12 March 2020

UK Budget 2020 - Tax Highlights

The UK’s first Budget since the government’s agreement to leave the EU officially marks the end of austerity as the Chancellor unveiled a £30bn package to “Get things done” and help the country through the coronavirus outbreak.  But, how will it impact businesses and investors in the UK?

Extra 2% tax for non-residents

Overseas investors in UK real estate should consider making their investments prior to April 2021 due to an additional 2% surcharge in stamp duty land tax arising on UK residential acquisitions by non-residents from that date.

Cut in entrepreneurs’ relief

With immediate effect from Budget day (11 March 2020), the lifetime limit for entrepreneurs’ relief has been reduced from £10m to £1m.  This relief offers a reduced rate of capital gains tax (10%) to UK resident owner managers of certain businesses and is still a significant benefit for most.

Corporation tax reduction cancelled

The proposed reduction of UK corporation tax to 17% will no longer take place in April 2020, so the UK tax rate will remain at 19% for the foreseeable future.

UK as a holding company jurisdiction

The government announced a consultation aimed at removing barriers and increasing the attractiveness of the UK as a holding company jurisdiction in various fund structures.  This consultation will involve a review and possible overhaul of various tax rules, including the following potential changes: an extension of the UK’s beneficial securitisation tax regime to credit funds; relaxing the conditions for the substantial shareholding exemption and possible expansion of the beneficial real estate investment trust regime for real estate funds; and a review of the impact of the UK’s 20% withholding tax regime on corporate interest and the administrative burden required to fall within applicable exemptions. 

Increased allowances and tax credits

From April 2020, UK businesses will benefit from increased structures and buildings allowances, enhanced capital allowances in designated enterprise zones, as well as higher tax credits in relation to research and development expenditure.

Previously planned changes 

Digital services tax – a new 2% tax on revenues from certain digital businesses will apply from April 2020 where such income is linked to UK users.  This tax is expected to be repealed once a global agreement has been reached on the taxation of the digital economy.

Off-payroll working rules (IR35) – rules shifting the responsibility for off-payroll working from the personal service company to the person who would be treated as the employer for tax purposes will take effect from April 2020.  

UK property income – non-UK resident companies in receipt of income from UK property will be subject to UK corporation tax on that income from April 2020, rather than income tax as is currently the case.

DAC 6 – as a reminder to all clients, the so-called EU “DAC 6” Directive has been implemented into UK law and will come into force on 1 July 2020 under which intermediaries (including, law firms) will be required to disclose “reportable cross-border arrangements” to HMRC where the first step was taken after 25 June 2018.  You will be notified in due course if our disclosure obligations relate to you.

If you have any questions about the UK Budget or would like to discuss how any of the measures may affect you, please contact Sam Coleman in our London office.

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