CORPORATION TAX RELIEF BACK FOR ACQUIRED GOODWILL

A further late change to the Finance Bill will re-introduce relief for acquired goodwill on the acquisition of businesses with eligible intellectual property from 1 April 2019.

This relief was withdrawn back in July 2015 and the restoration of relief for goodwill and customer-related assets is very welcome although the new form of relief will be more restricted.

The proposed new relief will be given at a fixed rate of 6.5% on up to 6 times the value of any qualifying intellectual property assets in the business being acquired. Qualifying assets will include patents, registered designs, copyright and design rights and plant breeders’ rights. This means that the qualifying costs will be written off over just over 15 years and will not follow the treatment in the company accounts as currently applies to other intangibles.

IF NO DEAL BREXIT – VAT ON LOW VALUE CONSIGNMENTS

If the UK leaves the EU without an agreement, VAT will be payable on goods entering the UK as parcels sent by overseas businesses. Low Value Consignment Relief (LVCR) will no longer apply to any parcels arriving in the UK. For parcels valued up to and including £135, a technology-based solution will allow VAT to be collected from the overseas business selling the goods into the UK.

IF NO DEAL BREXIT – Postponed VAT Accounting for Imports

The Government has announced that in the event of a “no deal” Brexit, it will introduce postponed accounting for import VAT on goods brought into the UK.

This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT at or soon after the time that the goods arrive at the UK border. This procedure will apply both to imports from the EU and non-EU countries.

IF NO DEAL BREXIT – WHAT ABOUT VAT?

The Government and HMRC have updated its collection of high-level guides called “partnership packs”, intended to help businesses involved in importing and exporting prepare for changes to customs procedures after 29 March 2019 in the event of a “no deal” scenario.

If the UK exits the EU without a deal, UK businesses will have to apply customs, excise and VAT procedures to goods traded with the EU, in broadly the same way that already applies for goods traded outside of the EU.

In the event of a “no deal” Brexit the government’s aim will be to keep VAT procedures as close as possible to what they are now. This will provide continuity and certainty for businesses.

However, there will be some specific changes to the VAT rules and procedures that apply to transactions between the UK and EU countries.

WELCOME CGT ENTREPRENEURS’ RELIEF CHANGE FOR SHAREHOLDERS

You may recall there were important changes to CGT entrepreneurs’ relief recently that could have the effect of denying the relief to certain employee shareholders. As the result of lobbying by the professional bodies the Government have made a late change in the Finance Bill to the definition of “personal company” so that fewer shareholders will be denied the relief when they dispose of their shares.

The normal test is that the shareholder is required to be entitled to at least 5% of the company’s ordinary share capital, voting rights, profits available for distribution, and assets available on the winding up of the company.

The amendment provides an alternative test which would allow relief where the individual is entitled to at least 5% of the sale proceeds in the event of a disposal of the whole of the ordinary share capital of the company, even if the 5% test in relation to distributable profits and assets on a winding up was not satisfied.

This remains a complex area and advice should be sought to check whether particular shareholders would be entitled to relief for their shares.

TERMINATION PAYMENT CHANGES DELAYED TO 2020

HMRC have announced that the changes to the national insurance (NIC) treatment of termination payments and sporting testimonials have been delayed to 6 April 2020.

From 6 April 2020 Employer class 1A NIC will become payable on termination payments in excess of £30,000 and on sporting testimonials that exceed £100,000 (lifetime limit). The changes are intended to align the NIC treatment with the treatment for income tax although there is no NIC liability for the employee on such payments.

Whether or not the £30,000 exemption applies on termination of employment is a complex area and specialist advice should be obtained.