Budget Report 22 November 2017
The Chancellor said, one of the things he loved most about this county is its sense of opportunity. He has always felt it. And he wants young people today to grow up with that same sense of boundless opportunity. In this Budget, he set out a vision for Britain’s future, and the Governments plan for delivering it.
By getting our debt down. By supporting British families and businesses. By investing in the technologies and the skills of the future. By creating the homes and the infrastructure the country needs. He goes on to say, we are at a turning point in our history and the Government resolves to look forwards, not backwards; To build on the strengths of the British economy. To embrace change, not hide from it. To seize the opportunities ahead of us. And, together, build a Britain fit for the future.
The key budget highlights were;
- 1.5% growth forecast in 2017, followed by 1.4%, 1.3% and 1.3%, 1.5%, and 1.6% in the following years to 2022..
- For this year, borrowing is forecasted at £49.9bn, then £39.5bn, £34.7bn, £ 32.8bn and £30.1bn in subsequent years up to 2022.
- Debt is forecast to peak in 2017-18 at 86.5% of GDP, and then fall in every year thereafter, reaching 79.1% of GDP in 2022-23.
- £3 billion set aside for exiting the EU
- NPIF (Northern Powerhouse Investment Fund) increased to £31 billion.
- £6.3 billion of additional NHS funding
- Additional £15.3 billion of new financial support for housing
- £44bn in government support to boost construction to meet target of building 300,000 new homes a year by the middle of the next decade.
- The Scottish, Welsh and Northern Ireland budgets will increase by £2 billion, £1.2 billion and £660 million respectively.
- Compulsory purchase of land banked by developers for financial reasons
- £200 million invested into Charging Investment Infrastructure for electric vehicles.
- R&D expenditure credit to rise from 11% to 12%, with effect from 1 January 2018
- Stamp duty to be abolished immediately for first-time buyers purchasing properties worth up to £300,000
- To help those in London and other expensive areas, the first £300,000 of the cost of a £500,000 purchase by all first-time buyers will be exempt from stamp duty. Reduction will apply immediately in England, Wales and Northern Ireland although the Welsh government will have to decide whether to continue it when stamp duty is devolved in April 2018. It will not apply in Scotland unless Scottish government decides to follow suit.
- Fuel duty frozen
- Duty rates on all tobacco products will increase by two percentage points above RPI inflation
- Personal allowance increased to £11,850 and the higher rate threshold to £46,350.
- Universal Credit - from January 2018 those who need it, and who have an underlying entitlement to Universal Credit, will be able to access up to a month’s worth of Universal Credit within five days via an interest-free advance. The government will extend the period of recovery from six months to twelve months. New claimants in December will be able to receive an advance of 50% of their monthly entitlement at the beginning of their claim and a second advance to take it up to 100% in the new year, before their first payment date. From February 2018 the government will remove the seven-day waiting period so that entitlement to Universal Credit starts on the first day of application
- State pension to rise by 3%
- Business rates - bringing forward to 1 April 2018 the planned switch in indexation from RPI to the main measure of inflation (currently CPI)
- Vehicle Excise Duty (VED) supplement that will apply to new diesel cars first registered from 1 April 2018
- Company cars – The Fuel Benefit Charge and the Van Benefit Charge will both increase by RPI from 6 April 2018
- 100% council tax premium to be levied on empty properties
- VAT Registration threshold to remain at £85,000.
- National Minimum Wage (NMW) to increase from £7.50 to £7.83
About this reportThis report was written immediately after Philip Hammond delivered his speech on 22 November 2017 and has been prepared from press releases and other documents. It is not intended to cover every aspect of the Budget but, instead, is designed to act as overview only. No liability is accepted for any action taken or refrained from in consequence of its contents. Advice should always be sought from a professional.
Income Tax & National Insurance
Personal tax allowance & threshold
The government is committed to raising the PA to £12,500 and the HRT to £50,000 by 2020 – which will mean an increase to the PA of over 90% in the space of a decade. The Budget announces that in 2018-19 the PA and HRT will increase further, to £11,850 and £46,350 respectively. This will mean that in 2018-19, a typical taxpayer will pay at least £1,075 less tax than in 2010-11.
Universal CreditThe government will provide more support to Universal Credit claimants:
- from January 2018 those who need it, and who have an underlying entitlement to Universal Credit, will be able to access up to a month’s worth of Universal Credit within five days via an interest-free advance. The government will extend the period of recovery from six months to twelve months, making it easier for claimants to manage their finances. New claimants in December will be able to receive an advance of 50% of their monthly entitlement at the beginning of their claim and a second advance to take it up to 100% in the new year, before their first payment date.
- from February 2018 the government will remove the seven-day waiting period so that entitlement to Universal Credit starts on the first day of application.
- from April 2018 those already on Housing Benefit will continue to receive their award for the first two weeks of their Universal Credit claim.
- the government will also make it easier for claimants to have the housing element of their award paid directly to their landlord
To support these changes the government will roll out Universal Credit more gradually between February 2018 and April 2018, and roll-out to all job centres will be complete in December 2018
Allowing claims on behalf of deceased partners – The Marriage Allowance allows taxpayers to transfer up to 10% of their unused PA to their partner, reducing their tax bill by up to £230 a year in 2017-18. The government will now allow claims in cases where a partner has died before the claim was made. These claims will be able to be backdated by up to 4 years.
Taxation of employee business expenses
Following the call for evidence published in March 2017, the government will make several changes to the taxation of employee expenses:
- Self-funded training – The government will consult in 2018 on extending the scope of tax relief currently available to employees and the self-employed for work-related training costs.
- Subsistence benchmark scale rates – To reduce the burden on employers, from April 2019 they will no longer be required to check receipts when reimbursing employees for subsistence using benchmark scale rates. The existing concessionary accommodation and subsistence overseas scale rates will be placed on a statutory basis, to provide greater certainty for businesses.
- Guidance and claims process for employee expenses – HMRC will work with external stakeholders to improve the guidance on employee expenses, particularly on travel and subsistence and the process for claiming tax relief on non-reimbursed employment expenses.
Armed Forces personnel accommodation
An income tax and NICs exemption will be introduced for certain allowances paid to Armed Forces personnel for renting or maintaining accommodation in the UK private market. This will support the Ministry of Defence’s aim to provide a more flexible, attractive and better value-for-money approach to accommodation.
Seafarers’ Earnings Deduction and the Royal Fleet Auxiliary
Seafarers are entitled to an income tax deduction of their foreign earnings in certain circumstances. The existing extra-statutory treatment of the Royal Fleet Auxiliary will be placed on a statutory basis.
Qualifying Care Relief (QCR) and self-funded Shared Lives payments
QCR is a tax simplification covering expenses incurred when providing care that means carers only need to keep simple records. The government will extend the scope of QCR to cover self-funded Shared Lives care payments, to encourage the use of Shared Lives care.
Class 4 National Insurance contributions
As previously announced, the government will no longer proceed with an increase to the main rate of Class 4 NICs from 9% to 10% in April 2018, and to 11% in April 2019. (66)
NLW and National Minimum Wage (NMW)
Following the recommendations of the independent Low Pay Commission (LPC), the government will increase the NLW by 4.4% from £7.50 to £7.83 from April 2018. The government will also accept all of the LPC’s recommendations for the other NMW rates to apply from April 2018. For youth rates, this represents the largest increase in 10 years. The recommendations include:
- increasing the rate for 21 to 24 year olds by 4.7% from £7.05 to £7.38 per hour
- increasing the rate for 18 to 20 year olds by 5.4% from £5.60 to £5.90 per hour
- increasing the rate for 16 to 17 year olds by 3.7% from £4.05 to £4.20 per hour
- increasing the rate for apprentices by 5.7% from £3.50 to £3.70 per hour
The government has announced that it will delay implementing a series of NICs policies by one year. These are the abolition of Class 2 NICs, reforms to the NICs treatment of termination payments, and changes to the NICs treatment of sporting testimonials.
Travel & Transport
Mileage rates for landlords
The government will extend the option to use mileage rates to individuals operating property businesses, on a voluntary basis, to reduce the administrative burden for these businesses.
Benefits in kind: electric vehicles
From April 2018, there will be no benefit in kind charge on electricity that employers provide to charge employees’ electric vehicles.
Fuel duty will be frozen for an eighth year in 2018-19. Fuel duty freezes since 2011 will have saved the average driver a cumulative £850 by April 2019, compared to what they would have paid under the pre-2010 escalator plans.
The government will review whether the existing fuel duty rates for alternatives to petrol and diesel are appropriate, ahead of decisions at Budget 2018. In the meantime, the government will end the fuel duty escalator for Liquefied Petroleum Gas (LPG). The LPG rate will be frozen in 2018-19, alongside the main rate of fuel duty.
Clean air fund
The government is launching a consultation alongside Budget on options that could be supported by this fund. This will be paid for by:
- a Vehicle Excise Duty (VED) supplement that will apply to new diesel cars first registered from 1 April 2018, so that their First-Year Rate will be calculated as if they were in the VED band above. This will not apply to next-generation clean diesels – those which are certified as meeting emissions limits in real driving conditions, known as Real Driving Emissions Step 2 (RDE2) standards
- a rise in the existing Company Car Tax diesel supplement from 3% to 4%, with effect from 6 April 2018. This will also apply only to diesel cars which do not meet the Real Driving Emissions Step 2 (RDE2) standards
VED – The government will:
- increase in line with RPI from 1 April 2018 VED rates for cars, vans and motorcycles registered before April 2017 and the First-Year Rates for cars registered after April 2017
- freeze the Heavy Goods Vehicle (HGV) VED and Road User Levy rates from 1 April 2018. A call for evidence on updating the existing HGV Road User Levy will be launched this autumn. The government will work with industry to update the Levy so that it rewards hauliers that plan their routes efficiently, to encourage the efficient use of roads and improve air quality
- from April 2019, exempt zero-emission capable taxis from the VED supplement that applies to expensive cars, consulting in advance on how to define such taxis.
The Fuel Benefit Charge and the Van Benefit Charge will both increase by RPI from 6 April 2018.
Air Passenger Duty (APD)
Short-haul APD rates for 2019-20 will remain frozen as they have been since 2012. The long-haul rate for economy passengers will be frozen at the 2018-19 rates while the rates for premium economy, business and first class will increase by £16 and for those travelling by private jet by £47.
Ultra-low emission vehicles
To support the transition to zero emission vehicles, the government will regulate to support the wider roll-out of charging infrastructure; invest £200 million, to be matched by private investment into a new £400 million Charging Investment Infrastructure Fund; and commit to electrify 25% of cars in central government department fleets by 2022. The government will also provide £100 million to guarantee continuation of the Plug-In Car Grant to 2020 to help consumers with the cost of purchasing a new battery electric vehicle.
Connected and Autonomous Vehicles (CAVs)
The government wants to see fully self-driving cars, without a human operator, on UK roads by 2021. The government will therefore make world-leading changes to the regulatory framework, such as setting out how driverless cars can be tested without a human safety operator. The National Infrastructure Commission (NIC) will also launch a new innovation prize to determine how future road building should adapt to support self-driving cars.
The Budget announces a comprehensive package of new policy which will raise housing supply by the end of this Parliament to its highest level since 1970, on track to reach 300,000 per year, through:
- making available £15.3 billion of new financial support for housing over the next five years, bringing total support for housing to at least £44 billion over this period
- introducing planning reforms that will ensure more land is available for housing, and that better use is made of under used land in our cities and towns
- providing £204 million of funding for innovation and skills in the construction sector, including to train a workforce to build new homes
Stamp duty land tax
The government will permanently raise the price at which a property becomes liable for SDLT to £300,000 for first-time buyers to help young people buy their first home. The relief will not apply for purchases of properties worth over £500,000. 95% of first-time buyers that pay SDLT will benefit, up to a maximum of £5,000, and 80% of first-time buyers will pay no SDLT at all.
Help to Buy Equity Loan
The Help to Buy Equity Loan scheme helps people to buy a home with a 5% deposit and has supported 135,000 people so far. The Budget confirms the announcement in October of a further £10 billion for the scheme, supporting another 135,000 people to buy a new home.
Creditworthiness and rental payment data
The government will launch a £2 million competition, to support FinTech firms developing innovative solutions that help first-time buyers ensure their history of meeting rental payments on time is recognised in their credit scores and mortgage applications. Mortgage lenders and credit reference agencies are often unable to take rental payment history into account as they do not have access to this data. This competition will support firms to solve this problem.
Empty homes premium
The government is keen to encourage owners of empty homes to bring their properties back into use. To help achieve this, local authorities will be able to increase the council tax premium from 50% to 100%.
Right to Buy pilot
The Budget confirms that government will proceed with a £200 million large-scale regional pilot of the Right to Buy for housing association tenants in the Midlands.
Capital Gains Tax (CGT) payment window
The introduction of the 30-day payment window between a capital gain arising on a residential property and payment will be deferred until April 2020.
Pensions & Savings
State Pension and Pension Credit
The basic State Pension will be increased by the triple lock. The rise in April 2018 will be 3%, a cash increase of £3.65 per week for the full basic State Pension. The benefits of the triple lock uprating will also be passed on to the poorest pensioners through an increase to the Standard Minimum Guarantee in Pension Credit to match the cash rise in the basic State Pension. This will be paid for through an increase in the Savings Credit threshold – the Savings Credit starting point. The full new State Pension will also be increased by the triple lock, rising by £4.80 per week.
Starting rate for savings
The band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2018-19.
Individual Savings Account (ISA) annual subscription limits
The ISA annual subscription limit for 2018-19 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2018-19 will be uprated in line with CPI to £4,260.
Lifetime allowance for pensions
The lifetime allowance for pension savings will increase in line with CPI, rising to £1,030,000 for 2018-19.
Save As You Earn scheme
Employees on maternity and parental leave will be able to take up to a 12 month pause from saving into their Save As You Earn employee share scheme, increased from 6 months currently. The change will take effect from 6 April 2018.
Life assurance and overseas pension schemes
From April 2019, tax relief for employer premiums paid into life assurance products or certain overseas pension schemes will be modernised to cover policies when an employee nominates an individual or registered charity to be their beneficiary.
The government will increase the rate of the R&D expenditure credit from 11% to 12% with effect from 1 January 2018. To provide businesses with the confidence to make R&D investment decisions, the government will also introduce a new Advanced Clearance Service for R&D expenditure credit claims.
Corporate indexation allowance
To bring the UK in line with other major economies and broaden the tax base through removing relief for inflation that is not available elsewhere in the tax system, the corporate indexation allowance will be frozen from 1 January 2018. Accordingly, no relief will be available for inflation accruing after this date in calculating chargeable gains made by companies.
Changing how non-resident companies’ UK property income and certain gains are taxed
From April 2020, income that non-resident companies receive from UK property will be chargeable to corporation tax rather than income tax. Also from that date, gains that arise to non-resident companies on the disposal of UK property will be charged to corporation tax rather than CGT.
Position paper: corporate tax and the digital economy
Alongside Budget the government has published a position paper setting out the challenges posed by the digital economy for the international corporate tax framework and its proposed approach for addressing those challenges.
Withholding tax: royalties
With effect from April 2019, withholding tax obligations will be extended to royalty payments, and payments for certain other rights, made to low or no tax jurisdictions in connection with sales to UK customers. The rules will apply regardless of where the payer is located.
Corporate capital gains
The government will amend the Substantial Shareholding Exemption legislation and the Share Reconstruction rules to avoid unintended chargeable gains being triggered where a UK company incorporates foreign branch assets in exchange for shares in an overseas company.
Hybrid mismatch rules
Some aspects of the corporation tax rules which apply to arrangements involving hybrid structures and instruments – the hybridity arising from differences in tax treatment between two jurisdictions – will be amended to clarify how and when the rules apply, and to ensure that the rules operate as intended. HMRC has published further details of these amendments alongside the Budget.
Intangible Fixed Asset regime
The government will consult in 2018 on the tax treatment of intellectual property (the Intangible Fixed Asset regime). This will consider whether there is an economic case for targeted changes to this regime, so that it better supports UK companies investing in intellectual property.
Value Added Tax
VAT registration threshold
In response to the Office of Tax Simplification’s report Value Added Tax: Routes to Simplification, the government will consult on the design of the threshold, and in the meantime will maintain it at the current level of £85,000 for two years from April 2018.
Businesses currently benefit from postponed accounting for VAT when importing goods from the EU. The government recognises the importance of such arrangements to business due to the cash flow advantage they provide. The government will take this into account when considering potential changes following EU exit and will look at options to mitigate any cash flow impacts.
Access to VAT refunds
The government will make the following changes to VAT refunds:
- Combined Authorities – Through Finance Bill 2017-18, legislation will be amended to ensure UK Combined Authorities and certain fire services in England and Wales will be eligible for VAT refunds.
- Accident Rescue Charities Grant Scheme – A grant will be provided to help accident rescue charities meet the cost of normally irrecoverable VAT.
VAT and vouchers
The government will consult on plans to legislate in Finance Bill 2018-19 to ensure that when customers pay with vouchers, businesses account for the same amount of VAT as when other means of payment are used, aligning the UK with similar changes being made across the rest of the EU.
Training & Education
National Retraining Partnership
The government will enter into a formal skills partnership with the Trades Union Congress and the Confederation of British Industry, to develop the National Retraining Scheme. Together they will help set the strategic priorities for the scheme and oversee its implementation, working with new Skills Advisory Panels to ensure that local economies’ needs are reflected.
Retraining to work in priority sectors
As a first step, the National Retraining Partnership will oversee targeted short-term action in sectors with skills shortages, initially focussing on construction and digital skills. Alongside the government’s investment in housing and construction, the government will invest £30 million to test the use of AI and innovative EdTech in online digital skills courses so that learners can benefit from this emerging technology, wherever they are in the country. There will also be new employer-designed courses in construction and digital.
The government will provide £8.5 million over the next two years to support Unionlearn, an organisation of the Trades Union Congress to boost learning in the workplace.
The Budget announces support for maths, given its crucial role in preparing the next generation for jobs in the new economy. The government will:
- give more children the opportunity to be taught using world-leading techniques by providing £27 million to expand the successful Teaching for Mastery maths programme into a further 3,000 schools.
- reward schools and colleges who support their students to study maths by giving them £600 for every extra pupil who decides to take Maths or Further Maths A levels or Core Maths – with over £80 million available initially, and no cap on numbers.
- nurture top mathematical talent by delivering its commitment to open maths schools across the country. The Budget commits £18 million to fund an annual £350,000 for every maths school under the specialist maths school model, which includes outreach work.
- test innovative approaches to improve GCSE Maths resit outcomes by launching a £8.5 million pilot, alongside £40 million to establish Further Education Centres of Excellence across the country to train maths teachers and spread best practice.
The Budget will ensure that every secondary school has a fully qualified computer science GCSE teacher, by committing £84 million to upskill 8,000 computer science teachers by the end of this Parliament. The government will also work with industry to set up a new National Centre for Computing to produce training material and support schools.
The government announced T levels at Spring Budget 2017. As implementation gets underway, the government will invest up to £20 million to help teachers prepare for this change.
The government will continue to work with employers on how the apprenticeship levy can be spent so that the levy works effectively and flexibly for industry, and supports productivity across the country.
Teacher Development Premium
The government will invest £42 million to pilot a Teacher Development Premium. This will test the impact of a £1,000 budget for high-quality professional development for teachers working in areas that have fallen behind. This will support the government’s ambition to address regional productivity disparities through reducing the regional skills gap.
Reducing student loan overpayments
The government will tackle the problem of graduates overpaying their student loans. The Student Loans Company and HMRC will update their processes by April 2019, in order to share data more frequently and stop payments after a borrower has fully repaid.
In light of the recent rise in inflation, over the next 5 years the government will provide a further £2.3 billion of support to businesses and improve the fairness of the system in England, by:
- bringing forward to 1 April 2018 the planned switch in indexation from RPI to the main measure of inflation (currently CPI).
- legislating retrospectively to address the so-called “staircase tax”. Affected businesses will be able to ask the Valuation Office Agency (VOA) to recalculate valuations so that bills are based on previous practice backdated to April 2010 – including those who lost Small Business Rate Relief as a result of the Court judgement. The government will publish draft legislation shortly.
- continuing the £1,000 business rate discount for public houses with a rateable value of up to £100,000, subject to state aid limits for businesses with multiple properties, for one year from 1 April 2018.
- increasing the frequency with which the VOA revalues non-domestic properties by moving to revaluations every three years following the next revaluation, currently due in 2022. To enable this, ratepayers will be required to provide regular information to the VOA on who is responsible for business rates and property characteristics including use and rent. The government will consult on the implementation of these changes in the spring
The government will amend SDLT higher rates for additional properties with immediate effect. The changes will benefit those increasing their share of their own home, families affected by a divorce court order, and cases where properties are held in trust for children subject to Court of Protection orders. The government will also remove a potential opportunity for avoidance.
Taxing gains made by non-residents on immovable property
To align the UK with other countries and remove an advantage which non-residents have over UK residents, all gains on non-resident disposals of UK property will be brought within the scope of UK tax. This will apply to gains accrued on or after April 2019. The government intends to include targeted exemptions for institutional investors such as pension funds.
Climate Change Levy (CCL)
Budget 2016 announced the rebalancing of gas and electricity main rates; the government will set CCL main rates for the years 2020-21 and 2021-22 at Budget 2018. In addition, and to ensure better consistency between portable fuels for commercial premises not connected to the gas grid, the government will freeze the CCL main rate for LPG at the 2019-20 level until April 2022. To ensure that the CCL exemptions for businesses that operate mineralogical and metallurgical processes remain operable after EU exit, the government will clarify the definition of the exemptions in Finance Bill 2018-19. The revised definition will also ensure that the exemptions work better in landlord-tenant situations.
Enhanced Capital Allowances (ECAs): energy-saving technologies
The list of designated energy-saving technologies qualifying for an ECA, which support investment in energy-saving plant or machinery that might otherwise be too expensive, will be updated through Finance Bill 2017-18.
First Year Tax Credits
The government will extend the First Year Tax Credit scheme until the end of this Parliament, thereby making sure that loss-making companies are encouraged to invest in energy-efficient technology. The credit rate will be set at two-thirds the rate of corporation tax.
Alcohol duty rates and bands
Duty rates on beer, cider, wine and spirits will be frozen.
Alcohol structures consultation
Following the consultation launched at Spring Budget 2017, the government will introduce a new duty band for still cider and perry from 6.9% to 7.5% alcohol by volume (abv), to target white ciders. Legislation will be brought forward in Finance Bill 2018-19, for implementation in 2019, to allow producers time to reformulate and lower their abv.
Tobacco duty rates
Duty rates on all tobacco products will increase by two percentage points above RPI inflation until the end of this Parliament. Hand rolling tobacco will increase by an additional one percentage point. These changes will come into effect from 6pm on 22 November 2017.
Minimum Excise Tax
The Minimum Excise Tax for cigarettes will rise to be set at £280.15 per 1,000 cigarettes. This will take effect from 6pm on 22 November 2017.
The government will create a new Centre for Data Ethics and Innovation to enable and ensure safe, ethical and ground-breaking innovation in AI and data‑driven technologies. This world-first advisory body will work with government, regulators and industry to lay the foundations for AI adoption, which estimates suggest could benefit households across the UK by up to £2,300 per year by 2030, and increase GDP by 10%. The government will invest over £75 million to take forward key recommendations of the independent review on AI, including exploratory work to facilitate data access through ‘data trusts’.50 The government will create new AI fellowships, and initially fund 450 PhD researchers, to secure the UK’s leading position in the global AI market.
Regulators’ Pioneer Fund
To help unlock the potential of emerging technologies, the government will establish a new £10 million Regulators’ Pioneer Fund. This will help regulators to develop innovative approaches aimed at getting new products and services to market.
To secure the UK’s world-leading position in digital innovation, the government will invest £21 million over the next 4 years to expand Tech City UK’s reach – to become ‘Tech Nation’ – and support regional tech companies and start-ups to fulfil their potential. Tech Nation will roll out a dedicated sector programme for leading UK tech specialisms, including AI and FinTech. Regional hubs will be located in: Cambridge, Bristol and Bath, Manchester, Newcastle, Leeds and Sheffield, Reading, Birmingham, Edinburgh and Glasgow, Belfast, and Cardiff.
UK Games Fund
The government will provide a further £1 million to extend the UK Games Fund until 2020, aiding access to finance and business support for early stage video game developers.
The UK has some of the best geospatial data in the world, and much of it is held by public bodies. The potential economic value of this data is huge. To maximise the growth of the digital economy and consolidate the UK’s position as the best place to start and grow a digital business, the government will establish a new Geospatial Commission to provide strategic oversight to the various public bodies who hold this data. To further boost the digital economy, the government will work with the Ordnance Survey (OS) and the new Commission, by May 2018, to establish how to open up freely the OS MasterMap data to UK-based small businesses in particular, under an Open Government Licence or through an alternative mechanism, while maintaining the OS’s strategic strengths. The Budget provides £40 million a year over the next two years to support this work.
Tax Avoidance, Evasion & Compliance
Requirement to notify HMRC of offshore structures
The government will publish a consultation response on the proposed requirement for designers of certain offshore structures, that could be misused to evade taxes, to notify HMRC of these structures and the clients using them. This work will be taken forward in conjunction with the OECD and EU.
Extending offshore time limits
Assessment time limits for non-deliberate offshore tax non-compliance will be extended so that HMRC can always assess at least 12 years of back taxes without needing to establish deliberate non-compliance, following a consultation in spring 2018.
VAT fraud in labour provision in the construction sector
Following a consultation into options for tackling fraud in construction labour supply chains, the government will introduce a VAT domestic reverse charge to prevent VAT losses. This will shift responsibility for paying VAT along the supply chain to remove the opportunity for it to be stolen. Changes will have effect on and after 1 October 2019. The long lead-time reflects responses to the consultation and the government’s commitment to give businesses adequate time to prepare for the change.
Hidden economy: conditionality
The government will consult further on how to make the provision of some public sector licences conditional on being properly registered for tax. This would make it more difficult to trade in the hidden economy, helping to level the playing field for compliant businesses.
NICs Employment Allowance
The government has found evidence of some employers abusing the Employment Allowance to avoid paying the correct amount of NICs, often by using offshore arrangements. To crack down on this, HMRC will require upfront security from employers with a history of avoiding paying NICs in this way. This will take effect from 2018 and raise up to £15 million a year.
The government will tackle disguised remuneration avoidance schemes used by close companies – companies with five or fewer participators – by introducing the close companies’ gateway, revised following consultation, and measures to ensure liabilities from the new loan charge are collected from the appropriate person.
The government will consult in 2018 on the best way to prevent UK traders or professionals from avoiding UK tax by fragmenting their UK income between unrelated entities.
Intangible fixed assets: related party step-up schemes
The Intangible Fixed Asset rules will be updated with immediate effect, so that a licence between a company and a related party in respect of intellectual property is subject to the market value rule, and to ensure that the tax value of any disposal of a company’s intangible assets is correct, even if the consideration is in something other than cash.
The government will remove the 6-year time limit within which companies must adjust for transactions that have reduced the value of shares being disposed of in a group company. This will ensure that any losses claimed are in line with the actual economic loss to the group. This change will take effect for disposals of shares or securities in a company made on or after 22 November 2017.
To prevent the avoidance of legislation designed to ensure that asset managers receiving carried interest pay CGT on their full economic gain, the government will remove the transitional commencement provisions with immediate effect.
Double Taxation Relief
From 22 November 2017 a restriction will be introduced to the relief for foreign tax incurred by an overseas branch of a company, where the company has already received relief overseas for the losses of the branch against profits other than those of the branch. This ensures the company does not get tax relief twice for the same loss. The Double Taxation Relief targeted anti-avoidance rule will also be amended to remove the requirement for HMRC to issue a counteraction notice, and extend the scope to ensure it is effective.
Double taxation arrangement: multilateral instrument
With effect from the Royal Assent of the Finance (No. 2) Act 2017, the powers giving effect to double taxation arrangements will be amended to allow the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting to be implemented.
Online VAT fraud: extending powers to UK businesses
The government will legislate in Finance Bill 2017-18 to extend HMRC’s powers to hold online marketplaces Jointly and Severally Liable (JSL) for the unpaid VAT of overseas traders on their platforms to include all (including UK) traders. This extension will help tackle the UK hidden economy and eliminate the risk of overseas traders establishing a UK shell company simply to escape the existing JSL regime. This will come into force on Royal Assent in the spring.
Online VAT fraud: extending powers on overseas businesses
The government will legislate in Finance Bill 2017-18 to extend HMRC’s powers to hold online marketplaces JSL for any VAT that a non-UK business selling goods on their platforms fails to account for, where the business was not registered for VAT in the UK and that online marketplace knew or should have known that the business should be registered for VAT in the UK. This will come into force on Royal Assent in the spring.
Online VAT fraud: VAT number display
The government will legislate in Finance Bill 2017-18 to require online marketplaces to ensure that VAT numbers displayed for businesses operating on their website are valid. They will also be required to display a valid VAT number when they are provided with one by a business operating on their platform. This will come into force on Royal Assent in the spring.
Online VAT fraud: split payments
To reduce online VAT fraud and improve how VAT is collected, the government is looking at a split payment model. Following the call for evidence launched at Spring Budget 2017, the government will publish a response in December.
Encouraging compliance by users of digital platforms
The government expects digital platforms to play a wider role in ensuring their users are compliant with the tax rules. The government will publish a call for evidence in spring 2018 to explore what more digital platforms can do to prevent non-compliance among their users.
Tax administration and compliance
Making Tax Digital (MTD)
As announced in July and legislated for in the Finance (No. 2) Act 2017, no business will be mandated to use MTD until April 2019. Only those with turnover above the VAT threshold will be mandated at that point, and then only for VAT obligations. The scope of MTD will not be widened before the system has been shown to work well, and not before April 2020 at the earliest.
Late Submission Penalties and Late Payment Interest
The government will reform the penalty system for late or missing tax returns, adopting a new points-based approach. It will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments. This will ensure that the system is fair, simple and effective across different taxes. Final decisions on both measures will be taken following this latter consultation.
Closure of Certificate of Tax Deposit scheme
To make the tax system simpler and fairer, the government will close the Certificate of Tax Deposit scheme for new certificates on and after 23 November 2017. Existing certificates will continue to be honoured for 6 years.
Faster recovery of Self-Assessment debt
HMRC will use new technology to recover additional Self-Assessment debts in closer to real-time by adjusting the tax codes of individuals with Pay As You Earn (PAYE) income. These changes will take effect from 6 April 2019.
Securing debt in insolvency: extension of security deposit legislation
The government will expand existing security deposit legislation to corporation tax and Construction Industry Scheme deductions. These changes will be legislated for in Finance Bill 2018-19 and take effect from 6 April 2019. The government will consult on the most effective means of introducing this change.
Other Measures Announced
Gift Aid donor benefit rules
Following the review of the Gift Aid donor benefit rules, to simplify the rules for charities the current three monetary thresholds will be reduced to two, while all existing extra-statutory concessions will be legislated. Changes will come into effect from April 2019.
What They Said
Philip Hammond | Chancellor of the Exchequer
"I report today on an economy that continues to grow, continues to create more jobs than ever before and continues to confound those who seek to talk it down. An economy set on a path to a new relationship with our European neighbours and a new future outside the European Union. A future that will be full of change; full of new challenges and above all full of new opportunities. And in this Budget, we express our resolve to look forwards not backwards. To embrace that change, to meet those challenges head on and to seize those opportunities for Britain." Read full speech
Jeremy Corbyn | Leader of the Opposition
"This Budget has been an advertisement for just how out-of-touch this Government is with the reality of people’s lives. Pay is now lower for most people than it was in 2010 and wages are now falling again. Economic growth in the first three quarters of this year is the lowest since 2009 and the slowest of the major economies in the G7. It’s a record of failure with a forecast of more. Economic growth has been revised down. Productivity growth has been revised down. Business investment revised down. People’s wages and living standards revised down. What sort of “strong economy, fit for the future” is that? The deficit was due to be eradicated by 2015, then 2016, then 2017, then 2020 and now 2025. They’re missing their major targets but the failed and damaging policy of austerity remains." Read full reaction
Carolyn Fairbairn | CBI Director-General
“Against a sombre economic backdrop, the Chancellor today gripped the steering wheel on the UK economy. This is a budget that balances support for people on squeezed incomes with vital action to help grow the UK out of austerity. But delivery is everything." Read full reaction
Adam Marshall | Director-General of the British Chambers of Commerce
“Chamber business communities wanted the Chancellor to focus on the basics - rates, roads, and ringtones - and will be pleased that they will see some action on all three fronts. While more remains to be done to reduce the impact of business rates on investment and growth, the Chancellor’s decisions will lessen the impact of rate rises on hard-pressed firms in many parts of the country from next April. Chambers campaigned hard for a reduction in the relentless rises of this iniquitous tax, and will be pleased that the Chancellor has listened and reduced the burden.” Read full reaction