TPE 2020 – Tax Update
©ICAS 2020
Contents
Technical Update –Taxation
1.1 Introduction ............................................................................................................. 5
1.2 Learning Objectives ................................................................................................ 5
1.3 Tax at TPE.............................................................................................................. 6
1.4 Tax Rates and Allowances ..................................................................................... 7
1.5 Capital Allowances ................................................................................................. 7
1.5.1 Annual Investment Allowance (AIA) ............................................................... 7
1.5.2 The Special Rate Pool .................................................................................. 11
1.5.3 Structures and Buildings Allowances (SBAs) ............................................... 11
1.6 Capital Gains Tax ................................................................................................. 13
1.6.2 Entrepreneurs’ relief ...................................................................................... 13
1.6.2 Replacement of business assets relief (rollover and holdover relief) ........... 15
1.7 Summary .............................................................................................................. 15
Appendix 1 CA Qualification Rates Sheet 2020 ......................................................... 16
ICAS 2020
Notes
Technical Update –Taxation
1.1 Introduction
The main purpose of this update is to inform students of the key technical changes
between 30 November 2018 (the legislation cut-off date for TPS 2019 material) and 31
March 2020 (the TPE legislation cut-off date date for November 2020 diet).
When you studied for the TPS Tax exam in 2019, the material included legislation up
to, and including, Finance Act 2018. For the 2020 TPE courses , you will be required
to update your knowledge to Finance Act 2019.
This module includes an overview of the changes in the legislation. Where the update
pack is silent on a topic you will find that the legislation and syllabus have not altered.
You should use this module along with your TPS Tax notes as part of your technical
revision material.
In terms of preparation for TPE, it is important that you feel confident enough in your
taxation (‘Tax’) knowledge. Once you have achieved this you can start to work on the
application and evaluation of your technical knowledge at TPE level.
Students who passed Tax in 2018 (or earlier)
If you passed TPS Tax in 2018 or earlier, the cut-off date for your tax technical
knowledge will be different. In order to bridge this gap, you are entitled to receive a
copy of the 2019 or earlier Tax update module for TPE. These earlier update modules
will be available through myCABLE.
Please contact us by email (students@icas.com) if the version you require is not
available on myCABLE. It is important that you contact us as soon as possible and not
immediately before the exam.
You may take a copy of this module into the TPE exam.
1.2 Learning Objectives
After completion of this module students should be able to:
•
understand the main technical updates applicable to the TPE 2020 course;
and
•
apply tax legislation changes introduced by FA2019 and be familiar with
these.
Achieving these learning objectives will help you to prepare relevant tax calculations
and analysis in your TPE exam.
TPE 2020 – Taxation – Update
5
ICAS 2020
Notes
1.3 Tax at TPE
The TPE exam requires students to apply technical knowledge in a broader context
than that required at TPS. Tax features in most TPE case studies but the focus is
different. Often, the TPE case studies will require you to apply logic and common
sense rather than complete complex technical tax calculations.
Tax areas that have featured in recent TPE case studies include:
•
VAT and SDLT on property transactions. At TPE the emphasis will be on
providing advice and recommendations based on the analysis of information,
including tax implications.
For example, setting out the advantages and
disadvantages of opting to tax a commercial property.
•
Capital gains tax. At TPE students would normally be expected to recognise a
liability arising, recommending the most suitable reliefs which could defer or
mitigate the liability. Calculations may be required to as part of the analysis.
•
Inheritance tax. At TPE students have been asked to provide advice on tax
due on the death of a shareholder and how best to release fund from the
death estate to beneficiaries. Calculations may be required to as part of the
analysis.
•
Business structures. At TPE students would be expected recommend a
suitable business structure for the scenario in the case study.
This may
include analysis of the advantages and disadvantages of trading either as a
sole-trader, a partnership or a company.
•
Anti-avoidance
legislation
for
example;
restricting
the
availability
of
corporation tax loss relief where there has been a change in ownership and a
major change in the conduct or nature of the trade. At TPE students would be
expected to identify the risk that loss relief may not be available and to
recommend that this is considered when evaluating the price offered for a
company.
•
Alternative financing options. TPE case studies have required students to
consider different forms of financing and the impact that these would have on
the business.
Students would be expected to discuss the differing tax
treatments for debt and equity as part of their answer.
•
R&D tax relief. TPE students have been provided with technical information
regarding the application of R&D Tax relief and had to apply this to the
relevant case study to determine if a claim is accurate and what actions are
required to address any issues.
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TPE 2020 – Taxation – Update
ICAS 2020
Notes
1.4 Tax Rates and Allowances
For TPE 2020 you should use the updated rates and allowances for 2019/20, with
2018/19 as prior year rates. The rates sheet is produced in appendix 1.
In the examination, you can be required to use rates from either of these years.
Unless you are told otherwise, for years earlier than 2018/19, please use 2018/19
rates. For later years, you should use 2019/20 rates.
You should familiarise yourself with the relevant changes to the rates and allowances.
1.5 Capital Allowances
1.5.1 Annual Investment Allowance (AIA)
The AIA provides full tax relief (100%) for £1,000,000 of expenditure on plant and
machinery (other than cars) per annum to all businesses regardless of size. The limit
of £1,000,000 is a temporary increase and was introduced from 1 January 2019;
before this the limit was £200,000. Businesses with an accounting period spanning
this change will have a hybrid limit (covered below). The limit is due to return to
£200,000 per annum on 1 January 2021 (after two years).
Businesses will be able to allocate their AIA to qualifying expenditure in any way
they wish. It will therefore be possible to set the AIA against expenditure which would
otherwise qualify at a lower rate of allowances (such as expenditure on long-life
assets or integral features which are both discussed later in the module).
Any qualifying expenditure incurred over and above the £1,000,000 limit will qualify for
the normal WDA rate applicable to that asset. Much like the personal allowance, the
AIA cannot be carried back or forward to different accounting periods.
Where companies are connected, such as a parent company and a subsidiary
company, the AIA of £1,000,000 must be shared amongst the connected
companies and used in the most beneficial way. In this course, you should assume
that the whole AIA of £1,000,000 is available to a company you are dealing with in a
question, regardless of the existence of other connected companies, unless you are
specifically told otherwise.
When calculating capital allowances and claiming the AIA, we use two separate
columns in our calculations to illustrate which additions qualify for the AIA, and which
belong in the main pool and special rate pool (which we will see later). This does not
mean that the AIA is a separate pool, but instead helps us calculate the rate of
allowances that qualifying expenditure is entitled to.
TPE 2020 – Taxation – Update
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ICAS 2020
Notes
Example 1 – Annual Investment Allowances
Conntex Ltd is a pharmaceutical company and has a twelve-month accounting period
to 30 June 2020. The TWDV b/f at 1 July 2019 was £56,950. The company incurred
£1,272,000 of qualifying expenditure on the purchase of specialist equipment during
the year.
Calculate the allowances available to Conntex Ltd for the year ended 30 June 2020.
Solution to Example 1
Main Pool
AIA
WDA – 18%
£
TWDV b/f as at 1 January 2019
£
0
56,950
Additions
1,000,000
272,000
Qualifying expenditure
1,000,000
328,950
AIA @ 100%
WDA @ 18%
TWDV c/f as at 30 June 2020
(1,000,000)
______
0
(59,211)
269,739
Conntex’s allowances total £1,059,211 (£1,000,000 + £59,211) for the year to
30 June 2020.
Due to the current level of the AIA the majority of businesses in the UK can get 100%
relief for the cost of qualifying plant & machinery in the accounting period in which the
expenditure is incurred. Remember that cars cannot benefit from the AIA and should
therefore be added to another appropriate column of expenditure.
As the AIA is an annual rate it should be scaled up or down if the business operates
with a long or short accounting period.
Example 2 – Calculating the AIA
Sockton Ltd draws up accounts for the 8 months ended 31 August 2019. During the
year it purchases machinery for £750,000. The company’s TWDV b/f at 1 January
2019 was £312,000.
Calculate the allowances available to Sockton Ltd for the 8 months ended 31 August
2019.
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TPE 2020 – Taxation – Update
ICAS 2020
Notes
Solution to Example 2
AIA = 8/12 x £1,000,000 = £666,667
Main Pool
TWDV b/f as at 1 January 2019
AIA
WDA – 18%
£
£
0
312,000
Additions*
666,667
83,333
Qualifying expenditure
666,667
395,333
AIA @ 100%
(666,667)
WDA @ 18% x 8/12
TWDV c/f as at 31 August 2019
(47,440)
0
347,893
Total allowances = £666,667 + £47,440 = £714,107
Where the business is a company it will have more than one capital allowances
computation if the accounting period exceeds 12 months. The AIA for each
computation should be calculated separately and will never exceed the annual amount
available (i.e., 12 months max) in either individual computation but may exceed this
limit over the two computations.
Where a business has a chargeable period which spans the change in AIA limit on 1
January 2019, a hybrid limit has to be calculated. This limit will be made up of two
parts;
a) The AIA entitlement for the part of the period which falls before 1 January
2019: and
b) The AIA entitlement for the part of the period which falls after 1 January 2019.
The total AIA entitlement for the period will be the sum of a) and b).
AIA entitlement =
(Months in period pre Jan 2019 x £200,000) + (Months in period from Jan 2019 x £1,000,000)
12
12
In addition to calculating the appropriate AIA for the whole period, it is also necessary
to check that the qualifying expenditure incurred before January 2019 does not
exceed a maximum entitlement for that period. This is calculated as the amount of AIA
that would have been available for the entire period if the January 2019 rate change
had not taken place. For a 12-month accounting period this figure will be £200,000.
There is no similar restriction on the expenditure incurred on or after 1 January 2019.
For the purposes of this course you will not be expected to learn the equivalent rules
in place for the reduction of the rate in December 2021 to £200,000 per annum.
TPE 2020 – Taxation – Update
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ICAS 2020
Notes
Example 3 – Calculating the AIA
Five companies each have a year end of September 2019.
Their capital
expenditure is as follows:
1/10/18 –31/12/18
1/1/19 –30/9/19
Total
£
£
£
£0
£250,000
£250,000
Dogma Ltd
£500,000
£0
£500,000
Saint Ltd
£300,000
£200,000
£500,000
Nanny Ltd
£200,000
£300,000
£500,000
£0
£900,000
£900,000
Penguin Ltd
Punk Ltd
How much expenditure will qualify for the AIA in each company?
Solution to Example 3
The AIA for the year to 30 September 2019 is £800,000, calculated as follows:
3 x £200,000
+
12
= £50,000
9 x £1,000,000
12
+
£750,000
Only £200,000 of expenditure from 1 October 2018 to 1 January 2019 may be
allocated to the AIA. The expenditure qualifying for the AIA is therefore:
•
Penguin Ltd
= £250,000 (no restriction as expenditure does not exceed
£800,000 and all incurred after 1 January 19).
•
Dogma Ltd = £200,000 (£200,000 as all before 1 January 2019).
•
Saint Ltd = £400,000 (£200,000 to 31 December 18 and £200,000 from
1 January 19).
•
Nanny Ltd = £500,000 (no restriction as expenditure to 31 December 18
does not exceed £200,000 and total expenditure does not exceed £800,000).
•
Punk Ltd = £800,000 (all expenditure from 1 January 19 but subject to a
maximum AIA of £800,000 for the period).
Any amounts not qualifying for AIA will be eligible for WDA.
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TPE 2020 – Taxation – Update
ICAS 2020
Notes
1.5.2 The Special Rate Pool
A ‘pool’ exists where all expenditure on plant and machinery is gathered together
without distinguishing the cost of any particular asset. So far, we have put all assets
into one pool known as the ‘main pool’.
Although we applied different rates of
allowance, (using different columns to differentiate rates) there was only one brought
forward and one carried forward figure.
There is a second pool, known as the ‘special rate’ pool (or ‘SRP’), where the WDA
rate is only 6% per annum (8% in the prior year). As this is an annual rate, the rate
will be scaled up or down for a long or short period.
The change in rate from 8% down to 6% is effective from 1 April 2019 for companies
and 6 April 2019 for sole traders and partnerships. Where a chargeable period spans
this change in rate a hybrid rate is required, calculated on a time apportionment basis.
For exam purposes this time apportionment should be done to the nearest whole
month, for example, a business with a year ended 31 August 2019 would apply a rate
of 7/12 x 8% + 5/12 x 6%.
1.5.3 Structures and Buildings Allowances (SBAs)
A new structures and buildings allowance is available on expenditure on new
commercial structures and buildings incurred on or after 29 October 2018.
The
allowance will give tax relief on the costs of constructing new commercial structures
and buildings or converting existing premises, which, you will know, would not qualify
for plant and machinery allowances.
SBAs provide a measure of tax relief on qualifying expenditure as follows:
•
a flat-rate allowance of 2% per annum is granted over a 50-year period (prorated for long or short periods);
•
relief is available on new commercial structures and buildings, including costs
for new conversions or renovations;
•
relief is available for buildings anywhere in the world, where the business is
within the charge to UK tax;
•
relief is limited to the cost of constructing the structure or building, including
demolition costs or land alteration costs, and direct costs to bring the asset into
existence;
•
claims for relief can only be made from when a structure or building first comes
into use;
•
land costs, and planning permission costs, are not eligible for relief;
TPE 2020 – Taxation – Update
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ICAS 2020
Notes
•
dwelling houses will not qualify, nor any part of a building used as a dwelling. A
proportion of a building can qualify if the building is dual purpose however
shared areas, used both as a dwelling and commercial area will not qualify and
a building which is predominantly a dwelling will also not qualify e.g. a home
office;
•
sale of the asset will not result in a balancing adjustment, instead the purchaser
takes over the remainder of the allowances;
•
expenditure on structures or buildings cannot qualify for the AIA;
•
where a structure or building is renovated or converted so that it becomes a
qualifying asset, the expenditure will qualify for a separate 2% relief over the
next 50 years.
Structures and buildings include offices, retail and wholesale premises, walls, bridges,
tunnels, factories and warehouses. Converting or renovating existing premises or
structures of this nature will also qualify.
As the cost of new premises is often substantial this new relief is likely to be worth
significant tax savings to a business.
As an example, a company incurring
£10,0000,000 on new commercial premises could be entitled to an annual writing
down allowance of £200,000, saving corporation tax, at 19%, of £38,000 per year.
Within such a building there is also likely to be a substantial amount of plant &
machinery that could qualify for tax relief at 100% (AIA/FYA), 18% (main pool) or 6%
(special rate pool). Expenditure on buildings should be examined closely to identify
the various elements of qualifying costs.
Example 4 – Structures and Buildings Allowances
Hottentam Spothur Football Club are planning to redevelop their stadium in North
London. They estimate that the stadium renovation will cost £1billion. Part of this cost
is due to an innovative new retractable pitch. The club have agreed with HMRC that
the retractable pitch and various other elements of the expenditure will qualify as plant
and machinery.
The stadium also includes commercial retail space and 285 affordable homes.
The have provided you with a breakdown of the expenditure would like to know the
total allowances available for the year ended 31 March 2020.
Costs:
£,000
Land alteration costs
15,000
Planning fees and legal fees re land purchase
12,000
Stadium structure (including retail space)
12
650,000
TPE 2020 – Taxation – Update
ICAS 2020
Notes
Affordable homes
113,000
Retractable pitch
100,000
Integral features
25,000
Plant and machinery
85,000
Total cost
1,000,000
Identify the amount of Hottentam’s expenditure which will qualify for allowances and
state the rates of allowances available on each element.
Solution to Example 4
The land alteration costs and stadium structure (including retail space) costs will
qualify for SBAs at 2% per annum. These costs will sit in their own pool and be written
down over 50 years.
The planning fees, legal fees and the affordable homes will not qualify for allowances.
The retractable pitch and plant and machinery will qualify for 18% WDAs in the main
pool (assuming the pitch is not expected to have a useful life 25 years or more).
The integral features will qualify for 6% WDAs in the special rate pool.
The AIA of £1,000,000 can be used against part of the integral feature expenditure but
cannot be used against SBA expenditure.
Total allowances:
•
SBAs – (£15,000,000 + 650,000,000) x 2% = £13,300,000
•
Main pool – (£100,000,000 + £85,000,000) x 18% = £33,300,000
•
Special rate pool - £1,000,000 x 100% + (£25,000,000 -£1,000,000) x 6% =
£2,440,000
Total - £13,300,000 + £33,300,000 + £2,440,000 = £49,040,00
1.6 Capital Gains Tax
1.6.2 Entrepreneurs’ relief
The conditions for qualifying assets have been updated. The qualifying assets must
have been owned throughout the 24-month period immediately prior to their disposal
to qualify for entrepreneurs’ relief. This has replaced the original 12-month rule.
TPE 2020 – Taxation – Update
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ICAS 2020
Notes
To qualify for this relief there must be a disposal of qualifying business assets:
Disposal of all/part of a
sole trade business or
partnership (s169I)
The individual must have
owned the business (or
been a member of the
partnership)
throughout
the 24-month period
prior to disposal.
Note that the disposal of
individual asset(s) by a
continuing
sole
trade
business will not qualify
unless it is an associated
disposal.
The relief also applies
where the business has
ceased to trade and the
individual disposes of the
assets within three years
of the date of cessation.
The individual needs to
have owned the business
for 24 months prior to
cessation of trade.
14
Disposal of
shares/securities
(s169I)
The individual must be
disposing of shares in a
trading company where the
individual both:
•
Owns at least 5% of
the ordinary share
capital; and
•
Is an employee of the
company.
These conditions need to
have been met throughout
the 24-month period prior
to disposal.
Associated disposal of
assets (s169K)
An individual owns an asset
which is used by their
partnership or their personal
trading company and is
disposed of as part of the
withdrawal of the business in
either of the other two
scenarios. The asset must
have been owned for 3 years
and used in the business for
24 months prior to disposal.
For example:
(1) Sells
shares
(2) Sells
building
≥5%
Used by
company
TPE 2020 – Taxation – Update
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ICAS 2020
Notes
1.6.2 Replacement of business assets relief (rollover and holdover relief)
If a building which has been the subject of a SBA claim is subsequently sold, when
calculating the gain which can be deferred by rollover or holdover relief, any claim
previous made for SBAs must be deducted from the cost of the original asset. This will
increase the amount of the deferred gain.
There is no such restriction where plant and machinery allowances have been claimed
on items such as integral features.
1.7 Summary
Finance Act 2019 introduced a number of changes to the tax legislation. The key
provisions have been covered for each tax above.
In approaching revision for the TPE case study, you should ensure that you are aware
of these changes in the legislation. At TPE there is less requirement for a large tax
revision exercise. Instead, you should use the TPE course case studies as valuable
exercises in applying logic and common sense.
TPE 2020 – Taxation – Update
15
ICAS 2020
Notes
Appendix 1 CA Qualification Rates Sheet 2020
TAX TABLES – EXAMINATIONS IN 2020
Income Tax Allowances
2018/19
2019/20
£11,850
£12,500
£100,000
£100,000
Blind person’s allowance
£2,390
£2,450
Transferable marriage allowance
£1,190
£1,250
Property income allowance
£1,000
£1,000
Rent-a-room relief limit
£7,500
£7,500
Trading income allowance
£1,000
£1,000
Basic personal allowance
Income level for restriction of personal allowance
Income Tax Main Rates and Bands (excluding Scottish rate)
Income Tax Rates
2018/19
2019/20
0%
0%
Basic rate for non-savings and savings income
20%
20%
Higher rate for non-savings and savings income
40%
40%
Additional rate for non-savings and savings income
45%
45%
7.5%
7.5%
32.5%
32.5%
38.1%
38.1%
Main and savings rates
Starting rate for savings income only
Dividend rates
Dividend ordinary rate – dividends taxable at the
basic rate
Dividend upper rate – dividends taxable at the
higher rate
Dividend additional rate – dividends taxable at the
additional rate
Income Tax Bands
Basic rate on income up to
Higher rate on income
£34,500
£37,500
£34,501 - £150,000
£37,501 - £150,000
£5,000
£5,000
£1,000
£1,000
£500
£500
Nil
Nil
£2,000
£2,000
Additional rate on income over £150,000
Savings income starting rate band
Personal savings allowance:
Basic rate taxpayers
Higher rate taxpayers
Additional rate taxpayers
Dividend allowance at 0%
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TPE 2020 – Taxation – Update
ICAS 2020
Notes
Scottish rate of income tax for non-savings, non-dividend
income
Scottish rate of income
2018/19
2019/20
Starter rate
19%
19%
Basic rate
20%
20%
Intermediate rate
21%
21%
Higher rate
41%
41%
Top rate
46%
46%
tax
Scottish rate of income
tax bands
Starter rate on income up to
£2,000
£2,049
£2,001 - £12,150
£2,050 - £12,444
£12,151 - £31,580
£12,445 - £30,930
£31,581 - £150,000
£30,931 - £150,000
£150,000
£150,000
Basic rate on income
Intermediate rate on income
Higher rate on income
Top rate on income over
Pension Information
2018/19
2019/20
Annual allowance1
£40,000
£40,000
Lifetime allowance
£1,030,000
£1,055,000
£3,600
£3,600
55
55
Basic amount qualifying for relief
Minimum pension age
1
The annual allowance is increased by unused relief from the previous three years. The allowance is
reduced by £1 for every £2 of adjusted income in excess of £150,000. The allowance cannot fall below
£10,000.
Investment Information
2018/19
2019/20
£20,000
£20,000
£4,260
£4,368
£4,000
£4,000
£1,000,000
£1,000,000
£200,000
£200,000
Annual ISA investment allowance
Annual Junior investment allowance (<16 years old)
Annual Lifetime ISA investment
allowance1
Enterprise Investment Scheme limit
Venture Capital trust limit
1
Lifetime ISA available to individuals who are aged between 18 and 40. Savers will receive a 25% annual
credit on amounts paid in up to their 50th birthday. The funds can be withdrawn from their 60th birthday or
at any time after the first year if the funds are being used to purchase a first home worth no more than
£450,000.
TPE 2020 – Taxation – Update
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ICAS 2020
Notes
Official Rate of Interest
2018/19
2019/20
2.5%
2.5%
Official rate of interest
Employment Income – Car Benefit rates1
CO2 Emissions
2018/19
2019/20
0g/km to 50g/km
13%
16%
51g/km to 75g/km
16%
19%
76g/km to 94g/km
19%
22%
95g/km
20%
23%
100g/km
21%
24%
105g/km
22%
25%
110g/km
23%
26%
115g/km
24%
27%
120g/km
25%
28%
125g/km
26%
29%
130g/km
27%
30%
135g/km
28%
31%
140g/km
29%
32%
145g/km
30%
33%
150g/km
31%
34%
155g/km
32%
35%
160g/km
33%
36%
165g/km
34%
37%
170g/km
35%
37%
175g/km
36%
37%
180g/km or above
37%
37%
2018/19
2019/20
£23,400
£24,100
1
Supplement for diesel = 4% (capped at 37%)
Car Fuel Benefits
Appropriate percentage (per car benefit rates)
Van Benefits
2018/19
2019/20
Private use benefit – CO2 emissions of 0g/km
£1,340
£2,058
Private use benefit – CO2 emissions >0g/km
£3,350
£3,430
£633
£655
Fuel benefit
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Notes
Approved Mileage Rates (AMR)
1
Car or van
First 10,000 business miles
45p
Additional business miles
25p
Motorcycles
24p
Bicycles
20p
Carrying passenger on business
5p
1
From 2011/12 onwards
Capital Allowances:
Rate
Qualifying assets
Annual investment
100% on
Any plant and machinery other than
allowance
£1,000,000 from 1
cars
January 2019
(£200,000 prior to
1 January 2019)
First year allowance
100% FYA
Registered energy-saving and waterefficient technologies and registered
environmentally beneficial plant and
machinery.
Zero-emission goods vehicles.
New low emission cars (no more than
50g/km).
Standard allowance
18% WDA
All plant and machinery excluding cars,
long life assets and integral features.
Cars with emissions to 110g/km.
Special rate
6% WDA from 1/6
Long life assets and integral features.
April 2019 (8%
Cars with emissions exceeding
prior to 1/6 April
110g/km.
2019)
Structures & buildings
2% SBA from 29
New commercial structures and
allowance
October 2018
buildings on a straight-line basis.
Corporation Tax
Main rate
TPE 2020 – Taxation – Update
FY2018
FY2019
19%
19%
19
ICAS 2020
Notes
EU Definition of Small and Medium Enterprises1,2,3
Small Enterprise
Balance
sheet
Medium
Enterprise 1
Enterprise 2
≤50
≤250
≤500
≤€10m
≤€50m
≤€100m
≤€10m
≤€43m
≤€86m
Employees
Turnover
Medium
assets
Must meet the employees’ criteria and either the turnover or the balance sheet asset criteria
1
2
Medium Enterprise 1 is used for transfer pricing.
3
Medium Enterprise 2 is used for R & D tax credits.
R&D Relief Rates
SME – tax deduction
Large company - RDEC
FY2018
FY2019
230%
230%
12%
12%
2018/19
2019/20
£11,700
£12,000
10%
10%
10%
10%
20%
20%
£10 million
£10 million
Capital Gains Tax Rates
Annual exempt amount
CGT rates for individuals
Gains qualifying for entrepreneurs’ relief
Gains in remaining basic rate
Gains exceeding basic rate
band1
band1
Entrepreneurs’ relief – lifetime limit on relevant gains
1
For gains in respect of residential property, the rates are 18% (gains in remaining basic rate band) and
28% (gains exceeding basic rate band).
20
TPE 2020 – Taxation – Update
ICAS 2020
Retail Prices Index (RPI)
Jan
Feb
1982
1983
1984
1985
82.97
87.20
91.94
Mar
79.44
83.12
87.48
92.80
Apr
81.04
84.28
88.64
94.78
May
81.62
84.64
88.97
95.21
Jun
81.85
84.84
89.20
95.41
Jul
81.88
85.30
89.10
95.23
Aug
81.90
85.68
89.94
95.49
Sep
81.85
86.06
90.11
95.44
Oct
82.26
86.36
90.67
95.59
Nov
82.66
86.67
90.95
95.92
Dec
82.51
86.89
90.87
96.05
82.61
86.84
91.20
1986
1987
1988
1989
1990
96.25
100.0
103.3
111.0
119.5
96.60
100.4
103.7
111.8
120.2
96.73
100.6
104.1
112.3
121.4
97.67
101.8
105.8
114.3
125.1
97.85
101.9
106.2
115.0
126.2
97.79
101.9
106.6
115.4
126.7
97.52
101.8
106.7
115.5
126.8
97.82
102.1
107.9
115.8
128.1
98.30
102.4
108.4
116.6
129.3
98.45
102.9
109.5
117.5
130.3
99.29
103.4
110.0
118.5
130.0
99.62
103.3
110.3
118.8
129.9
1991
1992
1993
1994
1995
130.2
135.6
137.9
141.3
146.0
130.9
136.3
138.8
142.1
146.9
131.4
136.7
139.3
142.5
147.5
133.1
138.8
140.6
144.2
149.0
133.5
139.3
141.1
144.7
149.6
134.1
139.3
141.0
144.7
149.8
133.8
138.8
140.7
144.0
149.1
134.1
138.9
141.3
144.7
149.9
134.6
139.4
141.9
145.0
150.6
135.1
139.9
141.8
145.2
149.8
135.6
139.7
141.6
145.3
149.8
135.7
139.2
141.9
146.0
150.7
1996
1997
1998
1999
2000
150.2
154.4
159.5
163.4
166.6
150.9
155.0
160.3
163.7
167.5
151.5
155.4
160.8
164.1
168.4
152.6
156.3
162.6
165.2
170.1
152.9
156.9
163.5
165.6
170.7
153.0
157.5
163.4
165.6
171.1
152.4
157.5
163.0
165.1
170.5
153.1
158.5
163.7
165.5
170.5
153.8
159.3
164.4
166.2
171.7
153.8
159.5
164.5
166.5
171.6
153.9
159.6
164.4
166.7
172.1
154.4
160.0
164.4
167.3
172.2
2001
2002
2003
2004
2005
171.1
173.3
178.4
183.1
188.9
172.0
173.8
179.3
183.8
189.6
172.2
174.5
179.9
184.6
190.5
173.1
175.7
181.2
185.7
191.6
174.2
176.2
181.5
186.5
192.0
174.4
176.2
181.3
186.8
192.2
173.3
175.9
181.3
186.8
192.2
174.0
176.4
181.6
187.4
192.6
174.6
177.6
182.5
188.1
193.1
174.3
177.9
182.6
188.6
193.3
173.6
178.2
182.7
189.0
193.6
173.4
178.5
183.5
189.9
194.1
2006
2007
2008
2009
2010
193.4
201.6
209.8
210.1
217.9
194.2
203.1
211.4
211.4
219.2
195.0
204.4
212.1
211.3
220.7
196.5
205.4
214.0
211.5
222.8
197.7
206.2
215.1
212.8
223.6
198.5
207.3
216.8
213.4
224.1
198.5
206.1
216.5
213.4
223.6
199.2
207.3
217.2
214.4
224.5
200.1
208.0
218.4
215.3
225.3
200.4
208.9
217.7
216.0
225.8
201.1
209.7
216.0
216.6
226.8
202.7
210.9
212.9
218.0
228.4
2011
2012
2013
2014
2015
229.0
238.0
245.8
252.6
255.4
231.3
239.9
247.6
254.2
256.7
232.5
240.8
248.7
254.8
257.1
234.4
242.5
249.5
255.7
258.0
235.2
242.4
250.0
255.9
258.5
235.2
241.8
249.7
256.3
258.9
234.7
242.1
249.7
256.0
258.6
236.1
243.0
251.0
257.0
259.8
237.9
244.2
251.9
257.6
259.6
238.0
245.6
251.9
257.7
259.5
238.5
245.6
252.1
257.1
259.8
239.4
246.8
253.4
257.5
260.6
2016
2017
258.8
265.5
260.0
268.4
261.1
269.3
261.4
270.6
262.1
271.7
263.1
272.3
263.4
272.9
264.4
274.7
264.9
275.1
264.8
275.3
265.5
275.8
267.1
278.1
TPE 2020 – Taxation – Update
21
ICAS 2020
National Insurance Rates
Class 1 figures:
Lower earnings limit (LEL)
Primary threshold (PET)
Secondary threshold (SET)
Upper earnings limit (UEL)
Upper secondary threshold for U21s
(UST)
Class 1 Primary Contribution Rates
Earnings between PET and UEL
Earnings above UEL
Annual
2018/19
Monthly
Weekly
£6,032
£8,424
£8,424
£46,350
£46,350
£503
£702
£702
£3,863
£3,863
£116
£162
£162
£892
£892
Annual
£6,136
£8,632
£8,632
£50,000
£50,000
2019/20
Monthly
Weekly
£512
£719
£719
£4,167
£4,167
£118
£166
£166
£962
£962
2018/19
12%
2%
2019/20
12%
2%
Class 1 Secondary Contribution Rate
Earnings above SET
13.8%
13.8%
Employment allowance
£3,000
£3,000
Class 1A Contribution Rate
Class 1B Contribution Rate
13.8%
13.8%
13.8%
13.8%
Class 2 contributions
Normal rate
Small profits threshold
£2.95 pw
£6,205 pa
£3.00 pw
£6,365 pa
Class 3 contributions
£14.65 pw
£15.00 pw
£8,424
£46,350
9%
2%
£8,632
£50,000
9%
2%
Class 4 contributions
Annual lower profits limit (LPL)
Annual upper profits limit (UPL)
Percentage rate between LPL and UPL
Percentage rate above UPL
Value Added Tax
Standard rate
20%
Registration limit
£85,000
De-registration limit
£83,000
22
TPE 2020 – Taxation – Update
ICAS 2020
Notes
VAT road fuel scale charges from 1 May 2019
Description of
VAT inclusive
VAT inclusive
VAT inclusive
vehicle: vehicles
consideration for a
consideration for a
consideration for a
CO2 emissions
12 month
3 month
1 month
figure
prescribed
prescribed
prescribed
accounting period
accounting period
accounting period
120 or less
592
147
49
125
886
222
73
130
947
236
78
135
1,004
250
83
140
1,066
265
87
145
1,123
280
93
150
1,184
296
98
155
1,241
310
103
160
1,303
325
107
165
1,360
340
113
170
1,421
354
117
175
1,478
369
122
180
1,540
384
128
185
1,597
399
132
190
1,658
414
137
195
1,715
429
143
200
1,777
444
147
205
1,834
458
152
210
1,895
473
157
215
1,952
487
162
220
2,014
502
167
225 or more
2,071
517
172
TPE 2020 – Taxation – Update
23
ICAS 2020
Notes
Inheritance Tax Rates and Bands
Death rate – 40%
Death rate (where 10% of estate left to charity) – 36%
Nil rate band
6 April 2007 – 5 April 2008
£300,000
6 April 2008 – 5 April 2009
£312,000
6 April 2009 – 5 April 2021
£325,000
Residence nil rate band1
6 April 2018 – 5 April 2019
£125,000
6 April 2019 – 5 April 2020
£150,000
6 April 2020 – 5 April 2021
£175,000
1
For estates with a value of more than £2m, the residence nil rate band is reduced by £1 for every £2 in
excess of £2m.
Quick succession relief
24
Period between transfers < 1yr
100%
Between 1 and 2 years
80%
Between 2 and 3 years
60%
Between 3 and 4 years
40%
Between 4 and 5 years
20%
TPE 2020 – Taxation – Update
ICAS 2020
Notes
Stamp Taxes
Stamp Duty 0.5%
Stamp Duty Reserve Tax
Paperless transfers 0.5%
Stamp Duty Land Tax (land and buildings in England or Northern Ireland)
Residential (excluding first-time buyers)
0%
Up to £125,000(1)
2%
Next £125,000 (the portion from £125,001 to £250,000) (1)
5%
Next £675,000 (the portion from £250,001 to £925,000) (1) (2)
10%
Next £575,000 (the portion from £925,001 to £1,500,000) (1) (2)
12%
Over £1,500,000(1) (2)
If the property purchased is an additional property costing > £40,000 such that
(1)
an individual now owns more than one residential property, there is an
additional 3% Stamp Duty Land Tax to be paid on the full value of the
transaction.
If the purchaser is a non-natural person the rate is 15% of the total
(2)
consideration for acquisitions over £500,000.
Residential purchases by first-time buyers
0%
Up to £300,000
5%
Next £200,000 (the portion from £300,001 to £500,000)
Above £500,000 - no relief due, the standard rates above apply
Non-residential
0%
Up to £150,000
2%
Next £100,000 (the portion from £150,001 - £250,000)
5%
Over £250,000
Stamp Duty Land Tax on NPV of rent
Net present value of rent
Residential
Non-residential or mixed
0%
Up to £125,000
Up to £150,000
1%
Excess over £125,000
Next £4,850,000 (the portion from
£150,001 - £5,000,000)
2%
n/a
TPE 2020 – Taxation – Update
Over £5,000,000
25
ICAS 2020
Notes
Land and Buildings Transaction Tax (land and buildings in Scotland)
Residential (excluding first-time buyers)
0%
Up to £145,000(1)
2%
Next £105,000 (over £145,000 to £250,000)(1)
5%
Next £75,000 (over £250,000 to £325,000)(1)
10%
Next £425,000 (over £325,000 to £750,000)(1)
12%
Over £750,000(1)
If the property purchased is an additional property costing > £40,000 such that
(1)
an individual now owns more than one residential property, there is an
additional 4% Land and Buildings Transaction Tax to be paid on the full value of
the transaction.
Residential purchases by first-time buyers
0%
2%
Up to £175,000
Next £75,000 (over £175,000 to £250,000)
Above £250,000 –the standard rates above apply to the excess
Non-residential
0%
Up to £150,000
1%
Next £100,000 (over £150,000 to £250,000)
5%
Over £250,000
Land and Buildings Transaction Tax on NPV of rent for non-residential leases
Net present value of rent
26
0%
Up to £150,000
1%
Excess over £150,000
TPE 2020 – Taxation – Update
ICAS 2020
Notes
Land Transaction Tax (land and buildings in Wales)
Residential
0%
Up to £180,000(1)
3.5%
Next £70,000 (over £180,000 to £250,000)(1)
5%
Next £150,000 (over £250,000 to £400,000)(1)
7.5%
Next £350,000 (over £400,000 to £750,000)(1)
10%
Next £750,000 (over £750,000 to £1,500,000)(1)
12%
Over £1,500,000(1)
If the property purchased is an additional property costing > £40,000 such that
(1)
an individual now owns more than one residential property, there is an
additional 3% Land Transaction Tax to be paid on the full value of the
transaction.
Non-residential
0%
Up to £150,000
1%
Next £100,000 (over £150,000 to £250,000)
5%
Next £750,000 (over £250,000 to £1,000,000)
6%
Over £1,000,000
Land Transaction Tax on NPV of rent for non-residential leases
Net present value of rent
0%
Up to £150,000
1%
Next £1,850,000 (over £150,000 to £2,000,000)
2%
Excess over £2,000,000
TPE 2020 – Taxation – Update
27
ICAS 2020
Notes
Environmental Taxes
Climate Change Levy (‘CCL’)
Main rates of CCL
From 1 April 2018
From 1 April 2019
Electricity
0.583p/kw hr
0.847p/kw hr
Gas
0.203p/kw hr
0.339p/kw hr
Petroleum Gas
1.304p/kg
2.175p/kg
Other taxable commodity e.g., coal
1.591p/kg
2.653p/kg
From 1 April 2018
From 1 April 2019
0.331p/kw hr
0.331p/kw hr
5.280p/kg
5.280p/kg
Coal and other solid fossil fuels (petroleum
154.790 pence per
154.790 pence per
coke; lignite; coke and semi-coke of coal or
gigajoule on gross
gigajoule on gross
calorific value
calorific value
From 1 April 2018
From 1 April 2019
£88.95/tonne
£91.35/tonne
£2.80/tonne
£2.90/tonne
From 1 April 2018
From 1 April 2019
£2/tonne
£2/tonne
Carbon Price Support rates of CCL
In Great Britain, gas supplied by a gas utility
LPG
lignite)
Landfill Tax, Scottish Landfill Tax and
Landfill Disposals Tax (Wales)
Standard rate
Lower rate
Aggregates Levy
Standard rate
28
TPE 2020 – Taxation – Update
ICAS 2020
Notes
Harmonised Penalty Regime
FA 2007 Sch 24 – Penalties for Errors
A penalty is payable when a loss of tax arises due to a taxpayer making a careless
error or mistake in a tax return or document, or a third party supplies false information,
or deliberately withholds information in connection with another person’s return or
document, or when HMRC raises an assessment for tax and the taxpayer fails to
notify HMRC that the assessment is too low.
The penalty is:
a) for careless action, 30% of the potential lost revenue,
b) for deliberate but not concealed action, 70% of the potential lost revenue, and
c) for deliberate and concealed action, 100% of the potential lost revenue.
If a person who would otherwise be liable to a penalty of a percentage shown above
has made a disclosure, HMRC must reduce the standard percentage to one that
reflects the quality of the disclosure. The standard percentage may not be reduced to
a percentage that is below the minimum show for it:
Standard %
Minimum % for prompted disclosure
30%
70%
100%
15%
35%
50%
Minimum % for unprompted
disclosure
0%
20%
30%
Disclosure is unprompted if made at a time when the person making it has no reason
to believe HMRC have discovered or are about to discover the inaccuracy.
FA 2008 Sch 41 – Penalties for Failure to Notify Chargeability
A penalty is payable based on the unpaid amount of tax that would have, had the
notification not been delayed, been due on the normal due date (the ‘potential lost
revenue’).
The penalty is:
a) for deliberate and concealed failure, 100% of the potential lost revenue,
b) for deliberate but not concealed failure, 70% of the potential lost revenue,
c) for any other case, 30% of the potential lost revenue.
If a person who would otherwise be liable to a penalty of a percentage shown above
has made a disclosure, HMRC must reduce the standard percentage to one that
reflects the quality of the disclosure. The standard percentage may not be reduced to
a percentage that is below the minimum shown for it:
Standard %
Minimum % for prompted disclosure
Minimum % for unprompted
disclosure
30%
Notified within 12 months: 10%
Notified in any other case: 20%
35%
50%
Notified within 12 months: 0%
Notified in any other case: 10%
70%
100%
20%
30%
Disclosure is unprompted if made at a time when the person making it has no reason
to believe HMRC have discovered or are about to discover the relevant act or failure.
TPE 2020 – Taxation – Update
29
ICAS 2020
Notes
FA 2009 Sch 55 – Penalties for Failure to Make Returns etc.
A penalty is payable where a person fails to make or deliver a return, or to deliver any
other document, before the filing date.
Penalty
£100
Late
£10 daily penalty (90 days max)
Three months late
Greater of: 5% of the tax due on return or £300
Six months late
For a return that is more than twelve months late, a tax geared penalty will apply:
•
100% for a deliberate failure to file the return with concealment;
•
70% for a deliberate failure to file the return and with no concealment; or
•
5% for a non-deliberate failure to file the return.
In each case a minimum penalty of £300 applies.
FA 2009 Sch 56 – Penalties for Failure to Make Payments on Time
A penalty is payable where a person fails to pay an amount of tax on or before the
‘penalty date’.
Penalty date
Initial penalty of 5% based
on:
Further penalty of 5%
based on:
Further penalty of 5%
based on:
30
Income tax
Capital gains tax
Stamp duty reserve tax
Stamp duty land tax
30 days after normal
payment date
Any unpaid tax at penalty
date
Unpaid tax at 5 months
after penalty date
Unpaid tax at 11 months
after penalty date
Corporation tax
Company tax return filing
date
Any unpaid tax at penalty
date
Unpaid tax at 3 months
after penalty date
Unpaid tax at 9 months
after penalty date
TPE 2020 – Taxation – Update