Full details of the tax changes are summarised below.
The Statement was not as austere as we were led to believe in the run up, with the big surprise being the complete u-turn on tax credits. There is additional funding for the NHS announced pre statement, funding for the building of new homes and protection of the police budget (although this debatable as part of the funding is at Local Authority level). HMRC is to implement 18% of efficiency cuts and the Department of Business 17%, one
element of which is to reduce Innovate UK grant funding and convert to Innovate loans.
Economic growth forecasts show increases for the next five years as follows: 2.4% for 2015 & 2016 increasing to 2.5% in 2017 and falling back to 2.4% in 2019. The Chancellor announcing that the four year public spending plan forecast would deliver a surplus in 2020 as well as debt continuing to fall, based on the OBR forecasts. It appears that the Chancellor is relying on increased tax revenues from growth and employment, as well as falling debt interest to generate the surplus, but the growth margin is not large.
A surprisingly low-key with no shock announcements other than what did not take place, with some tax changes, as summarised below.
Personal tax – Income Tax and National Insurance contributions
Employment intermediaries and tax relief for travel and subsistence
– As confirmed at the Summer Budget 2015, the government will legislate to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company. This change will take effect from 6 April 2016 and we will provide more details of these changes in due course.
Extending averaging for farmers
– Following the consultation announced at the March Budget 2015, self-employed farmers will have the option to extend the profits averaging period from 2 years to 5 years as of April 2016.
Venture capital schemes: changes to eligible investments
– With effect from 30 November 2015, the provision of reserve energy generating capacity and the generation of renewable energy benefiting from other government support will no longer be qualifying activities for EIS, SEIS, VCT.
Employee share schemes: simplification of the rules
– Measures will introduce a number of technical changes to streamline and simplify aspects of the tax rules for tax-advantaged (EMI, CSOPS) and non-tax-advantaged employee share schemes, including putting beyond doubt the tax treatment for internationally mobile employees.
Salary sacrifice– The government is concerned about the growth of salary sacrifice arrangements and is considering what action, if any, is necessary and therefore will undertake a review to decide if any action is to be taken.
Taxation on savings and pensions
Automatic enrolment minimum contribution rates
– A delay for the next two scheduled increases in automatic enrolment minimum contribution rates by 6 months each, to align these changes with the start of the self-assessment tax year, which will aid employers’ cash-flow.
Secondary market for annuities– Removal of the barriers to create a secondary market for annuities, allowing individuals to sell their annuity income stream.
–Increase in the basic State Pension under the triple lock provisions for 2016-17, meaning a full basic State Pension will rise to £119.30 a week, an increase of £3.35.
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. This relief only benefits individuals with low total income (under £15,600 per year).
ISAs: annual subscription limits– No changes to the ISA limit of £15,240 and the Junior ISA of £4,080.
ISAs: qualifying investments
– The list of qualifying investments for the new Innovative Finance ISA will be extended in autumn 2016 to include debt securities offered via crowdfunding platforms. Currently, equity crowdfunding investments are non-qualifying, but the government wishes to continue to consult on the point.
Inheritance tax and undrawn pension funds in drawdown pensions
– Legislation to be introduced 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. This will be backdated to apply to deaths on or after 6 April 2011.
Deeds of variation– Following the review announced at the March Budget 2015 as a result of the news that the Milibands had used a deed of variation in respect of their late father’s estate, no measures/changes will introduced, but their use will continue to be monitored.
– The introduction of an apprenticeship levy in April 2017 at the rate of 0.5% of an employer’s salary bill collected via PAYE. Each employer receiving an allowance of £15,000 to offset against their levy payment. This should mean that the levy should only be paid by large businesses with a salary cost in excess of £3 million.
Company car tax diesel supplement
– The 3% differential between the benefit in kind charge on diesel cars compared to petrol cars will be retained until April 2021, continuing to make a diesel car more expensive.
Small Business Rate Relief (SBRR) – The government will extend the doubling of SBRR for a further year from 1 April 2016. However, there was no announcement on business rates reform generally.
– Grant funding will be cut with the introduction of “new finance products” (loans) to support companies to innovate, following best practice in European countries. These will replace some existing Innovate UK grants.
Enterprise Zones/Science/Centres of Excellence – 26 new enterprise zones previously announced which provide tax breaks and support for businesses who set up in these areas will be progressed. This will protect £4.7 billion of science resource funding and capital expenditure projects, as well as other capital projects such as the creation of the Cyber Innovation Centre in Cheltenham.
Stamp duty land tax
– 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% points above the current SDLT rates. The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to certain corporates or funds making significant investments in residential property given the role of these investors in supporting the government’s housing agenda.
Stamp Duty Land Tax: changes to the filing and payment process
– Consultation 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. The changes will come into effect in 2017-18.
Annual Tax on Enveloped Dwellings (ATED) and 15% rate of Stamp Duty Land Tax –An extension of the reliefs available from ATED and the 15% higher rate of SDLT to equity release schemes (home reversion plans), property development activities and properties occupied by employees from 1 April 2016.
Capital Gains Tax
Capital Gains Tax (CGT) for non-UK residents disposing of UK residential property
– Amendments are being made to how the CGT computations required by non-UK residents on the disposal of UK residential property are calculated. This is to tidy up the rules introduced from 6 April 2015, where non-UK residents pay UK CGT on the disposal of a UK residential property and report the disposal within 30 days.
Capital Gains Tax Payment
– 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 because the property qualifies for Private Residence Relief.
Avoidance and Evasion
New criminal offence for tax evasion– As expected, a new criminal offence that removes the need to prove intent for the most serious cases of failing to declare offshore income and gains will be introduced. See our new item on the subject.
New civil penalties for offshore tax evaders
– Increase civil penalties for deliberate offshore tax evasion, including the introduction of a new penalty linked to the value of the asset on which tax was evaded and increased public naming of tax evaders. There will also be the introduction of civil penalties for those who enable offshore tax evasion, including public naming of those who have enabled the evasion.
Serial avoiders –
Tough measures to be introduced for those who persistently enter into tax avoidance schemes that are defeated by HMRC. These include a special reporting requirement and a surcharge on those whose latest return is inaccurate due to use of a defeated scheme, the names of such avoiders being published and, for those who persistently abuse reliefs, restrictions on them accessing certain tax reliefs for a period.
General Anti-Abuse Rule (GAAR)
– The introduction of a new penalty of 60% of tax due to be charged in all cases successfully tackled by the GAAR.
Specific Targeted Anti Avoidance Measures (TAAR)
– Measures introduced today to block two avoidance schemes involving capital allowances and leasing. Amendments will also be made to the Transactions in Securities rules and introduce a Targeted Anti-Avoidance Rule in order to prevent opportunities for income to be converted to capital in order to gain a tax advantage.
– Measures to be introduced to take action against taxpayers who have used or continue to use disguised remuneration schemes.
Capital Gains Tax entrepreneurs’ relief: contrived structures– Consideration to be given to bringing forward legislation to amend the changes made by Finance Act 2015 to entrepreneurs’ relief, in order to ensure that the relief is only available on genuine commercial transactions.
Investment of £1.3 billion to transform HMRC into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their new digital tax account to be introduced which should reduce errors in record keeping. Plans for the digital tax reporting system will be announced shortly and a consultation commenced in 2016.
In addition, a new, simpler process for paying tax will be introduced for those taxpayers in self-assessment who have simple tax affairs where HMRC already holds all the data it
needs to calculate the tax liability. Taxpayers will be sent a calculation which will be a legally enforceable demand for payment, and taxpayers will be able to challenge and appeal these calculations. This process will come into effect in the 2016-17 tax year.
Review of employment status
Following a review by the Office of Tax Simplification, the Government is to look at employment status and implement a number of changes.
Please do not hesitate to contact us if you wish to discuss anything covered in the newsletter or any tax, accounting or business related matter.
25 November 2015