Autumn statement predictions

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Rebecca Cave
Tax Writer
Taxwriter Ltd
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Rebecca Cave has consulted her crystal ball to predict what might be in the Autumn Statement on 25 November.

George Osborne had his sums all tied up; he would bring the country’s accounts back into surplus by 2019/20 by making £12bn worth of social security savings. This plan was flagged up before the election, but the detail was not revealed until the Summer Budget, when it became clear that £4.4bn of the social security savings would come from cutting tax credits paid to low income households.  

The alteration in tax credits rates and thresholds would be made by an affirmative statutory instrument (SI). This is a form of legislation which is not normally subject to detailed debate in the House of Commons, and is often waived through. However, both Houses of Parliament must approve it, and this is where George’s plans came unstuck; as the House of Lords refused to approve the SI which contained the tax credits cuts.

If the changes to tax credits had been presented in a separate Financial Bill the House of Lords wouldn’t have had the power to block the legislation, due to the Commons Financial Privilege.

As a result of the Lords’ action George Osborne must now find an additional £4.4bn of expenditure cuts from other sources, or reign-in his target of a £10bn surplus in 2019/20 by borrowing more and perhaps phasing-in the tax credits cuts over five years. A third option is to raise taxes or duties, but the pesky tax lock (Finance Bill 2015-16 cl 1& 2) has limited his action in that direction.  

So what can he do to raise funds? Three taxes which are not covered by the tax lock are CGT, IHT and SDLT, all of which are stuffed with reliefs and exemptions ripe for culling.

CGT

Entrepreneurs’ relief received some significantly body-blows in last year’s Autumn Statement on 3 December 2014, and in the Budget on 18 March 2015. I suspect the Chancellor has more attacks planned for this year, such as a removal of the relief when:    

  • transferring shares to family members to trigger a material disposal; or 

  • incorporating a property letting businesses. 

Another very generous CGT relief is the exemption for gains made on shares taken by employees in return for giving up a bunch of employment rights (employee shareholder shares). The first £2,000 worth of shares are free of tax and NI on acquisition, but up to £50,000 of shares (measured on acquisition value), are also free from CGT on disposal – whatever the size of the gain. That is a glorious relief for private equity investors, as explained in Jolyon Maugham’s blog, and is ripe for reform.  

IHT

Business property relief (BPR) and agricultural property relief (APR) provide 100% exemption from IHT when passing on a business or farmland. There have been rumours for years that BPR may be cut from the current 100% rate, or restricted in scope.

The value of quality English farmland has doubled over the last five years, and the price of farmland in other parts of the UK is similarly buoyant, which encourages investors. To have such a valuable asset protected from IHT by 100% APR, and be subject to 10% CGT under ER (in many circumstances) may be too tempting for George. Expect some tweaking, if not a wholesale reduction of IHT and CGT reliefs in that area. 

SDLT

Commercial property values have not increased in line with residential property, but the number of non-residential property transactions is steadily increasing, according to the latest quarterly HMRC report. When SDLT was reformed in December 2014 only residential properties were affected. Now there are two different methods of calculating SDLT for residential and non-residential property transactions, and two methods of calculating the commercial land tax charges north and south of the Scottish border. This confused picture is ripe for “simplification”, which may well subtly increase the yields.  

Currently there is a relief from SDLT where a family partnership incorporates, and that too could be vulnerable to be closed as a “loop-hole”.

Tweaking IR35

The government appears determined to deter tax-incentivised incorporation. The dividend tax is one line of attack, another is the restriction of travel and subsistence expenses for contractors working through intermediaries. Both changes are due to take effect from 6 April 2016. On top of those there is a rumour of further tweaking of the IR35 rules to force contractors on to their engager’s payroll where the engagement lasts for a set period – possibly as little as 12 months.      

The Autumn Statement promises to be exciting – but possibly not in a good way for small businesses.    

Replies

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16th Nov 2015 11:46

My prediction

Dividend tax up from 7.5% to 20%

 

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By DJKL
16th Nov 2015 12:40

Well

Tom 7000 wrote:

Dividend tax up from 7.5% to 20%

 

Well I suppose if one was a Chancellor wanting to screw up a chance of re-election for one's party (Maybe has given up on the leadership post the tax credit debacle, but I doubt it)  that might be one way to go; hit the pensioners with unsheltered dividends over the £5k threshold and all these contractors who have difficulty getting contracts if they do not incorporate, and for what? Those who already see the Conservatives as hate figures are hardly going to change their views based on this but all those impacted directly might see JC as a viable option.

IMHO any changes will firmly push the Conservatives into the political centre ground, an increase as proposed would be very counter intuitive. Do you have any reson why you think it might occur?

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16th Nov 2015 11:49

ATED

Also further changes to increase the yield from ATED, which has already way surpassed expectations.

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16th Nov 2015 11:49

Removal of ER on incorporation of a property business. I am sure that will be devastating to millions!

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16th Nov 2015 11:52

no refund of

s455, no matter what the reason...

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By vowlesj
16th Nov 2015 12:02

Reduce the VAT registration threshold

Reducing the VAT registration threshold to be the equivalent of France, ie £10k, would also shake up the finances a bit!   As well as leveling the playing field for small and slightly bigger traders.   

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16th Nov 2015 12:13

Tax on Air

Tax on air. Chip inserted into neck and if don't pay supply cut off.

Would ensure that people pay up!

 

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16th Nov 2015 12:14

He'll

tone down the tax credits so it'll go through House of Lords. Then tinker (possibly ATED) to make the rest up.

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16th Nov 2015 12:29

How about this one?

Charge employer NIC on dividends paid by close companies

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16th Nov 2015 17:10

You don't

work for the Office of Tax Simplification do you?

 

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16th Nov 2015 12:39

CGT on incorporation of property..

would be a disaster for people planning to use this to save their income from property from being taxed at up to 85% and having no funds to make repayments on the mortgages.

So it will probably happen.  After all, they seem determined to ruin private landlords under the guise of being 'fair' and treating interest payments as somehow optional and only subject to tax credit relief, why not go the whole hog!

Of course, it's the tenants who will suffer as landlords have to find the money to pay the tax from somewhere- so raise the rent and don't spend any money on repairs or renewing anything.

Now if only I could get a deposit together and find a mortgage lender that understands my finances I'd be able to stop paying my huge rent and pay half as much for a mortgage on the same size property....

 

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16th Nov 2015 13:15

i thought it was about taking tough

decisions....but as with all parties in government he is going to bottle on the big decisions (see how the pensioners are affected....oh they aren't....enough said)

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By JAADAMS
16th Nov 2015 13:21

Enterprise relief attack - a virtual certainty!

I recently attended a course given by the brilliant Robert Jamieson. He said that someone he knows professionally had told him that she was getting fed up with phone calls from G Osborne's office asking questions about the impact and working of ER... she's a barrister.

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16th Nov 2015 14:21

ER

I have heard a whisper that ER may go altogether or be severely cut back.

The cycle seems to be to:

- introduce a tax relief

- keep increasing it in subsequent budgets

- realise it is too expensive as everyone is making use of it

- abolish it altogether

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16th Nov 2015 14:28

Future Offshore Disclosure Opportunity

I expect there to be details about the new opportunity for making disclosures to HMRC in relation to undeclared offshore taxes. Its likely to be much less attractive than the current Liechtenstein Disclosure Facility (LDF) that ends 31 December eg with no immunity from prosecution for tax evasion and no flexibility around inheritance tax. 

Rebecca Busfield 

Watt Busfield Tax Investigations LLP

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By squay
16th Nov 2015 14:31

Legitimise all businesses by compulsory VAT registration

as they do in Holland. If you are in business then you must be VAT registered. It provides a level playing field for all businesses. Make it illegal for anyone to engage a business and not pay vat so the dodgy businesses could not do "cash" jobs by not charging vat. They could but the engager would be culpable as well and by definiton this would apply to all "private" jobs such as paying someone to paint your house or sort your garden out. VAT on invoices and receipts and the provision of them to made a legal requirement without asking.

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16th Nov 2015 14:57

.

increase to rates of CGT as this is not covered by the triple lock, in particular ER.   Or maybe ditch the whole system and go back to indexation allowances and taxes based on marginal rates of taxes.  Ie just change the whole thing. 

Self employed NI up, again not in the triple lock

Some back-scrabbling over landlords on how the interest computations will be made under the new rules, coupled with some more big bombs.  

My guess on stuffing landlords: ATED on all residential property held in Ltd Co's (ie remove the commercial lettings exemption), or is he going to wait until more have incorporated before doing that?  

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16th Nov 2015 15:16

@squay

As VAT is not a tax on business it doesn't matter what the threshold is for VAT. Yes I do agree that all business should be registered. The only way you would stop cash is to actually stop cash transactions but then people would find other means of sidestepping tax. The reason why 90% sidestep is because we are taxed out of existence and we don't get value for money.

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By Myshkin
16th Nov 2015 17:18

NI

No ceiling on NI contributions at the full rate would fix everything in one fell swoop.

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17th Nov 2015 09:51

How does George keep getting away with it
 

How does george keep getting away with it he is slowly but surely unravelling the fabric of society, and he got re-elected.    

AGE uk extract

An analysis by Age UK found the proportion of over-65s getting help had fallen by a third since 2005-6.

Last year, under 900,000 over-65s got help - one in 10 people in that group - compared with 15% seven years ago.

The review - based on published data - estimated at least 800,000 older people were going without vital help.

This includes council-funded help in the home with daily tasks such as washing, dressing and eating as well as care home places.

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17th Nov 2015 09:59

How does George keep getting away with it (part 2)
340,000 elderly will be denied care in new cuts: Vital help to be restricted to those who need assistance with two or more tasksCharities attacked new criteria announced by the Government last night Age UK said 340,000 would be denied care in 'bleak' future for elderlyDepartment of Health insisted new rules are meant to mirror old ones 

 

Vital help for elderly people will be restricted to only those who need help with two tasks or more, the Government said last night.

Councils have been told to provide home helps and other assistance only if people are unable to complete two or more essential daily tasks.

If they are unable to do only one of the 10 appointed tasks they should receive no help from their council – meaning they would have to pay for care themselves or do without it.

Read more: http://www.dailymail.co.uk/news/article-2805764/340-000-elderly-denied-care-new-cuts-Vital-help-restricted-need-assistance-two-tasks.html#ixzz3rk1Dhyvn 
Follow us: @MailOnline on Twitter | DailyMail on Facebook

And for those who say I am talking out of my elbow, I am not the only one

   http://www.theguardian.com/politics/2015/nov/11/cameron-hypocrisy-cuts-l...

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By shumph
17th Nov 2015 12:33

I wouldn't want it, however scrapping employees & employers NI would stop lots of the planning currently utilised, however what government is going to be the one scrapping the 20% income tax and increasing to the true tax rate of 30% to 50% on earnings.

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