We have already experienced volatility in the value of the pound and this is likely to continue. The pound’s weakness will have increased the cost of imports for many businesses. The rise in the Annual Investment Allowance for two years from January 1 may help to ease the pain by increasing the amount of upfront tax relief available on purchases of qualifying plant, machinery, vehicles (although not cars), office equipment etc.
The allowance has been increased from £200,000 to £1m a year until December 31, 2020, although businesses should check the timing of any intended purchases with their advisors, especially if their accounting period straddles the start or end dates for temporary increase.
Businesses will face further challenges in the form of Making Tax Digital (MTD). MTD for VAT will be coming into effect for VAT periods starting on or after April 1, 2019. This will affect the vast majority of VAT registered businesses with a turnover exceeding the registration threshold.
If they have not already done so, businesses will need to ensure that they are MTD compliant and have the necessary software in place now.
Brexit will cause further VAT headaches. Different rules apply to imports and exports depending on whether they are within the EU or the rest of the world. In an example of ill-fated timing, the new MTD reporting requirements will come into force within two days of when the UK is due to leave the EU on March 29. The precise nature of any new arrangements will depend on whether the UK leaves with or without a deal.
One piece of good news has been the relaxation of the new rules for Entrepreneurs’ Relief which reduces the rate of Capital Gains Tax on the disposal of a business to 10pc. For disposals made on or after April 6, 2019, the minimum qualifying period of ownership will increase from 12 months to two years.
These new rules initially casted doubt as to whether the owners of ‘alphabet’ shares would continue to qualify for the relief, thankfully the position has since been clarified so that the majority of business owners will still be eligible. However, owners should review their long term plans and seek professional advice if they are contemplating a sale.
From April 6, residential landlords will see further restrictions on the amount of tax relief that can be claimed on mortgage interest, with relief limited to the basic rate of tax in respect of 75pc of their interest costs.
HMRC is also continuing to target their compliance activity against landlords, making use of information from other government departments and third parties such as letting agents. However, their Let Property Campaign enables landlords to report previously undisclosed residential rental income.
The disclosure service enables them to bring their affairs up to date and take advantage of a more lenient penalty regime. We have had a number of enquiries from landlords who own one or two properties but were not aware of their responsibilities.
Given the soft target that landlords have presented in the past few years, we expect this to continue irrespective of the Brexit outcome or economic conditions.
