Budget 2020 summary

Budget Day

Budget day always brings trepidation for advisers and clients alike, not only because it will introduce changes to the tax system that will have an impact, but because some of this changes may have immediate effect.

This year’s budget did just that, bringing in the tax changes below, effective from 11 March 2020. 

The one everybody had their eye on was Entrepreneurs’ Relief which was hotly tipped to be abolished but, in the end, remained relatively unscathed.  Instead, the government decided to reduce the lifetime allowance of qualifying gains from £10m down to £1m, a substantial reduction but probably one that will not affect the majority of people selling their business. 

There were also anti-forestalling rules introduced to prevent avoidance around the new limits where contracts were entered into prior to 11 March for non-commercial purposes, or between connected parties.  In such scenarios the election for Capital Gains purposes is treated as being made after 11 March.

IR35 goes ahead

Elsewhere it was confirmed, in the red book if not in the speech itself, that IR35 reform in the private sector will go ahead as planned. This is despite the widespread disruption in the market.  Against a backdrop of a number of measures announced to support businesses during the current global COVID-19 outbreak, there was hope that the introduction may be delayed or at least softened in some way. 

It was also confirmed that the loan charge review findings, already announced prior to Christmas, would be implemented in this Finance Act. The draft legislation remains unaltered from that previously published.  I suspect that with the increasing support among MP’s that this measure may be debated in the Chamber much more fiercely than the original legislation that brought us here.

Retrospection

Further retrospective legislation was announced to reverse a decision in the First Tier Tribunal in favour of the taxpayer. Here it was ruled that for tax purposes LLP’s are companies and therefore the income tax enquiry powers which HMRC have been using were not appropriate.  This would have had the effect of invalidating nearly all LLP enquiries HMRC has undertaken and therefore the move is unsurprising. It does, however, smack a little of HMRC picking their ball up and going home because they think the goal should have been disallowed. 

Most commentators feel this is a step too far. It makes you wonder what purpose the Courts serve if HMRC can re-write the rules retrospectively.  We will be making our concerns known to MP’s prior to the debate stage of the legislation and I would be surprised if this was not the subject of Judicial Review in due course.

More funding for HMRC

In addition, HMRC has been handed further funding to bring in an additional £4.4bn by 2025 from targeting avoidance and evasion.  It is anticipated HMRC will achieve this by recruiting additional staff and investing in technology.  We can expect increased enquiry coverage as well as more targeted campaigns as a result, possibly focussed on specific sectors of industry were avoidance and evasion perceived to be prevalent.


As always, if you wish to know more about any of the above, or find out how WTT can help you, then please get in contact with me.