The rate of the R&D expenditure credit is being increased from 11% to 12%, in order to support business investment in R&D. This is the relief available to those companies that do not qualify for the more generous relief available to SMEs.
The VAT registration limit normally increases in line with inflation each year, however the limit has been frozen at £85,000 until 1 April 2020. At the same time the deregistration limit remains at £83,000.
There had been rumours that the VAT threshold would be reduced so that more businesses would be required to charge VAT on their sales. The UK currently has the highest VAT registration threshold in Europe.
Note that the introduction of Making Tax Digital (MTD) for VAT in April 2019 will apply to those businesses above the registration limit. Freezing or reducing the threshold will bring more businesses within the scope of MTD.
The Government will double the amount that an individual may invest under the EIS in a tax year to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies.
The annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs will be increased to £10 million from the current limit of £5 million. The lifetime limit raised by such companies will remain the same at £20 million.
Company car benefits are based on CO2 emissions data which has encouraged employees to choose diesel cars due to lower CO2 emissions. The government is trying to reduce the number of diesel cars and will increase the current 3% diesel supplement to 4% from 6 April 2018.
As previously announced radical changes to the company car benefit rules are being introduced in 2020. The benefit in kind for electric cars and hybrid cars with a range of 130 miles or more on the electric motor is being reduced to just 2%. That means that the taxable benefit for such a car with a list price of £30,000 would be just £600 a year. Where the employer allows staff to charge their own electric car at work there will be no taxable benefit.
The Chancellor reminded us that the government are committed to increasing the personal allowance to £12,500 in 2020 and the higher rate tax threshold to £50,000. However, the personal allowance for 2018/19 was only increased in line with inflation to £11,850 and the higher rate threshold to £46,350.
Note that up to 10% of the personal allowance (£1,185) may be transferred from one spouse or civil partner to the other if unused and the transferee is a basic rate taxpayer. This transfer will now be available on behalf of deceased spouses and civil partners, and the claim may now be backdated for up to four years where the entitlement conditions were met.
In an attempt to help first-time buyers get on the property ladder and stimulate the housing market the chancellor announced that for property purchases completed on or after 22 November 2017 there would be no SDLT payable if the purchase price is below £300,000.
This will be a permanent measure rather than a temporary holiday. Those claiming the relief will pay no SDLT on the first £300,000 of the consideration and 5% on any remainder. No relief will be available where the total consideration is more than £500,000. It should be noted that where a property is bought in joint names it must be the first property owned by all purchasers.
The Annual Allowance charge is calculated on the excess of contributions over the ‘pension input amount’ during the ‘pension input period’. From 6 April 2016 pension input periods are aligned with tax years.
The pension input amount is the combined contributions to all of the individual’s registered pension schemes, made by the individual, their employer or any other person on behalf of the individual.
For money purchase, defined contribution arrangements, the pension input is the number of actual contributions paid. For tax relievable contributions it is the ‘grossed up’ amount that is added in calculating the pension input amount, even where the individual did not qualify for the relief, for example, they had insufficient Net Relevant Earnings. Employer contributions are always gross.
Defined benefit arrangements increases in value during the pension input period are included in the total pension input amount, after adjusting for debits or credits to the arrangement for the year.
The Annual Allowance charge is applied to the excess contributions over the individual’s Annual Allowance for the tax year at their marginal income tax rate (i.e. 20%/40%/45%).