In light of Rishi Sunak’s inaugural Budget announcement earlier today, some of our Private Client & Tax group share their initial reactions to the number of issues addressed.
David Scott on Entrepreneurs’ Relief
“The lifetime Entrepreneurs’ Relief (ER) limit for Capital Gains Tax (CGT) has been reduced from £10m to £1m in today’s Budget. A significant change to ER wasn’t totally unexpected but the good news is that it hasn’t been abolished wholesale as some commentators suggested. The even better news is that ER will still apply for employees holding Enterprise Management Incentive (EMI) options who would commonly realise gains below £1m in any event.
“Also Investors’ Relief (IR) seems to have escaped any change. Will this mean that entrepreneurs will look to IR going forward instead of ER? IR is a similar relief to ER (also a 10% CGT rate on a lifetime gains up to £10m) and, while the shares need to be held for three years and the shareholder generally can’t be an employee or director (other than as a ‘business angel’), there’s no minimum shareholding requirement as there is with ER.”
Chris Moorcroft on the UK’s funds regime
“Tucked away in the Budget documents, away from the headlines, is a consultation on the UK’s funds regime. Nothing unusual there, perhaps, but what interests me is the Government’s stated intention of (wait for it…) using the tax system to make the UK a MORE attractive location to base asset holding companies. An almost novel concept after years of tax changes making the UK less attractive for foreign investment.”
Gary Ashford on R&D and HMRC powers
“With the introduction of this Budget, the Government set the objective of increasing economy-wide investment in R&D to 2.4% of GDP by 2027. As part of this, the Budget sets out ambitious plans to increase public R&D investment to £22 billion per year by 2024-2025.
“This landmark investment is the largest and fastest ever expansion of support for basic research and innovation, taking direct support for R&D to 0.8% of GDP and placing the UK among the top quarter of OECD nations – ahead of the USA, Japan, France and China.
“With the recent changes announced by HMRC to the Loan Charge, one obvious response by HMRC was going to be what they are doing about Tax Advisers who promote egregious tax schemes.
“We have at least part of the answer in today’s Budget, in that HMRC will make changes to the Disclosure of Tax Avoidance Schemes (DOTAS) and the Promoters of Tax Avoidance Scheme (POTAS) rules, to ensure they get early warnings of schemes being touted around, and provide HMRC with stronger powers over such advisers.
“The Government will also publish a new strategy for tackling those advisers, and will also be launching a call for evidence in the spring to look at the standards of tax advice provided in the UK, and how citizens can better rely on the advice provided to them. We still have more than 40,000 tax advisers operating in the UK who are not members of any professional body!”
Siena Gold on publishers and pensions
“Good news for publishers, online newspapers behind a firewall, and readers: from 1 December 2020 e-books, e-newspapers and e-magazines will be zero rated for VAT – a saving of 20%.
“Less good news for high earners saving into pensions: from April 2020 those earning over £300,000, only the first £4,000 of pensions savings will be tax-relieved. It will be interesting to see if there is a corresponding increase in assets saved into the more risky, but tax attractive, venture capital trusts and EIS eligible investments.”