March 11 2020

Budget 2020 – presented

Source: IBFD Tax Research Platform News

The Budget for 2020 was presented to Parliament by the Chancellor of the Exchequer on 11 March 2020. Detailed information is available on the government website.

The tax measures are as follows:

  • Corporation tax:
    • the headline corporation tax rate will remain at 19% in 2020;
    • the lifetime limit for the Entrepreneurs' Relief will be reduced from GBP 10 million to 1 million;
    • the R&D Expenditure Credit rate will be increased to 13% from 1 April 2020. The government will launch a consultation on whether qualifying R&D tax credit costs should include investments in data and cloud computing.
    • the Structures and Buildings Allowance rate will be increased to 3% from 1 April 2020;
    • the Enterprise Management Incentives scheme will be reviewed;
    • the funds regime will be reviewed during 2020; and
    • the Red Diesel Relief will be abolished for sectors other than rail, home heating and agriculture.
  • Income tax:
    • the Structures and Buildings Allowance rate will be increased to 3% from 6 April 2020;
    • the Employment Allowance will be increased from GBP 3,000 to GBP 4,000 from April 2020;
    • the band of savings income that is subject to the 0% starting tax rate will remain at GBP 5,000 for 2020-21;
    • the adult ISA annual subscription limit will remain unchanged at GBP 20,000 for 2020-21; and
    • the annual subscription limit for Junior ISAs and Child Trust Funds will be increased from GBP 4,368 to GBP 9,000 in 2020-21.
  • VAT:
    • VAT on women's sanitary products, or the so-called tampon tax, will be zero-rated; and
    • VAT on digital publications will be zero-rated
  • Indirect taxes:
    • a new Stamp Duty Land Tax surcharge will be levied at the rate of 2% on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021;
    • the National Insurance contributions Primary Threshold and Lower Profits Limit, for employees and the self-employed respectively, will be increased to GBP 9,500 from April 2020
    • duties on spirits, wine and beer will be frozen for 2020-21;
    • fuel duty will be frozen for 2020-21;
    • the Aggregates Levy rate will be frozen for 2020‑21
    • a new Plastics Packaging Tax will be introduced from April 2022 at GBP 200 per tonne of plastic packaging that contains less than 30% recycled plastic;
    • the government will consider the case for changing the Air Passenger Duty treatment of domestic flights, such as reintroducing a return leg exemption, and for increasing the number of international distance bands; for these purposes, a consultation will be launched in spring 2020; and
    • business rates will not be levied if the rateable value of specified properties in the retail, leisure and hospitality sectors is less than GBP 51,000.

As announced at Budget 2018, from 1 April 2020:

  • a new tax on the revenues certain digital businesses earn at the rate of 2% from 1 April 2020; and
  • the proportion of annual capital gains that can be relieved by brought-forward capital losses to 50% will be restricted.

The government will launch consultations on:

  • the tax impact of the withdrawal of the London Inter-Bank Offered Rate; and
  • the various aspects of the hybrid mismatch rules.

Developments related to tax administration include:

  • large businesses will be required, from April 2021, to notify HMRC when they take a tax position which HMRC is likely to challenge; and
  • the government will publish an evaluation of the introduction of Making Tax Digital for VAT, along with related research.