SPECIAL FEATURE
What to Watch out for in 2019 What are the key changes in 2019, what do you need to be weary of and what can you capitalise on?
After April 2019 these rates will be frozen and will only increase with inflation.
Brexit
VAT Reverse Charge for Construction Services
At 11pm on Friday 29 March, Britain will leave the EU. It is important that you begin considering (if you haven’t already) the impact Brexit could have on your business.
From 1 October 2019, a VAT reverse charge will apply to supplies of construction services, meaning that 100,000 to 150,000 businesses in the construction and building sectors will have to change their accounting systems.
Indeed, Brexit will bring more challenges than opportunities, most significantly with talent. You need to consider if Brexit will affect the talent not only within your business at a senior and junior level, but also within your suppliers’ organisations. Could it push prices up within your supply chain? If you trade with the EU, you also need to review your suppliers and consider whether you can secure more efficient trade deals with countries outside of the EU. Although implications of Brexit are as of yet unknown, you should be reviewing the potential impact on your business and how you can mitigate your risk when the time comes.
Making Tax Digital (MTD) With less than three months to go, if you are a VAT registered business with a turnover above £85,000, you should now have systems in place to make you compliant.
HMRC acknowledges that the impact on the industry is potentially significant. HMRC also notes that some businesses may suffer a loss of cash flow where VAT is no longer charged. To prepare for these changes, construction businesses should review supplies made to and received from other VAT registered contractors to establish whether these will be affected. They should also consider the adaptions that will need to be made to their accounting systems and consider the impact on cash flow that it can cause.
Annual Investment Allowance (AIA) From January 2019, the AIA will increase to £1million from £200,000 for two years. The AIA is available for most plant and equipment purchases.
Entrepreneur’s Relief (ER)
From April 2019, affected businesses will need to keep digital records and use software to submit their VAT returns (the digital gateway will be switched off).
ER reduces the rate of Capital Gains Tax on disposals of certain business assets from 20% to 10%. The Government has announced two changes:
You can choose to continue to use spreadsheets. However, these must meet digital requirements and be API enabled or have bridging software to make them compatible.
1. An increase in the holding period. Individuals will need to hold the assets or shares for at least two years, as opposed to twelve months, before they can claim ER 2. For disposals of shares on or after 29 October 2018, the individual must now meet two extra tests: They must be beneficially entitled to at least 5% of the company’s distributable profits (i.e. any dividends declared); and have a right to at least 5% of the net assets of the company available to equity holders on a winding up
Indeed, HMRC has delayed MTD, but only for VAT registered businesses with complex requirements and only by six months (see page 5 to find out more).
Personal Taxation and Wages The increases to the personal allowance and the higher rate threshold are coming in to force a year earlier than planned. From April 2019: • Personal Allowance rising to £12,500 • Higher-rate threshold rising to £50,000 • National Living Wage rising to £8.21 per hour
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In light of these changes, it is recommended that no decisions are made on disposals before reviewing existing arrangements to see if they meet the new conditions. For advice on any of the changes mentioned, contact Neill Staff at neill.staff@raffingers.co.uk.
