Amongst the Queen’s Speech a couple of weeks ago were details of the next Budget, which was due to take place on the 6th November 2019 (however, it has no been postponed until there is more clarity, with a potential general election and Brexit delay). I am sure that the spin from this will be to show that the current government is interested in more than just Brexit and it will probably contain some adjustments to the tax system, however we suspect that the Budget will mostly be about investment to support the economy during the transition out of the EU.

With the continued uncertainty about what will actually happen on the 31st October, some are saying that the Budget may even be delayed.  The following thoughts on what the Budget may contain are therefore assuming that it actually takes place – but even this prediction isn’t guaranteed! Excellent start!

Property Tax

Capital Gains Tax (CGT) on the sale of residential property to be paid within 30 days of completion after April 2020.

Currently when you sell a property the CGT payable is included on your tax return for the tax year in which the sale was made and the tax is payable by the following January.  You therefore could have anywhere between 9 and 21 months to pay your liability. A change was intended to be made law in 2019 but, like many of these changes, was delayed for a year.  From April 2020 HMRC’s digital system should be set up to deal with this and the CGT will no longer be payable via self-assessment, but instead within 30 days of sale, the same as it currently is for non-UK residents.

Restrictions may be imposed on Principal Private Residence (PPR) and Lettings Relief from April 2020.

PPR is essentially a tax relief that means you can sell your own home and have no capital gains tax to pay.  If you have a property that you only lived in for part of the time owned then the PPR relief applies to exempt part of the gain on selling the property.

At the moment, if you live in a property for only part of the period of ownership HMRC will allow the last 18 months to be exempt under PPR relief.  This means you can effectively get an extra 18 months of the gain tax free even if you were not living in the property at this time.  For example, if you lived in a property for 5 years moved out but it took another year and half to sell the property then the sale would still be completely free from capital gains tax (CGT).  HMRC are now however looking to reduce this tax free period from 18 months down to just nine.

There also looks to be severe restrictions on lettings relief which would see this relief being unavailable to most people.  Previously this could save up to £11,200 of capital gains tax per owner on properties used as the main home prior to being rented. Consultation doesn’t mean that it will necessarily happen this budget though as things often change as they go through the process of becoming tax law.

Offshore property companies to pay UK tax. 

To prevent property developers using offshore structures to avoid paying UK tax on a UK situated property, legislation will be amended to introduce new rules and charge UK tax on such companies.  From April 2020 UK Property income and gains received by non-resident companies will be subject to UK corporation tax.  A new taskforce dedicated to finding such structures and charging the UK tax will also be set up.

VAT

Domestic Reverse Charge

This month was supposed to mark the start of a new VAT system for the construction industry however the changes were delayed.  This is currently scheduled to be implemented in October 2020.  Hopefully the budget will give greater clarity as this has the potential to cause some serious cashflow issues for our clients in the construction industry.

Business Tax

IR35 changes squeezing the private sector 

Public sector reforms which are already in place will be extending to private sector from April 2020, but only where the engager (end customer) is a medium or large organisation.  Effectively this means that anyone contracting via a limited company will find it harder to find contracts that don’t require a permanent employment position.  This is because an organisation that meets the criteria for a medium or larger company will be under pressure from the tax system to not engage anyone using a personal service company.  Small companies that contract work to personal services companies will not face the same pressure for the moment.

Business rates revaluation changes

Intended to be at least once every 3 years and the revaluation date is to be brought forward one year to 2021.

Inheritance Tax

Possible changes to the IHT rules have previously been announced and marketed as ‘making things simpler’ but from our review of the consultation it will likely increase the tax cost for many estates!  A lot of arguments have been raised by various professional bodies about the proposals.  We shall see if the budget announces any progress on this or if they postpone these changes to when the threat of an election is less likely.

These are just a few predictions and rumours of what will be included in the Budget 2019. Make sure you are subscribed to our Budget newsletter mailing list to get our analysis of the tax changes on Budget day. Sign up below.

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