Our Spring Tax Updates will be taking place across the region in March 2018. The update will include the following: • Comment on the latest legislative changes • Provide practical advice • Help to prepare for the end of the tax year • Give thoughts on the current tax policy

1. 1
March 2018
Spring tax update

2. 2
Julian Smith, Tax Partner
Chair’s welcome

3. Housekeeping
@pkfFrancisClark
#FCSpringTax18 #Bournemouth
A copy of the
slides will be sent
to you by email
shortly

4. Spring tax update 2018
Business tax update – Lisa Whitbread
Private client update – Victoria Christopher
Financial planning update – Aimee Raymond

5. 5
Hammond’s Spring Statement
• Light at the end of the tunnel?
• Mission accomplished on the deficit?
• Any chance of tax cuts?
• UK productivity – how do we improve real living
standards?
• R&D – unleashing inventors & discoveries
• Corporate tax & digital economy consultation

6. www.website.com
The Corbyn factor
• Clients are concerned
• Many feel that wealth is under attack
• Non-residence being considered by some
• Succession – a good time to pass the
business on?

7. 7
Business tax update

8. Business tax update
• Gig economy
• Employment intermediaries
• International taxes
• Business incentives
• Corporation tax reform
• Making tax digital

9. 9
Gig economy
• ‘Gig economy’ – reliance on self-employed labour
• No PAYE/NIC & limited employment law
• Taylor review of Modern Working Practices - July 17
• To act on all but one of the 53 recommendations
• ‘Millions to benefit from enhanced rights as
government responds to Taylor review of
modern working practices’

10. Employment intermediaries
Employer
Mr A (employee) Mr A (shareholder and director of A Ltd)
Client
A Ltd
Employee paid a salary subject
to:
• PAYE 20/40/45%
• Employees’ NIC 12/2%
• Employers’ NIC 13.8%
Client engages A Ltd:
• Pays fees
• No NIC, no PAYE
A Ltd pays Mr A:
• Salary (below NIC level)
• Dividends (no NIC, lower IT)

11. Employment intermediaries
• IR35 failed to work as intended
• IR35 - onus on intermediary
• April 2017 - provisions for services
provided to the public sector
• Moves onus onto public sector body
• Extension to private sector

12. www.website.com
International taxes
• Reducing global corporate tax rates
• Multilateral Instrument (MLI)
• Requirement to correct – Sept 18
• Public register for overseas owners of UK
property
• ‘There are around 97,000 properties in England
and Wales held by overseas firms, as of
January 2018’ BBC
• Changes for non-UK resident entitles holding
UK property

13. 13
Business incentives
• Lowest CT rate in G20
• VAT threshold is the highest in the OECD
• Tax efficient investments (EIS limits doubled)
• Equity Incentive Schemes for Employees
• Capital allowances (removal of IA)

14. 14
Business incentives
• Research & Developments Claims
• RDEC increased from 11% to 12%
• SME R&D - 230%
• £10k expenditure provides a CT saving of £4.4k
• Or repayable cash credit of £3.3k

15. www.website.com
Corporation tax reforms
• Corporate interest restriction
• Restriction where UK net interest exceeds
£2.0m
• Rules are complex & continue to be refined
• Corporate losses regime
• More favourable for SMEs
• Restriction if b/f losses > £5.0m
• Nominated company & group allowances
statement
• Effect on structures
• Impact on tax cash flows
• Ensure financial models reflect changes
• Compliance and due diligence

16. Making tax digital
• Digital approach to tax compliance
• April 2019 launch date – VAT only
• Businesses with a turnover above £85k:
• Need to keep their records digitally
• Provide VAT return information through
MTD compatible software
• No change to submission deadlines
• Further information to follow
• Extension to other taxes?

17. 17
Private client update

18. Private client update
• Review of inheritance tax
• Non resident capital gains tax
• Changes to non-dom rules
• SDLT recent changes
• Residential property owned by
companies

19. 19
• HMRC research paper on the use of APR &
BPR
• Published in November 2017
• General objectives were found to be that of:
• Tradition
• Succession of wealth
• Preservation of business
• Reducing IHT - generally secondary
• Is it going to get any better?
Review of inheritance tax

20. Review of inheritance tax
OTS REVIEW OF IHT
Increasing asset values
NRB £325k since 2009
Annual exemption still £3k
RNRB - too complex?
PETs - encourage gifts
Trust taxation
Simpler, fairer and better?
HMRC challenge
use of reliefs

21. Non resident capital gains tax
• NRCGT in force since April 2015
• NRCGT return & payment within 30 days
• Many have not been aware of requirements
• Substantial penalties levied

22. 22
Non resident property gains
• To apply to all types of UK property from April
2019
• NRCGT rules
• Residential property
• Commercial property
• Scope to be extended to include indirect
disposals
• Reporting requirement for UK advisers

23. www.website.com
Non-dom tax reform
• Significant change to the taxation of non-
doms
• The concept of ‘deemed domicile’ is, with
effect from April 2017:
• Extended to apply to all taxes (not just IHT)
• UK resident in 15 / 20 tax years
• Returning non-doms - UK dom when UK
resident
• Residential property no longer excluded

24. SDLT recent changes
• Growing in complexity
• Additional 3% charge
• Multiple dwellings
• Residential or mixed use?
• Multiple purchasers
• Relief for first time buyers

25. www.website.com
Declaration of trust
• Often used for income tax purposes
• Mortgage transfer = consideration
• Rules changed for spouses
• No SDLT on mortgage < £125k
Property incorporation
• Income tax relief on mortgage interest
restricted to basic rate
• CGT – holdover gains if there is a
business
• SDLT – normally chargeable on market
value
• No SDLT if partnership
SDLT practical examples

26. 26
• Annual tax on enveloped dwellings
• Companies which own UK residential
property valued > £500,000
• Valuation 1 April 2017 is required
• Reliefs must be claimed
ATED
2018/19 returns and tax due by
30 April 2018

27. 27
Tax saving with no worries

28. Agenda
• ISA innovations
• Pension perks
• Inheritance Tax saving plus
‘income’ solution
• Enterprise Investment Scheme
rule change

29. www.website.com
.
Innovating ISAs
• Allowance now £20,000 per annum
• Four types
• Cash
• Investment (including AIM)
• Innovative
• Lifetime ISA (LISA)
• Growth free from CGT and Income
tax free
• New flexible feature, take money out
and put back in without losing
allowance/tax benefits

30. 30
.
Innovative Finance ISA
• Investing in
• Peer 2 Peer Lending
• Crowdfunding debentures
• Higher risk than cash, potentially
higher returns, tax free status useful if
investing in this area already
• Can’t transfer existing
P2P/Crowdfunding assets to ISA
• Can split your £20k across Cash,
Investment, Innovative and LISA (LISA
if you are under 40)

31. .
• Rising by £30,000 and will increase by CPI each year
Pension Lifetime Allowance
• Increasing on 6 April after years of reductions

32. Tapering Annual Allowance – use it or lose it
• Tapering for those with Adjusted Income > £150,000
• Annual Allowance of £40,000 reduced by £1 for every £2 of
income > £150,000
• £210,000 of Adjusted Income = £10,000 annual allowance
• Carry Forward might be available from unused allowances in
previous 3 tax years
• Carry Forward becoming restricted as more previous years will
be affected by Tapering
• Still opportunity to use 2014/15 and 2015/16 tax years for
unrestricted Carry Forward

33. .
Pension contributions for non-earners
• Non earners can still contribute £3,600 pa to pension
• Net cost only £2,880
• Tax relief of £720 added by HMRC, 25% uplift!
• Build up funds for non-earning spouse, children, grandchildren
• Tax free growth, flexible access from age 55
• Valuable method of passing assets down through generations
• Future generations less likely to have quality pension schemes

34. 34
.
IHT saving plus ‘income’
• Place funds in a Discounted Gift Trust
within an Investment Bond wrapper
• Generally available to those up to age 90
(subject to medical underwriting)
• Immediate ‘discount’ given removing assets
from your estate for IHT purposes
• Tax deferred income of up to 5% of initial
investment for up to 20 years

35. Discounted Gift Trust
Investor age 75
(Settlor)
Discount
£49,200
Retained
fund
£50,800
Investment
Bond
£100,000
Assignment Payment
Trust
OR
Regular
withdrawal
£400

36. .
Enterprise Investment Scheme changes
• Effective from Royal Assent of Finance Bill expected this
week
• New principles-based test to be introduced
• To ensure investment directed towards companies seeking
investment for long term growth and development
• Tax motivated investments where tax relief provides all or
most of the return no longer eligible
• Message – EIS still attractive but risk now higher

37. 37
Chair close

38. 38
A good tax environment for SMEs?
Capital gains tax on
trading businesses
10% tax up to £10m
Capital gains tax generally 20% or 28%
Inheritance tax 100% business &
agricultural property relief
Corporation tax 19% reducing to 17%

39. 39
Takeaways
• Digital & gig economy in the sights
• Innovation will be supported
• Interest relief continuing to be restricted
• Property wealth being targeted
• Pension reliefs being restricted
• Consider succession planning
• Now may even be a good time to pay some tax

40. No responsibility can be accepted for any action taken as a result of information contained in this presentation. We therefore strongly
recommend that no action should be taken before obtaining detailed professional advice.
Past performance is not a guide to future returns and the value of investments and income from them may go down as well as up and an
investor may not get back the amount invested.
PKF Francis Clark Financial planning and wealth management is a trading name of Francis Clark Financial Planning Ltd which is authorised
and regulated by the Financial Conduct Authority. Registered Office: Sigma House, Oak View Close, Edginswell Park, Torquay TQ2 7FF.
Registered in England No. 05413603.
Francis Clark Financial Planning Ltd is a member firm of the PKF International Limited network of legally independent firms and does not
accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.
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