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Autumn statement 2013: Highlights

5th Dec 2013
Freelance journalist
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AIA

Tax breaks for small business, new measures against tax avoidance and tax incentives for investment in young people and shale gas were among the main announcements in the 2013 Autumn Statement.

Backed with several tax policy proposals and a number of measures enacted on the day, the statement looked more like a pre-Budget report from Gordon Brown’s more activist period as Chancellor.

There was even a call back to 1999’s notorious IR35 press release.

Chancellor George Osborne opened his speech on Thursday by declaiming, “Britain’s economic plan is working.” Yet “difficult decisions” was the phrase that cropped up most frequently during the next hour - 10 times in all. An upturn in economic forecasts would allow the Chancellor to unveil a selection of tax concessions for business, but this was balanced by plans to increase the pension age.

He previewed a £9bn programme to increase the tax take by clamping down on "evasion, avoidance, fraud and error" that would involve most immediately a restriction on the use of artificial intermediaries to avoid national insurance.  While Whitehall departments would continue to get their budgets squeezed by £3bn, HMRC would be exempt.

Employer National Insurance contributions are to be scrapped on 1.5m jobs for young people. "Employer Nics going for under 21s. Undisputed good news at last," commented BDO employment tax and rewards partner Philip Fisher in AccountingWEB's live autumn statement blog. More than 220 participants from both AccountingWEB and our sister site BusinessZone followed the speech in the live thread, and at the end they gave a cautious welcome to the announcements, with 81% deeming it friendly, but 56% voting "friendly, but not enough":

2013 Autumn Statement live blog poll results

Here is a quick overview of the main business and tax-related announcements, with links to further information sources.

Economy on the up

Setting the scene with good news, the Chancellor reported a revision in the Office of Budget Responsibility’s growth forecast from 0.6% in March to 1.4%. The figure for 2014 was upgraded from 1.8% to 2.4%. The OBR estimate of national debt was revised down from 7.5% in March to 6.8%  and would continue to fall in the years to 2018-19 when the OBR expects to see a small surplus. Borrowing for 2013 would be £111bn, £9bn less than expected. The latest estimate is that borrowing will be £73bn less over the next five-year period and “the government will not have to borrow  anything at all” by 2018-19, the Chancellor said. However the feelgood projections did not distract the chancellor from imposing a cap on welfare spending of 50% of government spending (excluding state pension and cyclical benefits for job seekers).

Business incentives

Along with HMRC, small businesses appeared to be the main beneficiaries of spending handouts to maximise the political advantages of the recovery ahead of the next general election. The NIC holiday for under-21s was the finale of the Chancellor’s speech but along the way he also announced a 2% cap on business rate raises from April and a £1,000 “discount” on business rates for the next two years on retail premises with rateable values up to £50,000. The people in business such as small shops, cafes and restaurants “epitomise the hardworking values this government supports”, Osborne said. Also in the frame are:

  • Businesses moving into vacant properties will have their rates cut by 50%
  • Extension of the new enterprise allowance
  • A new tax relief is to be introduced for investment in social enterprises
  • Corporation tax relief for commercial theatre productions and relief for investing in new writings or touring productions to regional theatres
  • An expansion of apprenticeships – an additional 20,000 over the next two years. Employers will get the funds from HMRC.
  • New tax allowance for investment in shale gas; halves tax on early profits
  • Tax-advantaged employee share schemes to get self certification and online filing of returns, as recommended by OTS review.

Capitial gains tax (CGT) crackdown

The first inkling of a tightening of CGT conditions emerged as the Chancellor outlined his strategy  to add £9bn to his tax take. The final period exemption for private residence relief will be reduced from 36 months to 18 months from 6 April 2014. A CGT charge will also be introduced on future gains made by non-residents disposing of UK residential property. The details will be put out for consultation in early 2014.

Yet more anti-avoidance

A small number of tax measures will be enacted from 5 December to avoid potential tax losses including a Finance Act 2014 restriction on mixed membership partnerships reallocating excess profits from a non-individual partner to an individual. Legislation will also deny certain income tax loss reliefs and capital gains relief for individual partners who are deemed to be party to arrangements intended to gain them those reliefs.

The government will also seek to extend its current power to force people using tax schemes that have been defeated at tribunal to pay the tax they were trying to save up front.

Three other measures were introduced on the day to address potential risks affecting corporate groups and those operating internationally:

For more detailed explanations, see the Treasury's 2013 Autumn Statement page and continuing coverage on AccountingWEB over the next few days. After draft Finance Bill clauses are published next week, Rebecca Benneyworth will produce an impact report sponsored by BTCSoftware on what they will mean for small businesses.

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By ireallyshouldknowthisbut
05th Dec 2013 13:47

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Did anyone find the date PPR relief is reduced from 3 years to 18 months?  it is silent in para 1.295.

The data of the tax effect gives tax revenues from 2015/16 but it also give revenues from 2016.7 for non-resident CGT which is due April 2015. 

if this is April 2014 client will need to know PDQ. 

 

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
05th Dec 2013 13:59

You may need to wait until next week... or even longer

Thanks for pointing us at the relevant paragraph, but here on the Aweb team we have no more information on this than you.

If you're lucky, there may be draft clauses for the 2014 Finance Bill brought forward next week. But the paragraph just before the one you quote mentions a consultation on the new CGT charge for non-residents will be issued "early in 2014". It's conceivable that the consultation/exposure of the rules could be bundled together - leaving you and your client even less time to 

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By jon_griffey
05th Dec 2013 14:05

Non resident CGT

 

Why on earth is the non resident CGT to be introduced from April 2015?  This will give those involved time to rearrange their affairs accordingly to mitigate its effect and it appears to only be for 'future gains' arising after April 2015.  This suggests a tax-free uplift  Why not introduce it immediately and get a tax windfall from Johnny foreigner?

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Replying to Wanderer:
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By Old Greying Accountant
06th Dec 2013 17:09

May be ...

jon_griffey wrote:

Why on earth is the non resident CGT to be introduced from April 2015?  This will give those involved time to rearrange their affairs accordingly to mitigate its effect and it appears to only be for 'future gains' arising after April 2015.  This suggests a tax-free uplift  Why not introduce it immediately and get a tax windfall from Johnny foreigner?

... he is giving them time to sell up, creating a surplus of supply and so damping house price inflation thus simultaneously avoiding the need to increase interest rates whilst giving the indigenous population the chance of affording their own home!

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By ireallyshouldknowthisbut
05th Dec 2013 14:15

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@John, thanks it wasnt just me.

@Jon, because Jon, as I just put in my circular out to clients, Gideon has lots of friends of the non-resident persuasion.

Its just like the swiss account thing.  Raised a pittance.

They are just going to sell and buy commercial which isn't in the net. 

Presumably Gideon's friends own a lot of commercial. 

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Replying to Paul D Utherone:
By jon_griffey
05th Dec 2013 14:27

Non resident CGT

ireallyshouldknowthisbut wrote:

@Jon, because Jon, as I just put in my circular out to clients, Gideon has lots of friends of the non-resident persuasion.

 

Depressingly I think you are correct.  I can't see any other logical reason for this approach.  There must be a colossal amount of property out there owned by non residents which is heavily pregnant with capital gain.

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Replying to Rammstein1:
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By PaulCoe
05th Dec 2013 14:53

re PPR relief changes

 

This link states the new PPR rules come into effect from 6th April 2014.

https://www.gov.uk/government/news/autumn-statement-5-december-2013

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By ireallyshouldknowthisbut
05th Dec 2013 15:18

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@paul super, I completely missed that document earlier. 

@Jon - I agree completely. It would have raised some real money if he had the guts to do it from today, and include commercial.  But that was never the intention the intention is to LOOK as if you are being tough in the next newspaper headline. Just as with the Swiss deal. 20% withholding tax or similar would do the job, paid by the solicitor on completion, or exchange if more than say 30 days earlier. 

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By dww
05th Dec 2013 15:37

The generosity of the rich
The rich in UK are paying a greater share of their income than under previous Labour government """"

That's an odd descriptive bullet point amongst a list of action points.

I don't really understand why the point about the richest 1% paying 30% of all income tax is presented, as Osborne did today, in support of the "we're all in it together" line.  It seems to me it just highlights the increasingly grotesque income disparity that we've come to expect and accept.

If the richest get richer then they'll be paying 40, 50, 60% of all income tax.  Will that be a good thing too?

 

 

 

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By daveforbes
05th Dec 2013 16:29

CGT and non residents

There have been a couple of suggestions that bringing in of CGT for non-residents should be immediate to generate a windfall. Consider the scenario of a couple retiring to Spain 10 years ago. At the time they were considering selling their house which would not attract CGT . Their FA told them they could keep it and rent it out and still sell without CGT. Is George being soft giving them a chance to sell  ? 

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Replying to johngroganjga:
Red Leader
By Red Leader
05th Dec 2013 18:01

bit harsh

I think taxing the CGs from April 2015 is fair.

Remember the 6.4.65 valuation with CGT calcs of old? Even Wilson's Labour Government didn't attempt to backdate the gains that would be taxed.

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Replying to breathwell:
Red Leader
By Red Leader
05th Dec 2013 18:03

£9bn from catching tax evaders

I liked the comment on the FT blog. Referred to the £9bn as a "balancing figure"! Too true. Bit like closing stock ...

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Replying to johngroganjga:
By jon_griffey
06th Dec 2013 11:34

CGT and non residents

daveforbes wrote:

There have been a couple of suggestions that bringing in of CGT for non-residents should be immediate to generate a windfall. Consider the scenario of a couple retiring to Spain 10 years ago. At the time they were considering selling their house which would not attract CGT . Their FA told them they could keep it and rent it out and still sell without CGT. Is George being soft giving them a chance to sell  ? 

I don't know anything about Spanish CGT but I suspect that the gain would be reportable on their Spanish tax return and Spanish CGT paid thereon anyway.  If not then this hypothetical couple would still get a substantial helping of PPR relief.  The real mischief here is that substantial foreign wealth has been pouring into UK property - espcially in London with a promise of a tax free gain - which is now appears is going to be ringfenced.  Accordng to Savills, 46% of Prime London property sales last year was to 'international buyers'.  There are always winners and losers in tax but these lost tax receipts could have been used to cut fuel duty, or small business taxes.

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By Vaughan Blake1
06th Dec 2013 09:53

helping hard-working people to keep more of the money they earn

Apparently there will be a grading system from 1 - 10 on next year's SATRs.  You then self-assess how hard you are working from  10 - 'very hard' to 1 'larks about and has three hour lunches'. 

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
06th Dec 2013 10:08

Comments on business breaks

The press releases have been flying in since yesterday's speech. The following comments arrived from some of the big firms on the business announcements:

“By spending over £1bn next year on business rates, the Chancellor has shown that he has been listening to the pain felt by businesses through a system that has its origins in the Poor Laws of 1601 and was updated in 1990 alongside the introduction of the poll tax,” said Chris Sanger, EY’s global head of tax policy.

Simon Tivey of PwC said: "The new 50% 'reoccupation' relief for small businesses on the high street could reduce the number of vacant shops but has the potential to be unfair to existing businesses who may struggle to pay full rates.

But unless it's managed properly, small businesses will move shops to take advantage of the relief will createa “merry go round of rate relief relocations,” Tivey warned. 

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By Vaughan Blake1
06th Dec 2013 11:36

I do wonder if...

Given all the health reports/warnings about obesity, diabetes, stress and alchohol consumption, that average life expectancy will actually start falling by 2030.

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By Mitch
06th Dec 2013 12:20

PPR Relief changes

Does anyone know if there will be a transition phase for the PPR relief period change?

I have a client who moved into a care home in March 2012.  Her property (a big house bought many years ago for very little) has been on the market since then but has failed to sell.  The client and her family weren't too concerned as they thought they had plenty of time.  However, this change implies that if the property is sold on 5 April 2014 any gain will be fully exempt and if it is sold on 6 April there will be a CGT liability.  This seems very unfair as the client thought she had until March 2015 to sell and there is little chance of finding a buyer and exchanging contracts within the next 4 months.

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Replying to trecar:
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By Peter Cane
06th Dec 2013 12:39

Not aware of any transitional

I've seen nothing about any transitional rules but something may come up over the next few weeks.

In the meantime, could your client let the property until such time as a buyer is found? This will enable letting relief to be claimed which might at least limit the potential damage of reduction in PPR?

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By Simon Sweetman
06th Dec 2013 12:51

evasion

Can anyone remember the last time a chancellor didn't say he was going to raise £x million by cracking down on tax evasion ?

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By pauljohnston
06th Dec 2013 13:56

Re Tax evasion - I am

sure that if the Chancellor had a good look at MPs in Parliment he could raise some tax with out getting his feet wet.........

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By pawncob
06th Dec 2013 14:55

@Mitch

Surely the gain would only be on one day's increase in value?

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By Ian Lawrence
06th Dec 2013 15:26

NI thresholds

Has anyone found the NI thresholds for 2014/15 yet?  Am I being unobservant but cannot find them anywhere.  Thanks

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By PK Group
06th Dec 2013 16:46

Great read, and interesting discussion.

Helping small businesses flourish is a great step in aiding our economic recovery further. The 'Business Incentives' bullet points seem to be generally very positive, but the proof will be in the pudding as always.

PK Group

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Jennifer Adams
By Jennifer Adams
06th Dec 2013 19:25

Relevant cartoons

The cartoons are good here -

/www.accountingweb.co.uk/article/autumn-statement-live-expert-panel/550796

 

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By Mouse007
07th Dec 2013 22:26

Thanks JA, here's one just for you

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