DON T LOSE ANY SLEEP, WE VE GOT IT COVERED Tolley Autumn Statement 2015

Transcription

1 DON T LOSE ANY SLEEP, WE VE GOT IT COVERED Tolley Autumn Statement 2015 Owner-Managed Businesses Free in-depth, practical guidance on the Autumn Statement For more in-depth analysis on the Autumn Statement visit tolley.co.uk/autumn15

2 Disclaimer TOLLEY GUIDANCE Simon Groom, Director of Tax Content Creation During a 30 year career, mainly spent in training students for the ATT and CTA examinations, Simon has played a small role in starting the careers of many a tax professional, and during the last 9 years at Tolley he has spent most of that time leading the Tax Examinations business. He is now responsible for all of the tax content within Tolley, a role which means his appearances in the classroom are few and far between, but are probably more enjoyable for it. During his career he spent time as a student at Arthur Young (now part of EY) where he qualified as a Chartered Accountant, and Financial Training (now Kaplan) where he discovered a love of all things tax, which made studying and passing the ATII (now CTA) exams that little bit easier. He returned to EY in 2000, to work in their National Tax Training Team, and whilst there became a member of Council of the Association of Taxation Technicians (ATT), following many years of lecturing for them on student conferences, and as a volunteer on various committees. Re-reading this paragraph and seeing all the name changes makes the 30 year career seem even longer! Whilst at the ATT he played a role in developing the examination structure and syllabus, and latterly was chairman of their Membership Steering Group, and a member of the Audit Committee. He joined Tolley in 2006 and is now Director of Tax Content Creation. Request your free TolleyGuidance trial Tolley takes every care when preparing this material. However, no responsibility can be accepted for any losses arising to any person acting or refraining from acting as a result of the material contained in these notes. All rights reserved. No part of these notes may be reproduced or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Tolley. Whilst some of the links within this document resolve to publicly available websites, other links into documents within Tolley Guidance are subscription sensitive. If you do not have a subscription to Tolley Guidance then you can request a free trial tolley.co.uk/autumn15 Autumn Statement 2015 Today s main event was billed as a joint Spending Review and Autumn Statement. In truth, it was far more of the former and very little of the latter, with the proportion of the speech allocated to tax measures being almost non-existent. The key message was that, despite some changes, the reduction of the deficit is on track and the economy is safe in the hands of the government. That probably doesn t come as a great surprise given Mr Osborne s ambition for a promotion towards the end of this parliament. Once again he showed his innate ability to present statistics that support his claim of fiscal responsibility, despite the change of heart on tax credits. Looking at the figures a little closer gives a hint of a certain amount of smoke and mirrors, but that is only to be expected. He can also claim to have listened on tax credits, despite the fact that the changes originally proposed will essentially come in anyway (albeit a little later) with the move to universal credit. What he did fail to point out was that the extra cost of changing his mind on tax credits was more than covered by the windfall of 27bn over this parliament (according to the BBC s Newsnight programme). The windfall arises from reduced forecasts for debt interest and changes to the way that the OBR forecast tax receipts (particularly VAT), and has allowed him to reduce departmental spending by less than anticipated and still be on track to meet his deficit reduction target. Mr Osborne had a lot to say on home ownership and supporting housebuilding and we ve grown accustomed over the last few months to seeing him in a hard hat and a high-vis jacket, extolling the virtue of the building or manufacturing sectors. Could it all have been leading up to the claim today: for we are the builders? From now on we can refer to him as Bob. The customary dig at those on the opposition benches was in evidence while he was discussing the importance of culture. The comment his campaign has contributed to the arts, while his front bench contributes to comedy was particularly well received at least on one side of the house. The SNP didn t escape either as he asserted that, had Scotland voted for independence, the cuts that they would be announcing would be huge due to the collapse in revenues from North Sea oil. One comment did appear to be capable of misinterpretation. I wasn t the only one to wonder whether his permanent pothole fund was an unfortunate turn of phrase, although given the state of the roads, it seems good progress is being made on creating more permanent potholes. On the tax front there was very little to grab the headlines, although, as usual, there was much more buried away in the statement itself. It has to be said that there was very little in the way of back-up detail, and so, as we prepared the documents outlining the changes, there was a lot of searching to make sure nothing was missed. There were no changes to duties for the tabloids to get hold of, no announcements on headline rates and allowances; maybe it was the plan all along for the Summer Budget to be an early Autumn Statement. At Tolley, we ve been studying and analysing the changes, so that you don t need to lose any sleep we ve got it covered. Despite the lack of big announcements, it s still been a late night and our teams of writers, editors and technical specialists have been working throughout the afternoon and into the night to summarise not just what the changes are, but what they might mean for you and your clients. I m extremely grateful for their efforts, and I hope that you find the documents useful. Simon Groom Director of Tax Content Creation

3 Autumn Statement 2015 Owner-Managed Businesses Edward Brown Tax Director Brown Bear Taxation Ltd Ed is one of the owners of Brown Bear Tax Limited which provides tax advisory and compliance services to entrepreneurial businesses, corporates and accountants. Having spent over 13 years working for Grant Thornton UK LLP providing tax services to business with international operations, Ed brings a wealth of practical and technical experience to innovative business and their owners. The Chancellor, George Osborne, delivered his Spending review and Autumn Statement speech on 25 November This news item outlines some of the key changes relating to owner-managed businesses. More information on the tax proposals scheduled for inclusion in Finance Bill 2016 will be published in the Government s Overview of Legislation in Draft on 9 December. Headline announcements Some of the headline announcements from the Chancellor related to property and the digitisation of the tax system, but outside this there were few other headline statements. Making tax digital As announced at Summer Budget 2015, the government wants to digitise the tax process. The clear aim appears to be to modernise the tax system and provide a more real-time working basis of individual and business tax affairs, which one would expect, will lead to the advance of tax payments in many cases in due course. Key details so far are: > > the re-announcement of digital tax accounts for all small businesses and individuals to be introduced by 2016/17 > > requiring most businesses, landlords and the self-employed to update HMRC quarterly regarding their tax affairs by 2020 we await further details in the consultation due in > > the intention to consult on ways to simplify tax payments with suggestions of tax payable as profits arise (already now announced for capital gains tax arising on the disposal of residential property with payment due 30 days after completion from April 2019) Autumn Statement 2015, para Residential property A further levy on property investment and multiple residential property ownership is to be introduced by way of an additional 3% on top of current SDLT rates from 1 April 2016, to be charged on the purchase of additional residential property (e.g. buy to lets and second properties over 40,000), though exclusions to certain corporates and funds are expected. Autumn Statement 2015, para 3.70 Profit extraction and exits for company owners There was no further commentary with respect to the Summer Budget 2015 announcement regarding the increase in dividend tax rates and the dividend allowance due to apply from April 2016, so the expectation is that these will be introduced in the Finance Bill 2016 as previously announced.

4 Interestingly, the announcement at Summer Budget 2015 that the government will consult on the rules concerning company distributions now includes narrative that they will amend the Transactions in Securities rules and introduce a targeted anti-avoidance rule (Autumn Statement 2015, para 3.85) to prevent income being converted into capital. Will this impact retained profits extracted on an exit or liquidation? It is unlikely to impact arm s length transactions, but we eagerly await the consultation details, as this could really impact business confidence and entrepreneurship if more uncertainty or cost enters this area. Some good news, however, with respect to Capital Gains Tax entrepreneurs relief in that the government may bring forward legislation to amend changes made by Finance Act 2015 which many consider had unintended consequences to prohibit entrepreneurs relief in certain genuine commercial transactions. Further background detail can be found in ICAEW Technical release TAXGUIDE 07/15 with detail expected in Finance Bill Autumn Statement 2015, para 3.92 Personal Tax Averaging of profits for farmers Following consultation, the averaging period will be optional and self-employed farmers will be able to stick with the twoyear period or extend to a five-year period from April 2016 (Autumn Statement 2015, para 3.21). The two calculation mechanisms for five-year averaging were discussed in the July 2015 consultation document and their complexity may result in professional fees negating any savings made in choosing the most beneficial route. Tax incentivised investment On top of existing excluded activities from 6 April 2016, it is expected that all remaining energy generation activities will now fall to be excluded for EIS, VCT and SITR schemes. A further announcement is the introduction of increased flexibility for replacement capital within the EIS and VCT schemes, all subject to state aid approval, but should enhance the ability of investors and companies to operate within the scheme. Autumn Statement 2015, para 3.23 Business tax Apprenticeship levy As part of its strategy to see a marked increase in the number of apprenticeships offered by employers, the Government intends to introduce an apprenticeship levy payable by large employers as from April The levy will be set at 0.5% of an employer s pay bill (total amount of earnings paid (excludes benefits in kind ) to the employer s employees) and is payable over a 15,000 threshold, so will not apply to small companies unless the wage bill exceeds 3m. Travel and subsistence Following the consultation on restricting tax relief for travel and subsistence for workers engaged through employment intermediaries, the proposals announced today are to be modified so that the restrictions on tax relief for travel and subsistence will only apply to workers providing services through personal service companies where the intermediaries legislation (also known as IR35) applies. The new restriction will be imposed from 6 April Autumn Statement 2015, para 3.20 Automatic enrolment for pensions The obligation to automatically enrol employees in a workplace pension already applies to employers with more than 30 employees and will apply to all employers by 1 April The two step rise in the minimum rate of pension contributions required under the automatic enrolment regime will now be delayed to April 2018 and April Autumn Statement 2015, para Company car benefits diesel cars Currently the appropriate percentage used to determine the amount of tax due on an employee s use of a company car is three percentage points higher if the car in question runs on diesel. That 3% supplement was due to be abolished for 2016/17 onwards, but the Chancellor announced today that the supplement will remain in place until April Autumn Statement 2015, para 3.66 Corporation tax Loans to participators and charities A welcome change for charity financing will be introduced in Finance Bill 2016 that will create an exception from section 455 tax for loans or advances made on or after 25 November 2015 to trustees of charitable trusts where the monies are applied wholly for charitable purposes. Capital allowances and leasing anti-avoidance For transactions on or after 25 November 2015 new antiavoidance rules will be introduced to counter tax avoidance schemes that have been revealed to HMRC under the

5 disclosure of tax avoidance schemes (DOTAS). The first measure seeks to counteract the manipulation of disposal values, which in turn leads to excess capital allowances being claimed and the second measure is intended to counteract arrangements which generate non-taxable consideration received in return for agreeing to take over tax deductible lease payments. Related party rules, partnerships and transfers of intangibles Draft Legislation has been released which intends to counteract current arrangements involving partnerships and LLPs. This will enable a corporate member to circumvent the related party rules and essentially obtain a deduction under the intangible fixed asset regime. These are in instances that HMRC consider should still be categorised as a pre-fa 2002 asset when establishing the corporate member profits of a firm. The related party definition is widened by including the participation test in the transfer pricing legislation. This widening of definition also extends to transfers being treated as being at market value. The legislation will apply to transactions involving intangible fixed assets on or after 25 November 2015 and for previous transactions for accounting debits or credits accruing after that date, so it would appear that HMRC are preventing any planning already undertaken having any future benefit. Avoidance GAAR penalties In its consultation on Strengthening sanctions for tax avoidance, the Government set out proposals for the application of new penalties in cases successfully tackled by the application of the General Anti-Abuse Rule (GAAR). The Chancellor announced today that the new penalty will be set at a rate of 60% of the tax at stake. This new penalty will be legislated for in Finance Bill 2016 along with some other minor changes to the GAAR regime in relation to marketed avoidance schemes (see Autumn Statement, para 3.84). It is not yet clear how the new penalty would interact with other penalties potentially in play in respect of the same tax charge, such as a penalty for failure to comply with an accelerated payment notice. Parallel legislation is likely to be needed to apply the new GAAR penalty to NIC liabilities. is defeated, and would include a new reporting requirement and a surcharge on the additional tax due as a result of a failed scheme. The names of serial avoiders could be published and those who persistently abuse reliefs could face restrictions on them accessing certain tax reliefs for a period of time. Autumn Statement 2015, para 3.83 Devolution There were no major announcements regarding tax devolution for the home nations, but the Autumn Statement documentation contains a helpful summary of the current position: > > Scotland the Scotland Bill is expected to receive Royal Assent in early 2016 and work on the new fiscal framework is ongoing. For more information, see the Devolved taxes in Scotland the current position [updated] news item. > > Northern Ireland under the Corporation Tax (Northern Ireland) Act 2015, the Northern Ireland Executive has the power to set the rate of corporation tax on certain trading profits from 1 April It is expected the rate will be set at 12.5%. For more information, see the Will Northern Ireland profit from lower corporation tax rates? news item. > > Wales under the Wales Act 2014 the framework is in place for SDLT and landfill tax to be devolved and the Welsh rate of income tax (WRIT) to be created, but the Welsh Assembly has yet to exercise these powers. The Chancellor announced that the legislation will be amended to remove the requirement to hold a referendum on the introduction of the WRIT. Autumn Statement 2015, paras 1.226, 1.228, Serial avoiders Following this same consultation, the Government is to introduce a series of additional measures applicable to taxpayers who repeatedly use avoidance schemes. As outlined, this would apply to any individual who has received a warning notice following use of an avoidance scheme that

6 RESEARCH No matter what sort of organisation you work in, it s hard to stay fully informed on all the important new tax cases and amendments to tax legislation. Your clients want you to be able to take advantage of new tax planning opportunities. Your employer needs to be sure that your advice reflects the latest changes to compliance rules. You can trust Tolley s comprehensive range of tax products to make it easier than ever to keep up-to-date with the constant changes in tax and find all the details you need. Tolley s products are written by tax specialists for tax specialists and designed to suit the way you work. Five reasons to rely on Tolley for your research 1. Authoritative, trusted, comprehensive information 2. Flexible delivery: online, in print or both 3. Pricing to suit the needs of your business 4. Intuitive online search for faster results 5. Enhanced with news alerts, updates and cross-references TolleyLibrary For the whole picture, including analysis and commentary plus cases and legislation, and the broadest choice of our books, looseleafs and magazines, subscribe to TolleyLibrary. We re proud that it s the most user-friendly online library for tax and accountancy practitioners, containing the most comprehensive, up-to-date and trusted information. And you can manage your costs with subscriptions and payment options that fit the size and style of your business. Blending the best of the traditional and the modern, we ve built TolleyLibrary Light to give smaller practices online access to our most popular titles. It's easy to search, always up-to-date and keeps your costs in control and you benefit from links to the relevant HMRC manuals. Opt in to regular news updates to keep in touch with the areas of tax that most interest you. For more information on research visit tolley.co.uk/research

7 PRACTICAL GUIDANCE Undue risk is often the result of misunderstanding. Mistakes occur when the way ahead isn t clear. With us by your side, there s no need to have sleepless nights fearing litigation for inaccurate or incorrect advice or not meeting HMRC statutory requirements. We give you the tools to check that nothing slips your mind, and help us provide evidence that you have taken reasonable care. Five reasons to choose Tolley for practical guidance 1. Written by tax experts, based on real-life experience 2. Guidance that s detailed, practical and reliable 3. Information that s robust, up-to-date and complete, and stands up in court 4. Acts as a simple refresher or a step-by-step guide 5. Modular format helps you to control your costs TolleyGuidance TolleyGuidance is written by tax experts, who use their knowledge and experience to explain how tax really works. Expand your understanding, refresh your knowledge and explore new areas of specialism. The tax industry is renowned for its complexity and its speed of change. TolleyGuidance provides answers that are straightforward and up-to-date. Find practical, technical commentary on unfamiliar areas, with easy-to-apply examples based on real-life cases. Get step-by-step help to tackle the issue, with simple to understand how-to guides and easy to complete template documents. For many of our clients, TolleyGuidance reduces their need to use external specialists, and that can only reduce your costs. We ve worked with tax practitioners to create a modular service so you can choose the subject areas that are right for your business. Whatever your question, on whatever aspect of tax, you can find guidance, tools and associated information quickly, easily and with an eye on controlling your costs. For more information on practical guidance visit tolley.co.uk/practicalguidance

8 CPD / DEVELOPMENT Passing your tax exams is just a part of your learning. Continuing professional development is important because it ensures you continue to be competent in your profession. You can achieve a certain amount of learning on the job, but you need to bolster that with regular formal education and training. It s certainly worth the time investment. Professionals who plan their skills development tend to make faster progress in their careers, in the direction they choose. Tolley s professional development products and services make it easier, with a wide choice of subject matter and delivery routes. In-Person Meeting other practitioners is great for building contacts, and better still, helps you understand the current practice of tax and the requests you might face. That s why there s time for networking in our annual programme of popular half day CPD Seminars, as well as for hearing from our experts on the most topical issues across the industry. Online But when time is tight you might prefer to watch bitesize chunks of what s going on in tax, accountancy and audit. Watch our monthly Online CPD Seminars, when it suits you, on whatever device you prefer. You can use them with your team to help them achieve their CPD requirements too. Our online tax law Webinars also let you pose questions to tax barristers and discuss the latest issues with other attendees in the live sessions, as well as watching again how and when you like. Magazines and Journals For the ultimate in flexible learning, it s hard to beat our magazines Taxation, Tax Journal or Tax Adviser. Browse and learn, in print or online, across everything that s going on. They re the simplest way to make sure you re always right up to date with what matters in your areas of tax. Essential Business Development Skills When you re also involved in running the business, you may find that you need to arm yourself with skills beyond accountancy and tax. We developed our online webinars Essential Business Development Skills with accountancy and tax practice managers in mind, to give you ideas and advice on how to find and retain customers as well as manage staff and suppliers. For more information on CPD visit tolley.co.uk/cpd

9 QUALIFICATIONS Whether you re just starting out in tax or accountancy, or already have years of experience, its hard work gaining the qualifications you need to progress in your career. Tolley Exam Training can help you succeed in gaining those vital tax qualifications. We are experts in tax and our exam pass rates are the best in the industry. And we can help you right from the start, when you re choosing the qualification that s right for your experience and your interest. Association of Taxation Technicians (ATT) qualification Once you re working in tax compliance, you can demonstrate your competence with The Association of Taxation Technicians (ATT) exam. Tolley Exam Training gives you the choice of mixing traditional correspondence courses with live lectures and online training, so you can design your learning to fit your location and your work. Chartered Tax Advisor (CTA) qualification If you want to widen your possible career routes then you also need to be able give advice to clients. The Chartered Tax Advisor (CTA) qualification from the Chartered Institute of Taxation is the highest level tax qualification in the UK. Our experts are on hand with practical advice on exam choices that can save you hours of study as well as helping you to succeed. Advanced Diploma in International Taxation (ADIT) The Advanced Diploma in International Taxation (ADIT) meets the demand, both in and outside the UK, for a specialist qualification for international tax practitioners in the corporate area. It recognises that international tax advisers need to understand more than one tax system. So talk to us, we re one of the very few bodies in the UK who can prepare you for the Advanced Diploma in International Taxation (ADIT). For more information on qualifications visit tolley.co.uk/qualifications

10 The Front Line is where you stand face to face with HMRC and agree tax. It s not a place to be alone. Not a place to go to unprepared. As the UK s only provider of critical tax information, in-depth reference, ground-breaking training and learning resources and unique market insight, Tolley is there by your side with four product families designed for tax professionals working on The Front Line. Research Practical Guidance CPD/Development Qualifications Visit tolley.co.uk or call us on (Calls cost 7p/min) Tolley, Lexis House, 30 Farringdon Street, London, EC4A 4HH RELX (UK) Limited, trading as LexisNexis. Registered office 1-3 Strand London WC2N 5JR Registered in England number VAT Registered No. GB LexisNexis and the Knowledge Burst logo are trademarks of Reed Elsevier Properties Inc. LexisNexis 2015 SA The information in this document is current as of November 2015 and is subject to change without notice.