Law firm clients doing business in the United Kingdom (UK) should note that the UK Chancellor introduced his Budget on October 29, characterizing it as a budget for Britain's future. He made it clear that the range of measures he was announcing were intended to put the Government on a path to a full spending review next year that would set out the Government's priorities for public spending. The Chancellor did recognize that Brexit negotiations with the European Union (EU) were at a pivotal moment.

The Chancellor stated that the UK has turned an important corner and that "austerity is coming to an end." He put forward a range of measures to ensure the sustainability and fairness of the UK tax system in the future and boost investment in the UK. Those measures include the proposed 2% UK Digital Services Tax from April 2020 and the new rules on offshore receipts in respect of intangible property (previously the extension to the royalty withholding tax rules).

Other key measures for law firms are:

• Introducing tax relief on capital expenditures
• Introducing a new Structures and Buildings Allowance (SBA) to give tax relief on expenditures on nonresidential buildings and structures (excluding land) at an annual rate of 2% on a straight-line basis
• Increasing annual investment allowances from £200K to £1M for two years, commencing January 1, 2019
• Aligning the rules for the taxation of contractors engaged via intermediaries in the private sector with the public sector rules
• Allowing employers with a UK pay-bill of greater than £3M to transfer up to 25% of their apprenticeship levy funds (formerly 10%) to their supply chain
• Delaying until April 2020 in the introduction of employer's national insurance contributions (NIC) on termination payments over £30,000

EY Tax Alert 2018-2168 provides highlights of the 2018 UK budget. You may also download a copy of our full report on the budget here.

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