Autumn Statement 2015: Instant digest
The Chancellor George Osborne delivered his Autumn Statement today and while the speech itself was thin on detail, the emerging documentation is a trailer for what’s yet to come.
Here we outline some of the main policy changes:
The general economic picture from the OBR saw a big rise in forecast tax revenues, a fall in interest costs and money raised from the apprentices levy. This additional tax and interest cash will be used to soften the blow of departmental cuts and to fund a £12bn tax credit U-turn, according to the Chancellor. The OBR revealed that the “direct effect of policy decisions has been to push borrowing higher between 2016 and 2020”. Outgoing BBC economics editor Robert Peston commented that the Chancellor has been “bailed out by OBR forecast of higher tax revenues and lower interest costs”.
News that that the small business rate relief scheme will be extended for another year was welcomed by most business organisations, including the FSB, which proclaimed: “Good news for 600,000 small businesses with business rates relief extended for another 12 months.” Osborne outlined the government’s plan to transfer power across the country in a “devolution revolution”, paving the way for 100% business rate retention, giving councils the power to cut business rates to boost growth. The closest to a rabbit-hat combo we got was the announcement that there will be a tax on big business to pay for new apprenticeships. The levy will be set at 0.5% of the payroll bill, but a £15,000 allowance means that 98% of employers will not pay. There was surprise generated by the level of spending in Osborne’s statement, but the OBR’s optimistic forecasts for tax revenues, re-evaluation of housing association debt, falling interest costs and money generated from stamp duty and the apprentice levy allowed Osborne to soften the blow of government spending cuts.
Capital gains tax
From April 2019, a payment on account of any 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. Draft legislation will be published for consultation in 2016.
The general anti-abuse rule (GAAR) was given more teeth with new penalties in the Autumn Statement 2015. The government will introduce a new penalty of 60% of the tax due to be charged in all cases successfully tackled by the GAAR and will make small changes to the GAAR’s procedure to improve its ability to tackle marketed avoidance schemes. According to the Spending Review/Autumn Statement report (section 6.7): “New rules will be introduced to stop avoidance of stamp tax where ‘deep in the money’ options are used to transfer shares to a depositary receipt issuer or clearance service.” Finance Bill 2016 measures with immediate effect from 25 November 2015 focus in on the following policy measures including loans to participators, trustees of charitable trusts; capital allowances and leases; and related party rules, partnerships and transfers of intangible assets.
George Osborne promised in his Autumn Statement that the UK will have “the most digitally advanced tax administration in the world” by investing £1.3bn in digital tax accounts. All small businesses and individuals will have access to the digital tax accounts by 2016-17. The government will publish its plans to transform the tax system shortly and will consult on the details in 2016.
Higher rates of SDLT will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes, from 1 April 2016. The higher rates will be 3% above the current SDLT rates. The government will also 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, coming into effect in 2017 to 2018. The government will use this additional tax to invest in supporting their housing agenda and doubling the housing budget. However, the government will consult whether the exemption for corporates and funds owning more than 15 residential properties is appropriate.
Personal services companies - the phantom menace
The great pre-Autumn Statement PSC scare story proved to be just that. Somebody leaked suggestions to The Guardian, Mail and contractor representatives about introducing a formal employment status test to confirm whether or not a contractor was an employee. Or some of those parties may have got the wrong end of the supervision, direction and control stick that will be enacted with the revised travel and subsistence legislation due to take effect from 6 April 2016. Rather than bringing thousands of freelance contractors on to corporate payrolls, the Chancellor has reined in his anti-contractor urges to promise a consultation on restricting T&S relief to PSCs caught by the intermediaries legislation [not quite so - see comments below, Ed]. As FreeAgent’s Ed Molyneux summarised in our live Autumn Statement blog, “Looks like T&S restrictions will only apply to those caught by IR35 already...” Look out for the draft legislation when new Finance Bill clauses are published in two weeks' time.
”Action on disguised remuneration schemes” - barely
This was one of several anti-avoidance measures promised by the Chancellor during his speech. Scouring the Summary of Spending Review and Autumn Statement document uncovered a stray paragraph buried under heading 12.2 indicating “The government will consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income, where necessary, with effect from 25 November 2015.” Rather than prefiguring a more detailed adventure into employment status issues (see “Phantom menace” section above), it seemed to be “a tiny bit of tweaking of legislation that works” in the words of BDO’s Philip Fisher.
AccountingWEB community reaction
AccountingWEB’s live expert panel will be poring over the Autumn Statement documentation this afternoon, but during the speech itself there was a sense of resignation. Philip Fisher was underwhelmed by the lack of tax announcements, spotlighting the Chancellor’s “tampon tax” crowd favourite as evidence: “The big tax headline to date is no change to tampon tax. Is that the best he can do?”
Meanwhile, the AccountingWEB community pounced on the Chancellor, questioning why CGT on disposals of residential property will have to be paid within a month of the disposal. “Wonder how many more pages of legislation will be needed to deal with this acceleration and how fast HMRC will be where later losses subsequently extinguish the liability,” asked DJKL.