Tax Payable on Sale of Private Residence

It has long been part of the capital gains tax exemptions/reliefs that no capital gains tax would be payable on the sale of a persons sole/main private residence. This principal private residence exemption also included the final 36 months of ownership as deemed occupation, and therefore also exempt from charge, up until a few years ago. This final period of deemed occupation was then reduced to 18 months.

From 6th April 2020 the final period exemption will be shortened further from the 18 months down to only 9 months ( although the 36 month exemption period will continue to be available to disabled persons or those in a care home ). In addition to this reduced period, lettings relief will only apply when the owner of the property is in shared occupancy with the tenant.

It becomes more possible therefore that a chargeable gain could arise where an individual has to sell their home, before they can buy a new one. Any capital gains tax on disposal would also need to be paid within 30 days of completion. A failure to disclose the tax due, and the failure to pay the tax by the due date, would potentially lead to additional penalty costs.

Anyone selling their principal private residence after 5th April 2020 should be conscious of these changes to the exemption.

Private Sector Off Payroll Workers

Off payroll working rules were introduced a couple of years ago with regards the public sector. For off payroll workers you should think contractors/freelancers/IR35. The long awaited ” private sector IR35 ” legislation has now been released in draft form. This new legislation is expected to come into force from April 2020.

The new proposals will apply to private sector engagements where the ” end client ” is a medium or large business, as defined by the Companies Act. The end client is the person/organisation that receives the services of the personal service company ( PSC ) worker, at the end of the supply chain.

The end client now becomes the decision maker as to whether IR35 applies to the engagement or not. They must produce a Status Determination Statement ( SDS ), which provides a conclusion as to whether IR35 applies to the engagement, and the reasoning behind this conclusion. The SDS is then given to the PSC worker, and also the party directly below it in the supply chain. The SDS can then be further passed down the supply chain.

Whichever party is ultimately left ultimately holding the SDS will take responsibility as the ” fee payer ” which is essentially the party responsible for ensuring the correct tax treatment is applied to the PSC. The fee payer would typically be the party closest to the PSC in the supply chain ( i.e the party physically paying the PSC ).

This is complicated legislation, and it still appears to have many unanswered questions that could come out of it. The government has committed to providing further guidance during 2019, and has also accepted that HMRC’s check employment status indicator tool ( CEST ) is woefully inadequate at providing an accurate decision.

As further updates become available, we will post this information on our website, but all contractors/freelancers can expect a shift in attitudes as to their status from next April, as was seen in the public sector previously. This would then increase their tax burdens, and effectively reduce their take home pay!!!!!

 

NHS Pensions

There has been a lot of talk in the media recently about the pension contribution allowances, both annual and lifetime, and especially how they are adversely affecting certain professions such as the medical profession. As the annual allowance begins to be tapered off above earnings of £150,000 those in the health sector especially are facing the choice of either paying additional income tax bills on the overfunding, or having their NHS pension fund affected.

In a lot of cases, the additional income tax charges are coming as a surprise and shock to the individuals concerned. So much so that within the health sector, it is becoming increasingly concerning that doctors are refusing to work overtime on the grounds that the additional income is creating these penal tax charges.

Good news ( hopefully ) is however on the horizon. The government has recently confirmed that it will consult on proposals to offer senior clinicians a new pensions option. This would allow them to build their NHS pension more gradually over their career by making steadier contributions towards their pension, without facing regular and significant tax charges.

As news develops we will continue to update you on our news section.