As expected, the 2017 Spring Statement included a very low level of new tax changes in line with the intention announced in the Autumn Statement to have a single fiscal event in the autumn. For this reason, the main focus was on more general aspects of the health of the UK such as the NHS, education and building an economy that is fair for everyone.
UK National Insurance
The Chancellor chose to focus mainly on increasing income tax/national insurance payable by the self-employed and those who provide their services through companies. The Chancellor did set out provisions for increasing Class 4 NIC (currently 9%) to 10% from April 2018 and 11% from April 2019 which raises over £500 million and will cost individuals up to £720 pa in 2019. Cutting the dividend allowance from £5,000 to £2,000 from April 2018 will bring in over £800 million annually.
Headlines for Guernsey
Of the tax changes announced the main headlines for Guernsey would include the change in the law introduced last year taxing UK property development which will catch all completions from today, even where the contract was agreed before the new law was introduced on 5 July 2016. This could bring certain transactions within the scope of UK tax which was not previously expected.
There are also some new changes which will tax at 25% transfers in to certain pension products (Qualifying Recognised Overseas Pensions Scheme “QROPS”) although it is likely that the main impact could be for the overseas branches of Guernsey based pensions providers. We have also seen significant new reporting requirements published in relation to QROPS which will need urgent attention to meet recently announced impending deadlines.
The Chancellor has also confirmed they will hold a consultation on bringing non-UK companies investing in UK property (so called non-resident landlords) within the charge to corporation tax on their UK income and on gains relating to residential property. The good news is that rates of corporation tax are reducing to 17% from 2020 (as opposed to current rates of income tax of 20%). However new UK corporation tax rules will limit the amount of interest such companies may offset against rental profits and so, if introduced, the ultimate tax result will be very fact specific.
For more information about the Spring Statement and how it might affect you or your business please contact Jo Huxtable or Adam Hart at Deloitte on +44 1481 724011.