Press Room

November 5, 2018

From the United Kingdom: UK Government Announces Changes to Tax Law in Budget 2018

Source: Mark Davies, Mark Davies & Associates, a collaborating firm of Andersen Global

The UK's Chancellor 'Fiscal Phil' Hammond delivered his third budget speech on October 29, 2018 promising that, "the era of austerity is finally coming to an end."

The Chancellor produced a safe budget that would not disappoint many taxpayers. There were small tax giveaways for individual taxpayers, some public spending announcements, but it was not a good day for multinational corporate business trading in the UK. 

Corporate Tax

Corporation tax, currently at 19%, will fall to 17% by 2020.

The government will introduce a new Digital Services Tax from April 2020. This will apply a 2% tax on the UK generated revenues of large digital businesses. This is bad news for Facebook, Google and Amazon. 

There will also be further restrictions on how both capital and revenue losses are relieved.

There will be new rules on the taxation of certain corporate debt instruments, known as hybrid capital instruments, to reflect the economic substance of the transaction.

The government will introduce targeted legislation in Finance Bill 2018-19 to prevent UK businesses artificially avoiding UK tax by arranging for their UK taxable profits to accrue in offshore jurisdictions where less tax is paid than in the UK.

The taxation of intangible property (including royalties and income from the indirect exploitation of intangible property in the UK) will change in April 2019 to collect tax directly from the owners of intangible property, who are in receipt of intangible income relating to UK sales. The tax will apply to certain offshore entities that own intangible property located in low-tax jurisdictions. The tax will apply to owners with UK sales in excess of £10 million, and there will be an exemption where the income is taxed locally at appropriate rates and where there is sufficient local substance.

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