The chancellor omitted to mention the majority of the new measures that the government has proposed for the 2016 Finance Bill when he presented his Autumn Statement last Wednesday. In this guide we fill in the details for SME owners and tax advisers.
All these measures are to be included in the Finance Bill 2016, unless otherwise indicated.
Personal tax
Personal tax
Personal allowance and basic rate tax band
- It is proposed to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by 2020/21.
Extending averaging for farmers
- UPDATE: following consultation the averaging period for self-employed farmers will be extended from 2 years to 5 years with farmers having the option of either averaging period. From April 2016.
Netherlands Benefit Act for Victims of Persecution 1940-1945
- Exemption from income tax certain pension and annuity payments made by the Netherlands government, payable to victims of national-socialist and Japanese aggression during World War II. From April 2016.
Taxation of sporting testimonials
From 6 April 2017
- Simplification of the tax treatment of income from sporting testimonials: all income from sporting testimonials and benefit matches for employed sportspersons will be liable to income tax.
- An exemption of up to £50,000 for employed sportspersons with income from sporting testimonials that are not contractual or customary.
- Applies where the sporting testimonial is granted or awarded on or after 25 November 2015, and only to events that take place after 5 April 2017.
- National Insurance treatment of this income which will follow the income tax treatment.
London Anniversary Games and World Athletics and Paralympics Championships
- Exemption for non-resident competitors in the 2017 World Athletics and Paralympics Championships and the 2016 London Anniversary Games from income tax on their earnings from the event.
- 2016 will be the final year such an exemption is granted to the London Anniversary Games as the Olympic torch is passed to Rio de Janeiro.
Non-doms
Non domiciles
Business Investment Relief
- A consultation on how to change the Business Investment Relief rules to encourage greater use of the relief to increase investment in UK businesses.
Savings & Pensions
Savings & investments
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.
Innovative Finance ISA
- Crowdfunded debt securities may be held in an ISA from autumn 2016.
ISAs: annual subscription limits
- Unchanged for 2016/17
ISAs: tax advantages during the administration of an estate
- The ISA savings of a deceased person to continue to benefit from tax advantages during the administration of their estate Introduced in 2016, following consultation.
Pensions
- The Government will respond to its consultation on the system of pensions tax relief at Budget 2016.
- The increases to automatic enrolment minimum contribution rates will be moved to align these changes with the start of the tax year.
- For details of further measures, see Autumn Statement 2015: Pensions.
Employee tax
Employee tax
Real Time Information (RTI)
- ‘On or Before’ Reporting Obligation Review: the government has decided that the 2 year temporary relaxation, allowing existing micro-employers using Real-Time PAYE to report all payments they make in a tax month on or before the last payday in the tax month rather than on or before each and every payday, will end as planned on 5 April 2016. This will align the treatment for existing micro-employers with all other employers, and follows a review (Editor: what review?) the government committed to undertake at Autumn Statement 2014, as recommended by the OTS.
Personal service companies' travel and subsistence
From April 2016
- UPDATE: the proposed restriction on tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company has been limited in scope. It will only apply where the intermediaries legislation (IR35) applies.
Employee share schemes: simplification of the rules
- A number of technical changes to streamline and simplify aspects of the tax rules for tax-advantaged and non-tax-advantaged employee share schemes.
Salary sacrifice
- A review/consultation on salary sacrifice schemes.
Living accommodation
- The OTS is to review the tax treatment of employer provided living accommodation.
Authorised mileage rates
- From April 2016 the 3 percentage point differential between diesel cars and petrol cars will be retained until April 2021.
Apprenticeship levy
From 6 April 2017
- Large employers will be subject to a 0.5% Apprenticeship levy, paid through PAYE.
- Each employer will receive an allowance of £15,000 to offset against their levy payment: the levy will only be paid on any paybill in excess of £3 million.
Small Companies
- Dividend tax: no further measures were announced, draft legislation is now expected.
The following measures are also included in our Employee Tax and CGT tabs, as follows:
- Travel & subsistence for PSCs: the proposed restriction on tax relief for travel and subsistence expenses will only apply where the intermediaries legislation (IR35) applies.
- See
- RTI: the temporary relaxation in reporting for micro enterprises will end as already determined on 6 April 2016.
- Entrepreneurs’ relief: contrived structures: there will be new rules to amend the changes made by Finance Act 2015 to Entrepreneurs’ Relief, in order to support businesses by ensuring that the relief is available on certain genuine commercial transactions.
- Anti-avoidance (see tab below) measure to combat Disguised Remuneration schemes and schemes that turn income into capital will be subject to new rules under the Transactions in Securities provisions.
See Small Company Tax: What's New? Nov/Dec for a full update of these measures, combined with the earlier measures annnouned earlier in the year.
Large Companies
Large company tax
Corporation tax relief
- Museums and galleries tax relief: a consultation on a new tax relief
- Grassroots sport: consultation on how to expand tax deductions for the sport
Stamp Duty and Stamp Duty Reserve Tax Deep In The Money Options (DITMOs)
- Anti-avoidance using DITMO applies to options which are entered into on or after 25 November 2015 and exercised on or after Budget 2016.
- See Autumn Statement 2015: tax avoidance
Loan relationships: taxation of corporate debt and derivative contracts
- The tax rules for company debt and derivative contracts will be updated to ensure they interact correctly with new accounting standards in three specific circumstances.
Corporation tax: restitution interest
- A special 45% rate of corporation tax on income is to be applied to restitution interest. This measure was legislated for in Finance (No. 2) Act 2015.
Change in scope of the UK bank levy
- Consultation on changing the scope of the bank levy to UK operations from 1 January 2021, a change which was announced in Summer Budget 2015 alongside a commitment to legislate in this Parliament.
Property tax
Property tax
Stamp duty land tax: buy to lets and second homes
- A higher rate of SDLT (+3%) 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. See Autumn Statement 2015: SDLT & residential property.
Stamp Duty Land Tax: application to certain authorised property funds
- A new seeding relief for Property Authorised Investment Funds (PAIFs) and Co-ownership Authorised Contractual Schemes (CoACSs).
Stamp Duty Land Tax: changes to the filing and payment process
- Consultation on SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. For 2017-18.
Annual Tax on Enveloped Dwellings (ATED) and 15% rate of Stamp Duty Land Tax: scope of reliefs
- Reliefs extended 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.
CGT
Capital gains tax
CGT for non-UK residents disposing of UK residential property
- Amendments to the legislation, with retrospective effect to 5 April 2015, to remove a double charge that occurs in some circumstances and correcting an omission with effect from 25 November 2015.
- HMRC powers to prescribe circumstances when a CGT return is not required by non-residents and will add CGT to the list of taxes that the government may collect on a provisional basis.
Capital Gains Tax: payment window
- 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 (FB 2017)
Entrepreneurs’ relief: contrived structures
- New rules to amend the changes made by Finance Act 2015 to Entrepreneurs’ Relief, in order to support businesses by ensuring that the relief is available on certain genuine commercial transactions.
VAT
VAT
VAT on sanitary products
- The UK is bound by EU law. The UK has set up a new fund that will make available £15 million a year to support women’s charities over the course of this Parliament, or until EU rules are amended to enable the UK to apply a zero rate of VAT for sanitary products.
VAT reduced rate for energy saving materials
- Consultation to ensure the reduced rate of VAT on energy saving materials is maintained in line with EU law.
IHT
Inheritance tax
IHT exemption for payments to victims of World War II era
- Extra Statutory Concession F20 will be legislated. This gives an inheritance tax exemption in respect of certain compensation and ex-gratia payments for World War II claims.
- The legislation will include payments made under a recently created compensation scheme known as the Child Survivor Fund.
- The legislation will apply to deaths on or after 1 January 2015. (Finance Bill 2016)
Undrawn pension funds in drawdown pensions
- IHT 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. (Finance Bill 2016)
Deeds of variation
- Following review there will be no changes.
Charities
Charities
Gift Aid Small Donations Scheme
- This is subject to a review: a call for evidence will be published in December 2015.
Close company loans to participators: partial exemption for charities
- A s455 CTA 2010 tax charge is not applied to loans or advances made by close companies to charity trustees for charitable purposes.
- This will apply to qualifying loans or advances that are made on or after 25 November 2015.
Venture Capital Schemes
Venture Capital Schemes
Affects Enterprise Investment Scheme (EIS), Venture Capital Trusts (VCT) and Seed Enterprise Investment Scheme (SEIS) and Social Investment Tax Relief (SITR).
- From 30 November 2015, the provision of reserve energy generating capacity and the generation of renewable energy benefiting from other government support by community energy organisations will no longer be qualifying activities.
- Additionally, from April 2016, all energy generation activities will become excluded activities for the purpose of tax-advantaged venture capital schemes.
Childcare & tax credits
Childcare
Two changes were made to the proposals for the Tax Free Childcare account:
- The upper earnings limit is being dropped from £150,000 to £100,000
- Both parents must be working the equivalent of 16 hours at the National Minimum Wage, doubled from 8 hours.
Tax credits
- The government decided not to go ahead with its reforms to tax credits, however there are several changes taking place on 6 April 2016.
- See Autumn Statement: changes to tax credits for more detail.
Anti-avoidance
Anti-avoidance
- New criminal offence for tax evasion
- New civil penalties for offshore tax evaders & those who enable evasion
- New criminal offence for corporates failing to prevent tax evasion
- An additional requirement to correct past offshore tax non-compliance
- Cash and the hidden economy: consultation
- Measures to deter serial scheme users and scheme promoters
- For more details on each measure see Autumn Statement 2015: anti-avoidance.
Anti-tax schemes and strategies
A range of measures affecting the following planning:
- Disguised remuneration: from 25/11/2015
- Entrepreneurs’ relief: contrived structures
- GAAR abuse: 60% penalty
- Converting income into capital gains: amend the Transactions in Securities rules and introduce a Targeted Anti-Avoidance Rule.
- Corporate intangibles and partnerships
- Capital allowances and leasing
- Rules for addressing hybrid mismatch arrangements
- Taxation of asset manager’s performance based rewards
- Tools to encourage voluntary compliance and special measures to tackle the highest risk businesses
- Stamp Duty and Stamp Duty Reserve Tax Deep In The Money Options (DITMOs)
- For more details on each measure see Autumn Statement 2015: anti-avoidance.
Admin
Tax administration
Making tax digital
- 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 digital tax account.
- HMRC will ensure the availability of free apps and software and provide support to those who need help using digital technology.
- This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year.
Clarification of time limits for self-assessment
- The government will publish draft legislation clarifying the time allowed for making a self-assessment. It will make clear that the time limit is 4 years from the end of the relevant tax year.
Office of Tax Simplification (OTS) wip
- Review of employment status: the government has responded to the final report of the OTS review of employment status and is taking forward the majority of recommendations.
- Taxation of accommodation benefits: following OTS review, the government will publish a call for evidence on the current tax treatment of employer provided living accommodation.
Automated tax assessment
- A new, simpler process for paying tax under self-assessment for those with simple tax affairs and 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.
Infrastructure
Infrastructure
Lending to SMEs
- It is proposed to designate Experian, Equifax and CreditSafe under the Small and Medium Sized Business (Credit Information) Regulations 2015.
- These CRAs will receive SME credit information from designated banks and provide equal access to this information to all finance providers in a major structural reform that will promote competition in the SME credit market.
Broadband investment fund
- It is proposed to explore setting up a new broadband investment fund, to support the growth of alternative network developers by providing greater access to finance.
- The fund would be supported by both public and private investors, and would be managed by the private sector on a commercial basis.
