The Chancellor George Osborne has delivered his Autumn Statement 2013. The following is a summary of the main tax points of interest with draft legislation enacting the proposed changes to be published on 10 December 2013:
Corporation Tax - as previously announced, the main rate for corporation tax will fall from 23% to 21% from April 2014. It will reach 20% in 2015. The small profits rate remains at 20% meaning that from April 2015 the rates will be aligned.
Employment Allowance - as announced in Budget 2013, a £2,000 Employment Allowance will be introduced from April 2014 to help businesses expand by reducing the costs of employment.
Partnership review - the Government will take forward their proposals announced in consultations earlier this year to counter what they see as the use of partnerships and LLPs to disguise employment relationships and the allocation of business profits to corporate partners for tax reasons.
Venture Capital Trusts (VCT):
- changes will be made to allow investors to subscribe for VCT shares via nominees
- from April 2014, investments that are conditionally linked to a VCT share buy-back, or that have been made within 6 months of a disposal of shares in the same VCT, will not qualify for new tax relief
- there will also be further consultations on potential changes to VCT rules to address the use of converted share premium accounts to return capital to investors
Corporation Tax - associated companies - from April 2015 when the corporation tax rates align, the rules on associated companies will be replaced by a simpler set of rules based upon 51% group membership.
Close Companies - loans to participators - the Government does not intend to make any further changes to the rules relating to the taxation of loans to participators in a close company.
Corporation Tax - amending loss relief provisions - the rules restricting the availability of relief for corporation tax trading losses where a company changes ownership will be eased in relation to investment companies, and also to allow the insertion of a holding company into a group structure.
Bank Levy - from 1 January 2014, the rate of the bank levy will be increased to 0.156% and the design of the bank levy will be changed to have the effect of widening the tax base.
Capital Gains (CGT) - annual exemption - as previously announced the annual exemption for 2014-15 will be £11,000. For 2015-16 and thereafter, the annual exemption shall be £11,100. The exemption for trustees will be £5,000 and £5,500 respectively.
Income Tax - personal allowance: as previously announced, the personal allowance will increase from April 2014 to £10,000.
Income Tax - married couples: from 2015-16, married couples and civil partners will be able to transfer £1,000 of their income tax personal allowance to their spouse where neither is a higher or additional rate tax payer. The transferable amount will be uprated in proportion to the personal allowance.
Income Tax - relief for qualifying loan interest - from April 2014, the income tax relief for interest paid on loans to invest in close companies and employee-controlled companies, will be extended to investments in such companies which are resident throughout the European Economic Area.
ISA - annual subscription limits - the 2014-15 ISA limit will be increased to £11,880 (half of which can be saved in a cash ISA). The Junior ISA and Child Trust Fund limits will both be increased to £3,840.
Inheritance Tax (IHT) - simplification of trusts - the filing and payment dates for IHT relevant property trust charges will be simplified. Income which arises in such trusts and is not distributed for five years will form part of the trust capital when calculating the 10-year anniversary charge.
Life Annuities - following consultation the relief for interest on loans taken out to purchase life annuities, by people aged 65 or over before 1999, shall not be withdrawn.
Vulnerable Beneficiary trusts - from 5 December 2013, the CGT uplift provisions that apply on the death of a vulnerable beneficiary will be extended. From 2014-15, the range of trusts that qualify for special income tax, CGT and IHT will also be extended.
Employee ownership - following consultation, three new tax reliefs will be introduced:
- from April 2014, disposals of shares that result in a controlling interest in a company being held by an employee ownership trust will be relieved from CGT
- provided certain conditions are met, transfers of shares and other assets into employee ownership trusts will be exempt from inheritance tax
- from October 2014, where employee-owned companies controlled by an employee ownership trust make bonus payments to their employees, the bonus payments will be exempt from income tax up to a cap of £3,600 per annum
Employer-funded occupational health treatments - as announced in Budget 2013, there will be a tax exemption for amounts (up to £500) paid by employers for medical treatment for employees.
Dual contracts - rules will be introduced to prevent high earning, non-domiciled individuals from avoiding tax by dividing their employment between the UK and overseas. From April 2014, where a comparable level of tax is not payable overseas, UK tax will be levied on the full amount of employment income.
Share Incentive Plans (SIP) and Save as You Earn Limits (SAYE) - from April 2014, the annual limit for SIPs will increase to £3,600-per-year for free shares, and to £1,800-per-year for partnership shares. The monthly limit for SAYE arrangements will increase from £250 to £500.
Employment intermediaries - facilitating false self-employment - from April 2014, changes will
be made to prevent employment intermediaries from disguising employment as self-employment.
National Insurance - from April 2015, employer's national insurance contributions (NICs) will be abolished for under-21 year olds on earnings up to £813-per-week.
National Insurance - from October 2015, there will be a new class of voluntary NICs to give pensioners who reach State Pension age, before 6 April 2016, an opportunity to top up their Additional Pension records.
National Insurance - self employed persons - following previous consultation a simpler NICs process for self employed persons will continue to be developed.
Capital Gains - non-residents - from April 2015, CGT will be introduced on future gains made by non-residents disposing of UK residential property. How to implement this will be consulted on in early 2014.
Capital Gains - private residence relief - from April 2014, the final period exemption will be reduced from 36 months to 18 months.
SDLT - charities relief - in line with recent case law, legislation will be implemented from Royal Assent of Finance Bill 2014 to make it clear that partial relief from SDLT shall be available where a charity and a non-charity purchase property jointly. Relief will be available on the proportion of the purchase price funded by the charity.
Business Rates - indexation - the RPI increase in business rates will be capped at 2% in 2014-15.
Business Rates - reoccupation relief - a temporary reoccupation relief will be introduced which will grant a 50% discount from business rates for 18 months for new occupants of retail premises which occupy property in 2014-15 and 2015-16 which has previously been empty for at least a year.
Business Rates - bills - from 1 April 2014, new legislation will allow business rates to be spread over 12 months (rather than 10 months as currently)
Business Rates - retail premises - a discount of up to £1,000 will be introduced against business rates bills for retail premises (including pubs, cafes, restaurants and charity shops) with a rateable value of up to £50,000 (up to the state aid limits) in 2014-15 and 2015-16.
Council Tax - from April 2014, there will be a national Council Tax discount of 50% for property annexes.
Small Business Rate Relief - the doubling of the Small Business Rate Relief (SBBR) will be further extended to April 2015. Furthermore, from April 2014 the SBBR criteria will be amended to allow businesses in receipt of SBBR to keep it for one year when they take on additional property that would currently cause them to lose SBBR.
Business Premises Renovation Allowance - with effect from April 2014 and following consultation earlier this year the scheme will be simplified to make it more certain in its application and reduce the risk of exploitation.
HMRC AND TAX ADMINISTRATION
IHT - during 2015-16, an HMRC online service for IHT will be introduced.
Simplifying the tax system - the Government:
- has asked the Office of Tax Simplification (OTS) to carry out a review as to what can be done to improve the competitiveness of UK tax administration
- will implement a further nine 'Quick Wins' identified by the OTS in relation to employee benefits and expenses by the end of January 2014
- will implement a number of simplifications suggested by the OTS in relation to unapproved option schemes
Community Amateur Sports Clubs (CASCs) - from April 2014, donations of money from companies to CASCs will be eligible for corporate Gift Aid.
Film Production - from April 2014, for small and large budget films (subject to state aid clearance), relief will be available at 25% on the first £20 million of qualifying production expenditure and 20% thereafter. The minimum UK expenditure requirement will be reduced from 25% to 10%.
Fuel Duty - the proposed fuel duty increase due to take effect on 1 September 2014 will be cancelled.
Social Organisations - from April 2014, there will be a new social investment tax relief to encourage individuals to invest via equity and debt instruments into social organisations. Organisations which are charities, community interest companies or community benefit societies will be eligible. There will also be a tax relief on investment in social impact bonds.
Theatres - a formal consultation will be launched in early 2014 that considers a limited tax relief, from April 2015, for commercial theatre productions and a targeted tax relief for theatres investing in new works or touring productions to regional theatres.
AVOIDANCE AND EVASION
Accelerated payment - new rules will be introduced, known as 'pay now' notices, requiring taxpayers who rely on tax avoidance schemes, which have already been defeated in the courts, to pay the tax due immediately, rather than waiting for their own dispute to be concluded.
Penalties - following a consultation on proposals announced at Budget 2013, the Government will introduce new powers to require taxpayers to amend their tax returns where they have relied on a tax avoidance scheme, and that tax avoidance scheme has been defeated in another party's litigation. The Government will also introduce penalties for taxpayers who pursue litigation in relation to the same scheme and are also unsuccessful.
Avoidance schemes - high-risk promoters - following a consultation, the Government will introduce a new information disclosure and penalty regime for high-risk promoters of tax avoidance schemes.
Compensating adjustments - as announced on 25 October 2013, new legislation will be introduced effective from that date to prevent perceived abuses of the compensating adjustments provisions in the transfer pricing code by partnerships with service companies.
Corporate debt and derivative contracts - new provisions will be introduced to enhance existing anti-avoidance legislation. New rules will aim to prevent abuse of the 'bond fund' rules. Legislation will also be introduced in relation to the taxation of corporate partners where loan relationships and derivatives are held by a partnership.
Double taxation relief - from 5 December 2013, two loopholes will be closed to reinforce the UK's double taxation relief policy that relief should only be available where a person has been subject to double taxation once in the UK and once abroad.
Offshore evasion strategy - at Budget 2014, HM Revenue & Customs will consult on enhanced sanctions to deter and to penalise persons with money hidden overseas. The Government will also expand the network of HMRC officers abroad to reduce the threat of smuggling, fraud and fiscal crime.