Budget 2017 Highlights

 

Personal  

Draft legislation released in January contained details as to how the previously announced “untangling” relief provisions would operate.

UK resident non-UK domiciled individuals (“non-doms”)

Changes to the taxation of non-doms will take place as planned with effect from 6 April 2017.

These new rules will allow non-doms to separate overseas mixed funds into their constituent parts to provide certainty as to how future remittances to the UK will be taxed. This is an important relaxation for longer-term non-doms with old offshore mixed funds. Contact us for more information on how we can help you.

Making tax digital (“MTD”)

It has been announced that unincorporated businesses, self-employed individuals and landlords with turnover of less than the VAT threshold (due to increase from £83k to £85k for 2017/18) will not be required to file quarterly returns under MTD until April 2019. Those with turnover exceeding the VAT threshold will still be brought into MTD from April 2018. Those with turnover of less than £10k are confirmed as exempt from MTD. However, employees with secondary self-employment or rental income of more than £10k will be required to file under MTD.

Corporate

Corporation Tax rates

The Chancellor recommitted the government to reducing the rate of corporation tax to 19% from 1 April 2017, making it the lowest rate in the G20, and to 17% by 1 April 2020.

Research and development (“R&D”) tax review

In its commitment to increase the level of investment in science, the government intends to make administrative changes to the Research & Development (R&D) Expenditure Credit to increase certainty and simplicity around claims. This should reduce the compliance burden and encourage more companies to claim this valuable relief.

Interest deductibility

As anticipated, rules will be introduced from April 2017 which will limit the deductibility of interest expense. Groups will need to apply a restriction to interest of 30% of a group’s UK EBITDA or, if more favourable, the ratio of interest to EBITDA of the wider group could be applied. This introduces added complexity to legislation which already includes a number of restrictions regarding interest deductibility. However, the new legislation should only affect the largest groups as there will be a de minimis annual limit of net UK interest expense of £2m before the restriction applies.

Non-resident companies  

The government will consult on whether offshore companies with UK source income and gains will be brought within the charge to corporation tax. The Budget notes suggest that non-resident corporates could also be brought within the charge to corporation tax on certain gains. Offshore structures which are currently subject to UK income tax may therefore need to calculate their tax liabilities by reference to the corporation tax rules including rules on interest deductibility and the utilisation of losses.

Contact us for more information on the Budget 2017 and how it could impact your business.

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