When you have to be right.
CCH Autumn
Statement 2015
Special Feature
Prepared by our
in-house team
of tax writers
Autumn 2015
For once in his Autumn Statement/Spending Review the Chancellor really did concentrate on spending or not spending money rather than raising it. What he referred to as a ‘big Spending Review by a government that does big things’.
The speech contained a very short list of changes to tax, most of which had already been announced, or were too generally couched to make much sense. But, a little bit of digging amongst the accompanying documents found some tax substance.
In particular more details have emerged about the apprenticeships levy. Advisers do not like what they see. John Cullinane, Tax Policy Director at the Chartered Institute of Taxation, commented:
‘The Apprenticeship Levy is the big revenue raiser in this year’s Autumn Statement, raising an extra £3 billion a year from business by 2020 with what is basically a new payroll tax. Fixing the rate at 0.5 per cent of payroll is at the top end of expectations and will mean a hefty additional cost for some businesses.’ In a huge u-turn (funded by a £27bn potential surplus arising from a re-forecast by the Office for Budget Responsibility), the Chancellor announced that the proposed controversial changes to tax credits will not be phased in as planned but ‘avoided altogether’. The Chancellor also said that there will be no further changes to the universal credit taper, or to the work allowances beyond those that passed through Parliament last week. Building on announcements made in the 2015 Summer Budget regarding avoidance, evasion and imbalances, the Chancellor has confirmed new penalties for the General Anti-Abuse Rule (GAAR), action on disguised remuneration schemes and stamp duty avoidance, and he said there would be measures to stop abuse of the intangible fixed assets regime and capital allowances. Work on HMRC’s ten-year modernisation plan will continue alongside cuts in the departmental budget of some 18%. Some of the savings are to be reinvested, with an additional £800m government investment, to assist with the ongoing fight against tax evasion – an investment with an anticipated return of almost ten times in additional tax collected.
Foreword
Contributed by Paul Robbins
Paul Robbins BA, ACA,
CTA
After graduating, Paul worked in the tax departments of two large accounting firms, now absorbed into the Big 4, before joining Wolters Kluwer as a tax writer specialising in corporates.
As well as leading our team of in-house tax writers, Paul is lead technical editor on the Red Book, the
Tax Reporter, Tax Planning Online and the CCH Tax
Workflow system. As Tax Content and Innovation
Manager, he is also responsible for the quality and development of the entire tax information portfolio. With regards to local and national finances, the Chancellor said that local councils will be given wider powers to control their own spending; Northern Ireland needs to deliver sustainable budgets so that the government can take forward its plans for a cut in the rate of corporation tax to 12.5%; and the devolution of income tax to Wales will take place without the need for a referendum.
Our team of experts have commented on these and other key tax issues in the Statement in more detail. We hope their thoughts and explanations will gently introduce you to the tax issues you will need to get your head round over the next few months.
With just the publication of the draft clauses for the Finance Bill 2016 (scheduled for 9 December) to come we are nearly at the end of a very busy tax year. It is an odd feeling to be about to embark on the next round of tax legislation having only just had Royal Assent to the Finance (No. 2) Act 2015. For those of you unfamiliar with that Act we are publishing a Red, Green
and Purple Supplement 2015-16 which contains the Act,
explanatory notes and reproductions of amended and inserted provisions. Also look out for the second edition of Hardman’s Tax Rates and Tables 2015-16 which will include all the changes to rates and data announced today.
Needless to say our team will continue to keep you abreast of all the changes in the tax world during 2016.
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Personal tax
Contributed by Meg Wilson and Julie Clift
Julie Clift BA, CTA
Julie joined Wolters Kluwer as a senior technical editor in 2003 and has worked on some of our leading tax products including British Tax Reporter, Inheritance Tax Reporter, British Tax Guide and Tax Adviser.
Julie began her career at Arthur Andersen before joining Ernst & Young where she specialised in personal tax issues. She was deputy editor of The Tax Journal before returning to practice as a tax editor in the Deloitte Tax Policy Group.
Meg Wilson BA, CTA
Meg joined Wolters Kluwer as a full-time tax writer in 2012 and works on several areas of the Tax Reporter and the
NIC Guide. She also prepares case reports for tax decisions released by the tribunals and courts.
Meg qualified as a Chartered Tax Adviser in 1999 and has worked for HLB Kidsons, KPMG and Hazlewoods, a top 40 firm in Gloucestershire.
Income tax and National
Insurance Contributions
Sporting testimonials
Following the consultation which ran from 8 July 2015 to 2 September 2015, the government is to legislate to simplify the tax treatment of income from sporting testimonials.
From 6 April 2017, all income from sporting testimonials and benefit matches for employed sportspersons is liable to income tax and National Insurance contributions. In addition, an exemption of up to £50,000 will be available for employed sportspersons with income from sporting testimonials that are not contractual or customary. This legislation will apply where the sporting testimonial is granted or awarded on or after 25 November 2015, and only to events taking place after 5 April 2017. The tax legislation will be included in Finance Bill 2016, with separate legislation for National Insurance contributions to be introduced prior to 6 April 2017.
London Anniversary Games and World
Athletics and Paralympics Championships
As has become customary for athletics events in the UK following the London Olympics in 2012, the government is to exempt non-resident competitors in the 2017 World Athletics and Paralympics Championships and the 2016 London Anniversary Games from income tax on their earnings from the events. The government have advised that this will be the last year that the exemption applies to the London Anniversary Games as the Olympic torch is passed to Rio de Janeiro.
Employment intermediaries and tax relief for
travel and subsistence
As announced at Summer Budget 2015, the government is to legislate to restrict tax relief for travel and subsistence expenses for workers engaged through employment intermediaries, such as umbrella companies or personal service companies, and working under supervision, direction or control. Following consultation, relief will be restricted for individuals working through personal service companies where the intermediaries legislation applies. This change is to be effective from 6 April 2016.
Extending farmers’ averaging
Following the consultation announced at Spring Budget 2015, the averaging period for self-employed farmers is to be extended from two to five years from 6 April 2016, with farmers having the option of using either averaging period. This measure will be included in Finance Bill 2016.
Business investment relief
Finance Act 2012 introduced this new business investment relief for individuals who are eligible to be taxed on the remittance basis. The relief allows such individuals to bring foreign income and gains to the UK tax free for the purposes of making a qualifying investment. The Government is to consult on how to change the business investment relief rules to encourage greater use of the relief to increase investment in UK.
Venture capital schemes: changes to eligible
investments
During the progress of Finance (No. 2) Act 2015 through parliament, changes were made to the excluded activities of the Enterprise Investment Scheme (EIS), Venture Capital Trusts (VCT) and Seed Enterprise Investment Scheme (SEIS). From 30 November 2015, the provision of reserve energy generating capacity and the generation of renewable energy benefiting from other government support by community energy organisations are no longer to be qualifying activities. In addition, these activities are not to be eligible for Social Investment Tax Relief (SITR) when it is enlarged. The Government will exclude all remaining energy generation activities from the schemes from 6 April 2016, as well as from the enlarged SITR. The government will also introduce increased flexibility for replacement capital within EIS and VCT, subject to state aids approval. These measures are to be included in Finance Bill 2016.
Employee share schemes: simplification of
the rules
The government is to introduce a number of technical changes to simplify aspects of the tax rules for tax-advantaged and non-tax-tax-advantaged employee share schemes. These changes are aimed at providing more consistency, including putting beyond doubt the tax treatment for internationally mobile employees of certain employment-related securities (ERS) and ERS options. Any charge to tax will arise under the rules that deal with ERS options, rather than earnings. These simplification measures are to be included in the Finance Bill 2016.
Salary sacrifice
The government is still concerned about the growth of salary sacrifice arrangements and is considering what action, if any, is necessary. The government is to gather further evidence, including from employers, on salary sacrifice arrangements to help it decide what to do.
Income tax exemption for certain World
War II victims
The government is to legislate to exempt from income tax certain pension and annuity payments made by the Netherlands government payable to victims of national-socialist and Japanese aggression during World War II (under the Netherlands Benefit Act for Victims of Persecution 1940-1945). This exemption is to take effect from April 2016 and legislation is to be included in Finance Bill 2016.
Company car tax diesel supplement
The Chancellor has announced that the three percentage point differential between diesel and petrol cars, which was due to be abolished from 6 April 2016, will be
retained until April 2021 when EU-wide testing procedures will ensure new diesel cars meet air quality standards even under strict real world driving conditions.
Taxation of savings and pensions
Pension tax relief consultation
At Summer Budget 2015, the government launched a consultation on the system of pensions tax relief. The government has now announced it is considering the responses received and will publish its response at Budget 2016.
Dependant scheme pensions
The government has announced that legislation will be introduced in Finance Bill 2016 to simplify the test that takes place when a dependant’s scheme pension is payable.
Bridging pensions
Following the introduction of a single-tier pension from 6 April 2016, legislation will be introduced to enable the pension tax rules on bridging pensions to be aligned with Department for Work and Pensions legislation. This measure will be included in Finance Bill 2016.
Automatic enrolment minimum contribution
rates
The government has announced it will delay the next two scheduled increases in automatic enrolment minimum contribution rates by six months each, to align these changes with the start of the tax year.
Secondary market for annuities
The government will remove the barriers to creating a secondary market for annuities, allowing individuals to sell their annuity income stream. The government will set out further details on this measure, including the framework for the consumer protection package, in its consultation response in December 2015.
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Tax credits
Tax credits remain unchanged
Changes to the planned cuts to tax credits were expected but the Chancellor has now announced that these cuts will not go ahead. Instead the rate at which a claimant’s award is reduced as each pound of their income exceeds the income threshold (known as the taper rate) will remain at 41% of gross income from 6 April 2016. The level of income at which a claimant’s tax credit award begins to be tapered away (known as the income threshold), will remain at £6,420 per year from 6 April 2016. Claimants earning below this amount will retain their maximum award. Consequently the income threshold for child tax credit-only claimants will remain at £16,105 in 2016-17. As announced at Summer Budget 2015, the income rise disregard in tax credits will reduce from £5,000 to £2,500. This is the amount by which a claimant’s income can increase in-year compared to their previous year’s income before their award is adjusted.
Starting rate of savings tax
The band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2016-17.
ISAs: annual subscription limits
The government will maintain the ISA, Junior ISA and Child Trust Fund annual subscription limits at their current level for 2016-17. The ISA limit will remain at £15,240, while the Junior ISA and Child Trust Fund limits will remain at £4,080.
ISAs: qualifying investments
The list of qualifying investments for the new Innovative Finance ISA, which will be introduced from 6 April 2016 for loans arranged via a P2P platform, will be extended in Autumn 2016 to include debt securities offered via crowdfunding platforms. The Government will continue to explore the case for extending the list to include equity crowdfunding.
ISAs: tax advantages during the
administration of an estate
The government has announced that it will legislate to allow the ISA savings of a deceased person to continue to benefit from tax advantages during the administration of their estate and will set out further plans for introducing this measure in 2016, following technical consultation with ISA providers.
Julie Clift BA, CTA
Julie joined Wolters Kluwer as a senior technical editor in 2003 and has worked on some of our leading tax products including British Tax Reporter, Inheritance Tax Reporter,
British Tax Guide and Tax Adviser.
Julie began her career at Arthur Andersen before joining Ernst & Young where she specialised in personal tax issues. She was deputy editor of The Tax Journal before returning to practice as a tax editor in the Deloitte & Touche Tax Policy Group.
IHT exemption for compensation and
ex-gratia payments to victims of persecution
during the World War II era
The government has announced that it will legislate extra statutory concession F20 (ESC F20), which gives an inheritance tax exemption in respect of certain compensation and ex-gratia payments for World War II claims. The legislation will include payments made under a recently created compensation scheme known as the Child Survivor Fund.
This measure will be included in Finance Bill 2016 and will apply to deaths on or after 1 January 2015.
IHT and undrawn pension funds in
drawdown pensions
The government will legislate to ensure a charge to inheritance tax will not arise when a pension scheme member designates funds for drawdown but does not draw all of the funds before death.
The legislation will be included in Finance Bill 2016 and will be backdated to apply to deaths on or after 6 April 2011.
Deeds of variation
Following the review announced by the Chancellor at March Budget 2015, the government has decided it will not introduce new restrictions on how deeds of variation can be used for tax purposes but will continue to monitor their use.
Inheritance tax
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CGT for non-UK residents disposing of
UK residential property
The CGT computations provisions required by non-residents on the disposal of UK residential property are to be amended so that, with retrospective effect from 6 April 2015, a double charge that occurs in some circumstances will be removed. Revised legislation will also correct an omission with effect from 25 November 2015. In addition, HMRC are to be given powers to prescribe circumstances when a CGT return is not required by non-residents and will add CGT to the list of taxes that the government may collect on a provisional basis.
CGT payment window
From April 2019, a payment on account of any capital gains tax (CGT) due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal. This will not affect gains on properties which are not liable for CGT due to private residence relief. The government will publish draft legislation for consultation in 2016.
See also Property and stamp taxes section below.
Sarah Laing CTA
Sarah has been writing professionally since joining CCH Editions in 1998 as a Senior Technical Editor, contributing to a range of highly regarded publications including the
British Tax Reporter, Taxes –
The Weekly Tax News, the Red & Green legislation volumes, Hardman’s, International Tax Agreements and many others.
She became Publishing Manager for the tax and accounting portfolio in 2001 and later went on to help run CCH Seminars (including ABG Courses and Conferences). Sarah originally worked for the Inland Revenue in Newbury and Swindon Tax Offices, before moving out into practice in 1991.
She has worked for both small and Big 5 firms, and now works as a freelance author providing technical writing services for the tax and accountancy profession.
Capital gains tax
Loans to participators, trustees of
charitable trusts
Legislation will be introduced in Finance Bill 2016 to create an exception from the tax charge on loans or advances to participators under Corporation Tax Act
2010, s. 455. The exemption will apply to some loans or advances made by close companies to trustees (corporate or individual) of charitable trusts which are currently liable to pay the tax charge because those trustees are participators or associates of participators in the close company. The exemption will apply where such a trustee receives a loan or advance, and it is applied wholly to the purposes of the charitable trust. CTA 2010, s. 455 will continue to apply to charities where loans or advances are made in any other relevant circumstances as will the charge to tax under CTA 2010, s. 464A.
Capital allowances and leasing –
anti-avoidance
Legislation will be introduced in Finance Bill 2016 to amend Capital Allowances Act 2001, Part 2, Chapter 17 (Other Anti-Avoidance) so that it is capable of adjusting the disposal value of the person making the disposal of the plant or machinery as well as qualifying expenditure of the person acquiring it. CAA 2001, s. 215 will be amended so that it applies where the main purpose, or one of the main purposes, of the relevant transaction, or a scheme or an arrangement of which it is part, is to enable a person to obtain a tax advantage in the form of a reduced, or no, balancing charge or an increased allowance. Where the relevant conditions are met, the disposal value is to be adjusted in a just and reasonable manner by reference to payment received attributable to the arrangements not otherwise taken into account in the disposal value. Payment will be widely defined so as include any form of value receivable.
New legislation will also be enacted for corporation tax purposes as Corporation Tax Act 2010, Chapter 3 (Consideration for taking over payment obligations as a lessee taxed as income). Chapter 3 will provide that where a company becomes entitled to tax deductions as a result of taking over obligations under a lease of another person, then the company will always be
Corporation tax
and business tax
Contributed by Paul Davies
chargeable to tax on any consideration received. The legislation will apply to any situation and by whatever method the company takes over those lease obligations. Consideration will be defined widely to include any payment or valuable benefit referable, directly or indirectly, to the agreement. Parallel provisions will be enacted for income tax purposes in Income Tax Act 2007, Part 13 where the person taking over the lease obligations is not a company.
Both measures will apply to affected transactions taking place on or after 25 November 2015.
Related party rules, partnerships and
transfers of intangible assets
Legislation will be introduced in Finance Bill 2016 to amend the intangible fixed assets rules in Corporation Tax Act 2009, Part 8. The changes include specific provisions that will apply the commencement rules to partnerships and will confirm how these rules have effect with regard to intangible fixed assets that are acquired or disposed of by a partnership. The changes make it clear that transfers of intangible assets to a partnership with companies as members will not circumvent the intangible fixed assets commencement rules that would otherwise apply to those corporate members. The measure will be effective for transactions taking place on or after 25 November 2015. Part 8 will also be amended to allow an apportionment of the accounting debits and credits in any period that straddles 25 November 2015 where they relate to transactions that occurred prior to that date.
Paul Davies MA
(Cantab), ACA
Paul qualified as a Chartered Accountant with PWC where he gained experience of audit and business advisory services and specialised in corporate tax matters.
From PWC he moved to become Head of Tax for Northern Rock where he spent 16 years. More lately Paul has experience of managing the worldwide tax affairs of a fast growing hi-technology company in the communications sector.
Paul has a wide range of tax experience ranging from employee share schemes to VAT partial exemption matters and many more besides. He was awarded North East Tax Advisor of the Year in 2010.
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Loan relationships and derivative contracts
— interaction with accounting standards
The government announced in the Blue Book (Spending Review and Autumn Statement 2015) that it will legislate to update the tax rules for loan relationships and derivative contracts to ensure that they interact correctly with new accounting standards in three specific circumstances. No further information is available at the present time. The measures will be enacted in Finance Bill 2016.
Restitution interest
The government (somewhat belatedly) announced that a special 45% rate of corporation tax on income is to be applied to restitution interest. This measure has already been enacted in Corporation Tax Act 2010, Part 8C by virtue of Finance (No. 2) Act 2015, effective in relation to restitution interest determined or agreed on or after 21 October 2015 whether arising before, or on, or after, that date.
Apprenticeship levy
The government announced in the Blue Book that it will introduce the apprenticeship levy in April 2017. The levy will be set at a rate of 0.5% of an employer’s paybill and will be collected through PAYE. Employers will each receive an allowance of £15,000 to offset against their levy payment such that the levy will only be paid on paybills in excess of £3 million. The measure will be enacted in Finance Bill 2016.
Bank levy — restriction in scope to UK
operations
The government announced in the Blue Book that it will consult on restricting the scope of the bank levy to just UK operations from 1 January 2021 alongside a commitment to legislate in the current Parliament. This measure was originally announced in Summer Budget 2015.
Museums and galleries tax relief
The government announced that it will explore with the museums and galleries sector the case for
introducing a new tax relief for museums and galleries.
Deductions for contributions to grassroots
sport
The government announced in the Blue Book that it will launch a consultation at Budget 2016 on how to expand support that can be given to grassroots sport through the corporation tax system.
Charities
Gift Aid Small Donations Scheme
As announced on 18 March 2014, the government will review the Gift Aid Small Donations Scheme to ensure that it is operating as effectively as possible. A call for evidence will be published in December 2015.
Close company loans to participators: partial
exemption for charities
Following consultation, the government will legislate so that a tax charge will not apply to loans or advances made by close companies to charity trustees for charitable purposes. The legislation, which will be included in Finance Bill 2016, will apply to qualifying loans or advances that are made on or after 25 November 2015.
Mark Cawthron
LLB, Solicitor, CTA
Mark is a tax lawyer. He was formerly a partner in the City office of law firm Pinsent Masons and its predecessor firms from 1990 to 2007 and of the US law firm, Bryan Cave, from 2007 to 2010.
He has wide experience of corporate and business tax fields, particularly in: M&A; corporate finance and corporate restructurings; private equity (for institutional investors and management teams); real estate investment and development; employee share incentives; employment arrangements and their termination.
Property and
stamp taxes
Contributed by Mark Cawthron
Housing was one of the centrepieces of the Chancellor’s Spending Review and Autumn Statement speech. In addition to announcements designed to encourage the provision of new housing and/or to assist first-time buyers (‘Starter Homes’, ‘Right-to-buy’, ‘Shared Ownership’, ‘New Homes Bonus’, etc), the Chancellor continued his targeting of the residential buy-to-let and second homes sectors, through changes to the CGT and SDLT regimes.
It seems possible that the ongoing devolution of business rates to local authorities could, in time, come to be seen as a reform with far-reaching effect.
Capital gains tax payment window on
residential property gains
Directed in particular at the buy-to-let sector and, perhaps, non-resident sellers (but nevertheless of general application), capital gains tax (CGT) due on residential property will be payable within 30 days of completion of any disposal of the property. This requirement will be introduced from April 2019 (facilitated by the move to digital tax accounts). CGT due on residential property is currently paid between 10 and 22 months after a disposal is made. HM Treasury say this is out of step with the position for other taxpayers, such as those paying income tax through the Pay As You Earn (PAYE) system; further, that this delay can also cause problems where a taxpayer forgets to pay, or where they no longer have enough of the proceeds from the disposal to cover the tax charge. This new regime will not affect gains on properties which are not liable for CGT due to private residence relief. Draft legislation will be published for consultation in 2016, for inclusion in Finance Bill 2017.
Stamp duty land tax on acquisition of
additional properties
From 1 April 2016, higher rates of stamp duty land tax (SDLT) will be charged on purchases of additional residential properties (above £40,000), such as buy-to- let properties and second homes. The higher rates will be 3 percentage points above the current SDLT rates.
The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property given the role of this investment in supporting the government’s housing agenda.
The government will consult on the policy detail, including on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate. The way ‘additional’ property is defined will be interesting, and one can anticipate individuals and families looking at ownership and/or use to see if the increased charge can be side-stepped.
The current rates on residential property (not in Scotland, where SDLT (generally) no longer applies) are as follows:
Part of relevant consideration %
Not more than £125,000 0 More than £125,000 but not more than
£250,000 2 More than £250,000 but not more than
£925,000 5 More than £925,000 but not more than
£1,500,000 10 The remainder (if any) 12
Note: the single 15% higher rate charge payable under Finance Act
2003, Sch. 4A, which applies to certain acquisitions of dwellings for more than £500,000 by a company, a partnership including a company or a collective investment scheme, sits outside the charging structure above. One assumes therefore (though the detail must be awaited) that this proposed reform might create a new top rate, in relevant cases, of 18%.
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Stamp duty land tax – changes to the filing
and payment process
The government says it will consult in 2016 on changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. These changes will come into effect in 2017-18.
Annual Tax on Enveloped Dwellings (ATED)
and 15% higher rate SDLT
The reliefs available from ATED and from the 15% higher rate of SDLT will be extended to equity release schemes (home reversion plans), property development activities and properties occupied by employees, from 1 April 2016. This measure is to be included in Finance Bill 2016.
SDLT and Authorised property funds
A seeding relief will be introduced for Property
Authorised Investment Funds (PAIFs) and Co-ownership Authorised Contractual Schemes (CoACSs) and changes made to the SDLT treatment of CoACSs investing in property so that SDLT does not arise on the transactions in units.
There will be a defined seeding period of 18 months, a 3 year clawback mechanism, and a portfolio test of 100 residential properties and £100 million value or 10 non-residential properties and £100 million value. These changes, which have been the subject of prior consultation and a long period of gestation, will be included in Finance Bill 2016, to take effect from the date of Royal Assent to that Bill.
Taxation of accommodation benefits
Following recommendations from the 2014 Office of Tax Simplification report on simplifying the administration of employee benefits and expenses, the government will publish a call for evidence on the current tax treatment of employer-provided living accommodation.
Business rates
The government is devolving what it calls unprecedented powers to Scotland, Wales and Northern Ireland, and the Autumn Statement refers to the progress in this respect. The government announced that, in England, it will allow local government to keep the rates they collect from business, give councils the power to cut business rates to boost growth, and give elected city-wide mayors the power to levy a business rates premium for local infrastructure projects – with the support of local business.
By the end of the Parliament, local government will retain 100% of business rate revenues to fund local services, giving them control of £13 billion of additional local tax revenues, and £26 billion in total business rate revenues. The system of top-ups and tariffs which redistributes revenues between local authorities will be retained. The Uniform Business Rate will be abolished and any local area will be able to cut business rates as much as they like in order, the government says, to win new jobs and generate wealth.
Elected city-wide mayors will be able to add a premium to business rates to pay for new infrastructure, provided they have the support of the local business community through a majority of business members of their Local Enterprise Partnership.
The Department for Communities and Local Government will consult on changes to the local government finance system to pave the way for the implementation of 100% business rate retention by the end of the Parliament.
Small business rate relief
This temporary relief will be extended for a further year, to 31 March 2017. The government suggests this will help 600,000 businesses.
Under this regime as it currently applies to 31 March 2016, availability of the relief depends on whether the ratepayer has other properties, and if the relevant property has a rateable value not exceeding £12,000. 100% relief (doubled from the usual 50%) is available for properties with a rateable value of £6,000 or less; the rate of relief decreases from 100% to 0% for properties with a rateable value between £6,000 and £12,000. If the property has a rateable value in the band from £12,000 up to £18,000 (£25,500 in Greater London), the ratepayer is considered a small business, and, whilst there is no relief as such, business rates are be calculated using the small business multiplier instead of the standard one.
Council tax
Local authorities in England will be given an additional 2% flexibility on their current council tax referendum threshold to be used entirely for adult social care. The government suggests that, if fully used, this ‘social care precept’ could raise nearly £2 billion a year by 2019-20.
Enterprise zones
The government will expand the Enterprise Zone programme in England with the announcement of 18 new sites across the country and the extension of 8 sites on the current programme.
These include 15 Zones in smaller towns and rural areas, and Enterprise Zone benefits will as a result be available to 108 sites across the country.
Stamp Duty and Stamp Duty Reserve Tax
Shares transferred to a clearance service or depositary receipt issuer as a result of the exercise of an option will be charged at the 1.5% higher rate of stamp duty based on either their market value or the option strike price, whichever is higher.
HMRC say this will prevent avoidance using ‘Deep in the Money Options’, which are options with a strike price significantly below (for call options) or above (for put options) market value. Share transfers made other than to a clearance service or depositary receipt system as a result of exercising an option will be unaffected. The Autumn Statement publication states that this change will apply to options ‘which are entered into on or after 25 November 2015 and exercised on or after Budget 2016’. The measure will be included in Finance Bill 2016.
The measure will be enacted in Finance Bill 2016 and will apply to options entered into on or after 25 November 2015 and exercised on or after Budget 2016.
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VAT and indirect
taxes
Contributed by Stan Dencher
VAT
A new fund will make available £15m a year, equivalent to the annual VAT raised on sanitary products, to support women’s charities over the course of this Parliament, or until EU law is amended to enable the UK to zero-rate supplies of sanitary products.
There will be consultation on provisions in the Finance Bill 2016 to ensure that reduced-rating for energy saving materials is maintained in line with EU law.
Tobacco control
As part of the obligations under the Framework
Convention on Tobacco Control Illicit Trade Protocol, there will be consultation on introducing a licensing scheme for tobacco machinery and the possibility of licensing tobacco vendors.
Climate change levy
Following consultation, a transitional period for electricity suppliers to apply the climate change levy exemption on renewably sourced electricity generated before 1 August 2015 will end on 31 March 2018 under measures proposed to be in the Finance Bill 2016.
Shale gas revenues
There will be a Shale Wealth Fund from the shale gas revenues of up to 10% of the tax revenues from shale gas which is to be spent in local areas.
Landfill tax
The value of the Landfill Communities Fund for 2016-17 will be £39.3m, with the cap on contributions by landfill operators amended to 4.2%. Some £20m of the additional landfill tax revenues from this change will be allocated to the Environment Agency to address waste crime over the next five years. This includes the removal of provisions for third party contributions, simplification of record keeping requirements and changes to the scheme’s objectives.
Stanley Dencher BCom,
FCA, CTA (Fellow), AIIT
Stanley was a practitioner for nine years before joining Wolters Kluwer as a technical editor in 1984, working primarily on VAT publications. He wrote Personal Trading
Losses and is co-author of Company Cars, both published by Wolters Kluwer.
For many years Stanley presented tax seminars for the ICAEW and CIOT and for training organisations all over the UK.
Devolved taxes
Contributed by Paul Robbins
The Chancellor stressed the government’s commitment to various tax devolution measures. The current state of play on these is as follows:
• Scotland:Scotland Bill 2015 implementing the Smith Commission Agreement should receive Royal Assent in early 2016 and talks are ongoing on the difficult topic of the creation of a fiscal framework. Stamp duty land tax has already been devolved (and renamed land and buildings transaction tax) as has landfill tax. The Scottish rate of income tax will commence from April 2016. The Chancellor announced that legislation will be introduced so that HMRC’s set-off debt collection powers will cover Scotland.
• Wales: the Wales Act 2014 devolves stamp duty land tax and landfill tax to the Welsh Assembly and creates new Welsh rates of income tax. The requirement for a referendum to implement the new rates is to be removed.
• Northern Ireland: the Northern Ireland parties have indicated that they want to have their own rate of corporation tax of 12.5% from April 2018. This will depend on the Executive demonstrating to the UK government that the province’s finances have been put on a sustainable footing and commitments made under the Stormont House Agreement have been met.
Paul Robbins BA, ACA,
CTA
After graduating, Paul worked in the tax departments of two large accounting firms, now absorbed into the Big 4, before joining Wolters Kluwer as a tax writer specialising in corporates.
As well as leading our team of in-house tax writers, Paul is lead technical editor on the Red Book, the
Tax Reporter, Tax Planning Online and the CCH Tax
Workflow system. As Tax Content and Innovation
Manager, he is also responsible for the quality and development of the entire tax information portfolio.
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Over the last few years, the Chancellor has tinkered with most aspects of the UK’s tax system. But there is one area that has received more attention than most: tax avoidance and evasion. Despite his best efforts in this area, it would appear that tax avoidance and evasion remain a problem for the UK, with the result that significant new powers for HMRC are needed, seemingly on an annual basis. This time around, we have, amongst other measures, a controversial new criminal offence for tax evasion, and new penalties for offshore tax evaders and those who help them. For ease of reference, the announcements are grouped into three categories: measures which take effect immediately; measures for Finance Bill 2016 which have, in most cases, been the subject of consultation; and measures which the government will consult on with a view to bringing forward legislation in the future.
Measures with immediate effect
There are two measures which apply with immediate effect (i.e. from 25 November 2015). In both cases, the relevant legislation will be included in Finance Bill 2016 and has been published in draft.
First, the government will act to stop abuse of the rules relating to capital allowances and deductions for lease payments. It would appear that some businesses have entered into arrangements designed to secure a tax advantage by: (1) manipulating disposal values in order to generate excess capital allowances; and (2) creating consideration in a non-taxable form in return for agreeing to take over tax deductible lease payments. The government will amend CAA 2001 and CTA 2010 to put an end to such schemes.
Second, the government will clarify when intangible fixed assets held by a partnership come within the intangible fixed asset rules. The intention here is to put a stop to schemes that seek to obtain a benefit for corporate partners that is contrary to the intention of the related party rules. This measure will apply to transactions taking place on or after 25 November 2015 and, with regard to earlier transactions, will have effect in relation to accounting debits and credits accruing on or after that date. For more information on both of these measures, see the Corporation tax and business tax section.
Tax avoidance
and evasion
Contributed by Stephen Relf
Finally under this section, the government has indicated that, as part of the action it intends to take against disguised remuneration (see below), it may seek to close down, with effect from 25 November 2015, schemes intended to avoid tax on earned income.
Pre-announced measures to be included in
Finance Bill 2016
Following on from the consultation documents published in the summer, and earlier, a number of (mostly) pre-announced measures are to be legislated for in Finance Bill 2016. These include:
• a new criminal offence for tax evasion. This measure, which attracted some criticism during the consultation process, will remove the need to prove intent for the most serious cases of failing to declare offshore income and gains;
• new civil penalties for offshore tax evaders and those who help them. For evaders, the new penalty will be linked to the value of the asset on which tax was evaded. In addition to the penalties, evaders and enablers can expect to be publicly named;
• a new criminal offence for corporates failing to prevent tax evasion. This measure will target corporates which fail to prevent their agents from criminally facilitating tax evasion;
• new measures for serial avoiders (i.e. those who persistently enter into tax avoidance schemes that are defeated by HMRC). These include: a special reporting requirement; a surcharge; and, in some cases, restrictions on accessing certain tax reliefs.
Stephen Relf, BA, MPhil,
ACA, CTA
Stephen is a Chartered Accountant and Chartered Tax Adviser with a wide experience of tax gained at a Big Four firm, in industry and in his own practice. Stephen has written extensively on tax in
recent years, contributing to a number of publications including CCH products Tax Reporter and Tax Planning. Prior to joining CCH Stephen led the CIOT’s technical team. This involved engaging with the UK Government and others through written submissions and face-to-face meetings with a view to improving the UK’s tax system. Stephen continues to be involved with the CIOT through its technical sub-committees and in particular the Working Together Sub-committee.
In addition, the government will extend the Promoters of Tax Avoidance Schemes (POTAS) regime to include promoters whose schemes are regularly defeated by HMRC;
• a new penalty (of 60%) for cases successfully tackled by the General Anti-Abuse Rule (GAAR). Also, the government will make some small changes to the GAAR so that it better targets marketed avoidance schemes; • new rules to address arrangements designed to
convert income into capital. Changes will be made to the Transactions in Securities rules and there will be a new targeted anti-avoidance rule (TAAR);
• legislation to implement the OECD rules for addressing hybrid mismatch arrangements. The legislation will apply with effect from 1 January 2017;
• legislation to determine when performance awards received by asset managers will be taxed as income or capital gains; and
• a packet of measures to improve large business tax compliance. These include: a new requirement that large businesses publish their tax strategies; a special measures regime for businesses that persistently engage in aggressive tax planning; and a framework for cooperative compliance.
Last but not least, there is an interesting announcement with regard to Entrepreneurs’ Relief (ER). Legislation was introduced in Finance Act 2015, under the guise of anti-avoidance, to restrict access to ER. However, there was concern that the changes went too far and impacted on normal commercial arrangements. It would appear that the government has taken these comments on board and will now act to put things right. In the absence of any further information, the announcement is reproduced in full below:
‘Capital Gains Tax entrepreneurs’ relief: contrived structures – The government will consider bringing forward legislation to amend the changes made by
Finance Act 2015 to entrepreneurs’ relief, in order to support businesses by ensuring that the relief is available on certain genuine commercial transactions.’
Measures for consultation
The government has announced that it will consult on the following:
• an additional requirement to correct past offshore tax non-compliance, with new penalties where there is a failure to do so;
• cash and the hidden economy. HMRC are seeking a better understanding of the implications for tax compliance of the trend away from cash and have published a call for evidence; and
• the rules concerning company distributions. This would appear to be connected with the changes to the Transactions in Securities rules referred to above. In addition, the government will consider a review of the intangible fixed asset rules as part of the Business Tax Roadmap. This is welcome given the confusion and disruption caused by the changes made by Finance Act
2015 and Finance (No. 2) Act 2015 with regard to goodwill, and given the changes to be made in 2016 referred to above.
17
Making Tax Digital: reducing errors through
record keeping
At the Spring Budget 2015 the government committed to transform the tax system by introducing personalised digital tax accounts, thereby removing the need for annual tax returns.
As part of the government’s aim to ‘make tax digital’, the Chancellor has now announced that companies, unincorporated businesses, self-employed people and landlords will all be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology and will include features which will prevent errors and promote compliance. The Government estimates that by reducing errors through this better record-keeping it will save £610m in 2020-21. The measure will not apply to employees, or pensioners, with a secondary income source from self-employment or property and whose gross income from this secondary source is under £10,000 per year. The taxes affected are income tax, National Insurance contributions (NICs), corporation tax and Value added tax (VAT).
The measure will be implemented for income tax and NICs from April 2018, VAT from April 2019 and corporation tax from April 2020. The roll out will be staggered and there will be testing before the reporting becomes mandatory.
The government will publish its plans to transform the tax system shortly and will consult on the details in 2016. There is very little detail at the moment – only HMRC’s document, Making tax easier: The end of the tax return, which was issued alongside the Spring Budget 2015.
Possible alignment of tax payments
The government is to consult on options to simplify the payment of taxes, including whether to align payment dates and bring them closer to the point when profits arise, so that taxpayers make a single regular payment that covers all their tax affairs.
Reduced cost of tax administration for
businesses
HMRC are to introduce a strengthened target to reduce the annual cost to business of tax administration by £400 million by the end of this Spending Review period.
Self-assessment time limit clarification
The government is to publish draft legislation clarifying the time allowed for making a self-assessment, making it clear that the time limit is four years from the end of the relevant tax year. This will be legislated in Finance Bill 2016.
Tax
Administration
Contributed by Meg Wilson
Meg Wilson BA, CTA
Meg joined Wolters Kluwer as a full-time tax writer in 2012 and works on several areas of the Tax Reporter and the
NIC Guide.
She also prepares case reports for tax decisions released by the tribunals and courts.
Meg qualified as a Chartered Tax Adviser in 1999 and has worked for HLB Kidsons, KPMG and Hazlewoods, a top 40 firm in Gloucestershire.
Government taking forward OTS
recommendations on employment status
The government has responded to the Office of Tax Simplification’s (OTS) Employment Status Report and is taking forward the majority of its recommendations. The improvements suggested by the OTS include tackling the definitions inherent in employment status and changing tax (and possibly other) rules that would mean the issue of employment status was not such a contentious issue. Many of the recommendations will require careful consideration and in depth consultation and therefore it may be some time before we see significant improvements in this area.
Taxation of accommodation benefits
Following recommendations from the 2014 OTS report on simplifying the administration of employee benefits and expenses, the government is to publish a call for evidence on the current tax treatment of employer-provided living accommodation. The report found that:
• rules for exempting staff living in employer-provided accommodation because it is customary and for the better performance of their duties are not working well or consistently;
• ‘Grandfathering’ from the pre-1977 rules causes anomalies;
• rules for calculating the benefit are outdated, often relying on 1973 rateable values and a £75,000 value for expensive properties;
• a better way forward is to frame the exemption more closely around ‘necessary for the job’;
• an obvious way to assess any benefit is to use open market value rental, taking into account all relevant factors
New method of assessment
The government is to publish draft legislation that will enable a new, simpler process for paying tax from the 2016-17 tax year. This is to be used for taxpayers in self-assessment who have simple tax affairs where HMRC already holds all the data it needs to calculate the tax
liability, and where existing payment processes are not available. Taxpayers will be sent a calculation which will be a legally enforceable demand for payment, although taxpayers will be able to challenge and appeal the calculations. This measure is to be included in Finance Bill 2016.
RTI relaxation for micro-employers to end
Following a review, the government has decided that the two year temporary relaxation, allowing existing micro-employers (those with nine or fewer employees) using Real-Time PAYE to report all payments they make in a tax month on or before the last payday in the tax month rather than on or before each and every payday, will end as planned on 5 April 2016.
This aligns the treatment for existing micro-employers with all other employers. This decision follows a review the government committed to undertake at Autumn Statement 2014, as recommended by the OTS.
HMRC’s October 2015 Employer Bulletin usefully provides details of a number of misunderstandings about what is meant by reporting PAYE in real time ‘on or before’ the employee is paid.
Tax simplification
Contributed by Meg Wilson
Meg Wilson BA, CTA
Meg joined Wolters Kluwer as a full-time tax writer in 2012 and works on several areas of the Tax Reporter and the
NIC Guide.
She also prepares case reports for tax decisions released by the tribunals and courts.
Meg qualified as a Chartered Tax Adviser in 1999 and has worked for HLB Kidsons, KPMG and Hazlewoods, a top 40 firm in Gloucestershire.
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