The Budget for 2018 was presented to Parliament by the Chancellor of the Exchequer on 29 October 2018. Detailed information is available on the government website.
The Budget measures are summarized as follows:
Chancellor's Statement
The most important features of the Budget are as follows:
- from April 2020, "large" (i.e. with annual global revenues of at least GBP 500 million) social media platforms, search engines and online marketplaces will pay a 2% digital services tax on the revenues they earn which are linked to UK users; meanwhile, a consultation will be launched before the tax comes into effect;
- the tax rates for the oil and gas industries will remain unchanged;
- the annual investment allowance will be increased from GBP 200,000 to GBP 1 million from 1 January 2019 to 31 December 2020;
- there will be no change to the level of entrepreneurs' relief available although the ownership period will be doubled to 2 years;
- from April 2019, the personal allowance will be GBP 12,500 and the higher rate threshold will be GBP 50,000;
- a new tax will be levied on the manufacture and the import of plastic packaging containing less than 30% recyclable plastic; however, no tax will be levied on take-away coffee cups;
- all shared equity purchases by first-time buyers of up to GBP 500,000 are to be exempt from stamp duty;
- the business rates will be reduced by one third for all retailers in England with a rate table value of GBP 51,000 or less;
- there will be no increases in the short-haul rates of air passenger duty;
- the duties on beer, cider and spirits will be frozen for a year, while the duty on wine will increase in line with inflation;
- tobacco duty will continue to rise by inflation plus 2%; and
- fuel duties will be frozen for the ninth year in a row, as announced on 3 October 2018.
Finance Bill
Finance Bill 2018-19 will be published on 7 November 2018.
On 29 October 2018, HMRC published the following documents:
- Policy paper – Budget 2018: overview of tax legislation and rates. This document enumerates the tax policy measures announced at Budget 2018 and explains when they will be legislated.
- Guidance - Notes on Finance Bill 2018-19 resolutions. This document contains the updated explanation of each of the Finance Bill resolutions.
- Supporting documents. This document lists the draft legislation and the measures that took immediate effect from 29 October 2018.
Brexit
On 29 October 2018, HMRC published a Policy paper - Amendments to tax legislation to reflect EU exit, which provides further information regarding the minor consequential amendments to the Taxes Acts which will be required if the United Kingdom leaves the EU without a deal. There is no current provision because this is obviously a new power. The legislation will have effect on and after the Royal Assent to Finance Bill 2018-19.
The HMRC also published Guidance – Carbon Emissions Tax technical note and the accompanying Policy paper – Carbon Emissions Tax, which set out the arrangements for carbon pricing in the event of a "no-deal" Brexit.
Business taxation
A 2% digital services tax will be introduced.
The tax rates for the oil and gas industries will remain unchanged.
On 29 October 2018, HMRC published the following documents:
- Guidance – Hybrid capital instruments technical note. This document explains the new tax rules for loan relationships that are hybrid capital instruments.
- Policy paper – Taxation of hybrid capital instruments. This documents concerns the changes to the tax treatment for hybrid capital instruments.
- Policy paper – Temporary increase in the Annual Investment Allowance. This document confirms that the annual investment allowance will be increased from GBP 200,000 to GBP 1 million from 1 January 2019 to 31 December 2020.
- Policy paper – Capital allowances: Ending enhanced allowances for energy and water efficient plant and machinery. This document provides further information on the termination of the enhanced capital allowance and details the impacts.
- Policy paper – Minimum qualifying period extension for Entrepreneurs' Relief. This document sets out the increase to the minimum qualifying period for entrepreneurs' relief.
The HMRC also released the following documents in regard to measures for which appropriate legislation will be included in Finance Bill 2018-19:
- Policy paper – Diverted Profits Tax changes. This document highlights the measure that has effect on and after 29 October 2018, which clarifies that diverted profits will only be taxed under either Corporation Tax or Diverted Profits Tax, and to emphasize the minor modifications to the mechanics of the Diverted Profits Tax legislation.
- Policy paper – Corporation Tax: amendments to reform of loss relief rules. This document explains the amendments to group relief for carried-forward losses (other than shock losses of insurance companies) that were effective from 1 April 2017.
- Policy paper – Corporation Tax changes to the definition of permanent establishment. This document outlines changes to the definition of PE, which effectively implements into UK domestic law the BEPS Action Plan 7 recommendations.
- Policy paper – Corporation Tax changes for hybrid and other mismatches regime. This document details changes for certain mismatches involving PEs and the treatment of regulatory capital.
- Policy paper – Tax changes for UK property income of non-UK resident companies. This document reminds that from 6 April 2020, non-UK resident companies that carry on a UK property business, or have other UK property income, will be charged to Corporation Tax, rather than being charged to Income Tax as at present. This change will align with the end of tax year 2019 to 2020 on 5 April 2020.
- Policy paper – New statutory remedy for advance Corporation Tax. This document details the measure in response to Prudential Assurance Company Ltd v. Commissioners for Her Majesty's Revenue and Customs [2018] UKSC 39.
- Policy paper – Changes to personal company tests for Entrepreneurs' Relief. This document details new tests to the definition of a personal company for entrepreneurs' relief.
Personal taxation
On 29 October 2018, HMRC published the following documents:
- Policy paper – Income Tax Personal Allowance and basic rate limit from 2019 to 2020. This document confirms that from April 2019, the personal allowance will be GBP 12,500 and the higher rate threshold will be GBP 50,000.
- Policy paper – Capital Gains Tax annual exempt amount for tax year 2019 to 2020. This document details the Consumer Price Index increase in the annual exempt amount for the tax year 2019 to 2020, which is increased to GBP 12,000 for individuals and personal representatives and GBP 6,000 for trustees of settlements.
The HMRC also released the following document in regard to measures for which appropriate legislation will be included in Finance Bill 2018-19:
- Policy paper – Changes to taxing gains made by non-residents on UK immovable property.
VAT
On 29 October 2018, HMRC published the following documents:
- Policy paper – Changes to the VAT specified supplies anti-avoidance. This document explains how the amendments will affect providers of intermediary services to the insurance sector who export their services outside of the EU.
- Policy paper – VAT thresholds remain unchanged. This document confirms that the VAT registration and deregistration thresholds are maintained at GBP 85,000 and 83,000 respectively for a further 2 years from 1 April 2020.
The HMRC also released the following documents in regard to measures for which appropriate legislation will be included in Finance Bill 2018-19:
- Policy paper – Changes to the VAT treatment of vouchers. This document explains the changes to the VAT treatment of vouchers issued on or after 1 January 2019.
- Policy paper – VAT reverse charge anti-avoidance changes. This document describes the regulations to be made to discourage attempts by fraudsters to escape a reverse charge.
Indirect taxation
A new tax will be levied on the manufacture and the import of plastic packaging containing less than 30% recyclable plastic.
On 29 October 2018, HMRC released the following documents in regard to measures for which appropriate legislation will be included in Finance Bill 2018-19:
- Policy paper – Changes to residence nil rate band.
- Policy paper – Extension of Stamp Duty Land Tax First Time Buyers' Relief.
- Policy paper – Stamp Duty Relief for Share Incentive Plans.
- Policy paper – Stamp Duty, Stamp Duty Reserve Tax transfers of listed securities and connected persons.
- Policy paper – Increase of the Landfill Tax rates.
- Policy paper – Air Passenger Duty rates from 1 April 2020 to 31 March 2021.
- Policy paper – Remote Gaming Duty increase. The new duty rate of 21% will apply for accounting periods that begin on or after 1 October 2019 and will be chargeable on profits from remote gaming from that date onward.
- Policy paper – Tobacco products duty rates for 2018.
- Policy paper – Increase in Alcohol Duty rates.
- Policy paper – Vehicle Excise Duty increases for cars, vans, motorcycles and motorcycle trade licences.
Tax management
On 29 October 2018, HMRC published the following documents in regard to measures for which appropriate legislation will be included in Finance Bill 2018-19:
- Policy paper – Income Tax, Capital Gains Tax and Corporation Tax voluntary tax returns. This document deals with the introduction of legislation to provide for submission of voluntary tax returns to be treated the same as those submitted following to a statutory notice to file.
- Policy paper – Changes to interest provisions for late payment, repayment and penalties. This document clarifies interest provisions on late payments of Corporation Tax, Diverted Profit Tax, Stamp Duty, Stamp Duty Land Tax, Inheritance Tax and PAYE penalties.