A first draft Finance Bill, which will become the Finance Act 2019, was published in July.
More clauses emerged with the Chancellor’s Budget Statement on 29 October. Some tax changes being introduced next year are highlighted below, including some of the potential effects of Brexit.
Mandatory disclosure rules (DAC6)
These will apply to cross-border reportable arrangements if the first step was after 24 June 2018, although legislation (expected in the Finance Act 2019) will not apply until perhaps 1 July 2020.
The Anti-Tax Avoidance Directive after Brexit
The EU’s Anti-Tax Avoidance Directive (ATAD) is intended to apply minimum standards of anti-avoidance legislation across the EU, with the first elements to be reflected in member states’ domestic law by 1 December 2018. The UK will be required to conform with the directive until it leaves the EU (and potentially afterwards, depending on the final withdrawal agreement). As a result, changes are proposed to UK legislation regarding controlled foreign companies (from 1 January 2019), hybrid mismatches and exit taxation (from 1 January 2020).
Other tax effects of Brexit
Some possible unusual tax liabilities, which may prove typical, have been identified for Spain and Germany. UK residents who own homes in Spain who lose their status as EU/EEA residents will not be entitled to deduct property costs from their rental income for tax purposes. They will be charged tax at 24% on gross rents, rather than 19% on net rents. Other Spanish taxes will also be more burdensome.
A UK person who has been resident in Germany but moved back to UK retaining an interest of at least 1% in a corporation (anywhere in the world), which increased in value while a German tax resident, is liable for German tax at up to 30% on the virtual capital gain. However, this tax liability is postponed indefinitely for EU/EEA residents. After Brexit this tax might become due and have to be paid immediately.
In some cases Brexit will result in a withholding tax on dividends where it is not required now.
Certain UK tax reliefs concern the European Commission because they require the companies involved to carry out their business activities wholly or mainly in the UK. The UK may be required to amend them to change the reference from UK to EEA. There is income tax relief for losses on disposals of shares and tax relief where a loan to a trader has become irrecoverable. Post-Brexit, this may become irrelevant.