International accountant and shipping consultant Moore Stephens has outlined a number of unexpected changes introduced by the UK Budget 2018 which could have implications for the shipping and offshore maritime industries. But it stresses that these are relatively minor alterations which will have a limited impact on what continues to be a stable tax regime for the maritime sector.
The Annual Investment Allowance (AIA) will increase from £200,000 to £1m per annum for all qualifying investments in plant and machinery made between 1 January 2019 and 31 December 2020. This means that it will be important to either delay or bring forward any large expenditure on plant and machinery accordingly. However, there will be a reduction in the rate of writing-down allowances for special-rate pool assets from 8% to 6% per annum on a reducing balance basis.
A new 2% capital allowance will be available in respect of the construction costs of new commercial non-residential structures and buildings, including land alteration and improvement costs. Very broadly, the building must be used for a commercial purpose. This will apply where the contract is entered into on or after 29 October 2018.
There will be a restriction on the use of capital losses for companies. From 1 April 2020, the proportion of annual capital gains that can be relieved by brought-forward capital losses will be restricted to 50%. However, companies will have unrestricted use of up to £5m capital or income losses each year, so this rule is likely to be of limited application.
The government will consult on introducing a newly targeted relief for the cost of goodwill (the amount paid for a business that exceeds the fair value of its individual assets and liabilities) in the acquisition of a business with eligible intellectual property from April 2019.
New rules apply to off-payroll working in the private sector, where an individual who is effectively an employee is actually employed by a private company. In this case, responsibility for operating the off-payroll working rules will apply to the organisation or other third party engaging the worker. This change will apply from April 2020.
There are no changes to the corporation tax rate, which will fall to 17% in April 2020. But there are some changes to Entrepreneurs’ Relief (ER). For example, from 6 April 2019, the minimum period throughout which the qualifying conditions for relief must be met will be extended from 12 months to 24 months. There are also changes to the definition of ‘personal company’.
The government is to consult on some changes to the principle private residence relief from capital gains tax for owner-occupiers, including a reduction in the final period exemption from 18 months to 9 months. These rules will apply from April 2020.
Moore Stephens tax partner Sue Bill says, “There were no big surprises for the maritime sector in the UK Budget 2018, with the result that the UK tax regime continues to provide certainty and stability for the shipping and offshore maritime sectors.”