, further changes will be made, regardless as to which party or parties are elected. We will, of course, update you again on these and future changes in due course.
If you would like to discuss any of the changes detailed above, or any other tax matter, in relation to your specific personal circumstances, please get in touch with your usual UHY adviser or contact on of our legal sector specialists, below.