‘Autumn Statement 2016’

Autumn Statement 2016 – what was missing

Monday, December 5th, 2016

Budget 2016 – what was missing

Stamp Duty Land Tax (SDLT) – there have been some pretty loud calls for this to be reformed, especially with recent evidence of first time buyers struggling to get on the ladder due to the SDLT burden. The 3% surcharge on second home owners has done little to dampen buyers’ appetite, raising £670m in taxes since introduction earlier this year. We thought some changes were in the air but perhaps not.

Inheritance Tax (IHT) – another tax which many see as a ‘double-tax’ whammy and which has seen increased calls for it to be scrapped. With the effective threshold now at £1m for couples passing on estates containing property, there is still scope to tinker with the threshold or reduce the rates but not today.

Further reductions to corporate tax – with President-elect Donald Trump hinting that he is keen to reduce US tax to 15%, a reduction to this level was not entirely unexpected, given the Prime Minister has said she wants the UK to have the lowest tax rate in the G20. It will reduce to 17% but no further for the time being.

No reductions in VAT, despite calls for a temporary reduction to 17.5%

Property interest restrictions – the manner in which the tax relief applies as a tax reducer has adverse impacts on the overall tax rate, leading to tax rates at above the additional rate of 45%. No changes here.

Autumn Statement 2016 – tax changes we already knew about

Monday, December 5th, 2016

Autumn Statement 2016 – tax changes we already knew about

Quite a lot had already been announced.

Corporation tax to reduce to 17% from 2020 – this was confirmed today.

Tax-free personal allowance – will increase to £11,500 from next April

Higher rate threshold to increase to £45k from next April

Restrictions on tax relief for higher-rate landlords from next April

Salary sacrifice schemes to be scrapped from April 2017 although more details on exemptions were provided today

£1m IHT nil rate band for couples passing on estates containing property from April 2017

Loss relief extension and restriction on profits above £5m

Business with profits above £20m will have to pay corporation tax on account. The implementation has been delayed until April 2019 to allow businesses time to prepare; no further mention was made in today’s Autumn statement

Further crackdown on avoidance and tax penalties of 60% are to be imposed – this was previously announced

Autumn Statement 2016 – spending plans

Monday, December 5th, 2016

Spending Plans

There were few surprises when it came to where our hard earned money was being spent. News had trickled out throughout the last week or so but here are some key announcements:

The new National Productivity Investment Fund will provide £23bn to support a range of investments including:

  • £7.2bn for the construction of new homes
  • £4.7bn towards science and innovation
  • £2.6bn to tackle road congestion and enhance the UK’s road networks
  • £0.7bn to support the market in rolling out future 5G communications
  • £400m to venture capital funds so growing tech firms can access funding supporting growth & innovation
  • £1.8bn funding for the regions through the Local Growth Fund

A consultation will be held on the R&D ‘above the line’ tax credit.

Further help will be available to double the capacity of exporters in the UK.

Autumn Statement 2016 – personal & employer taxation

Monday, December 5th, 2016

Personal Tax

The government has recommitted to raising the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament. It will then rise in line with CPI as the higher rate threshold does, rather than in line with the NMW.  From April 2017 the personal allowance will rise to £11,500 and the higher rate threshold to £45,000.

Employment Taxes

National Living Wage will increase from £7.20 to £7.50 from April 2017 which equates to an annual pay rise of over £500 for full time workers. The government will also invest an additional £4.3m pa to strengthen NMW enforcement.

Salary sacrifice: the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions, childcare, Cycle to Work and ultralow emission cars. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.

Valuation of benefits in kind – the government will look at how various benefits in kind are valued for tax purposes.

Employee business expenses – the government will also publish a call for evidence at Budget 2017 on the use of the income tax relief for employees’ business expenses.

Off-payroll working rules: following consultation, the off-payroll working rules in the public sector will be reformed from April 2017 by shifting responsibility for operating the rules and paying the correct tax, to the body paying the worker’s company.

National Insurance

Thresholds –the NI secondary (employer) threshold and the NI primary (employee) threshold will be aligned from April 2017, meaning that both employees and employers will start paying National Insurance on weekly earnings above £157.

As previously announced, Class 2 NICs will be abolished from April 2018.

Savings

NS&I Investment Bond – The Government will introduce a new NS&I 3 year savings bond in Spring 2017. The expected interest rate is 2.2% but this may be adjusted to reflect market conditions when the product is launched. The bond will be open to those aged 16 and over,  and will be open for investments of between £100 and £3,000 and will be available for 12 months from Spring 2017.

Pensions

Money Purchase Annual Allowance – The Money Purchase Annual Allowance will be reduced to £4,000 from April 2017.

The ‘Triple-lock’ on state pension will not be abandoned.

Making Tax Digital –no new announcements other than the government will publish its response to the Making Tax Digital consultations and provisions to implement the previously announced changes in January 2017.

Reforms to the taxation of non-domiciled individuals

As previously announced, the permanency of non-domiciled tax status and from April 2017 will cease, non-domiciled individuals will be deemed UK-domiciled for tax purposes if they have been UK resident for 15 of the past 20 years, or if they were born in the UK with a UK domicile of origin.

From April 2017, IHT will be charged on UK residential property when it is held indirectly by a non-domiciled individual through an offshore structure, such as a company or a trust.

The government will change the rules for the Business Investment Relief (BIR) scheme from April 2017 to make it easier for non-domiciled individuals who are taxed on the remittance basis to bring offshore money into the UK for the purpose of investing in UK businesses.

Autumn Statement 2016 – corporate tax

Monday, December 5th, 2016

Corporate Tax

In 2010 the government committed to the ‘business tax road map’ to provide certainty to businesses, which following Brexit has an increased significance to encourage investment being placed and remaining in the UK. The Chancellor has continued with this policy in his first Autumn Statement. The rates of corporation tax had previously been announced to fall to 17% by 2020 and this is upheld and still forecast still to be one of the lowest in the G20.

No significant new announcements were made for businesses in this statement only a reinforcement of those previously announced and we are still awaiting clarity on some of these measures.

Corporation Tax Interest Deduction

Following a consultation, new rules are being imposed to limit the corporation tax deduction received by large corporates in the UK from April 2017. Where the group has net interest expense of more than £2 million and exceed 30% of the UK taxable earnings with the net interest to earnings ratio in the UK above the worldwide group these new rules will apply. Further details as to the exact nature of these rules are to follow.

Reform of Loss Relief

As announced in the Budget 2016 the corporate loss relief is being reformed. In the UK we have a restrictive loss relief system where losses are only eligible to be carried forward and offset against profits arising from the same trade. This can be further restrictive where we also have a change in ownership within a specified period. It was proposed to lift the restrictions to allow loss relief to be applied against all income but also to be able to perform group relief in later periods as currently restricted to the same period for loss relief against profits generated.

As we reported in March, where you see a benefit there is always a sting in the tail! This was the restriction of loss relief to 50% where profits are in excess of £5 million.

Non Resident Company Profits

Further consultation is being considered to ensure all profits earned in the UK are brought into UK tax. At present if a non UK resident company carries on a trade in the UK through a permanent establishment it is liable to corporation tax on the profits directly attributable to the permanent establishment.

Tax Avoidance

Tax avoidance measures are now virtually guaranteed at be announced at every Budget and Autumn Statement as the government continue to apply pressure in this area. Whilst previously we have seen direct measures focused UK tax payers we now see the attention shift to international tax and ensuring the UK tax is received for activity conducted in the UK. Further modernisation of the UK tax system is expected for multi nationals as the government and other leading G20 countries seek to catch up businesses worldwide tax arrangements.

Disguised Remuneration Schemes

The government had previously announced measures to tackle these schemes used by employers and their employees. Measures will now be extended to deny corporation tax relief unless the tax and national insurance is paid within a specified period.

These rules are now also to be extended to the self-employed.