Stuart Wilkinson, tax partner at EY in Cambridge, comments on the Autumn Statement today: “The Chancellor has delivered on one promise – to make the Autumn Statement more about the economy and less of the mini-Budgets of his predecessors. Today was less of a mini Budget and more of a trailer for what’s yet to come."
EY comments: mini Budget or merely a trailer?
He continues: “We saw Business Rates reform deferred until the Budget next year (so bad luck for Retailers and Manufacturers who pay 23% and 17% of the burden respectively). Also, those worried about salary sacrifice were given a further reprieve, with the depths of the document noting that the Government was ‘gathering further evidence’.
“However, the sky blue document also heralded in almost £21bn in tax rises over the six year period, of which the Apprenticeship Levy is meant to raise over half. The rest will come from tax avoidance, evasion, and planning as well as those who seem to be portrayed as the new villains of the day, those who have buy-to-let or second properties.”
“With limited detail announced today, we have to wait two weeks to Legislation Day on 9 December when we see the draft Finance Bill.”
Pay up and pay up faster…
Stuart Wilkinson, tax partner at EY in Cambridge, comments on Autumn Statement: “The Chancellor wants us all to pay and to pay up faster, as his Autumn Statement accelerated when tax is paid.
“First we have Capital Gains Tax for residential property (effectively buy-to-lets and second homes), who now have to pay almost 21 months earlier and now the government is looking at shortening the window for paying stamp duty from 30 days to 14. Following on from the Summer Budget’s advance of corporation tax, the Chancellor seems to have found a seam of gold that he wants to continue to develop.
“So what taxes will be next? With the Chancellor announcing the digitisation of HMRC, we can expect him to keep mining for some time.”
Charities tax relief: It is the season of giving…
In addition to his more high profile charity announcements, the Chancellor made a lower key but nevertheless welcome change. The change removes charities from punitive tax rules designed to prevent individuals and trustees from extracting money from private companies by way of loan.
Currently, if a company with five or fewer shareholders lends money to its shareholders, which may include a charity, a tax charge can be triggered. The Chancellor has recognised that this can frustrate charitable intentions and so has introduced a tax relief.
Stuart Wilkinson, tax partner at EY in Cambridge, comments on Autumn Statement: “Although largely a technical change, in the season of giving, charities will welcome this relaxation in the rules which tax advisers have been asking for since 2013. The devil will of course be in the detail and we will need to look carefully at the new rules to be sure that no charities remain trapped in a net that was never designed to catch them.”
Climate Change Levy: energy tax
“The new apprenticeship levy follows the habit of Chancellors to use pleasant words to sugar coat the introduction of new taxes, as we have seen, for example, with the naming of the UK’s energy tax as the Climate Change Levy. This new tax, which alone constitutes over half of the tax rises announced in the Autumn Statement, requires employers to pay an additional 0.5% on their employment costs.
“To some this might seem very similar to a rise in employer’s National Insurance Contributions. However, this would breach the Government’s ‘triple tax lock’ commitment and has bad connotations as increasing a ‘jobs tax’. Furthermore, this follows on from the introduction in the Summer Budget of the Dividend Tax, which was set up as a new tax rather than merely an increase in the income tax rates on dividends.
“To those paying either tax, this word-smithing is irrelevant. They will still find themselves paying more tax on income they thought was protected under the Manifesto commitment.
ISAs: investment vehicles
“ISAs seem to be the Chancellor’s favourite investment vehicle. Having already announced changes to ISAs in his Budget in March and in the Summer Budget, he has gone for a hat trick by announcing further changes in the Autumn Statement as well.
“The Chancellor is extending the list of qualifying investments for the new Innovative Finance ISA from Autumn 2016 to include debt securities offered via crowdfunding platforms. He is also planning to extend the ISA rules so that you can continue to benefit even after your death! From 2016, ISAs savings of a deceased person will benefit from tax advantages during the administration of their estate.
“With still more extensions to the ISA regime, ISAs could soon become the ‘only show in town’ for those with modest amounts to save and invest.”
Public sector: new ways of outsourcing
“The scale of the planned efficiency savings will almost certainly force the public sector to look at new ways to outsource and commission services.
“This will be uncharted territory for some. In some of these new outsourcing areas, even the supplier community will be unfamiliar and unproven. It’s therefore vital that these contracts are carefully managed in order to provide value for money for the tax payer and to avoid some of the mistakes we have seen in the past.
“These marriages between the public and private sector have to work; and it will take a whole lot more than good intentions and wishful thinking. With the potential for some contracts to span anything from 12 months to 10 years, Government and business will need to keep their relationships under regular review, to ensure they are appropriately resourced and that the lines of communication remain open.”
Motor insurance claims and flood defence funding
"Anything that helps to reduce and control the cost of injury claims will be welcomed by motor insurers and UK motorists alike. But the devil will be in the detail when the reform proposals are published. Previous reforms did make a difference in the short-term but have not fixed the problem - the hope will be that these reforms will lead to a sustained drop in motor insurance costs and not just a temporary lull in claims made by those looking to make money from false injuries. However, the cost savings made could simply act to neutralise the rise in costs the recent IPT hike has incurred.
“It is also encouraging to see the Government commit further funds to flood defence. Combined with the Flood Re scheme, which comes into force in the spring of 2016, this is an important step in addressing the costs and impact of flooding to UK households.”
“The £1.8bn earmarked for digital transformation signals a real ambition to tackle fundamental reform of government services.
“However, there still needs to be an overall major rethink and simplification of all services and putting digital at the front of a programme or initiative won’t mean a sudden improvement in delivery.
“To achieve change, there must be a rethink of the government’s use of new technologies and delivery methods. Many of these government systems are over 30 years old and will need many years to decommission and overhaul – especially considering the length of this Parliament.
“The easy work in digital has been done and this is now longer about building better websites, but about the nuts and bolts on which government operates.”
Shale gas industry
“The announcement to create a Shale Wealth Fund (SWF) to support the creation of a shale gas industry should accelerate investment in this sector. One of the biggest challenges the sector faces right now is funding projects as a result of drawn out planning applications and the low current gas price. This long planning is making investors reluctant to hand over cash as under the current system projects are uneconomical.
“The creation of a SWF helps garner community engagement because the communities will directly benefit from the projects that are happening in their own back yard. It will also speed up and streamline the planning process by connecting the investors with the local communities and planning decision makers.”
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