Autumn Statement 2016

Building for the future

The Chancellor has delivered his first Autumn Statement to Parliament. Our specialists give us their views of the key measures and outcomes to understand the impact on you and your business. #AutumnStatement


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Our analysis

Business tax

Corporation tax rate - The main rate of corporation tax will be cut to 17% by 2020

Business tax road map - The government recommitted to the business road map as published at Budget 2016

Interest deductibility - New rules will be introduced from April 2017 to limit the tax deductions that groups can claim for UK interest expenses

Loss relief - Legislation will be introduced to restrict the use of carried-forward losses to 50% of profits in excess of £5m. The new rules apply from 1 April 2017. Special rules continue to apply for banks

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. A consultation will be published on the case and options for implementing this change

Substantial shareholder exemption (SSE) - From April 2017, changes will be made to simplify the rules, remove the requirement for the investing company to be a trading company or a member of a trading group, and provide a more comprehensive exemption for companies owned by qualifying institutional investors

Research & Development (R&D) - The government will review the tax environment for R&D to look at ways to build on the introduction of the ‘above the line’ R&D tax credit to make the UK an even more competitive place to do R&D.

Employee Shareholder Status (ESS) - The income tax and CGT reliefs on shares issued to an employee under an ESS agreement made on or after 1 December 2016 will be withdrawn. Tax relief in respect of shares issued under ESS agreements made before that date is not affected

Taxation of different form of remuneration:

Salary sacrifice – From April 2017 the tax and employer National Insurance advantages of salary sacrifice schemes will be removed so that the salary sacrificed is subject to the same tax as cash income. There are exemptions including arrangements relating to pensions, childcare, Cycle to Work and ultra-low emission cars. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021

Valuation of benefits in kind – The government will consider how benefits in kind are valued for tax purposes, publishing a consultation on employer-provided living accommodation and a call for evidence on the valuation of all other benefits in kind at Budget 2017

Employee business expenses – The government will publish a call for evidence at Budget 2017 on the use of the income tax relief for employees’ business expenses, including those that are not reimbursed by their employer

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Personal tax

Personal allowance and higher rate threshold - The income tax personal allowance (PA) will rise to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament. In April 2017, the personal allowance will rise to £11,500 and the higher rate threshold to £45,000. Once the PA reaches £12,500 it will increase in line with inflation

National Insurance thresholds –The employer (secondary) NI threshold and the employee (primary) NI threshold will be aligned from April 2017.  Both employees and employers will start paying NI on weekly earnings above £157.  Class 2 NICs will be abolished from April 2018

Non-domiciled individuals - There are no new announcements on non-doms.  The changes proposed initially in the 2015 Summer Budget and in further consultations will be introduced from 5 April 2017.  Further detail is likely to be included in the draft Finance Bill, expected to be published on 5 December 2016

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

ISA limit - This will increase from £15,240 to £20,000 from April 2017

Pensions money purchase annual allowance - This will be reduced to £4,000 from April 2017

Foreign pensions - The tax treatment of foreign pensions will be changed, bringing foreign pensions and lump sums fully into tax for UK residents, in the same way UK pension's are taxed.  A number of other changes to specialist foreign pensions and situations were also announced.

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Avoidance and evasion provisions

Disguised remuneration - The Budget 2016 amendments will be extended to tackle the use of disguised remuneration schemes by the self-employed. Also new rules will apply to deny tax relief for employer's contributions to such schemes unless tax and National Insurance are paid within a specific time period

Strengthening sanction for enablers - Following a recent consultation, the government will introduce sanctions for those who design, market or facilitate the use of tax avoidance arrangements which are later defeated by HMRC

VAT flat rate scheme - A new 16.5% rate will apply from 1 April 2017 for businesses with limited costs eg labour-only businesses

Offshore tax evasion - A new legal requirement to correct a past failure to pay UK tax on offshore interests will be introduced. Also, a consultation will be published on introducing a new legal requirement for intermediaries arranging complex structures for client holding money offshore to notify HMRC

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Tax simplification - The Office of Tax Simplification is to review aspects of the VAT system and Stamp Duty on share transactions

Business rates - Both rural rate relief and small business rate relief will be increased to 100% in April 2017

Insurance premium tax- The IPT rate will increase to 12% from 1 June 2017

Fuel duty - This will remain frozen

Soft drinks industry levy - Draft legislation will be published on 5 December 2016

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Stella Amiss
Tax Partner
Tel: +44 (0)20 7212 3005

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