In this week’s instalment considering the draft clauses from the Finance Bill 2016 most relevant to financial planners I am going to turn my attention to stamp duty and tax administration. As in previous articles in this series, I will break down my consideration into the headings used in the HM Revenue & Customs overview of the draft legislation for consultation.
Stamp duty land tax and annual tax on enveloped dwellings
Stamp duty land tax: additional properties
As announced at Autumn Statement, the Government will introduce higher rates of SDLT on purchases of additional residential properties, including buy-to-let properties and second homes, from 1 April. The higher rates will be 3 per cent above the current SDLT rates. The Government consultation on the details of the higher rates closed last week. When added to the proposed limitations on mortgage interest relief and the costs of repairs, this provision diminishes even further the attraction of the buy-to-let market for many investors.
Tax administration and Office of Tax Simplification
Making tax digital
As announced at Autumn Statement, the Government will invest £1.3bn to transform HMRC into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account.
HMRC will ensure the availability of free apps and software that link securely to its systems and provide support to those who need help using digital technology. This will not apply to individuals in employment or pensioners, unless they have secondary incomes of more than £10,000 per year. The Government will publish its plans to transform the tax system shortly and will consult on the details this year.
While most advisers will not be involved in completing tax returns, having a clear understanding of how the new digital system will work ( in some cases for their own business ) will be essential.
As announced at Autumn Statement, legislation will be introduced in the Finance Bill 2016 to provide a new power to allow HMRC to make an assessment of a person’s income tax or capital gains tax liability without them first being required to complete a self-assessment return and where it has sufficient information about that individual to make the assessment. This measure will have effect on and after the date of Royal Assent to the Finance Bill 2016.
Time limits for self-assessment returns
As announced at Autumn Statement, legislation will be introduced in the Finance Bill 2016 to clarify the time allowed for making a self-assessment. Taxpayers will have up to 5 April 2017 to submit returns for tax years up to and including 2012-2013.
There are transitional arrangements for the years 2013/2014, 2014/2015 and 2015/2016. Returns for these years are to be submitted by 5 April in the years 2018, 2019 and 2020 respectively.
For tax years 2016/2017 and beyond, there will be four years from the end of the tax year to make the self-assessment. The filing date of 31 January (31 October for paper returns) still remains and late filing penalties may be applicable after this date.
Capital gains tax: payment on account
As announced at Autumn Statement, from April 2019 a payment on account of any CGT due on the disposal of residential property will be required to be made within 30 days of completion of the disposal. Taxpayers will be able to reconcile their payment on account with their total CGT liability for the year after the year end. Legislation will be introduced in the Finance Bill 2017 and the Government will publish draft legislation for consultation in 2016.
Student loan repayments
As announced at Autumn Statement, from April the income threshold for loans taken out on or after 1 September 2012 is frozen at £21,000 until 5 April 2021, and from April 2019 employers will be asked to start deducting repayments from borrowers of postgraduate loans, at a rate of 6 per cent alongside undergraduate repayments at the existing rate of 9 per cent.
Legislation will made by the Department for Business, Innovation and Skills using statutory instruments.
Tony Wickenden is joing managing director at Technical Connection