August 27, 2019 Last updated August 26th, 2019 238 Reads share

Changes Proposed For The 2020 Finance Bill – Are You Prepared?

Proposed Changes 2020 Finance BillImage Credit: Deposit Photos

Potential tax changes proposed for the 2020 finance bill and their impact on you or your business

The Government of UK is working on a number of proposed changes that might come into effect from either the 1st or the 6th of April 2020, however, there is a good chance that the commencement date of the new policies might change to September 2019.

The Finance bill 2019/20 introduced several reforms of which 8 are very important and have been listed below:

1. IR-35 reforms for private sector

Reforms have been introduced in the rules of IR35 for the private sector, the reforms correspond to the changes that were introduced for public sector contracts in April 2019.

If you are unsure about how IR-35 effects you now and in the future speak to competitive contractor accountant.

2. Changes to residence & letting relief

Following changes will come into effect from 6th April 2020, according to the draft law

  • Deemed occupation’s final period has been reduced to 9 months that was previously 18 months
  • The owner can not enjoy letting relief during the period of non-occupation.
  • Deemed occupation to become restricted to 24 months at the start of ownership.
  • Whilst transferring property ownership to spouse, exemption history not to be transferred
  • Clarification of late claims made for nomination of the main residence

Letting reliefs is usually enjoyed by people who decide not to sell their property but instead prefer to rent it out as they plan to move up the ladder. A total of £ 40,000 per property can be enjoyed through letting relief by property owners.

As a result of the policy changes that will come into effect from April 6, 2020, many people will be barred from claiming to let relief, and even those who have been accruing their relief for some time will not be able to enjoy the perks anymore, as the policy suggests that dispositions will not be available on the gains attributable on the disposal made before and after April 2020.

Many owners who have to leave their residence due to unexpected or unforeseen circumstances, for instance, admission to hospital due to an illness, will be affected by the reduction in the final period of deemed occupation. For the individuals moving into residential care or facing disability, the final period of deemed occupation still stands at 36 months.

If you are thinking about disposing of a property and would like to know how that above might impact you speak to a skilled tax accountant or a chartered accountant.

3. Changes in anti-avoidance legislation (insolvent companies)

According to the anti-avoidance legislation of the finance bill, there have been changes introduced in the general anti-abuse rule (GAAR). These changes will allow the extension of the time period needed to collect evidence to make a GAAR adjustment by HMRC.

The changes made in the anti-avoidance legislation and the penalties determined will come into effect for tax periods that will end on or after the finance bill 2019/2020 has successfully passed.

Whilst some amendments have been aimed at demoralizing companies for their lack of commitment to pay tax debts, one of the major amendments in the anti-avoidance rule revolves around companies who are tangled in the insolvency procedure, as previously, it was witnessed that many insolvent companies avoided or evaded their payment of taxes.

According to the changes, the owners of the company have to make sure they clear the tax debts owed by the company regardless of the insolvent status of the company. These changes are subject to the following conditions:

  • Methods of tax evasion and tax avoidance have been considered and used by the company
  • The owner of the company is responsible for his/her act and had possible personal motives behind this act.
  • There is a high probability that tax liabilities will not be paid on time.
  • Tax evasion or tax avoidance resulted from a liability that has not yet been paid.

A competitive accounting firmbusiness accountantaccountant or online accountant should be well suited to help you figure out the best way to clear all your liabilities and close your company in the most effective way.

4. Increase in digital sales tax

According to the amendment suggested for digital sales tax, search engines, social media platforms and online market forums that benefit from users in the UK, will be charged an additional tax of 2% on the revenues that they earn after 1st April 2020. However, this tax is applicable if the entities generate more than 25 million in the UK of the 500 million generated by the group.

It is advisable to speak to an Accountant to start preparing for this change if expect that you will be impacted by this new rule.

HM Treasury is required to assess the operations of digital sales tax (DST) by 31st December 2025.

Finance bill

5. Scope of claiming CGT and income tax relief broadens

If we shed light on the existing rules of “Loans to traders” and “share loss relief”, we witness that the capital gains tax relief (CGT ) and income tax relief could be claimed for the investments made into the businesses or companies that are only located in the UK.

The judgment on 24th January 2019, ruled that the UK rule that limits the scope of claiming the relief only on investments in UK companies opposed the EU rules that allowed free movement of capital.

The proposals presented in the Finance Bill 2019/20 will make the relief applicable to investments that have been invested anywhere in the world.

6. Exemption of medical courier vehicles

Medical courier charities that use blood bikes and other vehicles to carry medical supplies in an emergency are now exempted from vehicle excise duty (VED) or road tax. Previously, only vintage cars and emergency vehicles such as police and ambulances were exempted from vehicle excise duty (VED).

7. Increase in stamp duty land tax SDLT

Recently, Professional bodies demanded that stamp relief claims on the demerger of unlisted companies and arrangements made for the reduction of capital should be made viable.

After consideration, the additional charge of 1% for stamp duty land tax SDLT imposed on non-residents on the purchase of property in the UK has finally been abolished.

8. Compensation exemption from two additional types of taxes

Compensation payments are provided to people by the government who have been wronged by them in some way. These compensation payments will now be exempted from:

  • Kindertransport compensation for Inheritance tax (IHT)
  • Windrush compensation for income tax, capital gains tax (CGT) and inheritance tax (IHT)

Finance Bill – Deposit Photos

Thao Le

Thao Le

Thao Le is a Senior Accounting Manager at Clear House Accountants. Having worked and grown in the industry for a number of years she is now responsible for a team of accountants, tax planners and bookkeepers, working with them to help clients from a variety of industries, grow, save money and plan for the future. Thao holds a Bachelor and Masters degree in Accounting and Finance and is currently working towards her ACCA, she is also a Xero and Quickbooks Certified Advisor. Thao believes her expertise lies in high-level tax planning, management accounting and strategic business planning based on financial performance and business analytics. Her experience, expertise and knowledge make her an exceptional contributor at clear house towards various articles and research content.

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