Compounding the Bank of England’s decision to slash interest rates to 0.25%, the UK Government sent a message loud and clear today that it is braced - yet prepared - for the potentially devastating (but temporary) impact of COVID-19 on the UK economy. Resultant funding for UK business and the National Health Service was central to Chancellor Rishi Sunak’s announcements, as were tax measures to “get things done”:

1. Entrepreneurs’ Relief

As widely anticipated and amid concerns that this relief has done little to incentivise entrepreneurial activity and benefits only a privileged few, for disposals made on or after 11 March 2020 the lifetime limit for gains qualifying for the lower 10% rate of capital gains tax is reduced from £10 million to £1 million.

Anti-forestalling measures will apply to arrangements entered into before 11 March 2020, for example an unconditional contract entered into prior to 11 March 2020 with completion to occur after that date, in which case the disposal is treated as taking place at that later date.

2. Review of the UK Funds Regime

The Government will review the UK’s funds regime during the course of 2020, addressing regulation and direct and indirect taxation. Preliminary steps are, first, to review VAT charged on management fees (separately, the Government announced on 4 March 2020 that it is legislating to clarify when fund management services are exempt from VAT) and, secondly, to consult publicly on increasing the attractiveness of the UK as a location for intermediate entities through which alternative funds hold assets. The consultation document can be accessed here. Please contact any of the authors if contributing to our response is of interest.

3. Non-Resident Stamp Duty Land Tax (“SDLT”)

The Government confirmed that an additional 2% SDLT “surcharge” will apply from 1 April 2021 on purchases by non-UK residents of residential property in England or Northern Ireland. The detail of the rules has not yet been published but, based on an earlier HMRC public consultation, it is likely that the surcharge will apply on top of existing SDLT rates, resulting in a potential top rate of SDLT of 17%. The Government confirmed in the Budget today that transitional rules may apply to contracts which exchange before 11 March 2020 but complete or substantially perform after 1 April 2021.

4. Stamp tax on transfers of Unlisted Securities to Connected Companies

In Finance Act 2018-19, the Government introduced a rule to prevent artificial reduction of stamp tax on acquisitions of listed shares by connected companies. This rule will be extended in Finance Bill 2020 to unlisted shares in order to further prevent tax avoidance.

5. Intangible Fixed Assets

As part of the Government’s overall policy objective for all intangible fixed assets to be taxed and relieved under a single regime, intangible fixed assets created prior to 1 April 2002 which are acquired on or after 1 July 2020 from a connected company will be brought within the corporate intangible fixed assets regime, thereby removing a restriction currently applying to related party acquisitions.

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