UK Budget 2018

Building a path for tomorrow

How it could affect the Channel Islands

Below is a summary of the key announcements that could impact Islanders:

Digital Services Tax (DST)

From April 2020, a new 2% tax will apply to the revenues of certain digital businesses to reflect the value they derive from the participation of UK users, pending an appropriate international solution. The government will consult on the detailed design of the DST and legislate for it in the Finance Act 2020. The tax will apply to annual ‘UK’ revenues above £25m from activities relating to search engines, social media platforms and online marketplaces (of businesses with in-scope annual global revenues of more than £500m). Loss-makers will be exempt and businesses with very low profit margins will be subject to a reduced effective rate.

Annual Investment Allowance

The amount of qualifying investment in plant and machinery made on or after 1 January 2019 until 31 December 2020 will go up from £200,000 to £1m.

Capital allowances

The capital allowances special rate for qualifying plant and machinery assets will be reduced from 8% to 6% (from 6 April 2019), while a new 2% non-residential structures and buildings allowance (SBA) is available where contracts for physical construction works are entered into, on or after 29 October 2018.

Corporate capital loss restriction

From 1 April 2020, the proportion of annual capital gains over a £5m allowance that can be relieved by brought-forward capital losses will be limited to 50%.

Intangible fixed assets

There will be relief for the cost of goodwill in acquiring businesses with eligible intellectual property from April 2019. The degrouping charge rules which apply when a group sells a company that owns intangibles, will be reformed from 7 November 2018 to align them with the equivalent rules applying to capital gains. The tax on income from intangible property held in low-tax jurisdictions to the extent referable to UK sales will apply from April 2019, as previously announced, with some changes.

Consultation on Stamp Duty Land Tax (SDLT) charge for non-residents

The government will publish a consultation in January 2019 on a SDLT surcharge for non-residents buying residential property in England and Northern Ireland.

Offshore tax compliance strategy

The government will publish an updated offshore tax compliance strategy.

Profit fragmentation

As announced at Autumn Budget 2017, the government will legislate in Finance Bill 2018-19 to introduce targeted legislation that aims to prevent UK businesses from avoiding UK tax, by arranging for their UK-taxable business profits to accrue to entities resident in territories where significantly lower tax is paid than in the UK. The taxable UK profits will be increased to the actual, commercial level.

Tax abuse and insolvency

Following Royal Assent of Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency.

See more details on the UK Budget 2018

Contact us

Justin Woodhouse

Tax leader, PwC Channel Islands

Tel: +44 7700 838233

Debbie Payne

Tax Director, PwC Channel Islands

Tel: +44 7700 838284

David Waldron

Tax Director, PwC Channel Islands

Tel: +44 7781 138617

Follow us