Autumn Budget 2018

Below is a summary of items announced that may be relevant to FSL clients.  For more detail please refer to GOV.UK website.  The Overview of Tax Legislation and Rates (OOTLAR) published by HM Treasury and HMRC gives a comprehensive summary of all the tax-related changes.

Corporate Tax: Corporate Capital Loss restriction

The government will legislate in Finance Bill 2019-20 to restrict companies’ use of carried-forward capital losses to 50% of capital gains from 1 April 2020. The measure will include an allowance that gives companies unrestricted use of up to £5m capital or income losses each year, meaning that 99% of companies will be financially unaffected. A consultation paper was published on 29 October 2018 and draft legislation will be published in summer 2019. The measure will be subject to anti-avoidance rules that are to apply with immediate effect.

Ref: Autumn Budget 2018, para 3.28 and OOTLAR, para 2.16

Amendments to reform of loss relief

The government will legislate amendments to the loss relief legislation in Finance Bill 2018-19 to ensure that the legislation works as intended and prevents relief for carried-forward losses being claimed in excess of that intended. Changes will be made to the legislation covering:

• The definition of “relevant profits”.
• The computation of Basic Life Assurance and General Annuity Business (BLAGAB) profits.
• The deductions allowance where a company is a member of more than one group.
• The calculation of terminal relief.
• Shock losses of insurance companies being surrendered as group relief.
• The cap on profits against which group relief for carried-forward losses may be allowed in certain circumstances.
• Other consequential provisions that are minor in nature.

The draft legislation published on 6 July 2018 has been amended to include changes to the group relief cap on profits. The changes to the group relief cap apply from 1 April 2017, relevant profits and Basic Life Assurance and General Annuity Business changes apply from 6 July 2018, and other changes from 1 April 2019.

Ref: Autumn Budget 2018, para 3.29 and OOTLAR, para 1.16

Who is likely to be affected

Companies and unincorporated associations that pay Corporation Tax and have carried-forward losses.

Impact to CGiX: FSL are currently investigating the potential impact to CGiX

Capital Gains tax: Annual Exemption Amount

The capital gains tax annual exempt amount will be increased to £12,000 for individuals and personal representatives and £6,000 for most trustees of a settlement. This will have effect for the tax year 2019 to 2020. The rates are set out in Annex A of the OOTLAR.

Ref: OOTLAR, Annex C, page 208

Impact to CGiX: The annual exemption amounts will need to be manually added in CGiX for 2019-2020.