Autumn Statement 2015

 

The Autumn Statement for 2015 was delivered on Wednesday 25 November 2015.

The Autumn Statement itself can be downloaded from this page. This year they’ve combined it with the Spending Review. Isn’t that nice of them?

You can find an overview here.

But for tax practitioners, the following pages are the most important.

First of all, there’s a link for tax related documents which I posted yesterday. Anyone reading that page will recall my words:

“HMRC has a record of adding other pages and confusing everybody in the process.”

Well, they’ve done it again!

The main tax announcements can be found at this page – but once you click on that link you have to click on yet another link, which will take you to the right place.

And here you can find the measures that take place with immediate effect.

And for good measure, the draft legislation for Finance Bill 2016 can be found on this page, which, at the moment, duplicates the previous link. No doubt this page will become filled next week when the draft documents are usually published.

(Why can’t there be some sort of order involved when posting these links? Why are we taken on a great big merry-go-round?)

But enough of that. What happened this time?

Climbdown on tax credits

The major change of course is the U-turn on tax credits. After a humiliating defeat in the House of Lords a few weeks ago, the Chancellor has backpedalled.

Buy to let landlords hit again!

George certainly has got it in for this class of person! Do you know, one of my best friends once tried to tempt me into buy to let, because it had worked so well for him. “Satwaki, all you’ve got to do is to plonk down the cash, get an agent to look after the property and bob’s your uncle. It’s EASY!”

Well, the minute he said those magic words “It’s easy” it put me off completely. If it’s easy, it’s too good to be true. Especially from someone who could have made another career as a con-man.

Enough of the digression! What are the main tax measures that will be hitting residential property owners?

Higher SDLT rates will be payable when buying an additional property, either as a second home or as a buy to let

The higher rates are to be set at 3 percentage points above the current rates, for properties worth more than £40,000 (where can one find a property for less?)

It is envisaged that the higher rates will not apply to caravans, mobile homes and houseboats (but do any of the latter constitute a real property interest as opposed to a chattel? Hint to students – what does the legislation say?).

More importantly, the higher rates won’t apply to corporates or funds making significant property investments in the residential sector – unsurprising, given the recent REIT reforms of 2012.

The new rates will apply from 1 April 2016, but we will have a consultation paper before then so that everyone can complain about how middle England is being squeezed till you can hear the pips squeak…

Capital Gains Tax and SDLT filing dates to reduce

 This really did catch my eye when I first saw it.

Firstly for CGT – anyone selling a residential property will need to make a payment on account within 30 days of completion. That is a very short timeframe – the current practice is to account for the tax in the self assessment return. Massive cashflow advantage for the Government – not welcome at all for taxpayers.

Note that this measure will not apply where no CGT is payable by virtue of the principal private residence. Guess who’s going to be hit by this one?

Secondly SDLT – the Government plans to reduce the filing date from 30 days to just 14! Oh dear oh dear – bad enough for those poor buy to let landlords having to pay the higher SDLT rates on acquisition…

However, this one appears to catch everyone buying a property, whether individual, or corporate, and whether the property is residential or commercial. The plans are to introduce the new filing dates in 2017 or 2018. Again, we’ll have a nice little consultation process so that everyone can complain how awful it all is.

The following measures take place with immediate effect from 25 November 2015:

Corporation Tax: related party rules, partnerships and transfers of intangible assets

These measures are intended to “clarify” when “intangible fixed assets held by a partnership come within the intangible fixed asset rules.” What does this mean?

Under the intangibles legislation tax relief is available for intangibles such as IP, as it is written off in the accounts. This applies only to corporates and only to intangibles created or acquired after 1 April 2002 (“new IP”). Pre-2002 assets – “old IP” – are excluded until such time that they are sold to an unrelated third party.

It seems that some people have been using a partnership structure to turn old IP into new IP – even though in substance, there has been no economic change in ownership. Well, this measure is going to put a spanner in the works!

(So far, goodwill has been the intangible that has been subject to specific anti-avoidance restrictions. For example, since July 2015 it hasn’t been possible to obtain tax relief for goodwill on an acquisition. But this new measure appears to extend the range of intangibles that are subject to anti-avoidance – is there more to follow?)

Policy paper here.

Draft legislation here.

Corporation Tax and Income Tax: capital allowances and leasing – anti-avoidance

Yet another anti-avoidance rule for the leasing industry. They’ve been at it for yonks. There are two measures involved:

  • A measure to prevent people from using an artificially low disposal value when selling plant and machinery. The idea is that the lower the disposal value, the smaller the balancing charge. This measure is subject to there being a tax avoidance motive;
  • A second measure aimed at anyone who has received any payment for taking over the rental obligations under a lease, with the intention of claiming the relevant tax deductions. (Alternatively the payment could be to a party connected with the person who will claim the deductions). From now on, the payment is to be taxed as income to the extent that it has not been taxed already.

Policy paper here.

Draft legislation here.

Corporation Tax: loans to participators, trustees of charitable trusts

Not an anti-avoidance rule for once but an exemption on loans or advances made to a charitable trust by a close company.

Under the close company rules, a loan made to a participator can be subject to a tax charge for the company, which amounts to 25% of the loan. This can give rise to difficulties when the recipient is a charity, so the Government has decided to make an exemption, provided that the loan itself has been advanced for charitable purposes only.

Policy paper here.

Draft legislation here.

 

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Satwaki Chanda

Satwaki Chanda

Satwaki Chanda is a tax lawyer with a First Class degree in Mathematics. Called to the Bar in 1992, he is the Editor of Tax Notes.
Satwaki Chanda

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