Susan Clark, Tax Manager at DRG Chartered Accountants outlines the changes in Employment and National Insurance Tax and Entrepreneurs Relief.
Employment and National Insurance Tax
As widely discussed, HMRC have also looked at the anti-avoidance IR35 rules for personal service companies and will be extending the changes currently applying to those working in the public sector, to those working in the private sector. The responsibility of operating the off-payroll scheme will now rest with the organisation paying the individuals personal service company. This will bring private sector organisations in line with the public sector and it will take effect from April 2020.
HMRC have announced the restriction of the employment allowance from April 2020. The allowance, currently worth £3,000, will only be available to employers with an employers NIC liability of below £100,000 in the previous tax year. Where the allowance applies to connected companies this will apply to the aggregate liability.
Benefits in kind on cars and vans are set to increase. From 2019/20, for cars, the amount on which to apply the appropriate percentage to calculate the car fuel benefit has increased from £23,400 at present to £24,100 for 2019/20. For vans, the benefit will be increased to £3,430 with van fuel benefit rising to £655 for 2019/20.
The previously announced changes to salary sacrifice arrangements for company cars and vans and other matters remain unchanged.
Changes to Entrepreneurs Relief
Several changes were announced to this valuable relief but it looks like it will remain at present. However, it is worrying that HMRC perceive it to have been misused.
The legislation will be published in the Finance Bill 2019 to effect the following changes.
For disposals on or after 6 April 2019, unless the business ceased before Budget Day where the existing rules continue, the minimum period of ownership will be two years.
In addition, the new rules on the definition of a personal company, which apply from Budget Day, will require the entrepreneur to have a 5% interest in the “economic rights” of the company. This change would mean that many structures which have been put in place to allow shareholders to qualify for ER may no longer be effective.
Lastly legislation will be introduced to allow shareholders to still benefit from the dilution of their shareholding to below 5% because of a new issue of shares up to the point of the dilution. This will apply to shared issued by fundraising on or after 6 April 2019.
If you would like to discuss the Autumn Budget and how it could affect you and your business, please do get in touch with the tax team at DRG Chartered Accountants.
DISCLAIMER: This information is for guidance only, and professional advice should be obtained before acting on any information contained herein. We will not accept any responsibility for loss to any person as a result of action taken or refrained from in consequence of the contents of this publication.
