UK Budget 2018: Trick or Treat?Posted on 30th November 2019
The UK government delivered its Budget on 29 October as opposed to 31 October to avoid being tainted by Halloween. So was it ‘trick’ or ‘treat’?
Hanging in the balance is that if UK’s negotiations with the European Union (“EU”) aren’t successful, a no-deal Brexit will require a new Budget to set out a ‘different strategy for the future’. In fact, the Chancellor announced an extra £500 million budgeted for preparations for leaving the EU. Some believe that the £500 million available for a no-deal Brexit is also a valuable negotiating ploy for the UK. UK taxpayers and British expats may be concerned about a no-deal Brexit and wish to take this opportunity to review their UK financial affairs.
The clear message throughout the budget was that austerity is coming to an end and the budget offered ‘treats’ such as investments in transport, health and infrastructure. The announcement of an additional £2 billion in funding for mental health services was warmly welcomed. The £1.7 million funding in Holocaust education programmes to mark the 75th anniversary of the liberation of Bergen-Belsen concentration camp is also note-worthy.
In tax news, the UK tax-free personal allowance will increase to £12,500 (from £11,850) from 6 April 2019 – a year earlier than planned. The basic rate band will be extended to £37,500 (from £34,500). This means that taxpayers with incomes of less than £50,000 a year will only pay 20% UK income tax. These measures will be welcomed by British expats with UK income, for example, those with rental income in the UK.
The UK confirmed that it will be implementing the previously announced proposals in relation to property tax for non-UK resident taxpayers and non-UK resident companies. Non-UK resident taxpayers will be subject to UK tax on gains from direct (and certain indirect) disposals of UK property from 6 April 2019. This relates to residential and non-residential property. In addition, non-UK resident companies will be subject to UK corporation tax on UK property income from 6 April 2020.
Those buying UK residential property will not welcome the proposal of a surcharge of 1% to Stamp Duty Land Tax (SDLT). It is expected that the 1% surcharge will be in addition to the existing 3% surcharge on the purchase of residential property by all companies and individuals who already own a residential property.
A huge talking point is the introduction of a new 2% digital services tax on UK revenues of big technology companies from April 2020. The UK is taking a leap of faith by going it alone and not waiting for international commitment to challenge tech giants such as Amazon, Google and Apple. The 2% levy is based on the money made on digital services such as advertising and streaming entertainment (and not online sales). The UK expects to raise more than £400 million annually from this measure. The Chancellor highlighted that “the rules of the game must evolve now if they are to keep up with the digital economy,” and whilst the public benefits from digital platforms, the fairness of the tax system must be considered. He clarified that the UK expected large companies and not startups to shoulder the burden of the tax.
OFFSHORE TAX COMPLIANCE STRATEGY
The UK is updating its offshore tax compliance strategy following the success of the strategy set out in ‘No Safe Havens’ in 2014 ‘No Safe Havens’. Over 100 jurisdictions have been automatically exchanging financial data under the Common Reporting Standard (“CRS”) – Israel has missed the deadline but that is another ‘trick’ or perhaps ‘treat’. The UK has already begun their analysis of this unprecedented amount of information with the intention of targeting non-compliant taxpayers. The odds are now stacked against taxpayers with undeclared offshore assets. Taxpayers must seek professional advice to understand how best to resolve any outstanding issues.
OFFSHORE TAX COMPLIANCE STRATEGY
Overall the UK budget offered various ‘treats’ in the form of investments in public services and interesting proposals for how the UK plans to raise money in a post-Brexit country. Nevertheless, the Budget was overshadowed by Brexit as the Chancellor’s predictions for the public finances were highly dependent on a smooth transition.