What a year 2016 has been in the world of UK tax. Here is our run down of the top 10 developments and events.
1. Brexit
June's result was a shock. It will only be once Parliament figures out what they think that people voted for and the UK's negotiators do some deals that we might have some inkling as to how tax may be affected.
2. Making Tax Digital
- Should every taxpayer be forced to use a smart phone or a computer? Many taxpayers, professional bodies and MPs think not.
- HMRC will respond to its six recent consultations in January 2017.
- Based on the experiences of foreign tax authorities, we hope that HMRC will decide to run MTD as a voluntary pilot for the first couple of years.
- See Making Tax Digital: Index
3. Dividend taxation
- On 6 April 2016 the 10% dividend tax credit was abolished and a new £5,000 dividend allowance did little to soften the tax blow which has affected hundreds of thousands of company owners and investors.
- See Dividend tax
4. A bad (very) year for PSCs.
HMRC continue their crack down on the use of Personal Service Companies (PSCs).
- The changes to dividend tax cost your average owner £5k per year.
- New rules were introduced to restrict tax relief for travel and subsistence costs.
- The Transactions In Securities rules were expanded with a new TAAR for ‘phoenixing’.
- Next year further changes will hit PSCs working in the public sector.
- See Personal service companies & tax
4. A good year for HMRC in the courts.
Despite a shaky start to the year when hundreds of invalid Accelerated Payment Notices (APNs) had to be withdrawn, HMRC went on to score several wins in film partnership cases and their 10th successive victory on schemes promoted by NT Advisors.
5. Small business simplification
- The Office of Tax Simplification (OTS) dropped its proposals for 'look through taxation' but will take forward proposals for new Sole Enterprise with Protected Assets (SEPA) trading vehicle. See Small company reforms.
- OTS work on simplifying the corporation tax computation and consideration of responses on alignment of income tax and NIC continue.
- John Whiting, former director of the OTS received a CBE in June.
6. Accounting complications
- Changes to UK GAAP have been challenging company owners and small businesses who for accounting periods beginning on or after 1 January 2016 have found that:
- The FRSSE is withdrawn
- Small companies have to use FRS102 Section 1A
- Micro-entities can use FRS105
- See UK GAAP changes and New GAAP for unincorporated business.
7. VAT changes
- In November 2016 reversed its previously denied change of practice on the recovery of pre-registration input tax on the cost of goods.
- At the 2016 Autumn Statement anti-forestalling measures were introduced prior to 2017 changes to flat rate scheme to prevent low cost businesses doing too well.
8. Staff benefits
From 6 April 2016 there were many changes employee benefits:
- The higher paid / lower paid employee distinction was abolished.
- Voluntary payrolling was introduced.
- A new exemption for trivial benefits.
- A new exemption for paid and reimbursed expenses to replace the dispensation regime.
9. SDLT increase for additional properties.
- From 1 April 2016 an additional 3% is charged on second homes and buy to lets.
- See SDLT & residential property: higher rates
10. More offshore anti-avoidance and penalties
There are now a bewildering array of penalties, disclosure regimes and anti-avoidance for offshore issues.
- Finance Act 2016 introduced:
- Increased penalties for inaccuracies, failure to notify a charge to tax or failure to deliver a return in connection with offshore matters and transfers.
- A new criminal offence for tax evasion and failing to declare offshore income and gains.
- New civil penalties for offshore tax evaders and their enablers.
- Publication of details of deliberate tax defaulters and their enablers.
- Asset based penalties for offshore inaccuracies and failures.
- See Penalties: Offshore income and CGT
- From 5 July 2016 property developers are prevented from using offshore structures to avoid UK tax on profits from trading in UK property. See Profits from Trading and Dealing in UK land.
- Under the new Client Notification rules agents have until 31 August next year to notify clients with offshore bank accounts of the new Common Reporting Standard provisions.
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