Here you'll find links to articles that give KPMG's take on the measures announced in the Autumn Statement 2016.
For an in-depth look at the Autumn Statement see our overviews below:
The good news is that there is no news, or at least very little news. In his Autumn Statement on 23 November 2016, the Chancellor of the Exchequer Philip Hammond, announced a “steady as it goes approach” to business taxation. Whilst the headline announcements from the Autumn Statement include additional billions for economic infrastructure investments and a confirmation that there are no plans to introduce further welfare cuts over the life of the Parliament, there was little unexpected change from a tax perspective.
The Chancellor has reflected upon the worsening economic forecasts and the uncertainties that lie ahead, by limiting the changes to the tax system to provide business with a period of stability.
Over the summer there were a large number of tax consultations over a range of issues from interest deductibility, use of corporate losses, changes to the individual non UK domiciled regime and additional penalties for enablers of tax avoidance. In the main, these are going ahead although very little detail was released on 23 November 2016. We will have to wait until the draft Finance Bill clauses are released in early December.
Another of the summer consultations was a review of the existing substantial shareholding exemption which enables trading groups of companies to dispose of trading subsidiaries without a taxable gain. This relief will be widened from April 2017, removing the restrictions applying to the investor company and providing additional reliefs for companies owned by qualifying institutional investors.
There will be a consultation on subjecting non-resident companies receiving taxable income to corporation tax rather than income tax at present. This will mainly impact non-resident corporate landlords, and bring them within the new interest restrictions and loss relief rules.
The largest revenue raising measure is the increase in insurance premium tax to 12% from 10% in June 2017 – this effectively pays for the announced freeze in fuel duty. The Chancellor hinted that there may be further rises in the future for insurance premium tax by comparing its currently low rate with the 20% VAT rate.
Employees who benefit from salary sacrifice arrangements could be liable to additional income tax and national insurance contributions, although pensions, child care, workplace nurseries, low emission cars and cycle to work schemes will be exempt.
The public sector will have an increased tax burden arising from the use of contractors, as the obligations to operate PAYE will move from the contractors personal company to the public sector entity. The existing disguised remuneration anti-avoidance rules will also be extended to include self-employed contractors.
The Chancellor confirmed that the personal allowance for individuals would be raised to £12,500 as well as raising the higher rate threshold to £50,000 by 2020. The national living wage will be increased to £7.50 from April 2017.
Looking forward, a key concern of the Chancellor, mentioned several times in his speech, was to ensure that there is a wide tax base for the economy. This will be reflected in a continued attack against tax avoidance and evasion; but also in future reviews considering how entrepreneurs, small businesses and contractors should be taxed given the changing nature of work and the number of businesses which are incorporating. This has been a hot potato over a number of years, which previous Governments have looked at and either shied away from or introduced partial measures such as IR35. Any changes will need to take into account national insurance contributions as well as income tax.
A forthcoming change for tax compliance is the making tax digital programme which will involve more frequent tax reporting. The Government will respond to their summer consultation in January 2017.
Lastly, the Chancellor announced a reversion to a policy adopted by Kenneth Clarke when he was the Chancellor in the 1990s. In the future, the Budget will be held in Autumn, with the Government commenting in the Spring on the Office of Budget Responsibility forecasts. This will provide additional time to consult and comment upon Budget measures, before changes are implemented in the April following. However, will the Chancellor be able to restrain himself from announcing tax changes in March 2020, particularly popular ones, just before a General Election?
Substantial Shareholding Exemption (SSE) Reform
Investing company requirements are to be removed, and a more
comprehensive exemption for companies owned by qualifying institutional
Changes to the VAT Flat Rate Scheme announced
A new rate of 16.5% will apply for “limited cost” traders that use the Flat
Rate Scheme, from 1 April 2017.
New Budget timetable
The Chancellor announced that the Spring 2017 Budget will be followed by
an Autumn Budget, marking a switch to a new annual Budget timetable.
Taxation of non-resident companies
The Government is to consult at Budget 2017 on bringing non-resident companies subject to income tax within the corporation tax regime.
Government to remove salary sacrifice advantages
Following consultation, the tax and NIC advantages of salary sacrifice schemes will be removed from April 2017, with limited exceptions.
Insurance Premium Tax - Increase in the standard rate to 12%
This increase to 12% is the third increase in the standard IPT rate in under two years.
Strengthening tax avoidance sanctions and deterrents
The Government has confirmed that it intends to bring forward a new penalty regime targeted at enablers of defeated tax avoidance schemes.