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The Generous Chancellor

In his first Budget, Rishi Sunak mastered the art of pleasing many different voters including those paying into pensions, cyclists and all road users besieged by potholes and those of us who read books digitally….

He faced a tough challenge, in the form of a government that wishes to signal an end to austerity, that wishes to support the new voters that supported it to victory last December, and possibly most importantly of all, that has to deal with a domestic and global economy that is looking undoubtedly shaky as a result of the battering it is taking from coronavirus.

Against all of this, what are the key measures announced that will be of immediate interest to individuals?

We highlight these below, and will be publishing detailed briefings on a number of points, including Stamp Duty Land Tax, in the next few weeks.

Entrepreneurs Relief (ER)

We all expected a change to Entrepreneurs Relief, and change we have:

  • with effect from Budget Day, the lifetime limit for entrepreneurs’ relief is reduced from £10m to £1m (so the maximum tax saving per individual has been reduced from £1m to £100k);
  • this applies to all aspects of the relief e.g. on a business sale, share sale or sale of EMI shares;
  • all other conditions e.g. 5% voting, nominal value and economic interest and the two year minimum period appear to remain unchanged; and
  • there are several “anti-forestalling” provisions that may mean that various planning structures that sought to “bank” ER prior to Budget Day are rendered ineffective.

According to the Budget documents, 80% of those who benefit from ER will still do so under this change.  So ER is now very much restricted to initial business growth.

Corporation tax

As already announced, the corporation tax rate will remain at 19% for 2019-20 and 2020-21, and the previously announced reduction to 17% is shelved.  It is noted that this remains the lowest corporation tax rate in the G20.

Stamp Duty Land Tax (SDLT)

The Chancellor has announced that the government will introduce a 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021.  Refunds of the surcharge will be available for those who become resident after their purchase. This was widely anticipated as the previous Conservative government ran a consultation on this back in 2019 and the Conservative manifesto also referred to this idea.  The devil will be in the detail but we do not yet have any further information as to how this surcharge will operate in practice.  Overseas purchasers looking to buy off-plan, where completion may not take place for some time, will be keen to review the details of any transitional provisions.  There were a number of technical issues with the proposals suggested in 2019 as discussed in our ‘Insight’ article here.  The policy costings released today suggest that that this will result in a drop in tax receipts for the year 2021-22.  It will be interesting to see what effect this has on the market, although for overseas investors the exchange rate will always be a key factor.   

Pensions - tax break for high earners

Broadly, from 6 April, high earners who do not exceed either of the new (much increased) income thresholds of: 

  • £200k net income before tax excluding pension contributions
  • £240k net income plus pension accrual

will have an annual allowance of  up to £40k to contribute to their pension pots, tax free.

This compares favourably with the current position, where earnings of over £110k might see that £40k annual allowance being eroded down to £10k by the operation of a taper.  The change is only detrimental to those earning over £300k, for whom the new minimum annual allowance from 6 April will shrink, from, £10k at present to just £4k for the very highest earners).

Ostensibly, this measure may help to retain much-needed NHS doctors (whose earnings may otherwise have exceeded the current thresholds) but since it is also of general application, non-medics may ride on their (white) coat-tails as well!

Money laundering and tax avoidance

The Government has announced plans to introduce a levy to help fund new Government action to tackle money laundering.  This is to be paid by firms subject to the Money Laundering Regulations, which includes accountants, financial service businesses, estate agents and solicitors. There are no details as to the quantum or compliance requirements, but a consultation is due to be published later this spring.  Affected businesses should watch and wait.

Unsurprisingly, more efforts are being made to tackle avoidance, evasion and non-compliance. While it remains frustrating to see avoidance and evasion referred to in the same sentence, this has become somewhat standard.  A series of specific measures is announced, including preventing the illicit trade in tobacco and – more immediately relevant (we think) additional compliance resources for HMRC.  HMRC will have funds for more compliance officers and this is estimated to bring in £4.4bn of additional receipts by 2024-25. 

Given the plethora of anti-abuse rules and penalties available to HMRC, it will be interesting to see how in practice the additional funds are raised.  Alongside this the announcement made on 31 October last year, that HMRC can use automated processes to issue notices to file and penalty notices to taxpayers, has been confirmed.  While it is eminently sensible to automate where possible, let us hope this does not result in a flurry of inaccurate penalty notices….

Points of interest and consultations

Fund Industry

Two consultations were announced as part of a review of the UK funds regime.  In a welcome move to ensure the UK is and remains attractive to the fund management industry, the regulatory environment and the tax rules are to be considered.  In particular, one consultation focusses on how to enhance the tax treatment of ‘Asset Holding Companies’ in alternative fund structures.  The consultation is open to 20 May and it is very much a matter of watch this space.

Loan charge – and more disguised remuneration

The Budget confirmed that the changes to the controversial loan charge under the disguised remuneration rules, recommended by the independent review conducted by Sir Amyas Morse, will be adopted.  As originally enacted, some employment loans which were outstanding on 5 April 2019, and which had been made as long ago as 1999, would lead to income tax charges on the amount outstanding.

This led to serious financial difficulties for many people caught by this, and following the recommendations of the independent review, it is confirmed the measure will be restricted to the outstanding balance on loans made between 9 December 2010 and 5 April 2019 inclusive.

This is alongside a package of measures giving the ability to pay the charge over a period of time.

Alongside this, the Budget announced that ‘disguised remuneration schemes continue to be used.  Therefore the government will shortly issue a call for evidence on further action to stamp out these schemes’.

Tax Adviser review

It was announced that there would be a call for evidence on raising standards for tax advice.  This is interesting and, assuming it is designed to ensure tax advice is good, comprehensive and reliable, clearly a good measure.  We anticipate this will also seek to restrict those HMRC considers promote aggressive or abusive tax schemes.

Digital publications

In a no doubt popular and very logical move, VAT will no longer apply to e-publications (let us hope this does not affect bookshops further, however).


Following the publication of HMRC’s views on the situs of cryptocurrency (see my colleague Dominic Lawrance’s analysis of this here) there is to be a consultation to bring certain cryptoassets within the financial promotions regulation rules.

Plastic tax

As part of a commitment to the natural environment, paving legislation to permit the introduction of a Plastic Packaging Tax will be set out in Finance Bill 2020.  Actual legislation is expected in Finance Bill 2020-21 with effect from April 2022, following consultation.  The main aim of the measure is to require packing to have at least 30% recycled plastic.  This is an interesting measure and may lead to a reduction in the use of plastic packaging.


It is good news that about 50 million potholes will get the heave ho and be filled in.  The Chancellor announced £27bn will be invested in English strategic roads between 2020 and 2025, with enough funding to address many potholes.

What we did not see

Remittance and non-domiciliaries

In what is – hopefully – a sign of stability for UK resident non-domiciliaries, no announcements were made about the remittance basis.  While technical changes are needed to tidy up drafting defects in the 2017 rules, it is to be hoped this signals a general period of stability for the remittance basis, and a recognition of its importance in ensuring the UK remains an appealing  location for internationally mobile wealth creators and investors.

Inheritance Tax (IHT)

In light of the recent APPG report on inheritance tax, which recommended a complete overhaul of the regime, some mention of this deeply unpopular tax might have been expected.  However, the Budget made no reference to IHT at all.  In the main, this is probably a good thing, as a knee-jerk announcement would not have been welcome - the changes proposed in the APPG report would require much more thought before they could be legislated for.  We would urge the government to take their time in considering any possible changes to the IHT regime and to ensure that a full and genuine consultation process is carried out before any new legislation is passed.  

Tax policy roadmap

We have been calling for a commitment to a tax policy roadmap for some time, as an excellent way to create stability and to ensure consultation is engaged in in a genuine, timely and effective manner.

We did not see that but let us hope this is picked up in the Autumn Statement.

Start up reliefs

While there is to be a review of the Enterprise Management Incentive Scheme, which effectively allows tax favoured share incentivisation for some employees of smaller companies, there was no broader commitment to simplifying start up reliefs, including EIS, SEIS and VCT reliefs.  Again, we consider this incredibly important and let us hope this is picked up in the Autumn Statement.

This article was written by Sophie Dworetzsky. For more information please contact Sophie at sophie.dworetzsky@crsblaw.com or call +44 (0)20 7427 6404.

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