Now that the certainty of Brexit has been determined, perhaps now is a good time to think about the tax changes coming into effect in April 2020.
The Chancellor of the Exchequer is expected to deliver his post-election Brexit budget in the early part of 2020.
Company taxes
The corporation tax rate was due to be reduced to 17% from April 2020 but this reduction has been postponed until at least 2020-21 and therefore, companies will have to factor in the higher rate of tax 19% in long term forecasts.
However, there is some good news for Non-resident companies letting UK property as from April 2020 they will fall under the corporation tax regime. Therefore, tax on UK rental income will be liable at 19% rather than 20% currently under the self-assessment system.
For small companies, the government intends to reintroduce a cap on the research and development credit for small and medium-sized enterprises (SMEs). Currently the amount of tax credit that can be received by a qualifying loss-making business is 14.5%. For accounting periods beginning on or after 1 April 2020, the R&D tax credit is intended to be limited the company’s total PAYE and NIC liability payable during that accounting period. See also https://www.fkgb.co.uk/research-development-tax-credits/
From April 2020, the government will likely introduce a new Digital Services Tax of 2% on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users.
A key change from April 2020 is that there will be more of an onus on private sector businesses to take responsibility for compliance with IR35 rules (in the same way that public sector businesses have since 2017). Thereby, consideration should be given to the relationship between the company and the subcontractor as to whether the worker a “deemed employee”.
In short, where a deemed employment relationship exists, the company may have to deduct PAYE and NIC from the payments made to the worker’s personal service company. See also https://www.fkgb.co.uk/ir35-hmrc-increasedscrutiny/
Personal Taxes
One of the main tax changes for individuals from April 2020 is to capital gains tax (CGT) reliefs and, in particular principal private residence (PPR) relief on the sale of an individual’s main home.
Currently the last 18 months of ownership is always deemed to qualify as occupation of the home for the purposes of the relief. However, this will be reduced to the last nine months of ownership for sales of residential property after 5 April 2020.
From 6 April 2020, lettings relief will only be available for those periods where owners live in shared occupation with their tenants. Therefore, where the owner is not living in the property relief is not available. Previously letting relief of up to £40,000 (£80,000 for a couple) could be given against the capital gain where landlords who rent out their main residence and then sold it. See also https://www.fkgb.co.uk/changes-to-principal-private-residence-relief/
