Spring Statement 2019

The Chancellor presented his Spring Statement on Wednesday. As expected, his speech centred on the benefits of securing a Brexit deal and also served as an opportunity to comment on the country’s economic state – with the message being one of strong foundations and robustness.

He had promised little in terms of tax changes, and he delivered on this up to a point; but there were a surprising number of areas where more details were revealed. Here is a summary of a few key areas:

Businesses

It will be a great relief to businesses who are continuing to implement Making Tax Digital [“MTD”] for VAT ahead of the 1 April 2019 start date, that the government has confirmed a light touch approach to penalties in the first year of implementation. The message is, do your best and no filing or record-keeping penalties will be charged.

We were also relieved to learn that MTD will not be extended to either smaller VAT-registered businesses nor to any new taxes in 2020.

Many businesses will be familiar with the complex calculations needed to handle partial exemption for VAT recovery. In 2017, the Office of Tax Simplification completed its review of the VAT system and suggested how this might be simplified. A call for evidence is expected in coming months, looking at how these rules together with VAT capital goods scheme rules might be simplified and improved.

One of the major changes announced in Budget 2018 was a new capital allowance for structures and buildings. Following a consultation last year, a technical note and draft secondary legislation have been published with the Spring Statement. While most of the principles have been retained, some elements have been changed; for example, the building will now continue to qualify for the allowance during any period of disuse. There will still be no balancing adjustment on sale, but the rules for demolition are amended and there is rather more to consider for leased property.

Personal

At Budget 2018, the government announced there would be new rules restricting the availability of private residence relief for taxpayers selling their own homes.

The Chancellor announced a reduction in the final ownership period exemption from 18 months to 9 months, which is due to kick in from April 2020. The 36 months final period exemption available to those entering a care home is retained.

In addition, lettings relief whereby a maximum of £40,000 of gain per owner is exempt if the home has been rented out is also to be reformed. There is going to be a consultation on these changes.

Tax Avoidance

No Budget or Spring Statement would be complete without comment from the Chancellor on moves to tackle avoidance and evasion. This time was no exception, but although there is a lot of material, it is mainly a reprise of all measures taken to tackle this area since 2010.

In total, 100-plus measures have been introduced which has helped to secure over £200 billion of tax that would have otherwise gone unpaid.

The message from this is to be prepared for further layering and additional complexity on top of an already overly intricate tax system!

For further information and guidance, please contact Calvin Healy on 01225 325580 or email ch@richardsonswift.co.uk