In his first Autumn Budget to Parliament on Wednesday 22 November, The Chancellor, Philip Hammond announced the need to invest now to grow our economy for tomorrow. The Chancellor indicated he wanted to choose a “balanced approach” by maintaining fiscal responsibility, addressing the housing market challenges and helping families cope with the increased costs of living. Amidst the backdrop of the Brexit negotiations and the downward revision of growth forecasts by the Office of Budget Responsibility (‘OBR’), Mr Hammond revealed plans to spend nearly £25 billion on a range of measures to address the key challenges facing the UK economy.
For Northern Ireland, we welcome today’s announcement of an additional £650 million for a Northern Ireland Executive to apply towards future infrastructure projects here. Support for innovation was another key focus with our innovative businesses benefiting from the Research and Development Expenditure Credit, mainly available to large companies, increasing to 12% from 11% for qualifying expenditure incurred on or after 1 January 2018. There will also be reviews of VAT on tourism activities (which are at a reduced rate of 9% in the Republic of Ireland) and Air Passenger Duty with further updates on these expected next Autumn.
Key highlights include:
Individuals – Personal tax free allowance will increase form £11,500 to £11,850 from April 2018 alongside the increase in the higher rate tax threshold to £46,350. The National Living wage is to also increase form £7.50 to £7.83 per hour.
Capital Gains – The introduction of the 30-day payment window between a capital gain arising on a residential property and the payment date will be deferred until April 2020.
SDLT – As widely expected there was good news for first time home owners, where an SLDT exemption will apply to £300,000 of the purchase price of a home on properties costing less than £500,000. The buyer of the property must be one or more individuals who have never owned a residential property, or an interest in a home, in the UK or anywhere else in the world and intended to be occupied as the buyers’ main home. First time buyers should be careful if parents are assisting in funding the purchase of a property and are to be a named buyer, which will block the SDLT exemption if the parent has previously owned a home.
Corporation Tax – From 1 January 2018, indexation allowance will no longer be available for companies disposing of capital assets which aligns the capital gains calculation to that for individuals The freeze in this allowance means that companies will no longer receive relief for any increase in an asset’s value due to inflation. There will also be changes to the taxation of non-resident landlord companies who previously were taxed using income tax rules however form April 2020 these companies will become liable to UK corporation tax.
VAT – Whilst it was disappointing that there were no simplification of the VAT system for small businesses, the threshold for registration will remain at £85,000 until 2020.
Employee Taxes – There has been increase of 1% in respect of the calculation of the Benefit in Kind on diesel cars however some additional tax relief will apply to electric vehicles.
R&D – As part of the government’s Modern Industrial Strategy, there has been an increase in the main rate of R&D tax relief from 11% to 12 % providing a cash saving of £9.72 for every £100 of qualifying expenditure incurred.
Anti-avoidance – The Chancellor announced further measures which are expected to collect a further £4.8 billion over the course of the next four years which includes introducing a requirement to notify HMRC of the creation of certain offshore structures, which can be used to avoid tax and collection of withholding taxes on royalties which are paid to to low/non taxing jurisdictions.