2019/20 tax year: business tax rate changes and allowances

A roundup of all the business tax changes which come into force from the 2019/20 tax year including, reforms to the apprenticeship levy, Making Tax Digital for VAT becomes effective and deferral of exit charges under capital gains tax

VAT

Making Tax Digital for VAT

Making tax Digital for VAT is effective from 1 April 2019 however, companies will not have to file their first digital VAT return under Making Tax Digital for VAT until 1 July at the earliest.

VAT threshold

The VAT registration threshold remains at £85,000 for 2019/20.

Tax reliefs

Capital allowances

Special rate pool (SRP) writing down allowance rate reduced from 8% to 6%.

Entrepreneur’s relief

From 6 April the minimum period throughout which certain conditions must be met to be eligible for Entrepreneurs Relief increases from one year to two years.

Apprenticeship levy

From 1 April 2019 the government will introduce a package of reforms to the apprenticeship levy to strengthen the role of employers, including providing up to £240m to halve the co-investment rate for apprenticeship training to 5%.

Other reforms include raising the amount of the apprentice levy that larger companies can transfer to smaller firms in their supply chain from 10% to 25%.

A further £5m was announced for the Institute for Apprenticeships to introduce new standards and updating existing ones so that more courses can be offered – meaning more choice for those considering their training options. The government will discontinue the old frameworks so that all new apprenticeships will be on the same higher-quality standards by the start of the 2020/21 academic year.

Capital gains tax

Deferral of exit charges under CGT come into force from 6 April 2019. Currently exit charges can arise on unrealised gains when trust ceases to be resident in the UK or when assets cease to be used in a trade carried on through a branch or agency in the UK. From 6 April, in certain circumstances payment of these charges can be deferred. Certain trusts or non-UK resident individuals who satisfy certain tests will be given the option of deferring the payment and paying it over six years in equal instalments.

Cars

Electric charge points allowance

From 1 April 2019, the current 100% first-year allowance for costs incurred on installing electric charge-points will be extended until 2023 to further encourage the take up of electric vehicles. The 100% first year allowance will expire on 31 March 2023 for corporation tax purposes and 5 April 2023 for income tax purposes.

The measure, first introduced on 23 November 2016, is designed to encourage the use of electric vehicles by supporting the development and installation of electric charging equipment.

Van benefit charge

Van benefit charge will increase in line with the Consumer Price Index (CPI) and the car and van fuel benefit charge will increase in line with the Retail Price Index (RPI).

The flat-rate van benefit charge will increase to £3,430, the multiplier for the car fuel benefit charge will increase to £24,100, and the flat-rate van fuel benefit charge will increase to £655.

The changes will have effect on and after 6 April 2019.

Pensions

State earnings related pension scheme (SERPS)

Due to the end of financial reconciliations for old contracting-out pensions, there are important changes for pension scheme administrators.

For schemes in deficit following financial reconciliation, HMRC will send out letters week commencing 1 April 2019 and the payment deadline will be 21 May 2019 at the latest.

For schemes with more than £1,000 deficit, HMRC will write off debt that was raised before 4 March 2013, this is six years before the new run date. For schemes in surplus that have agreed steps with HMRC, the refund letters are expected to be issued week commencing 13 May 2019.

Employer premiums

Tax exemption for employer premiums paid into life assurance and overseas pension schemes widened from 6 April 2019. This concerns premiums paid by employers into life assurance products and contributions to qualifying recognised overseas pension schemes (QROPS). These contributions are currently only tax exempted if the beneficiary is the employee or a member of the employee’s family or household.

The changes will allow the beneficiary to be any individual or registered charity without the premiums being treated as a taxable benefit in kind.

Stamp duty land tax (SDLT)

Stamp duty relief for share incentive plans amended for consistency. There is a minor correcting amendment to section 95 of the Finance Act 2001 (exemptions in relation to approved share incentive plans) (‘section 95 FA 2001’) concerning stamp duty and stamp duty reserve tax relief for SIPs. This puts the legislation onto the basis already as operated by HMRC and will not change the basis on which relief is available.

Corporation tax

The corporation tax rate remains at 19% for the 2019/20 tax year. The government plans to reduce the rate to 17% for the 2020/21 tax year.

Profit fragmentation

The government has introduced targeted legislation that prevents UK traders and professionals from avoiding tax by arranging for their taxable business profits to arise in territories where significantly lower tax is paid than in the UK. The taxable UK profits will be increased to the actual, commercial level. This comes into force on 1 April 2019, and HMRC says clamping down on profit fragmentation will bring in £120m.

Report by Amy Austin

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