Autumn Financial Statement 2016
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| Chancellor Philip Hammond has
delivered his Autumn Statement 2016, which is the first major review of
government finances since the EU Referendum, and Mr Hammond's first major
statement since taking responsibility for the work of the Treasury in July
2016. As previously speculated, this will be Mr Hammond's only Autumn
Statement as it was confirmed that the government is to move to a single
major fiscal event each year. This means that following the Spring 2017
Budget and Finance Bill, Budgets will be delivered in the Autumn, with the
first one scheduled to take place in Autumn 2017. However, the Office for
Budget Responsibility (OBR) is required by law to produce two forecasts a
year - one of these will remain at the time of the Budget, the other will
fall in the Spring and the government will therefore respond to it with a new
'Spring Statement'. The effect of this new approach is that Finance Bills
will be introduced following the annual Budget in Autumn, with the desired
aim of reaching Royal Assent in the following Spring, before the start of the
new tax year. This change in timetable is designed to help Parliament to
scrutinise tax changes before the start of the tax year where most will take
effect. |
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| Personal allowance and basic rate limit for 2017-18 The
personal allowance for 2017-18 will be increased to £11,500 (£11,000 in
2016-17), and the basic rate limit will be increased to £33,500 (£32,000 in
2016-17). The additional rate threshold will remain at £150,000 in 2017-18.
It was announced that the allowance will rise to £12,500 by the end of
Parliament. Starting rate for savings The band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2017-18. Dates for 'making good' on benefits-in-kind As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include provisions to 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 April 2017. Assets made available without transfer of ownership Existing legislation is to be clarified to ensure 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. Termination payments As announced at Budget 2016, from April 2018 termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs. Following a technical consultation, tax will only be applied to the equivalent of an employee's basic pay if their notice is not worked, making it simpler to apply the new rules. The government will monitor this change and address any further manipulation. The first £30,000 of a termination payment will remain exempt from income tax and National Insurance. Company car tax bands and rates for 2020-21 To provide stronger incentives for the purchase of ultra-low emissions vehicles (ULEVs), new, lower bands will be introduced for the lowest emitting cars. The appropriate percentage for cars emitting greater than 90g CO2/km will rise by 1 percentage point. Cars, vans and fuel benefit charges The
company car fuel benefit charge multiplier will be £22,600 for 2017-18
(rising from £22,200 in 2016-17). Life insurance policies Finance Bill 2017 will contain provisions regarding the disproportionate tax charges that arise in certain circumstances from life insurance policy part-surrenders and part-assignments. This will allow applications to be made to HMRC to have the charge recalculated on a 'just and reasonable' basis. The changes will take effect from 6 April 2017 and are designed to lead to fairer outcomes for policyholders. NS&I Investment Bond From Spring 2017, National Savings and Investments (NS&I), the government-backed investment organisation, will offer a new three-year Investment Bond with an indicative rate of 2.2%. The bond will offer the flexibility for investors to save between £100 and £3,000 and will be available to those aged 16 or over. Personal Portfolio Bonds As announced at Budget 2016 and following a period of consultation, the government will legislate in Finance Bill 2017 to take 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 of Finance Bill 2017. ISA, Junior ISA and Child Trust Fund investment limits The
annual subscription limit for Junior ISAs and Child Trust Funds are to rise
in line with the Consumer Prices Index (CPI) to £4,128 from 6 April 2017. National Living Wage and National Minimum Wage increases From
April 2017, the National Living Wage (NLW) for those aged 25 and over will
increase from £7.20 per hour to £7.50 per hour. The National Minimum Wage
(NMW) will also increase from April 2017 as follows: Consultation on reducing money purchase annual allowance The
pension flexibilities introduced in April 2015 gave savers the ability to
access their pension savings flexibly, as best suits their needs. Once a person
has accessed pension savings flexibly, if they wish to make any further
contributions to a defined contribution pension, tax-relieved contributions
are restricted to a special money purchase annual allowance (MPAA). Foreign pensions The tax treatment of foreign pensions is to be more closely aligned with the UK's domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones. The government will also close specialist pension schemes for those employed abroad ('section 615' schemes) to new saving, extend from five to ten years the taxing rights over recently emigrated non-UK residents' foreign lump sum payments from funds that have had UK tax relief, align the tax treatment of funds transferred between registered pension schemes, and update the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes. Cracking down on tax avoiders and those who help them A new penalty is to be introduced for those helping someone else to use a tax avoidance scheme. Significant penalties may be imposed where HMRC successfully defeat avoidance schemes. The new penalty will ensure that those who help tax avoiders participate in avoidance schemes also face the consequences. In addition, tax avoiders will not be able to claim as a defence against penalties that relying on non-independent tax advice is taking reasonable care. The taxation of different forms of remuneration Employers
can choose to remunerate their employees in a range of different ways in
addition to a cash salary. The tax system currently treats these different
forms of remuneration inconsistently and sometimes more generously. The
government will therefore consider how the system could be made fairer
between workers carrying out the same work under different arrangements and
will look specifically at how the taxation of benefits in kind and expenses
could be made fairer and more coherent. Proposed changes in this area are as
follows: Legal support From April 2017, all employees called to give evidence in court will no longer need to pay tax on legal support from their employer. This will help support all employees and ensure fairness in the tax system, as currently only those requiring legal support because of allegations against them can use the tax relief. Non-domiciled individuals As
previously announced, from April 2017, non-domiciled individuals will be
deemed UK-domiciled for tax purposes if they have been UK resident for 15 of
the past 20 years, or if they were born in the UK with a UK domicile of
origin. Non-domiciled individuals who have a non-UK resident trust set up
before they become deemed-domiciled in the UK will not be taxed on income and
gains arising outside the UK and retained in the trust. Inheritance tax reliefs From Royal Assent of Finance Bill 2017, inheritance tax relief for donations to political parties will be extended to parties with representatives in the devolved legislatures, as well as parties that have acquired representatives through by-elections. This measure is designed to ensure consistent and fair treatment for all national political parties with elected representatives. Social Investment Tax Relief (SITR) From 6 April 2017, the amount of investment social enterprises aged up to 7 years old can raise through SITR will increase to £1.5 million. Other changes will be made to ensure that the scheme is well targeted. Certain activities, including asset leasing and on-lending, will be excluded. Investment in nursing homes and residential care homes will be excluded initially, however the government intends to introduce an accreditation system to allow such investment to qualify for SITR in the future. The limit on full-time equivalent employees will be reduced to 250. The government will undertake a review of SITR within two years of its enlargement. Offshore funds UK taxpayers invested in offshore reporting funds pay tax on their share of a fund's reportable income, and capital gains tax (CGT) on any gain on disposal of their shares or units. The government will legislate to ensure that performance fees incurred by such funds, and which are calculated by reference to any increase in the fund's value, are not deductible against reportable income from April 2017 and instead reduce any tax payable on disposal of gains. This equalises the tax treatment between onshore and offshore funds. Reduction in Universal Credit taper Under the Universal Credit system, as a person's income increases, their benefit payments are gradually reduced. The taper rate calculates the reduction in benefits as a person's salary increases. Currently, for every £1 earned after tax above an income threshold, a person receiving Universal Credit has their benefit award reduced by 65p and keeps 35p. From April 2017, the taper will be lowered to 63p in the pound, so the claimant will keep 37p for every £1 earned over the income threshold. National Insurance Contributions As recommended by the Office of
Tax Simplification (OTS), the Class 1 secondary (employer) NIC threshold and
the primary (employee) threshold will be aligned from April 2017, meaning
that both employees and employers will start paying NICs on weekly earnings
above £157. |
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| Simplifying PSAs As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include provisions to simplify the process for applying for and agreeing the Pay as You Earn Settlement Agreement (PSA) process. Broadly, a PSA allows an employer to make one annual payment to cover all the tax and National Insurance due on small or irregular taxable expenses or benefits for employees. Further details will be published in due course. The changes will have effect in relation to agreements for the 2018-2019 tax year and subsequent tax years. Capital allowances: first-year allowance for electric charge-points From
23 November 2016, businesses will be able to claim a 100% first-year
allowance (FYA) in relation to qualifying expenditure incurred on the acquisition
of new and unused electric charge-points. The allowance will be available
until 31 March 2019 for corporation tax purposes and 5 April 2019 for income
tax purposes. Employee shareholder status The income tax reliefs and capital gains tax exemption will no longer be available with effect from 1 December 2016 on any shares acquired in consideration of an employee shareholder agreement entered into on or after that date. Any individual who has received independent advice regarding entering into an employee shareholder agreement before the 23 November 2016 will have the opportunity to do so before 1 December (but not later) and still receive the income and CGT tax advantages that were known to be available at the time the individual received the advice. The effective date is to be the 2 December where independent legal advice is received on 23 November prior to 1.30pm. Corporation tax reliefs for the employer company are not affected by this change. New tax allowance for property and trading income As announced at Budget 2016, the government will create two new income tax allowances of £1,000 each, for trading and property income. Individuals with trading income or property income below the level of the allowance will no longer need to declare or pay tax on that income. The trading income allowance will now also apply to certain miscellaneous income from providing assets or services. Expanding the museums and galleries tax relief The new museums and galleries tax relief is to be expanded to include permanent exhibitions. The new relief, which starts in April 2017, was originally only intended to be available for temporary and touring exhibitions. The rates of relief will be set at 20% for non-touring exhibitions and 25% for touring exhibitions. The relief will be capped at £500,000 of qualifying expenditure per exhibition. The relief will expire in April 2022 if not renewed. In 2020, the government will review the tax relief and set out plans beyond 2022. Tax deductibility of corporate interest expense Following recent consultation, the government will introduce rules that limit the tax deductions that large groups can claim for their UK interest expenses from April 2017. These rules will limit deductions where a group has net interest expenses of more than £2 million, net interest expenses exceed 30% of UK taxable earnings and the group's net interest to earnings ratio in the UK exceeds that of the worldwide group. The provisions proposed to protect investment in public benefit infrastructure are also to be widened. Banking and insurance groups will be subject to the rules in the same way as groups in other industry sectors. Reform of loss relief Following
consultation, the government will legislate for reforms announced at Budget
2016 that will restrict the amount of profit that can be offset by
carried-forward losses to 50% from April 2017, while allowing greater
flexibility over the types of profit that can be relieved by losses incurred
after that date. The restriction will be subject to a £5 million allowance
for each standalone company or group. Bringing non-resident companies' UK income into the corporation tax regime The government is considering bringing all non-resident companies receiving taxable income from the UK into the corporation tax regime. At Budget 2017, the government will consult on the case and options for implementing this change. The government wants to deliver equal tax treatment to ensure that all companies are subject to the rules which apply generally for the purposes of corporation tax, including the limitation of corporate interest expense deductibility and loss relief rules. Substantial Shareholding Exemption (SSE) reform Following consultation, the government will make changes to simplify the rules, remove the investing requirement within the SSE and provide a more comprehensive exemption for companies owned by qualifying institutional investors. The changes will take effect from April 2017. Authorised investment funds: dividend distributions to corporate investors The rules on the taxation of dividend distributions to corporate investors are to be modernised in a way which allows exempt investors, such as pension funds, to obtain credit for tax paid by authorised investment funds. Proposals and draft legislation will be published in early 2017. Northern Ireland corporation tax 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. Corporation tax deduction for contributions to grassroots sport 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. Patent Box rules The government will legislate in Finance Bill 2017 to add specific provisions to the Patent Box rules, covering the case where Research and Development (R&D) is undertaken collaboratively by two 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 on or after 1 April 2017. Authorised contractual schemes: reducing tax complexity for investors in co-ownership authorised contractual schemes As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include legislation (to be supported by secondary legislation) to clarify the rules on capital allowances, chargeable gains and investments by co-ownership authorised contractual schemes (CoACS) in offshore funds, as well as information requirements on the operators of CoACS. Off-payroll working rules Following consultation, the government will reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker's company. This reform aims to tackle high levels of non-compliance with the current rules and means that those working in a similar way to employees in the public sector will pay the same taxes as employees. In response to feedback during the consultation, the 5% tax-free allowance will be removed for those working in the public sector, reflecting the fact that workers no longer bear the administrative burden of deciding whether the rules apply. Bank levy reform As announced at Summer Budget 2015, the bank levy charge will be restricted to UK balance sheet liabilities from 1 January 2021. Following consultation, the government confirms that there will be an exemption for certain UK liabilities relating to the funding of non-UK companies and an exemption for UK liabilities relating to the funding of non-UK branches. Details will be set out in the government's response to the consultation, with the intention of legislating in Finance Bill 2017-18. The government will continue to consider the balance between revenue and competitiveness with regard to bank taxation, taking into account the implications of the UK leaving the EU. Hybrids and other mismatches The government will legislate in Finance Bill 2017 to make minor changes to ensure that the hybrid and other mismatches legislation works as intended. The changes will have effect from 1 January 2017. Annual Tax on Enveloped Dwellings The annual charges for the Annual Tax on Enveloped Dwellings (ATED) will rise in line with inflation for the 2017-2018 chargeable period. Clarification of tax treatment for partnerships 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 shortly for technical consultation. Tax-advantaged venture capital schemes The
rules for the tax-advantaged venture capital schemes (Enterprise Investment
Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital
Trusts (VCTs)) are being amended to: Gift Aid digital As announced at Budget 2016, intermediaries are to be given a greater role in administering Gift Aid, with the aim of simplifying the Gift Aid process for donors making digital donations. |
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| Tackling aggressive abuse of the VAT Flat Rate Scheme A
new 16.5% VAT flat rate for businesses with limited costs will take effect
from 1 April 2017. Updating the VAT Avoidance Disclosure Regime As announced at Budget 2016 and following consultation, legislation will be introduced in Finance Bill 2017 to 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. Penalty for participating in VAT fraud As announced at Budget 2016, 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 of the Finance Bill 2017. Power to examine and take account of goods at any place The government will introduce legislation in Finance Bill 2017 to 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 of the Finance Bill 2017. Retail Export Scheme The government is to consult on VAT grouping and provide funding with a view to digitising fully the Retail Export Scheme to reduce the administrative burden to travellers. Tackling exploitation of the VAT relief on adapted cars for wheelchair users The government is to clarify the application of the VAT zero-rating for adapted motor vehicles to stop the abuse of this legislation, while continuing to provide help for disabled wheelchair users. |
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| Landfill tax As announced at Budget 2016, the
definition of a taxable disposal for landfill tax purposes is to be amended
in order to bring greater clarity and certainty. This will come into effect
after Royal Assent of Finance Bill 2017, on a day to be appointed by Treasury
Order Insurance Premium Tax increase Insurance Premium Tax (IPT) will increase from 10% to 12% from 1 June 2017. IPT is a tax on insurers and it is up to them whether and how to pass on costs to customers. Air Passenger Duty (APD): regional review A summary of responses is to be published shortly relating to a recent consultation on how the government can support regional airports in England from the potential effects of APD devolution. Given the strong interaction with EU law, the government does not intend to take specific measures now, but intends to review this area again after the UK has exited from the EU. Freeplays in Remote Gaming Duty Following the consultation announced at Budget 2016, the government will legislate in Finance Bill 2017 to bring the tax treatment of freeplays for remote gaming more in line with the treatment for free bets under General Betting Duty. The changes will take effect for accounting periods beginning on or after 1 August 2017. Tobacco Illicit Trade Protocol: licensing of tobacco machinery and the supply chain Following consultation the government will legislate in Finance Bill 2017 to introduce a licensing scheme for tobacco machinery to allow officials to quickly determine whether machines are being held legally. Applications for licences will be accepted from January 2018 and the scheme will come into force on 1 April 2018. Implementation of the Fulfilment House Due Diligence Scheme As announced at Budget 2016 and following a consultation on the scope and design of the scheme, the government will legislate in Finance Bill 2017 to 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. Soft Drinks Industry Levy Draft legislation for the Soft Drinks Industry Levy will be published on 5 December 2016. |
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| Tax evasion and compliance Emerging insolvency risk HMRC intend to develop their ability to identify emerging insolvency risk, using external analytical expertise. HMRC will use this information to tailor their debt collection activity, improve customer service and provide support to struggling businesses. Offshore tax evasion A new legal requirement is to be introduced to correct a past failure to pay UK tax on offshore interests within a defined period of time, with new sanctions for those who fail to do so. Requirement to register offshore structures The
government intends to consult on a new legal requirement for intermediaries
arranging complex structures for clients holding money offshore to notify
HMRC of the structures and the related client lists. Tackling the hidden economy Following consultation, the government will consider the case for making access to licences or services for businesses conditional on them being registered for tax. It will also develop proposals to strengthen sanctions for those who repeatedly and deliberately participate in the hidden economy. Further details will be announced in Budget 2017. Tax administration Making Tax Digital In January 2017, the government will publish its response to the Making Tax Digital consultations and provisions to implement the previously announced changes. Tax Enquiries: Closure Rules The government will legislate to provide HMRC and customers earlier certainty on individual matters in large, high risk and complex tax enquiries. Tax Avoidance Disguised remuneration schemes Budget 2016 announced changes to tackle use of disguised remuneration schemes by employers and employees. The government will now extend the scope of these changes to tackle the use of disguised remuneration avoidance schemes by the self-employed. Further, the government will take steps to make it less attractive for employers to use disguised remuneration avoidance schemes, by denying tax relief for an employer's contributions to disguised remuneration schemes unless tax and National Insurance are paid within a specified period. HMRC counter avoidance The government is investing further in HMRC to increase its activity on countering avoidance and taking cases forward for litigation, which is expected to bring forward over £450 million in scored revenue by 2021-22. |
