Chancellor Philip Hammond has announced measures to clamp down on tax avoidance as it looks to raise £2bn over the next five years.
Addressing the House of Commons yesterday afternoon, Hammond said the government would introduce new rules in order to make Her Majesty’s Revenue and Customs the preferred creditor in business insolvencies, thus ensuring a larger share of bankruptcy estates for the taxman.
The chancellor of the exchequer announced, “We will end the practice of purchasing services though offshore branches to avoid UK VAT.”
“And we will stop our general research and development tax credit system being abused by re-introducing PAYE restriction for the small and medium-sized enterprises,” he said.
HMRC will crack down on insurance companies that issue investment products through offshore centres such as the Isle of Man or Dublin where these instruments do not attract VAT.
Next year’s budget will also extend its clampdown on off-payroll working to larger businesses via the IR35 rules. The policy will net the Treasury’s coffers £3bn, documents show.
Tax advisers have been warned they may need to review their clients’ pay structures, following this announcement.
Off-payroll working rules were introduced in 2000 and ensure that individuals who are self-employed and work through personal service companies (PSCs), who would be regarded as employees if directly engaged, pay “broadly” the same employment taxes as if they were employed.
Employers could now face serious consequences if they wrongly identify a worker as an employee or self-employed. The new rules will only apply to medium to large sized businesses.
Government pledges extra £5m on pension dashboard
A document released following Philip Hammond’s speech showed the Treasury will contribute an extra £5m to the Department for Work and Pensions (DWP) to help build the dashboard.
The Treasury also suggested the state pension will be included within the pension dashboard. The government is taking steps to support “the launch of pensions dashboards, innovative tools that will for the first time allow an individual to see their pension pots, including their state pension, in one place,” the document said.
The Budget documents also confirmed that the DWP will consult later this year on the details of the design of pensions dashboards and on an industry-led approach. The Budget documents referred to the initiative as “dashboards” and so has suggested that it will be more than one single platform.
However, no more funding from the government is expected for the following years.
Cold calling ban to become reality in autumn
The government is making progress on a pensions cold calling ban, which will lead to some IFAs having to find new ways of marketing.
HM Treasury confirmed draft regulations on the ban will be published in autumn and the prohibition itself will come into force 21 days after the day on which they are made.
It confirmed a focus on lead generators and said some IFAs will be affected because they legitimately use the service of companies who find new clients through cold calling.
A number of respondents to the consultation on banning pensions cold calling suggested the FCA should update its rules to include a ban on regulated firms buying leads obtained from cold-calling.
The report outlined that only those who were FCA-authorised or a trustee or manager of an occupational or personal pension scheme would be able to call – and only if the recipient of the call had consented to such calls being made by the caller or if the recipient of the call had an existing client relationship with the caller where it would be reasonable to accept cold calls on pensions.
The government noted the above exceptions were not extended to lead-generation firms noting that “larger advice firms do not tend to use the services of lead generation firms because they already have an established client bank.”
The plan to ban cold calling, which will include emails and texts, was announced in August 2017.
The ban will be enforced by the Information Commissioner’s Office (ICO), which recently received new powers to fine bosses of companies which pester people with unsolicited calls by as much as £500,000.
FCA to consult on crypto derivatives ban
The UK’s financial watchdog is weighing a potential ban on the sale of derivatives based on cryptocurrencies such as bitcoin, as part of the UK authorities’ sweeping push to regulate the virtual asset class.
If implemented, the move would likely put a dent in the volumes and revenues of online brokers, some of which saw record results earlier this year driven by retail traders drawn to crypto CFDs during times of high price volatility in the underlying cryptos such as Bitcoin, Ethereum and Ripple.
The proposed prohibition was suggested by the recently-established UK government’s crypto assets taskforce which released its first report. The government’s Cryptoasset Taskforce is made up of the Financial Conduct Authority (FCA), HM Treasury and the Bank of England.
The FCA said it had “made clear that in its view cryptoassets have no intrinsic value and investors should therefore be prepared to lose all the value they have put in”.
The regulator also said that cryptoassets posed “potential future threats to financial stability”.
Hammond backs SME complaints to FOS
Hammond also said the government welcomes the FCA’s plans to grant access to the Financial Ombudsman Service for small and medium-sized firms.
This comes two-weeks on from the regulator’s announcement of its plans to hike up the FOS limit by £200,000 to £350,000.
He said the plans in place to extend access to the ombudsman for SMEs were underway, and that “FOS will now take steps to ensure they have the necessary skills and processes in place to handle these new cases.”
SMEs with an annual turnover below £6.5m and with fewer than 50 employees, or an annual balance sheet under £5m can refer unresolved complaints to FOS as of this month.
Personal allowance rises to £12k
The personal allowance will rise to £12,500 from April 2019. This means a basic-rate taxpayer will pay £1,205 less tax in 2019-20 than in 2010-11.
As well as raising the personal allowance, the higher rate – the point at which most people start paying 40% tax – will be raised from £46,350 to £50,000. This will give somebody earning £50,000 a year an extra £860 a year: an additional £760 from their income between £46,350 and £50,000, as well as the £130 from their personal allowance.
Brexit will get another £500m and a new digital tax will be introduced in 2020, as reported by International Investment. The industry has responded with relief to the announcements.
