The Autumn Statement for 2016 took place on Wednesday 23 November 2016.
The main Autumn Statement page is here.
The tax documents are here.
I have a strange, and uncomfortable feeling about this. I am writing this at 3 pm on the afternoon of the Autumn Statement. Normally, we see a fair amount of material on the page with the “tax related documents”, but this year, there doesn’t seem to be a lot.
I’m not taken in by this, not for one minute. And indeed, after just a bit of clicking, look what I just found.
Once again, there’s another link that they didn’t tell you about. I only found the Tax Information and Impact Notes – the TIINs – by clicking on a random page about the 100% capital allowances for recharging electric vehicles, and finding a link in small letters at the top called: Tax information and Impact Notes.
Surely, it is not beyond the wit of those who “organise” the online presentation of the documents, to actually organise it properly.
So now you know. We have another page – Tax Information and Impact Notes. However, although that page has a lot of material, only most of it consists of the TIINs from the last Budget in March 2016. But I suspect that this is where we will find the rest of the draft legislation when it comes out on Monday 5 December.
Don’t forget the 9 page document at the bottom of the tax related page entitled:
And then there’s the Autumn Statement itself, which, no doubt, will have even more material hidden away somewhere.
Let’s first look at what is going to change as from today:
The following measures take place with immediate effect from 23 November 2016
This is all about electric refuelling stations for electric cars, buses and the like (technically electric charge-points).
The allowance is available for businesses that acquire new and unused “electric charge-points.” Which, presumably they fix to a wall or a building. For example, you might see these at your local filling station, or Tesco or Sainsburys.
The acquisition and installation costs will qualify for a complete 100% capital allowance – remember, capital allowances for such items would normally be available at the 18% writing down rate, unless covered by the annual allowance. However, this is a separate allowance – a first year allowance – which means that you don’t have to rely on the annual allowance for a complete write-off.
One interesting point – it isn’t envisaged that the cars will be going very far, since the document says that the allowance:
“will encourage the use of cleaner vehicles by making electric charge-points a more common feature on the high street.” [emphasis added]
So we are a long way off from seeing electric fuelling stations dotted all over the country.
The allowance will be effective from today, but it will only be available for a short timeframe of about two years, ending on 31 March 2019 for companies and 5 April 2019 for individuals operating either as sole traders or in partnership. Of course, they could always extend it.
Special tax incentives for employees holding shares in their own employer company were introduced in 2013 – and after just three years, it looks as if the scheme is to be scrapped.
The idea behind the scheme was to reward employees with a stake in the company in which they worked, in return for giving up some of their employment rights. The employee is required to take advice from an independent adviser before signing away his birthright by entering into an employee shareholder agreement.
There are/were two tax reliefs:
- Income tax and NIC reliefs on receipt of the shares, or where the shares are bought back by the company;
- A capital gains tax exemption on selling the shares – though this was actually capped earlier this year by a lifetime limit of £10,000 worth of gains.
The scheme is now being scrapped. Though the operative dates are a bit confusing:
- 1 December 2016 – the reliefs are withdrawn with respect to any shares awarded by virtue of an employee shareholder agreement entered on or after this date;
- Note however, shares can be awarded after that date and still qualify for the reliefs if the employee shareholder agreement was made before 1 December 2016;
- 23 November 2016 – if you have received independent advice today, before 1.30 pm, then there is still time to benefit from the scheme, provided that the employee shareholder agreement is made before 2 December 2016 (in other words, you can still enter into an agreement on 1 December 2016 and still qualify).
Petroleum Revenue Tax – making it simpler to opt out
Petroleum Revenue Tax (“PRT”) is a special tax that applies to the profits of companies operating oil and gas fields in the UK or UK continental shelf. The tax was in fact zero-rated from 1 January 2016 (a bit like VAT?) – from today, new measures are introduced to make it easier to take a field out of the PRT regime.
Have you noticed something? This measure encourages the big bad oil business and the 100% capital allowance encourages the nice, squeaky clean electric car business (it’s not all that squeaky clean if you ask me).
That completes those measures that are effective from today, Wednesday 23 November 2016. There are, however, a lot of other announcements that will be of interest. Over the next few weeks, I shall be filling this page, but please have patience. There’s only one of me, and many of you.
We shall divide this into the following headings:
Non-resident companies to be subject to corporation tax?
A possible consultation into whether all non-resident companies earning income from the UK are to be subject to corporation tax. Currently, overseas corporates are only within the charge if they trade in the UK through a permanent establishment.
For example, non-resident corporate landlords who invest rather than trade are taxex at basic rate income (currently 20%) – the current UK corporate rate is 20% but will come down to 17% by 2020.
So this looks to be a good proposition – but what about capital gains? Apart from residential property, capital gains are tax free for investors apart from where the company is close and the asset consists of residential property. Will all cpital gains of overseas investors be taxed for the first time? Will this prompt more overseas property investment trusts to come onshore and convert to REIT status?
(Autumn Statement 2016 paragraph 4.26)
Interest relief to be restricted
These were the proposals that first appeared earlier in this year’s Budget, and subsequent consultation. From April 2017, tax deductions for interest will be restricted for groups where:
- The group has net interest expenses of more than £2 million;
- The net interest expense exceeds 30% of UK taxable earnings; and
- The group’s net interest to earnings ratio in the UK exceeds the same ratio as applied on a worldwide basis.
The restrictions are aimed at big bad multi-nationals who use large amounts of debt to shift profits from one jurisdiction to another. Small and medium sized businesses ought not to be affected – but one never knows when certain anti-avoidance measures catch those businesses that were never supposed to have been targeted in the first place.
This is the reaction of the British Property Federation on twitter:
Restrictions on tax deductibility of interest coming in April. Cld srsly hurt real estate investment – not even the target #autumnstatement
— BPF (@BritProp) 23 November 2016
Property being a highly geared business activity is more likely to fall foul of these new rules. As Rachel Kelly, Senior Policy Officer of the BPF points out: there’s a difference between using debt to shift around the various members of a corporate group, and using debt to pay for bricks and mortar.
Reforming the rules on corporate losses
This is the result of the announcement made at Budget 2016 and subsequent consultation. There is both good news and bad news.
Bad news first – from April 2017, losses that are carried forward to future profits will be restricted. At present, if there are sufficient profits to relive all the loss, then all the losses can be relieved. The new rules will only allow the loss to be set against 50% of profits – even if the whole profit is enough to cover the loss. Any excess loss can be carried forward to the following year, but again, one can only use 50% of the following year’s profits.
The result is that the losses can still be relieved, but it may take longer under the new rules. By the way, banks are still out of favour because their restriction will be 25% of profits.
That said, it looks as if each company/group will be entitled to a £5 million allowance – we’ll have to look at the legislation closely to see what this really means.
Good news – although carry forward losses will be restricted, there will be “greater flexibility” over the type of profit which they can shelter. Under the current system, the general rule is that losses of one trade can only be carried forward against profits against the same trade.
(Autumn Statement 2016 paragraph 4.25).
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