The UK’s 2020 Budget has been announced today, with Chancellor of the Exchequer Rishi Sunak introducing a number of changes to the UK tax system. The most important points to be aware of are:
- The Entrepreneurs’ Relief lifetime allowance is to be cut from £10m to £1m, effective from today. Changes to this relief were anticipated (see our earlier briefing) and will affect business owners and entrepreneurs looking to sell a stake in their business. New rules have been introduced which, broadly, prevent the previous £10m limit from applying to sales where the contract was exchanged before 11 March with completion delayed until a later date for tax reasons, or for transactions between connected parties that are not wholly commercial.
- A new SDLT 2% surcharge is to be introduced for non-residents purchasing residential properties in England and Northern Ireland. The new rates will only apply to purchases after April 2021, rather than being immediately effective (see our earlier briefing). The new rules are not expected to apply to purchases which complete before 1 April 2021, or where contracts were exchanged before 11 March 2020 with completion after 1 April 2021, subject to certain conditions.
- No updates or changes to Inheritance Tax have been made yet despite two consultations and a recent report – we are keeping a close eye on this.
- Research and Development tax credits are set to be increased for a number of sectors.
- VAT is to be abolished on sales of e-books and digital publications.
- Corporation Tax is to be frozen at 19%.
- Further measures are being introduced to clamp down on aggressive tax avoidance, evasion and non-compliance and HMRC’s budget is set to be increased to help counter this.
- The Government is consulting on making changes to the tax and regulatory treatment of alternative asset holding companies. Of particular interest is the Government’s review of the VAT to treatment of fund management fees and the permanent establishment and tax residence rules that apply to certain fund structures.
- The Government is to review the Enterprise Management Incentive scheme, which provides employees with an equity stake in their employer in a tax-advantaged way.
- Changes are to be made to pensions allowances for higher earners.
Further information and comment on these changes will follow in due course.
If you require further information about any of the changes made in the 2020 Budget, please contact one of the Farrer & Co tax specialists or your usual contact at the firm on +44 (0)20 3375 7000.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, March 2020