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The Budget 2018 - A state of limbo and a 50 pence piece

I shall call this Budget the limbo Budget. Until Parliament has completed the car crash that is Brexit, the reality is that the economy is in a state of limbo and the Chancellor does not really know what he is dealing with. As a consequence, most significant changes are being introduced post Brexit. In all probability there will be another Budget shortly after the UK has left the EU on 29 March next year, or as I like to say, the UK has used a 12 bore shot gun to shoot itself in the foot, and then reloaded and shot itself in the other foot.

The high-light is undoubtedly the 50 pence piece that will be introduced to commemorate (yes commemorate!) the UK’s slow and tortuous walk towards irrelevance, decline, and the exit of the EU. It will of course be worth 20 pence by the time 30 March comes around.

Moving on, what then are the changes that are likely to impact the clients of Auxilium Tax resulting from this Budget? Below we look at a select few changes that we consider relevant to our client base.

Principal private residence relief (‘PPR’)

Under current rules the last 18 months of ownership are exempt from CGT provided the house has at some time during the period of ownership been an individual’s only or main residence. This period will be reduced to the last 9 months of ownership from 6 April 2020.

Currently where a ‘main residence’ has at some point during the period of ownership been let, the part of the gain which would be chargeable by reason of the letting is exempt to the extent of the lower of £40,000 and the amount equal to the exemption of the gain in respect of occupation by the owner. From 6 April 2020 lettings relief will only be available where tenant and owner live in the residence.

Non resident CGT on non-residential properties

Historically non-UK residents did not pay UK CGT on the disposal of UK situs property. This changed on 6 April 2015 when non-residents became liable to tax on disposals of UK residential property (the non-resident capital gains tax or NRCGT charge). From 6 April 2019 this change will be extended to cover non-residential as well as residential property.

Disposal of UK residential property – CGT payment window

From 6 April 2019 all non-residents disposing of UK land (residential or not) will be required to report the disposal and pay any tax due within 30 days of the disposal (currently this rule only applies to non-residents disposing of residential property).

From 6 April 2020 UK residents who dispose of UK residential property and make a gain will also need to report the gain and pay the tax within 30 days of completion.

Entrepreneur’s Relief (‘ER’)

Where available, ER reduces the rate of CGT payable on a ‘qualifying business disposal’ to 10%. There is a lifetime limit of £10m of gains to which ER can apply.

Until yesterday’s Budget, ER was available (inter alia) with respect to the disposal of shares or securities in a personal company. In order for any disposal to qualify for ER the following requirements need to be met:

  • The individual needs to hold at least 5% of the ordinary share capital of the company and exercise at least 5% of the voting rights;

  • The company needs to be a trading company or the holding company of a trading group;

  • The individual must be an officer or employee of the company or another group company;

  • The above requirements need to have been met for at least one year prior to the date of disposal (or for a year prior to the date the company ceases trading and the individual disposes of the shares within 3 years of that date).

Two new conditions were added as part of the Budget that took effect from 29 October 2018. The individual needs to be beneficially entitled to at least:

  • 5% of the distributable profits

  • 5% of the assets available for distribution to equity holders in a winding up.

This measure has been introduced to ensure that those taking advantage of ER ‘have a true material stake in the business’. HMRC have said this change will likely impact fewer than 1,000 individuals.

In addition to this change, from 6 April 2019, the minimum holding period throughout which individuals and trustees must meet specified conditions in order to obtain ER on a ‘qualifying business disposal’ increases to 2 years (it is currently 1 year). The intention here is to ensure that individuals have a longer involvement in the business which HMRC considers to be more indicative of true entrepreneurial activity, distinct from speculation or investment.

Stamp Duty Land Tax (‘SDLT’) – higher rates for additional dwellings

In April 2016 HMRC introduced a punitive rate of SDLT for individuals purchasing additional dwellings. The rate was 3% above the standard rate.

A person who buys a new home before selling his old home, has to pay the punitive rate up front, and then reclaim the higher rate back once his old home has been sold (subject to it being sold within 3 years of the purchase of the new property). The reclaim formerly had to be submitted by the later of:

  • 3 months from selling the old home;

  • A year from the filing date for the SDLT return for the new home.

As of 29 October 2018, the time allowed to claim back higher rates of SDLT for the purchase of additional dwellings is extended. The reclaim must now be made by the later of:

  • 12 months from selling the old home

  • A year from the filing date for the SDLT return for the new home.

The legislation will also be clarified to confirm that ‘a major interest’ in a dwelling includes an undivided share.

Off payroll working in the private sector (IR35)

The off payroll working rules that were introduced to the public sector in April 2017 will be extended to the private sector from April 2020. See our article on IR35 and the public sector for details of how the new regime will work: “Small organisations” will be exempt from the rules – although a definition of ‘small organisation’ is as yet not given.


This Budget was (perhaps understandably) low on big headline grabbing changes, especially in the private client world. The reality is that there will need to be another Budget post Brexit and we predict that the Spring statement will be upgraded to a full Budget. Given the delay on implementation of a number of the announcements, don’t be surprised to see further changes before they become law.

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