Deloitte previews the Autumn Statement 2016


Deloitte’s team of tax experts, chief economist, head of infrastructure and public sector leader consider key potential announcements, the economic outlook and the state of public finances ahead of Chancellor Philip Hammond’s first Autumn Statement on 23 November.

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The economy

Ian Stewart, Chief UK Economist, said: “I’d expect this Autumn Statement to be short on the eye-catching surprises beloved of Mr Hammond’s predecessor, with the watchwords of dependability and consistency in times of uncertainty. This will set the theme for the long haul of Brexit that lies ahead.

“Brexit is likely to slow growth over the next couple of years and further reduce the chances of the government meeting its target of balancing the books by 2020. The Chancellor is likely to push the deadline for eliminating the deficit well into the next Parliament. This would give him more scope to lean against economic weakness by boosting spending – particularly through targeted increases in spending on infrastructure and housing.

“Anyone looking for a dramatic, Keynesian-style revolution in fiscal policy will be disappointed. The destination, eliminating the budget deficit, will be unchanged but Mr Hammond is likely to say that, in the post-referendum world, it is prudent to take longer to get there.

“I will be watching closely to see how Brexit has altered the Office of Budget Responsibility’s view of Britain’s long term economic prospects. My hunch is that they will forecast that most of the knock to growth will happen in the next couple of years, with growth towards the end of this Parliament running marginally lower than previously expected.”


Bill Dodwell, Head of Tax Policy, said: “The Chancellor is facing fewer calls for more taxes and tax reliefs and instead calls for fewer tax changes and a focus on simplification. His first task will naturally be economic, as the Office of Budget Responsibility delivers its first review of the UK economy after June’s momentous vote. It’s likely that this Autumn Statement will see neither major tax reductions nor spending increases

“Business and individuals will look for updates – and hopefully changes – to two current areas. These are ‘Making Tax Digital’ and, for companies, proposed restrictions on the use of losses and interest expense.”

Making tax Digital

The Making Tax Digital project was first mentioned in Budget 2015, followed by the December 2015 publication of the ‘Digital Road Map’.  The ambition is to modernise HMRC’s systems to provide a better service for taxpayers, with real-time updating of their tax position, through new digital tax accounts.  Seven million people already have personal tax accounts, with accounts being rolled out to everybody over the coming years. Taxpayers will then pay the right amount of tax during the tax year, instead of millions facing under and over payments after year-end.  The online accounts will be populated with data provided to HMRC by third parties, reducing the need for millions to complete Self-Assessment tax returns.  

The project is based on three things:

  • Significant updating of HMRC’s current systems, which have historically been based around the computerisation of paper forms and returns.  HMRC estimates this will cost £1.3 billion.
  • Major new data provision to HMRC by third parties. This started with Real Time Information for PAYE and is moving to real-time updates from banks and building societies.  Potential new data providers could be pension funds receiving contributions, companies/registrars paying dividends, and charities reporting gift aid.
  • Major changes to record keeping and data submission by landlords, the self-employed, simple partnerships and small companies.  This is intended to introduce new requirements to keep records using accounting software and upload data to HMRC every quarter.  The aim of this is to raise more tax by fewer taxpayer errors, through earlier data submission.

Kirsten Tassell, personal tax partner at Deloitte in Cambridge, commented: “The controversial aspects involve mandating record keeping and quarterly updating for most self-employed people and landlords from April 2018, with an extra year being allowed for those with modest incomes and two extra years given for small companies.

“We think that requirements for accounting software should not be mandated for several years. This is a huge change for 5.4 million small businesses and 1.5 million landlords and will add to their costs, as they have to buy new systems and potentially engage professional help. There are hundreds of different types of accounting software, much of which is designed for particular types of businesses. It is highly unlikely everything could possibly be in place for 2018.

“We hope that the Chancellor will acknowledge that changes are needed to a project of this scale – and say as much at the Autumn Statement. We would like to see a road-map from HMRC, acknowledging that information providers will need several years to prepare.”

Corporate taxation

The UK has taken a lead in changing the global corporate tax system, through the G20/OECD Base Erosion and Profit Shifting (BEPS) project and has already introduced several of the measures, including better reporting to tax authorities, changes to the Patent Box regime, removal of tax deductions for so-called hybrid payments, and updated transfer pricing rules.  The UK is also expected to change its double tax treaties by ratifying a multilateral instrument in 2017. 

Bill Dodwell commented: “There has been consultation on limiting tax deductions for financing expense within large companies. The original plan was to introduce new limits from 1 April 2017, raising over £1 billion annually.  Some businesses have asked the Chancellor to defer the introduction of the new rules until 2019, when the European Union introduces similar restrictions.  We doubt that the Chancellor will agree – although we hope that changes will be made to make it clearer that interest paid to third parties should always qualify for tax deductions.  Sectors especially concerned include infrastructure and property. 

“A separate proposal from Budget 2016 is to limit the use by large companies of losses incurred in earlier years. From April 2017, only half the profits over £5 million can be offset with losses from prior years. This has a particularly adverse impact on capital projects, which typically incur losses during the ‘build’ phase, and now face having to pay tax before making an overall profit. Affected business sectors have asked the Chancellor to reconsider this measure.”

Employment taxes

Budget 2016 produced two potentially important changes, which have been consulted on over the summer and autumn.  The first relates to public sector engagement of contractors through personal service companies (PSCs).  From April 2017, the proposal is to place the onus on the public sector engager to assess whether or not the contractor would be regarded as employed if engaged directly rather than through the PSC.  If so, then the engager would be required to operate PAYE and National Insurance on payments to the PSC. 

Mark Groom, employment tax partner at Deloitte, commented: “Many public sector bodies have asked for a deferral on the basis that they will not have suitable systems in place. If the change does go ahead – and is successful – it must be likely that it would be extended to private sector engagers.”

A second consultation concerned salary sacrifice arrangements, where employees agree to reduce salaries so as to receive other benefits instead. 

Mark Groom said: “The proposals will in fact go further than salary sacrifice, and are intended to apply wherever a benefit has been obtained instead of cash in any circumstances including, for example, cash alternatives, flexible benefit allowances and simple trading up of benefits. With the exception of several specified benefits, where any of these circumstances apply, the benefits concerned will be taxable based on the higher of the tax value of the benefit and the cash that could otherwise have been obtained.  In the case of a company car, for example, if the tax value based on CO2 emissions is, say, £3,000 but an employer also offers, say, a £5,000 cash alternative, tax will be due on £5,000 rather than on £3,000. The three main exceptions where these new proposals will not apply are pension contributions, childcare or cycle to work schemes.  

“Benefits currently afforded a favourable tax treatment will be most impacted. Typically these include death in service benefits, health screens, car parking, workplace gyms, work-related training, mobile phones and low CO2 cars.  We hope the government will reconsider the scope of these proposals and as a minimum include grandfathering provisions to protect those already contractually committed to such benefits.” 

Rates and allowances

The UK-wide personal allowance and higher rate thresholds for all but Scotland are already in place for 2017/18.

The amounts are:

Tax   Year

Personal   allowance

Basic   rate band

Higher   rate threshold









Kirsten Tassell commented:“The Conservative manifesto commitment was to increase the personal allowance and higher rate threshold to £12,500 and £50,000 respectively by 2020. Increasing the personal allowance a further £500 in 2017/18 might cost around £3.5 billion, and increasing the basic rate limit rate a further £4,500 to reach the higher rate threshold of £50,000 might cost around £4 billion.

“The upper national insurance threshold is linked to the higher rate threshold, so an increase in this would raise money by increasing the band on which the main rate (12% or 9%) is due. The starting threshold is linked to the CPI rise to September 2016, so we would expect to see an increase of 1% to £8,140 per annum. A higher increase to help low earners is possible, although an increase of £1,000 per annum might cost around £3 billion. 

“The Scottish government will announce its own income tax rates and bands on 15 December.”

Other tax matters:

The Autumn Statement may include updates on the outcomes of other consultations, including:

Capital gains tax on residential property

The 2015 Autumn Statement introduced a requirement that from April 2019 capital gains tax on residential property sales is to be paid within 30 days of the sale completion.

“We would expect to see further consultation around the practical implications of this change. 30 days is a very tight deadline and in many cases it will not be possible to calculate an accurate tax liability within 30 days of the disposal.”

£1,000 exemption for rental and trading income

The 2016 Budget announced a simplification for those who have small amounts of either property or trading income. From April 2017 there will be a separate allowance for each source of income and if either is less than £1,000 it will not be taxable and will not need to be declared on a tax return.

“Those with income in these categories of over £1,000 can either deduct the allowance from their cash income or calculate their profit by deducting expenses, and will need to decide the best way to proceed. It is not clear how this new relief will interact with Rent-a-Room relief which allows tax-free income of up to £7,500 for those who let a room in the house they are living in, and we may hear some more detail in the Autumn Statement.”

Stamp Duty Land Tax on second homes

From 1 April 2016 higher rates of Stamp Duty Land Tax (‘SDLT’) have applied to purchases of additional residential properties in England, Wales and Northern Ireland, such as second homes and buy-to-let properties. Similar changes applied to Land and Buildings Transactions Tax in Scotland.

Kirsten Tassell commented: “Whilst the purpose of the legislation was to apply an extra 3% SDLT to second homes and buy-to-let properties, the higher rates apply where the purchaser of a residential property owns two or more residential properties at the end of the day of purchase, unless the additional dwelling purchased replaces their main residence. For individuals, the order in which transactions take place and the position of joint owners may pose particular problems.

“If a new property is bought and the existing residence is not sold at the same time the higher SDLT rate must be paid. It will be refunded if the previous main residence is sold within three years of the acquisition of a new main residence, although this will clearly create cash flow problems.

“Joint purchasers are treated as if they are one unit. Therefore, if a parent helps a child to acquire their residence by becoming joint owner, as is frequently required by mortgage providers, and the parent already holds an interest in a dwelling, the higher rates will apply to the whole transaction, even though the child does not own any other property, and the property is intended to be the child’s main residence. 

“The changes in SDLT have generated £670 million in England and Wales since they were introduced in April 2016, but some relaxations to focus the tax purely towards second homes and buy-to-lets would be welcome.”


Individuals who are not domiciled in the UK will be subject to a new tax system from 6 April 2017. At present they are not taxed on any income or gains from outside the UK provided these are not brought to the UK. Once a non-domicile has been in the UK for more than 7 years a charge is payable for this treatment, of up to £60,000 per annum, depending on the length of residence. From 6 April 2017 this treatment will not be available for those who have been resident in the UK for at least 15 of the previous 20 tax years. Individuals who were born in the UK with a UK domicile who leave the UK and subsequently return will not be able to use the remittance basis at all.

Kirsten Tassell added: “There has been a technical consultation over the last few months as to exactly how the new rules will work, but the government proposals have not yet been fully thought out. Further draft legislation is expected in December and this may be referred to in the Autumn Statement. There are thought to be around 5,000 non-domiciles in the UK who use the remittance basis. It is important the rules are available as soon as possible so that they have clarity over their tax affairs.”

The public sector

Rebecca George OBE, UK Public Sector Leader, said: “For the public sector, we could see continued tightening of day-to-day budgets but much more money for building and infrastructure projects. What we’d hope to see as well is some recognition that big transformation programmes – like getting public bodies to use digital technology more effectively – need to continue. This is certainly true in the NHS, the feedback we hear from health leaders is that extra funding can provide a short-term fix to the challenges the health service faces, but longer term it needs an accelerated programme of reform.

“Our State of the State report shows that public sector leaders are concerned about the level of distraction from those programmes that Brexit could cause, and the public still see support for services like the NHS as a bigger priority than leaving the EU. We also found that 60 per cent of the public support extra spending on public services, even if that means tax rises, so there is appetite for the Chancellor to loosen the purse strings.”


Nick Prior, Global Head of Infrastructure, said: “The idea of the Chancellor using the Autumn Statement to unlock extra funding for infrastructure appears to be having its day, and about time too.

“While we’re unlikely to see a full shift to Keynesian levels of government spending, the cost of government borrowing is at such a low level that even modest injections of cash can go some way to boosting UK productivity and improving a poor track record on infrastructure. The World Economic Forum recently ranked the UK 27th in the world for the quality of its roads and 19th for rail.

“So my advice to the Chancellor would be to ‘think small’. The last government focused, some say too much, on grand and glamorous projects which take many years to bear fruit and aren’t directly relevant to large numbers of people.

“Instead, Mr Hammond should focus on the smaller, ‘shovel ready’ projects - roads, rail improvements, social housing and schools – where money can be put to immediate use and we can see much faster return on investment.

“In a recent survey Deloitte ran on what the public say would most improve their area, the top priorities were better public transport, better hospitals, more investment and better roads. So there is appetite for this kind of focus.

“There would also be political advantages to a strategy like this, as it fits with the government’s narrative of fair and inclusive growth that benefits the many, not the few. These are the kinds of infrastructure that most people use every day and investment here would make a tangible difference to those who feel left behind and that government doesn’t work for them.”



The Deloitte Cambridge office comprises 8 Partners and over 250 staff who deliver a full range of professional services to the East Anglian region. As well as focussing on the life sciences and technology sectors for which the region has become so renowned, the office has long standing specialisms in other sectors including the professions, consumer business, food and agribusiness.

Deloitte LLP