The Chancellor’s Autumn Statement
Current Issues | Tax | 23rd November 2016
The Chancellor announced very few tax proposals, although referring to some reliefs from business rates (which are subject to the latest revaluation with effect from April 2017) and that the scheduled road fuel duty rise would be cancelled. However, much more was revealed in papers made available immediately after he spoke, and will be in draft clauses to be published on 5 December..
The clauses dealing with the changes to the taxation of non-domiciliaries in particular were eagerly awaited.
Income tax personal allowance
The Chancellor re-affirmed the government’s intention to increase the personal allowances to £15,000 by April 2020 and the basic rate threshold to £50,000, saying that the personal allowance for 2017/18 will be £11,500.
National insurance contributions (NIC)
The employee and employer NIC thresholds are to be aligned from April 2017 at £157 a week.
Corporation tax rates
The Chancellor also confirmed the intention to lower the corporation tax rate to 17% by 2020.
Annual Tax on Enveloped Dwellings (ATED)
The annual ATED charges will rise in line with inflation for 2017/18.
Electric charge-point equipment – capital allowances
A 100% first-year allowance (FYA) will apply to expenditure incurred on electric charge-point equipment. It will apply to expenditure from 23 November 2016 to 31 March 2019 [5 April for income tax purposes].
The measure complements the 100% FYA for cars with low carbon dioxide (CO2) emissions, and those cars powered by natural gas, biogas and hydrogen.
No income tax reliefs will be available on the receipt or buy-back of shares issued to an employee under an employee shareholder agreement made after 30 November 2016. The capital gains tax exemption relating to shares received as consideration for entering into an employee shareholder agreement is also removed for such shares. Shares received under agreements made before that date are not affected. Corporation Tax reliefs for the employer company are not affected.
PAYE Settlement Agreements (PSAs)
As announced at Budget 2016 and following consultation, the Finance Bill 2017 will simplify the process for applying for and agreeing PSAs for 2018/19 and subsequent tax years.
Meeting the tax on non-payrolled benefits
As announced at Budget 2016 and following consultation, the Finance Bill 2017 will ensure an employee who wants to ‘make good’, on a non-payrolled benefit in kind will have to make the payment to their employer by 6 July in the following tax year. ‘Making good’ is where the employee makes a payment in return for the benefit in kind they receive. This reduces its taxable value. This will have effect from 6 April 2017.
Following a consultation, the Finance Bill 2017 will remove the tax and NIC advantages of most benefits funded by salary sacrifice. The exceptions will be pension contributions, child care, cycle to work schemes and ultra low emission vehicles. The new regime will apply from 6 April 2017 save that for arrangements in place before April 2017 the start will be delayed to April 2018 and for arrangements concerning cars, accommodation and school fees April 2021.
Short-term use of business assets
The Finance Bill 2017 will clarify existing legislation so that employees will only be taxed on business assets for the period that the asset is made available for their private use. This will take effect from 6 April 2017.
Life insurance policies – chargeable events
As announced at Budget 2016 and following consultation, the Finance Bill 2017 will address the disproportionate tax charges that arise in certain circumstances from life insurance policy part-surrenders and part-assignments to allow applications to be made to HM Revenue and Customs (HMRC) to have the charge recalculated on a just and reasonable basis. This will lead to fairer outcomes for policyholders. The changes will take effect from 6 April 2017.
Following consultation, the government will legislate to clarify and improve certain aspects of partnership taxation to ensure profit allocations to partners are fairly calculated for tax purposes. Draft legislation will be published for technical consultation.
Incorporation by the self-employed
There is to be a consultation on the tax cost of the self-employed choosing to incorporate.
Personal Portfolio Bonds
As announced at Budget 2016 and following consultation, the Finance Bill 2017 will give a power to amend by regulations the list of assets that life insurance policyholders can invest in without triggering tax anti-avoidance rules. The changes will take effect on Royal Assent to Finance Bill 2017.
The Finance Bill 2017 will add specific provisions to the Patent Box rules, covering the case where Research and Development (R&D) is undertaken collaboratively by 2 or more companies under a ‘cost sharing arrangement’. The provisions ensure that such companies are neither penalised nor able to gain an advantage under these rules by organising their R&D in this way. This will have effect for accounting periods commencing after 31 March 2017.
Tax-advantaged venture capital schemes
In Finance Bill 2017 the government will amend the requirements for the tax-advantaged venture capital schemes – the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs) to:
- clarify the EIS and SEIS rules for share conversion rights, for shares issued after 4 December 2016
- provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures to align with EIS provisions, for investments made after 5 April 2017
- introduce a power to enable VCT regulations to be made in relation to certain shares for share exchanges to provide greater certainty to VCTs
- consult on options to streamline and prioritise the advance assurance service.
The government will not be introducing flexibility for replacement capital within the tax-advantaged venture capital schemes at this time, and will review this over the longer term.
The government will amend the Northern Ireland Corporation Tax regime in Finance Bill 2017 to give all small and medium sized enterprises (SMEs) trading in Northern Ireland the potential to benefit. Other amendments will minimise the risk of abuse and ensure the regime is prepared for commencement if the Northern Ireland Executive demonstrates its finances are on a sustainable footing.
Contributions to Grassroots Sports
As announced at Autumn Statement 2015 and following consultation, in Finance Bill 2017 the government will expand the circumstances in which companies can get Corporation Tax deductions for contributions to grassroots sports from 1 April 2017.
Co-ownership authorised contractual schemes (CoACS)
As announced at Budget 2016 and following consultation, the Finance Bill 2017 and secondary legislation will clarify the rules on capital allowances, chargeable gains and investments by CoACS in offshore funds, as well as information requirements on the operators of CoACS.
VAT Flat rate schemes
The government is ‘tackling aggressive abuse’ of the flat-rate scheme. From April 2017 it is to confine use of the scheme to ‘limited cost traders’, a term to be defined in new legislation.
Updating the VAT Avoidance Disclosure Regime
As announced at Budget 2016 and following consultation, the Finance Bill 2017 will strengthen the regime for disclosure of avoidance of indirect tax. Provision will be made to make scheme promoters primarily responsible for disclosing schemes to HMRC and the scope of the regime will be extended to include all indirect taxes. This will have effect from 1 September 2017.
A penalty for participating in VAT fraud
As announced at Budget 2016 and following consultation, the Finance Bill 2017 will introduce a new and more effective penalty for participating in VAT fraud. It will be applied to businesses and company officers when they knew or should have known that their transactions were connected with VAT fraud. The penalty will improve the application of penalties to those facilitating orchestrated VAT fraud. The new penalty will be a fixed rate penalty of 30% for participants in VAT fraud. This will be implemented following Royal Assent to the Finance Bill 2017.
VAT Fulfilment House Due Diligence Scheme
As announced at Budget 2016 and following a consultation on the scope and design of the scheme, the Finance Bill 2017 will introduce a new Fulfilment House Due Diligence Scheme in 2018. This will ensure that fulfilment houses play their part in tackling VAT abuse by some overseas businesses selling goods via online marketplaces. The scheme will open for registration in April 2018.
Power to examine and take account of goods at any place
The Finance Bill 2017 will extend the current customs and excise powers of inspection. This will amend the Customs and Excise Management Act 1979 and enable officers to examine goods away from approved premises such as airports and ports, to search goods liable for forfeiture and open or unpack any container. This will take effect from Royal Assent to the Finance Bill 2017.
ISAs and CTFs
From 6 April 2017 the annual subscription limit for Junior ISAs and Child Trust Funds will be uprated in line with the Consumer Prices Index (CPI) to £4,128, alongside the ISA subscription limit increase from £15,240 to £20,000, which was previously announced at Budget 2016.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to the above. If you would like advice or further information, please speak to your usual Shipleys contact.