February 2020

Budget Day 11 March

The 2020 Budget on 11 March will be the first to be delivered after the UK's departure from the EU on 31 January 2020 and will confirm the 2020/21 tax rates, bands and allowances.

Year end tax planning before 5 April 2020

While we will wait for the Budget for the next tax year's rules, it is worth checking that the current tax year's tax liabilities have been minimised. 

Some points to consider include:-

• The transfer of income-producing assets between spouses and family members to use up lower rate bands.
• A Joint Property Election where spouses or civil partners vary their beneficial entitlement to jointly owned assets and income to reduce their overall tax liabilities.
• Using the tax free £2,000 dividend band in place for 2019/20.
• Timing the closing of deposit accounts that pay interest at a yearly intervals to ensure the interest falls into the most beneficial tax year.
• Paying interest from a company to its directors in respect of loans made to the company. This may be advantageous given the savings tax rate and tax free interest allowance.
• For ISAs, checking whether you have used up your ISA limit for the year - it is £20,000 for 2019/20. Also consider funding an ISA for children or grandchildren, a Junior ISA for children or grandchildren under 18 without a trust fund and a Right to Buy ISA.
• Checking availability of the married couples allowance (MCA) that allows a lower rate tax payer to use some of the unused personal allowance of their spouse. This can be applied for online and backdated 4 years.
• Using the annual capital gains tax (CGT) exemption of £12,000.
• If you are planning to claim private residence relief for capital gains tax soon, note that the final period of exemption is reduced from 18 months to 9 months from 6 April 2020 and lettings relief is removed from 6 April 2020 unless the property owner remains in occupation of the property alongside the tenant so a sale may be best brought forward into this tax year if possible.
• For inheritance tax planning, using your £3,000 annual gift allowance and the £250 small gifts to individuals allowance.
• For pension planning, considering making pension contributions in respect of children and other family members.

Please do contact us if you would like to discuss any possible tax savings in more detail.

Brexit – transition period

The leaders of the UK and European Union signed the Withdrawal Agreement, and the UK left the EU on 31 January 2020. However the UK is now in the transition or implementation period during which time it is 'business as usual' as the UK is covered by EU rules until the end of the year. By 2021 the UK aims to have agreed a deal on future arrangements with the EU and the rest of the world.

HMRC has contacted businesses in the UK who may import and export between the UK and the EU to explain what they can do to prepare for changes to customs arrangements after the UK has left the EU.

No change during the implementation period

Between 1 February and 31 December 2020, there will be an implementation period. HMRC has confirmed that there will be no changes to the terms of trade with the EU or the rest of the world during this time. From 1 January 2021, the way businesses trade with the EU will change and HMRC is reminding businesses that they should prepare for life outside the EU, including ensuring they are ready for customs arrangements.

HMRC is advising businesses to:

• make sure they have a UK Economic Operator Registration and Identification (EORI) number
• prepare to make customs declarations.

HMRC has posted letters to 220,000 VAT registered businesses advising them on the current position.

Off-payroll working

HMRC has now published draft secondary legislation for the off-payroll working rules that are due to come into force in April this year.

In 2017, HMRC introduced new off-payroll rules to the public sector, which saw some contractors' net income cut significantly. HMRC also shifted the responsibility for compliance from individual contractors to public bodies or recruitment agencies.

From 6 April 2020, the new tax rules will use the 2017 changes as a starting point for the extension to medium and large organisations in the private sector. These reforms will shift the responsibility for assessing employment status to the medium and large organisations engaging the individual worker via and intermediary.

The new draft legislation is open for consultation until 19 February 2020.

Tax relief on professional fees and subscriptions

Employees are allowed to claim tax relief on their annual professional fees or subscriptions to some HMRC approved professional organisations. The costs are tax deductible generally where the individual must have membership to do their job or it is helpful for their work. Where the fees are paid by the individual's employer this will not generally result in a benefit in kind charge.

HMRC has updated the list of approved bodies which includes not only details of the professional bodies that are approved but also details of qualifying annual subscriptions for journals.