Finance Bill 2019: Proposed tax changes

Parliament
iStock_Majaiva_AW
Share this content

On a hot Friday afternoon in July, HM Treasury published 226 pages of draft tax legislation, alongside 143 pages of explanatory notes. Rebecca Cave has heroically waded through this bumf to bring you the highlights and surprises.

This is the draft Finance Bill 2018-19, which will become FA 2019, when it is passed in March 2019, so the new law can take effect from 1 April 2019 or a later date.

The formal consultation on these proposals is open until Friday 31 August. However, the draft provisions could be subject to changes announced in the Budget in November 2018, or as a result of representations made during this consultation period.

There is list of supporting documents for the Bill, which groups together the draft provisions, explanatory note and the technical note for each policy change.

MTD penalties

My first scan through the draft Bill was to seek out any further MTD provisions, but the only changes in that area relate to penalties for late submission of MTD reports and late payments of tax (Finance Bill part 3, schedules 11 and 12).

Late filing

The technical note: late submission penalties confirms that a points based penalty system will be imposed to encourage taxpayers to submit their MTD reports for income tax and VAT on time. This system will work much as I outlined in March in response to the consultation paper.

Points will be given for each late report. When the number of points breaches a set threshold (which will vary according to MTD obligations), a financial penalty will be charged for subsequent failures.

Points will expire after a period of good compliance. HMRC will have the discretion not to apply points, for example when the software fails. The taxpayers will be able to appeal against points and penalties through their online digital account, but its not clear whether tax agents will be able to do this on behalf of their clients.

In time this points system will be expanded to other taxes and duties including corporation tax, as the government intends to bring corporation tax within the scope of MTD at a later date.

Late paid tax

The policy document: interest harmonisation and sanctions for late payment relates to income tax, corporation tax and VAT. The new interest charges should replace the surcharge system for VAT from 1 April 2020, and it will be introduced for the other taxes at a later date.

Rent a room relief

The government believes that rent a room relief is being abused, as some people think this relief can be claimed for properties entirely let out for holiday or short term lets – it can’t.

The relief is retained at its currently level of £7,500 per year, but an additional condition will apply from 6 April 2019 such that the taxpayer must be present in the property for all or part for the time for which the room is let out.

This rules out letting the whole house while on holiday, but taking short holidays during a period of long term letting to a lodger will not break the conditions of the relief.

Benefits in kind

Electric vehicles

A clarification of the law regarding charging of electric vehicles by employees at work was promised in the 2017 Budget, but the required legislation wasn’t included in FA 2018.

The law will now be changed with retrospective effect from 6 April 2018, so that employees who charge their own electric or hybrid vehicles at or near work won’t be subject to a benefit in kind.

This tax exemption won’t apply if the employer reimburses the employee for the cost of charging the vehicle at another location. Charging company provided electric vehicles at work does not generate a benefit in kind as electricity is not “road fuel” for the car benefit rules.

Emergency vehicles

When employees in the emergency services keep their work vehicles at home, they may be taxed on the provision of the vehicle under the use of assets rule.

The law will be changed with retrospective effect from 6 April 2017 so use of assets does not apply to emergency vehicles. Also, the employees won’t be taxed on the benefit of fuel used in the vehicle to travel to work when on call.

Benchmarked expenses

There are a number of benchmarked expenses rates for subsistence while travelling for business in the UK and abroad, such as the £5 meal allowance.

Amounts reimbursed to employees within those rates are free of tax and NIC, but the employer is supposed to ask for evidence of amounts spent. From 6 April 2019 employers will not be required to check receipts provided by employees, but they will be expected to check that the employee has undertaken the qualifying business journey.

OpRA rules for cars

The salary sacrifice rules (OpRA) for taxing the amounts forgone when receiving the benefit of a company car or van contain two anomalies.

At present the connected costs of providing the vehicle such as insurance are ignored, and the capital contributions made by the employee to the cost of the car can be overstated, as that amount is not apportioned over the tax year. These anomalies will be removed from 6 April 2019.

Capital gains

Entrepreneurs’ relief

As proposed at the Spring Statement the entrepreneurs’ relief rules are to be changed where additional equity funds are raised by the company on and after 6 April 2019, to allow the company founders to continue to qualify for the relief even if their shareholding has slipped below 5%. Tax advisers will have to be aware of the need to make elections to retain the relief or defer the gain. Another legislative trap for the unwary.

Payments on account

The government had proposed a 30 day deadline for paying CGT arising from the disposal of residential property. On first sight it appeared that objections were listened to as the headline refers to payments on account within 60 days.

However, reading the detail of the proposal and draft law it is apparent that the payment window will be set at 30 days from completion date for disposals of residential property, made by any person, on and after 6 April 2020.

A CGT return will be required to be submitted within the same 30-day period. This return will be independent and additional to the self-assessment return, and HMRC will be able to enquire into to it separately.

So double the paperwork and tighter payment deadlines – that’s tax simplification!

Non-residents

Non-resident persons (individuals, close companies and trusts), who are not already registered with HMRC for self assessment, corporation tax or ATED, currently have to pay their non-resident CGT within 30 days of completion for disposals of residential property.

The scope of CGT for non-resident persons is to be expanded to cover all gains made from UK real property: commercial and residential, for disposals made on and after 6 April 2019.

The 30-payment deadline will be applied to all CGT arising from UK property disposals made by all non-residents, with no exemptions for non-close companies. It will no longer be possible to defer the payment of CGT until the self assessment tax return is due. ATED-related CGT will be abolished (hurrah!).

Other proposals

The following proposals will also advance tax payments or the requirement to pay in advance of tax liabilities:

  • Reduction in the payment deadline for SDLT from 30 days to 14 days for transactions made on and after 1 March 2019 (why March?).
  • HMRC to be permitted to ask for security deposits for corporation tax and CIS deductions from 6 April 2019.

The time given for HMRC to raise assessments will double from 6 years to 12 years, where the source of the tax is offshore assets or offshore income.

Unsurprisingly the period available for the taxpayer to submit claims or elections is not extended beyond the usual 4 years. This HMRC power is retro-active as it applies to transactions arising in 2013/14 and later years.

 

About Rebecca Cave

Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.

Replies

Please login or register to join the discussion.

avatar
09th Jul 2018 10:03

The taxpayers will be able to appeal against points and penalties through their online digital account, but its not clear whether tax agents will be able to do this on behalf of their clients...

As the ones most likely to default will be those who don't understand or are unwilling users of MTD, this has a lot of potential to backfire badly and tie up the appeals process.

Most clients won't set up an online digital account. They have ZERO interest and even less incentive to do so. Being forced to do so doesn't mean many will use it, and even less likely are they to use it to do anything.

I wonder if HMRC have done any research on how much bigger the black economy will become as a result of MTD, as people decide it's all too much work and just drop out.

Edit: And are we supposed to now keep our client's log in details for these digital tax accounts too so we can access them? I have no interest in doing so. Without agent access from a central portal these digital tax accounts will be a mess.

Thanks (11)
avatar
to Ian McTernan CTA
09th Jul 2018 12:53

Are you not aware that the MTD rules do not allow us agents to log into our clients' Digital Tax Accounts?
Streng Verboten!
You couldn't make it up.

Thanks (2)
By bigugly
to Ian McTernan CTA
09th Jul 2018 17:15

Keeping clients' details would be a breach of GDPR

Thanks (0)
to bigugly
10th Jul 2018 09:53

What is GDPR?

Thanks (0)
avatar
to JCresswellTax
11th Jul 2018 12:00

I sincerely hope that you are being ironic.

Thanks (0)
avatar
09th Jul 2018 10:48

Ian thanks for summing up my views entirely. We are heading into a two tiered system where those with agents will comply and those without may or may not.

HMRC need to get the agents dashboard working pdq or else its workload is going to increase further.

The tinkering as covered by Rebecca Cave is not going to work effectively if we cant have access that our clients do.

Thanks (2)
to pauljohnston
09th Jul 2018 13:27

HMRC first promised the Agent Dashboard back in 2012 so it's 6 years late already.

Thanks (2)
avatar
to kevinringer
10th Jul 2018 20:02

Anybody know what the penalty is for being 6 years late? Sorry, silly me, half watching the game.

Thanks (0)
09th Jul 2018 10:53

30 days to file a CGT return is going to 'interesting' from two fronts:

1. Educating clients to come to us well before completion, ie at the offer accepted stage to ensure things like the purchase completion statement is available and any issues have been resolved in the computation.

2. Currently agents are excluded from completing the 'instant' CGT returns in the first place.

Thanks (0)
avatar
By tedbuck
09th Jul 2018 10:59

Here we go again, more work that achieves nothing, more time wasted on appeals, more staff needed by HMRC, more taxpayers' money to pay for it, more IT contractors needed by HMRC, more problems because IR35 will send them elsewhere, more chaos in the name of digitalisation which HMG rarely seem to get right. Dtill I suppose that it is more data that they will be able to lose, sell or otherwise exploit. Cynical? Not me just the results of experience.

Thanks (5)
avatar
By Ammie
09th Jul 2018 11:37

Demonstrates again how detached HMRC and HM Government are from the real world.

The reality of the repercussions will be surprising for them and they will have a whole lot more to deal with to resolve, which I anticpate will take a very long time.

Accelerated tax receipts are fine if all runs smoothly, but as has been alluded to, the holes that will appear in tax revenues will be material, cue tax rises and more Brexit blame!!!

Thanks (3)
avatar
09th Jul 2018 11:51

HMRC seem to be of the view that locking out agents will generate more tax as we are 'evil' and encourage clients to not pay tax. What they are failing to realise is we are doing all of the flipping work and excluding us will only make MTD a shambles!
If we are helping our clients and have full access we can fix problems. We are the best hope of making this work.

Thanks (6)
avatar
By HLB
09th Jul 2018 11:57

Where are you ICAEW, ACCA et al? If this were France we would be on the streets protesting by now! Perhaps that is the only way HMRC will listen.

This whole digitisation process has been a mess. I went through the last major change when the system moved to self assessment. Agents were given explanatory manuals (I still have mine), training at the local tax office (we had one then) and the change was well advertised with Hector the Inspector appearing regularly in newspapers and on TV. At the moment no-one seems to know what is going on which is pathetic and does not bode well for the future of the tax system.

Come on professional bodies. Get a grip and fight our corner and be seen to be doing so. It will be for everyone's benefit.

Thanks (10)
avatar
09th Jul 2018 12:08

Shouldn't they make sure MTD actually works before working out penalties for "misuse"? Real time PAYE still doesn't work properly, tax return software still has errors.. etc.. Seems to me a half arsed rushed through cash cow.

Thanks (7)
avatar
to jamiea4f
10th Jul 2018 02:21

Some anecdotal fuel.

Closing down my PAYE scheme took over 9 months because a missed return resulted in £1 of HMRC assessment of PAYE for the missed period. All the while the scheme was in credit for £250.

No returned calls, no response to letters. It required a steadfast refusal to be hung up on or called back on a 2 hour call to fix and close the scheme.

Sadly technology is being seen as an alternative to competent staff and is accompanied with an assumption that there are no edge cases and no non conforming routes through the system.

Thanks (1)
avatar
to jamiea4f
10th Jul 2018 20:00

It’s just a matter of priorities and HMRC have at least made theirs plain to see.

Thanks (0)
avatar
By tedbuck
09th Jul 2018 12:51

Interesting that the general tenor of this thread seems to be that HMG and HMRC are out of touch and pretty incompetent and that the ICAEW etc. are just sitting on their hands and weeping quietly to themselves so as not to upset HMRC. I suppose they are a bit detached from reality as well - I don't suppose many of them have to deal with HMRC at ground level.

The same claptrap applies to auditing and accounts production. What is the point in producing accounts to clients that have to be preceded at interview with the statement that only 5 pages matter and the rest is drivel produced by some person somewhere with nothing better to do than write notes that are not in comprehensible English and mean absolutely nothing to the reader. Didn't we have all this before with inflation accounting?
One really wonders what these bodies are really for. They certainly haven't done much for large firms' auditing standards but I bet they are beautiful box-tickers. And we do have these wonderful accounting standards for those who want them. (I have yet to meet one of those people!)

Thanks (6)
09th Jul 2018 13:29

So this Bill will become law in March 2019. I wonder when? The 19th perhaps. There's not much else happening then.

Thanks (3)
avatar
09th Jul 2018 14:04

"HMRC to be permitted to ask for security deposits for corporation tax and CIS deductions from 6 April 2019"

Must have missed this, please expand?

Thanks (0)
11th Jul 2018 21:51

Excellent summary Rebecca, well done.

Thanks (1)
avatar
12th Jul 2018 15:53

Stacking shelves at Morrison's looks ever more attractive!

Thanks (0)
avatar
12th Jul 2018 15:53

Stacking shelves at Morrison's looks ever more attractive!

Thanks (0)