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Potential Impacts of Brexit on Taxation - What does it mean for Taxpayers, Individual & Corporates
Welcome to iCalculators monthly Self-assessment update for October. In this month's tax related news, we take a look at:
Key points in our October 2019 self-assessment Update:
As we talk about it, we cannot yet propound what exactly Brexit will mean for taxpayers. When considering the current situation, there may be a rise in personal tax regime to balance corporation tax cuts. It is looking increasingly probable that corporate tax brackets may be reduced to soften the Brexit impact on business and the treasury department will have to make up for the shortfall.
People who are long term residents in the UK are liable for income and capital gain tax (CGT) on any worldwide income or gains that they receive. Taxpayers are required to submit their self-assessment tax returns, which go through statutory residence test (SRT). This helps them maintain some certainty in maintaining their residence status.
For more information on self-assessment visit the links given below:
Till now the UK has had to fall in line with VAT, which is majorly a European tax. Even though the UK will not be bound to follow this policy, there are very few chances that the VAT will be abolished. VAT is a big revenue source for the treasury and a major factor in dealing with tax avoidance and double taxation, it is very likely to remain in the system, may be with a few changes.
All direct taxes like income tax, corporation tax and capital gain tax are UK based. However, changes upon Brexit are quite possible. Considering the fact that there will be changes in immigration rules and cross border policies, it's only logical to predict that there will be significant impact on direct taxes too.
Fundamentally, a self-assessment system is where companies and individuals are required to assess their own tax liability for a particular period and submit a return to HMRC. These returns are then reviewed by HMRC and decision is made. There is a possibility that a query can be raised by the HMRC on any aspect of the filed return of any individual or a company. Queries are not raised for every return but are raised in accordance to risk factors such as tax avoidance.
After the queries are resolved, HMRC makes the decision and informs the taxpayer. Both individual and companies are required to make the payments in HMRC account.
There will be a tax increase rate (on selling the property) for homeowners. Homeowners will be charged tax when they sell their property if they have rented it out at any point. The tax change will be introduced in April 2020 and will increase the capital gain tax bill for accidental home owners.
This rule was introduced in the UK four years ago but is not very popular as it has not been used ever since. HMRC has taken a step forward to prevent tax avoidance using GAAR recently. It was used against a scheme that involved purchase of gold for employees by the employer company (also known as the gold bullion avoidance scheme).
This scheme was intended to achieve immediate deduction in corporation tax, income tax and national insurance contribution charges.
The scheme was referred to a panel of experts that reviews applications on GAAR and as expected the advisory panel gave the decision against it, stating the scheme is nothing but a stunt pulled for tax avoidance.