The back of the sofa proved very lucrative for the Chancellor in the run-up to the Budget, brought forward from what has become its more recent proximity to Christmas to leave more time to deal with Brexit. More accurately, the Office for Budget Responsibility confirmed that tax receipts have proved more robust than perhaps anticipated, although they also noted after the Budget that the Chancellor had chosen to spend most of his windfall, rather than move more quickly to close what is still a substantial annual Budget deficit.

The early timing of the Budget also has particular relevance for Scotland. A devolved tax system demands to some extent reaction and interaction - and the Scottish Government now has rather more time than in previous years to decide what to do about its own fiscal plans - time which may be especially valuable as they no longer have the absolute majority required to drive through proposals, even Budget-related ones. This is particularly important as the Chancellor's headlines are likely to come from the significant rise in the income tax personal allowance - a matter for Westminster - coupled with an equally significant rise in the threshold at which UK higher rate tax commences.

The latter, along with the level of income tax rates themselves, are of course now devolved and the Scottish Government took the opportunity for 2018-19 to diverge from the thresholds and rates in the rest of the UK. That divergence may increase for 2019-20, but we will not hear proposals until the Scottish Budget on 12 December. And the Scottish Government does not have a majority in the Scottish Parliament, so what is finalised in a resolution by the Scottish Parliament may be much closer to the beginning of the new tax year; and may not even be as proposed in December. As illustrated below, the income tax position, even for middle earners, may look rather different on either side of the Solway Firth.

The Budget speech itself, and the now traditional leaks before it, illustrate that divergence in other ways. A significant proportion of the speech was spent on promises of spending to come, to illustrate the supposed end of austerity, but many of those announcements will not necessarily be replicated as policy in Scotland. Such spending decisions, on matters such as health, education and the repair of roads (not to mention the schoolboy obsession with lavatories, public or otherwise), are a matter for the Scottish Government, not only in the detail but in the actual policy directions for Scotland.

The Scottish Government, of course, now has to make many more decisions on whether to raise the same proportion of tax or adopt a different course. This was illustrated in the Chancellor's speech, in which he referred to his decisions in the Budget leading to a redirection of £950 million for the Scottish Government, £550 million for the Welsh Government and £320 million for the Northern Ireland Executive. The relatively limited size of the Scottish figure illustrates perfectly how much more is now required from Holyrood.

Specific Scottish references were limited and included mention of new City and Growth initiatives for the conspicuously city-free geographies of Ayrshire, Moray and the mysterious Borderland, as well as the multiple locations represented by Tay Cities. But Scotland will also have a disproportionate interest in developments in fishing support and oil & gas taxation.

The legislation required to implement the headline tax cut is extremely limited. That will not lead to a smaller Finance Act _ there is a substantial amount of detail to be enacted from past Budgets and other announcements (including a re-enactment of a substantial proportion of capital gains tax legislation, to cope with its extension to more non-residents). And there is plenty of other detail requiring to be brought into effect, including the virtually obligatory further extension of anti-avoidance measures. And our incredibly complex tax system will get the addition of what may be significant completely new taxes, affecting the very physical realm of plastics and the more nebulous world of digital trade.

A selection of these matters is noted and commented upon in what follows.

Personal Tax

Income tax

The main rate of income tax for non-savings, non-dividend income is devolved to Scotland for Scottish taxpayers, along with income tax thresholds. Thus the Scottish levels for these will be proposed in the Scottish Budget on 12 December 2018. This UK Budget sets the main rate of tax and the thresholds for those in England, Wales and Northern Ireland. It also sets the savings and dividend rates for all UK taxpayers. For non-Scottish residents, those rates are unchanged for 2019/20. But the personal allowance rises by £650 to £12,500 and the higher rate band rises by £3,000 to £37,500, meaning that outwith Scotland the combination of personal allowance and basic rate threshold totals £50,000. Both these figures were Conservative manifesto commitments, although they have been reached a year earlier than anticipated.

However, it was also announced that the personal allowance and basic rate threshold will be held at £12,500 and £50,000 for 2020-21, rising thereafter in line with the Consumer Prices Index. Such announcements for future years have, however, often been overtaken by other policy imperatives.

Assuming that the Scottish structure remains broadly the same as in the current year, it is likely that higher rates will commence at a lower level than in the rest of the UK. Given that National Insurance thresholds are tied to the UK higher rate threshold, it is likely that there will be a slice of a Scottish taxpayer's income that attracts both the Scottish higher rate and full employee's National Insurance contributions _ a marginal rate of 53%. The effects of the divergence on income tax for a taxpayer earning £50,000 might well amount to the Scottish taxpayer paying over £1,000 more than a counterpart elsewhere in the UK _ but that taxpayer, along with the rest of Scottish taxpayers, will have to wait and see.

It is also worth noting that the level at which the personal allowance starts to be withdrawn has been frozen again, at £100,000. Inflation is gradually eroding the real value of that figure; and the marginal rate of tax for the amount just above that threshold is currently 61.5% for Scottish taxpayers.

The starting rate for savings income of £5,000 is retained throughout the UK, although this applies to a very limited number of taxpayers.

Capital Gains Tax

The annual CGT exemption is set to rise from £11,700 to a more arithmetically friendly £12,000, in line with the CPI. CGT rates are to remain the same, as in 2018/19. See below on various measures affecting land.

Entrepreneurs' Relief

Barely a budget has gone by in recent years without speculation as to whether entrepreneurs' relief will be abolished. The relief allows business owners to dispose of trading business assets or shares in trading companies at a reduced CGT rate of 10% (as opposed to 20%) if certain conditions are met for a period of 12 months. Acknowledging the pressure from some quarters to withdraw the relief, the relief will instead be restricted to situations where the conditions have been met for a period of two years prior to disposal. The new legislation will apply to disposals made on or after 6 April 2019, except where there has been a cessation of the business or trade prior to 29 October 2018.

In addition, the rules in relation to the extent to which entrepreneurs' relief will apply on disposal of shares will be tightened to ensure that a 5% economic entitlement is required. From 29 October 2018, in order to qualify for the relief, a shareholder will require to have been employed/hold office and held shares with 5% voting rights, held 5% of the ordinary share capital with entitlement to 5% of the distributable profits and 5% net assets on a winding up for the duration of the qualifying period. Prior to this change there was no requirement to be entitled to 5% economic rights and some shareholding structures had been adopted to take advantage of the relief where economic rights did not match the ordinary shareholding proportions. 

This new restriction will impact a number of management share incentive programmes, particularly in private equity-backed companies where management may have been incentivised with new shares or rolled over a previous investment on a private equity-backed buyout into holdings which would have benefited from entrepreneurs' relief under the pre-Budget rules.

Buying, owning and selling land

Rent-a-room relief

In an apparent concession to the Airbnb generation, the Government has decided not to proceed with legislation to demand shared occupancy for this relief. However, the relief will continue to be available only for letting in a main or only residence.

Capital gains tax

From April 2020, there is to be a restriction in the extension to principal private residence relief (PPR) which applies when a property is let for part of the taxpayer's ownership. The lettings relief will only apply where the owner shares occupancy with the tenant.

In a further restriction to PPR, the exemption for the last period of ownership regardless of occupation is to be reduced from 18 months to nine months, thus further restricting the availability of PPR to overlapping residences. This period was 36 months as recently as 2013-14. That 36 month period will remain in force for disabled persons.

Legislation will be introduced to bring forward the payment of capital gains tax on account for all chargeable disposals of residential property, not just those made by non-residents. Changes have been made following consultation to allow for reasonable estimates of valuations and apportionments; to remove non-UK properties from the rules; and to remove non-UK resident companies from the reporting requirement.

Non-resident property companies

As previously announced, non-UK resident companies which carry on a UK property business or have UK property income will be subject to corporation tax rather than income tax from 6 April 2020. This levels the playing field between onshore and offshore companies and means a raft of UK corporation tax measures will apply to offshore companies. Those affected will need to start considering how these changes could affect them. Taken together with the new rules on taxing gains made by non-residents on land in the UK, these changes may make new offshore investors buying property in the UK less inclined to do so through offshore companies.

Gains on disposals of land by non-residents

There is confirmation that legislation will be introduced so that capital gains tax or corporation tax will apply to non-UK resident individuals and non-individuals on disposals of both residential and commercial property. Further changes have been made to the draft legislation which affects direct and indirect disposals of all forms of UK land made by non-residents after 6 April 2019. The updated legislation is to be published in Finance Bill 2018-19 and will include details of how the legislation applies to collective investment vehicles. It is to be hoped that these provisions take into account the representations made by stakeholders about the importance of sensible rules for widely held funds, pension schemes and similar bodies.

In general, this measure brings the UK taxation of land disposals into line with that applying in most countries which apply a capital gains tax _ but as a new tax burden it may drive some behavioural changes.

Capital Allowances on structures and buildings

The Chancellor introduced a new capital allowances regime affecting investment in real estate _ the Structures and Buildings Allowance (SBA).

Although the draft legislation has not yet been published _ and HMRC will consult on some of the core details _ the SBA will apply to capital expenditure on non-residential buildings under contracts entered into after 29 October 2018. It is not yet clear where the dividing line between residential and non-residential will be drawn, and HMRC has invited representations on the point.

The SBA will allow for a 2% straight line writing down allowance against construction or renovation costs for buildings or structures (such as bridges) used for a qualifying business purpose, including those used in oil and gas ring-fenced trades. Expenditure qualifying for capital allowances under other headings will not qualify for SBA. Likewise, expenditure qualifying for SBA will not be eligible for the generous new Annual Investment Allowance.

For example, a building costing £25,000,000 can be written down at £500,000 per year over a 50 year period. This would equate to a £95,000 corporation tax saving at current rates (falling to £85,000 once corporation tax is reduced to 17%).

It is worth noting that this regime will not be as flexible as other capital allowances regimes (such as plant and machinery allowances). Costs will be treated as written down by 2% every year irrespective of whether allowances can be claimed, or whether the building owners are eligible.

Eligibility for allowances will transfer with the underlying property, and purchasers will simply inherit the remaining tax written down amount of the initial spend.

Additional rules will apply in cases where structures or buildings are destroyed, or substantially refurnished following significant damage.

Stamp Taxes

Consultation on 1% SDLT surcharge for foreign purchasers of residential property

The UK Government is to publish a consultation document in January 2019 about the proposed 1% additional surcharge for non-residents buying residential property in England and Northern Ireland, which was trailed by the Prime Minister at the Conservative Party conference. There will be obvious complexities around the definition of non-residents for these purposes (for example, whether UK companies owned by foreign entities will be covered).

It remains to be seen whether the Scottish Government will follow suit in relation to LBTT. That was certainly the case for the last SDLT surcharge - the UK Government's announcement of the 3% Higher Rate for Additional Dwellings charge was swiftly followed by the LBTT 3% Additional Dwelling Supplement (ADS). It is therefore quite likely that there will be a non-residents' 1% LBTT surcharge, even though the purchase of residential properties by non-residents is much less prevalent in Scotland than it is in London. An announcement by the Scottish Government can be expected at the time of the Scottish Budget on 12 December 2018; as in past years the Scottish Government may struggle to get the necessary primary legislation in place prior to any planned implementation date.

SDLT filing deadline reduced to 14 days

The time limit to file a Stamp Duty Land Tax (SDLT) return and pay the tax due will reduce from 30 days after the effective date of the transaction, to 14 days for transactions to purchase land in England and Northern Ireland, with an effective date on or after 1 March 2019. No similar change is likely for LBTT _ registration of land normally takes place very quickly under Scots law.

SDLT First Time Buyers' Relief extended on shared ownership transactions

First time buyers who pay SDLT in stages on shared ownership purchases will be able to claim First Time Buyers' Relief where the market value of the property is £500,000 or less. The changes took effect on 29 October 2018 and apply retrospectively from 22 November 2017.

Annual Tax on Enveloped Dwellings

The Annual Tax on Enveloped Dwellings (ATED), which applies to non-natural persons (i.e. companies, collective investment schemes and some partnerships) holding residential property with a value of £500,000 or more, will increase from 1 April 2019 by a range of figures tilted towards the upper end. The minimum charge, on properties valued between £500,000 and £1 million is to be £3,650, while the maximum on properties valued at more than £20 million is an eye-watering £232,350.

Inheritance tax and trusts

Some changes have been announced to the residence nil rate band, in relation to downsizing and to the definition of "inherited". These changes are said to ensure that the policy of the relief works as intended. They take immediate effect, which indicates some element of anti-avoidance.

Legislation is to be introduced to confirm that additions to trusts by UK actual or deemed domiciled individuals are not excluded property. This, to some extent, reverses the decision in Barclays Wealth Trustees (Jersey) Ltd v RCC [2017] EWCA Civ 1512. The new rules will apply to charges arising after the Finance Bill 2019-20 receives Royal Assent.

It was announced in the 2017 Autumn Budget that there was to be a consultation on the taxation of trusts, with the aim of making such taxation simpler, fairer and more transparent. That consultation is now to proceed.

Pensions, savings and investment

The ISA subscription limit for 2019-20 is to remain unchanged at £20,000. For Junior ISAs and Child Trust Funds the limit increases with the CPI index to £4,368.

The lifetime pension savings allowance rises with CPI to £1,055,000. The annual allowance remains unchanged at £40,000, but tapering to as low as £10,000 when income exceeds £150,000.

Venture capital reliefs

Some changes are to be made to the EIS knowledge-intensive funds structure. The rules will change so as to require approved funds to focus on investments in knowledge-intensive companies; give funds a longer period in which to invest capital; and allow investors to set their income tax relief against income tax liabilities in the year before the fund closes.

Charity taxation

There are to be a series of administrative relaxations for charities. There will be a rise in the trading limit without incurring a tax liability to £8,000, where turnover is under £20,000; and to £80,000 where turnover exceeds £200,000.

The Retail Gift Aid Scheme is to be relaxed so that charity shops need to send donors letters every three years rather than every year, when goods donated raise less than £20.

The Gift Aid Small Donations Scheme is to have its limit increased to £30. This apples to small collections where it is impractical to obtain a Gift Aid declaration.

Employment tax (or is it?)

Off-payroll workers in the private sector

Off-payroll workers rules (known as the IR35 rules) for the private sector have been announced which aim to tackle non-compliance by contractors operating through personal service companies (PSCs). Although a number of solutions had been identified in the UK Government's consultation on tackling the issue earlier in the year, it was clear that its preferred option would be to extend the public sector rules broadly in their current form.

The rules will shift the onus of determining whether a contractor operating through a personal service company should be taxed as an employee from the PSC, and the obligation to account for PAYE and employee/employer NICs will sit with the agency or end user, which contracts with the PSC. Engagers may use the HMRC CEST (Check Employment Status Tool) to determine whether IR35 should apply or not. HMRC will work with stakeholders to identify improvements which can be made to CEST to ensure it "meets the needs of the private sector" in response to criticism that it is not fit for purpose.

Taking the difficulties encountered by the public sector on the swift implementation of the changes in 2017 on board, the changes will not be implemented for the private sector until April 2020, giving the private sector more time to get to grips with the impact of the new rules on their business. In addition, the changes will apply only to large and medium-sized businesses (although the tests for what is a large or medium-sized business have not yet been confirmed), so small businesses will remain outside the rules.

The finer detail of the legislation will be subject to consultation. 

Companies which will fall within the new rules should use the time between now and April 2020 to identify the impact which the new rules will have on their business, and lay the foundations for consistent and compliant hiring practices across their organisation.

Employment Allowance

The employment allowance, under which businesses can reduce their employer NIC liability by up to £3000 per annum, is to be restricted to those businesses and charities with an employer NIC bill below £100,000.


The UK Government has accepted the proposals by the Low Pay Commission to increase the National Minimum Wage and National Living Wage with effect from April 2019. This will mean an increase in the National Minimum Wage for workers age 25 and over to £8.21, the rate for 21-24 year olds will increase to £7.70, the rate for 18-20 year olds will increase to £6.15 and the rate for 16-17 year olds will increase to £4.35. The apprentice rate will increase to £3.90 and the accommodation offset will increase to £7.55.

Private use vans/private mileage

The flat rate van benefit charge for employees is to be increased by the Consumer Price Index to £3,430 and car and van fuel benefit by the retail prices index from 6 April 2019 (the multiplier for car fuel benefit charge increases to £24,100 and the flat-rate van fuel benefit charge increases to £655).


A package of measures was announced in relation to Apprenticeships for employees based in England, including enabling those employers paying the Apprenticeship levy to transfer up to 25% of their funds to pay for apprenticeship training in their supply chains and a halving of the co-investment rate for apprenticeship training for those employers who don't pay the levy from 10% to 5%. As apprenticeships are a devolved matter, the plans will not apply to employees based in Scotland.

Employment status

A consultation is to be held on the fundamental matter of employment status, with a view to making the test for that status clearer, both in relation to employment rights and taxation. Unsurprisingly, this is recognised as " important and complex issue", which may be an understatement, given the labours of legislators and judges on the issue for literally hundreds of years. While some certainty would be welcome, that is probably a chimera and it is not being too cynical to suggest that any such increased certainty would be likely to be accompanied by increased tax receipts. There are more immediate challenges to the position of some people.

National Insurance

The Employer's Allowance of £3,000 is to be restricted from April 2020 to employers with a total employer NIC bill below £100,000.


Corporation tax 

There are several mentions of the continued ambition to lower the corporation tax rate to 17% by Financial Year 2020-21.

Measures will be introduced in Finance Bill 2018-19 to ensure that tax legislation continues to operate as intended after the introduction of the new accounting standard for leases, IFRS 16. These changes affect the rules on long funding leases and the corporate interest restriction rules.

Corporate capital loss restriction

The UK Government will legislate in Finance Bill 2019-20 to restrict companies' use of carried-forward capital losses to 50% of capital gains from 1 April 2020, bringing the treatment of capital losses into line with the restrictions on income losses. The measure will include a provision that allows companies unrestricted use of up to £5 million capital or income losses each year, meaning that 99% of companies will be financially unaffected.

Tax Abuse and Insolvency

The UK Government will introduce legislation in Finance Bill 2019-20 to allow HMRC to make directors and other persons involved in tax avoidance, evasion or phoenixism jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency. This will have effect from Royal Assent of Finance Bill 2019-20.

Capital Allowances

There were a number of changes to the capital allowances regime _ both generous and not as generous as one might expect.

On the generous side of the scales falls one of the more striking business giveaways: the temporary increase of the annual investment allowance (AIA) from £200,000 to £1,000,000 from 1 January 2019 to 31 December 2020. As with other changes to the AIA, there will be transitional rules for businesses whose accounting periods straddle these dates.

This extended AIA is potentially worth up to £190,000 per year in corporation tax savings against capital investment in qualifying assets.

This allowance has varied enormously in size over a short period of time.

There is also the new Structures and Buildings Allowances regime (not quite an equivalent to the old Industrial Buildings Allowance), covered in "Buying, Owning and Selling Land", above.

On the more parsimonious plate we have the reduction in special rate allowances (the regime for long life assets) from 8% to 6% a year, meaning that such assets will be written off over longer periods, and the cancellation of enhanced allowances for energy and water efficient technologies. On the reduction in the special rate, this is most likely to affect existing assets (such as integral features in buildings); the logical approach to any new purchases will simply be to claim the enhanced AIA against any special rate assets first _ exactly what people do already.


Goodwill – something of a tax whipping boy in recent years – gets a mild reprieve with the announcement of a targeted goodwill writing down allowance for purchasers of business with significant IP assets.
For the anoraks amongst us, there is welcome news in another bit of fine print (that for understandable reasons did not make the speech - even Spreadsheet Phil has some idea when to stop) around intangible assets. 

From 7 November the intangibles degrouping charge rules will be revised to bring them more in line with those applying to ordinary capital assets. This is – historically - one of those areas that can form a tax trap for the unwary and a headache for the wise.

Without dwelling on the detail (there is – as yet – none) this is to be welcomed on two counts. Firstly, it has the potential to massively simplify reconstructions for companies and groups rich in IP and (particularly pernicious under the current regime) internally generated goodwill. At present such companies are limited to strict statutory forms of demerger, and cannot benefit from more flexible approaches without very detailed planning. Secondly, it should increase flexibility for companies wishing to partially divest themselves of IP heavy trading or product lines. 


A targeted anti-avoidance rule imposing a market value charge on transfers of listed shares to connected companies takes effect from Budget Day. There will also be a consultation, to be published on 7 November 2018, on aligning the SDRT and stamp duty consideration rules and introducing a connected parties market value rule. Although intended to counter the use of contrived arrangements to avoid tax, these changes perhaps also pave the way for a reform of stamp duty and its replacement by a more modern, self-assessed tax.


“It is like we blinked and it is 2001 again!” was the reaction by some to the announcement that HMRC would again have preferred creditor status when a business enters insolvency. 

Looking at the announcement in more detail, it is not quite a case of Back to the Future. 

From 6 April 2020, when a business enters insolvency, more of the taxes paid in good faith by its employees and customers, and temporarily held “in trust” by the business, will go to fund public services rather than being distributed to other creditors. 

This change will apply only to taxes collected and held by businesses on behalf of other taxpayers, therefore affecting VAT, PAYE Income Tax, employee NICs, and Construction Industry Scheme deductions. The current rules remain unchanged for taxes owed by businesses themselves, such as Corporation Tax and Employer NICs.

Some are expressing concern. The removal of HMRC as preferred creditor in 2002 meant that more funds would be available to ordinary, unsecured trade creditors. This announcement, when it takes effect, will mean HMRC again take priority over the unsecured creditors and pension schemes. 

Directors and other persons involved in tax avoidance, evasion or phoenixism should also be aware that the 2019-20 Finance Bill will legislate to make these persons jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency. 


The fishing industry across the UK will benefit from the Government’s investment of £10 million from UK Research and Innovation to establish an innovation fund. This should help ensure the UK is a world leader in safe, sustainable and productive fishing. The UK Government will also provide additional funding to the devolved administrations to allow them to match its increased contribution of £2 million to fishing safety projects in England. 


Following the Scottish Government’s £200 million commitment to the Tay Cities Deal, the Chancellor announced the UK Government’s commitment of £150 million, allowing the deal to be agreed. Such deals see the Scottish and UK Governments work with local councils to bring long term improvements to local economies. 

The UK Government also announced that it will begin formal negotiations with local partners and the Scottish Government towards a Moray Growth Deal and that “good progress” was being made with the Scottish Government towards growth deals for Ayrshire and alongside local partners in England for the Borderland.


Despite widespread rumours of a reduction in the registration threshold, the Chancellor has frozen the threshold at £85,000 for a further two year period (until 31 March 2022). The deregistration threshold remains at £83,000. 

The new VAT reverse charge for construction services will apply from 1 October 2019 with legislation to be published alongside Finance Bill 2018-19. The reverse charge shifts the requirement to account for VAT from the supplier to the customer, and is intended to make the regime more robust. 

An anti-avoidance measure to prevent UK insurers gaining a competitive advantage by setting up associates in non-VAT territories and using these associates to supply their UK customers will take effect from 29 March 2019.

From Royal Assent to Finance Bill 2018-19 a non-corporate entity (e.g. a partnership or individual) will be able to join a VAT group with its corporate subsidiaries if it controls all of the members of the VAT group. This is a helpful change following a consultation earlier this year but perhaps does not go far enough, as there are many commercial situations where it would make sense for a partnership to be able to join a VAT group even though it does not control all the other members.


One of the less surprising announcements in the Chancellor’s Budget speech was the introduction of the Digital Services Tax (DST) from April 2020. Anyone who has picked up a newspaper, watched the news, or overheard a conversation in the pub in the past few months will be aware that there is a growing discontent with the way in which the so-called ‘tech giants’ such as Facebook, Amazon, Apple, Netflix and Google (the “FAANG” companies, so appropriate to Halloween) approach their tax affairs. In today’s difficult political climate, being seen to take action on this was almost a necessity.

Ongoing G20 and OECD discussions have focused on finding a solution to how large tech companies are taxed. 

Frustrated with what is perceived to be slow progress in these discussions, it seems that the UK has broken ranks in order to introduce a new tax on large tech companies – the DST. This will not, however, be a measure designed to deal with what some see as the real issue – various tech companies’ current approach to existing taxes such as corporation tax – but will instead offer a new means by which to tax these businesses.

The DST will operate as a 2% tax on the revenue (not profits) of particular digital businesses, which is derived from UK users.

While further detail will follow, we know that the DST will:

  • apply to businesses operating search engines, social media platforms and online marketplaces (for which, read Google, Facebook, and Amazon)
  • be charged on revenue derived from UK users but with a £25 million annual allowance
  • only apply to groups with a yearly worldwide revenue of at least £500 million

Although the trigger for the tax will look at revenue, there will be an exemption for businesses, which are – despite revenue – loss making. 

We are told that the DST is designed so that it won’t hurt innovation and investment by smaller tech start-ups and is intended to apply only to the ‘tech giants’. Nevertheless, Julian David, CEO of techUK - which represents the tech industry in the UK – has said that “the £500 million threshold the Chancellor proposed is low and risks capturing much smaller companies than anticipated”.

Some critics of the DST have also questioned the worth of introducing this tax when there remains a manifesto pledge to reduce corporation tax by a further 2%. In addition, others have highlighted the need for a digital-focused tax such as this to be based on a coordinated international response and that a single country cannot take matters into their own hands.

Alternatively, some have argued that in the face of delay amongst the international community, particularly from those in Washington who may view the efforts to tax tech giants as an attack on American success stories, the introduction of the DST will offer a useful starting point to speed up progress in discussions.

It is important to bear in mind that if an international consensus on the taxation of tech giants can be reached before April 2020, as Mr Hammond has said he hopes, the DST may never come into effect. Only time, and the reaction to Monday’s Budget, will tell if this will be the case and the tax on such tech giants will be as ethereal as many of their products. 

Single-use plastics (and one more cup of coffee for the road…)

While perhaps not as extensive as some would have hoped, the Government made a number of announcements aimed at tackling the scourge of single-use plastics. In the face of the Blue Planet 2 effect and foreboding estimates such as the WWF’s predicted million tonne increase in the amount of plastic waste we throw away by 2030, the Government could ill afford to do nothing.

In response, the Government introduced a new tax on produced or imported plastic packaging. While the exact scope of the tax is subject to consultation, we do know that this entirely new tax will apply to all plastic packaging that doesn’t include at least 30% recycled content.

Alongside already planned reforms to the Packaging Producer Responsibility System, the Government hopes that its package of measures will encourage businesses to ensure far more packaging can be recycled and to use more recycled plastic in their packaging, and more widely will deliver a sustainable reduction in single-use plastics. 

The new tax will be introduced in April 2022, giving potentially affected businesses time to adapt their processes, adjust their behaviours, and manage any costs they may incur either in an attempt to avoid the new tax, or indeed to pay it should they not be able to meet the 30% recycled content threshold.

Revenues from both the new packaging tax and the Packaging Producer Responsibility Reforms will enable investment to be made to address single-use plastics, waste and litter. 

The Government also announced £20 million to tackle plastics use generally and to boost recycling: £10 million more for greater plastics R&D and £10 million to pioneer innovative approaches to boosting recycling and reducing litter, such as the widespread introduction of ‘smart bins’.

One area of disappointment for many is that despite widespread public support, the Government declined to introduce a tax on disposable cups, the so called Latte-levy. While acknowledging that this was and is a problem, the Government stated that it felt a levy on all cups would not at this time be effective in encouraging widespread reuse. In a direct message to industry, the Government stated that if industry does not go as far as hoped with regards to reducing the impact of disposable cups, it will return to the issue and take action.


The general consensus among the industry is “no news is good news”.

This allows the focus to remain on the introduction of transferable tax history rules from 1 November 2018. This ground breaking tax mechanism was announced in the 2017 Budget and will be legislated for in the Finance Bill 2018-19. The changes, taking effect this week, enable the transfer of the seller’s tax history to the buyer of oil & gas assets, meaning new entrants, without historic tax losses, will be able to benefit from tax relief on future decommissioning costs. The Government will also amend the Petroleum Revenue Tax rules on retained decommissioning costs to simplify the way older fields can be sold to new investors. Headline tax rates will remain at their current level. 

Looking forward, the Government will launch a call for evidence and work together with the Oil and Gas Authority to identify what more should be done to further strengthen Scotland and the UK’s position as a global hub for decommissioning.


Alan Barr


Isobel d'Inverno

Director of Corporate Tax