THESE ARE SOME OF THE PROPOSED CHANGES WE ALREADY KNEW ABOUT …..

Some proposed changes which were announced by the Chancellor in the 2016 Budget and Autumn Statement and which appeared in our previous summaries are due to be enacted.

Income Tax: Benefits in kind

Draft Finance Bill 2017 clauses having effect from the 2017-18 tax year allow an employee to make a payment in return for a benefit in kind and reduce the taxable value of the benefit as long as the payment is made by 6 July in the following tax year.

There are also draft clauses clarifying existing legislation so that employees will only be taxed on business assets for the period the assets are made available for private use and removing the tax charge on certain legal costs and costs of pension advice borne by employers.

Income Tax: Property and trading income allowance

The draft Finance Bill 2017 introduces two new income tax allowances of £1,000 each for property and trading income. Individuals with income below the level of the allowances will no longer need to declare or pay tax on that income. If income exceeds the relevant allowance then the individual may choose to pay tax on the amount by which income exceeds the allowance. The trading income allowance will also apply to certain income from providing services or assets.

Income Tax and National Insurance: Salary sacrifice schemes

The proposed changes affecting salary sacrifice schemes or “optional remuneration arrangements have been announced and will be included in Finance Bill 2017. The new measures, to take effect from the 2017-18 tax year, are intended to ensure that most benefits provided as part of a salary sacrifice scheme will be treated the same as cash income. Pensions, pension advice, childcare, cycle to work schemes and ultra-low emission cars will be exempt from the new rules. Arrangements in place before April 2017 will be protected from the new rules for up to a year and arrangements involving cars, accommodation and school fees will be protected for up to four years.

Taxation of investments

Draft Finance Bill 2017 clauses will allow taxpayers to apply for a recalculation of “wholly disproportionate” taxable gains arising on some surrenders and assignments of life insurance policies. If successful, the gain will be recalculated on a just and reasonable basis.

Income Tax and Capital Gains Tax: Tax-advantaged venture capital schemes

Draft Finance Bill 2017 clauses include clarification of the pre-arranged exit rules for Enterprise Investment Schemes and Seed Enterprise Investment Schemes. There are also changes to the rules for certain follow-on investments in Venture Capital Trusts with effect from 6 April 2017.

Income Tax and Capital Gains Tax: Employee shareholder status

Draft Finance Bill 2017 clauses confirm that new issues of employee shareholder shares no longer qualify for income tax and capital gains tax reliefs and exemptions

Corporation Tax: Patent Box

Draft Finance Bill 2017 clauses include detailed rules dealing with the tax treatment of costs incurred by two or more companies carrying out research and development under a “cost sharing arrangement”.

Corporation Tax: Contributions to grassroots sport

Draft Finance Bill 2017 clauses include a new tax relief for certain contributions to grassroots sport from 1 April 2017.

Capital allowances

Draft Finance Bill 2017 clauses confirm that expenditure incurred on charging points for electric vehicles will qualify for a 100% first-year allowance. The allowance is available until 31 March 2019 for corporation tax purposes and 5 April 2019 for income tax purposes.

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Income Tax: Increase in cash basis threshold

The threshold for the simplified cash basis of accounting for individuals and unincorporated businesses will rise to £150,000 on 6 April 2017. This was previously announced in a policy paper dated 31 January 2017 but is included again in the Budget announcements. The earlier announcement included details of prohibitions on deductions for specific items of capital expenditure including land, cars and items which are not depreciating assets.

TAX FREE CHILDCARE SCHEME STARTS 2017

The chancellor also announced that the new tax-free childcare scheme is due to start in 2017.

The scheme will provide up to £2,000 a year in childcare support for each child under 12 where the parents save in a special account. If they save £8,000 the government will top up the account with 20% to a total of £10,000 which can then be used to pay for childcare costs.

BUSINESS RATES RELIEF FOR SMALL BUSINESSES

There has been much lobbying from the small business sector to reduce business rates. The Chancellor stated that 600,000 small businesses currently benefit from small business rates relief.

He also announced that no small business that is coming out of small business rates relief will pay more than £600 more in business rates this year than they did in 2016/17.

In order to support the licenced trade from April 2017, pubs with a rateable value up to £100,000 will be able to claim a £1,000 business rates discount for one year.

CHANGING YOUR ACCOUNTING DATE CAN ALSO DELAY THE START OF DIGITAL REPORTING

A way of delaying the start of Making Tax Digital (MTD) would be to change the year end of your business. The legislation in the latest Finance Bill specifies that MTD will apply to accounting periods commencing on or after 6 April 2018.

This means that if you currently prepare accounts to 30 April then the first quarterly update to be submitted to HMRC will be for the period to 31 July 2018. However, if you changed the accounting date of your business to 31 March then the first quarterly update would be for the period from 1 April to 30 June 2019.

Contact us to discuss the full tax implications of such an action.