Finance Act 2019
Overview
The Finance Act 2019, an integral part of the UK’s fiscal landscape, brought significant changes to the world of finance and taxation. This comprehensive legislation, enacted in July 2019, not only impacts individuals but also has far-reaching implications for businesses operating in the United Kingdom.
The Finance Act 2019 is an essential piece of legislation that annually accompanies the UK government’s budget. It serves as a vehicle to implement the financial measures announced in the budget, which can range from changes in tax rates to new policies and incentives. The Act is designed to provide legal effect to these measures, ensuring that they are enforced consistently and transparently.
Key requirements of the Finance Act 2019 include:
- Digital Services Tax (DST): One of the most notable aspects of the Finance Act 2019 was the introduction of the Digital Services Tax. This tax targets large technology companies that generate significant revenue from UK users but often pay relatively little in UK corporate tax. The DST imposes a 2% tax on revenues generated from certain digital services, such as online advertising and the sale of user data, where those revenues exceed a certain threshold.
- Changes to Capital Allowances: The Act introduced changes to capital allowances, allowing businesses to claim a higher annual investment allowance (AIA) for qualifying capital expenditure. This was aimed at incentivizing investment in machinery and equipment.
- Entrepreneurs’ Relief: Entrepreneurs’ Relief, which provided a reduced rate of capital gains tax on business disposals, underwent significant changes. The lifetime limit was reduced, which affected business owners looking to benefit from this relief.
- Corporate Interest Restriction: The Finance Act 2019 introduced rules aimed at limiting the tax deductibility of interest expenses for large businesses, promoting responsible borrowing practices.
- Offshore Receipts in Respect of Intangible Property (ORIP): The Act also introduced the ORIP rules, which are designed to prevent offshore entities from exploiting intangible property rights to reduce their UK tax liability.
The Finance Act 2019 was passed on the 12th of February 2019 and applies to the following countries:
- United Kingdom;
- England;
- Scotland;
- Wales; and
- Northern Ireland.
Does the Finance Act 2019 affect my business?
The Finance Act 2019 has a profound impact on businesses operating in the UK. Here are some of the key effects:
- Tech Giants and Digital Services Providers: The Digital Services Tax directly affects large tech companies and digital service providers with significant UK user bases. It requires them to reevaluate their tax liabilities and potentially increase their tax contributions.
- Capital Investment Incentives: The enhanced annual investment allowance (AIA) encourages businesses to invest in new equipment and machinery, providing them with an opportunity to offset more of their taxable profits against capital investments.
- Entrepreneurs and Small Business Owners: The changes to Entrepreneurs’ Relief impact business owners considering the sale of their enterprises. They may need to reconsider their financial strategies and exit plans.
- Large Corporations: Large corporations face increased scrutiny regarding their interest expenses and tax structures. Compliance with the new corporate interest restriction rules is crucial to avoid potential penalties.
- Intellectual Property Holding Entities: Companies holding valuable intellectual property rights must carefully assess the implications of the ORIP rules and make necessary adjustments to their tax strategies.
The Act introduces a range of measures designed to shape the financial landscape and incentivize specific behaviors. To navigate these changes successfully, businesses must stay informed, seek professional advice, and adapt their strategies to remain tax-efficient and compliant in this evolving regulatory environment.
Do I need the Finance Act 2019 in my ISO Compliance Register?
You will need the Finance Act 2019 in your ISO Compliance Register if your business falls under one or more of the following categories:
- Technology Companies: Large tech giants, social media platforms, and online marketplaces that generate substantial UK revenues are directly impacted by the Digital Services Tax.
- Manufacturing and Industry: Manufacturers benefit from the increased AIA, as it incentivizes capital investments in machinery and equipment.
- Small and Medium Enterprises (SMEs): SMEs can take advantage of the AIA to invest in their growth. They also need to consider Entrepreneurs’ Relief changes when planning for succession or business sales.
- Financial Services: Large financial institutions and corporate groups must assess their interest expenses and financing structures to ensure compliance with the new corporate interest restriction rules.
- Intellectual Property-Intensive Businesses: Companies with valuable intellectual property portfolios should review their tax positions in light of the ORIP rules to mitigate any adverse tax consequences.
Legislation related to the Finance Act 2019
Legislation related to the Finance Act 2019 include:
- Criminal Finances Act 2017
- Finance Act 2021
- Finance Act 2022
- Finance Act 2023
More information
Visit the Finance Act 2019 article on the legislation.gov.uk website.
Create an account in the ISO Compliance Register App and add this article to your Register.
