A review of some of the key announcements in 2015’s third Budget
The 2015 Autumn Statement was overshadowed by the Spending Review, with scant detail in the Chancellor’s speech. A degree of (or perhaps in) detective work is required in order to collate relevant information, with lingering concern that something important may have been missed.
The following may be of interest to readers, with further detail at:
Digital / Quarterly Reporting
Under the Heading “Making Tax Digital”, the government has announced:
“Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account, reducing errors through record keeping.”
Apparently, this new development will “not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year.” Which indicates that it will apply to those individuals whose incomes exceed that limit. Since this is one of the key criteria for determining whether or not HMRC requires a Self Assessment tax return (see for instance Self Assessment Tax Returns) it may well be that those in the Self Assessment regime will need to get used to a quarterly return basis. A consultation is to be expected in January 2016.
3% Extra SDLT Charge on Additional Residential Properties
The government intends to apply an additional 3% to current SDLT rates on those residential properties that will, broadly, not be the purchaser’s only or main residence, with exceptions for caravans and similar. There is also a £40,000 de minimis. This measure will apply from 1 April 2016.
It seems that individuals and trusts remain the key target (much like the proposed withdrawal of interest relief for residential property investors announced in the Chancellor’s second 2015 Budget, in June) as the additional rates will not apply to “corporates or funds making significant investments in residential property”, although a consultation on that exemption will be forthcoming. We may have to wait a while yet to see if company structures, etc., holding fewer than 15 properties (which seems to be the “significant” threshold) will be caught.
Paying SDLT and CGT Earlier
The government intends to reduce the SDLT payment and filing window from 30 days to 14 days, in 2017/18. A consultation will be launched in 2016.
The government also intends to introduce a requirement that a “Payment on Account” for any Capital Gains Tax due on the disposal of residential property, be made within 30 days of completion. The intention is for this to apply from April 2019, with a consultation to be launched next year.
While it is arguably appropriate for HMRC to take its cut of any taxable gain without unnecessary delay, experience suggests that many taxpayers struggle with compiling the necessary historic data within the timeframe currently available – which can conceivably be up to almost 2 years for a gain made very early in the tax year. But a 30-day period may prove inadequate if, for example, purely tax-driven historic valuations were found to be required.
0.5% Apprenticeship Levy
The government has confirmed that the Apprenticeship Levy will go ahead, at a rate of 0.5% of an employer’s “paybill”, and to be collected via PAYE from April 2017. An allowance of £15,000 against that charge will ensure that only employers with annual paybills in excess of £3million will need to make a contribution towards the aspiration to fund the cost of 3 million apprenticeships by 2020.
Annexe B of the government’s consultation response confirms that an employer’s “paybill”:
“…will be calculated based on total employee earnings; it will not include other payments such as benefits in kind. It will apply to total employee earnings in respect of all employees.”
Entrepreneurs’ Relief – Mixed Messages?
The (Spending Review and) Autumn Statement said directly of Entrepreneurs’ Relief only that:
“The government will consider bringing forward legislation to amend the changes made by Finance Act 2015 to Entrepreneurs’ Relief, in order to support businesses by ensuring that the relief is available on certain genuine commercial transactions.”
Which would appear to be a welcome restriction to previous anti-avoidance legislation. However, it also said, under “Tackling Tax Avoidance”:
“The government will shortly publish a consultation on the company distributions rules, and will amend the Transactions in Securities rules and introduce a Targeted Anti-Avoidance Rule.”
Finance Bill 2016 has since expanded on this, to set out that (briefly) distributions on a winding-up in ‘phoenix’-type arrangements will be considered to be income. This will apply where a person appears to be carrying on a similar trade or activity, within 2 years of receipt of a distribution on a winding-up.
60% Penalties for GAAR
Also under “Tackling Tax Avoidance”, the Autumn Statement advised that a new penalty, at 60% of the tax due, will be applied in cases where the General Anti-Abuse Rule is successfully applied.
Greater Restrictions on New Tax-Free Childcare
When it finally does become available, (postponed to 2017), the new childcare regime will no longer be available for those families with a parent whose upper income exceeds £100,000 per parent, (down from £150,000), and the minimum income level per parent will be increased from 8 hours’ worth to 16 hours’ worth of the National Living Wage.
Clearly, some Higher-Rate taxpayers will now want to remain in the existing Childcare Voucher regime, alongside those Additional-Rate taxpayers who were already ineligible for the new regime. This assumes the government will allow the ‘old’ childcare voucher scheme to continue; that appears currently to be the intention.
3% Diesel Supplement to be retained
Under “Company Car Tax”, the Autumn Statement also confirmed that the 3% diesel supplement will now be retained until 2021.
At the time of writing, Finance Bill 2016 had just been published. Readers will hopefully forgive any developments in the Finance Bill that are not reflected in the foregoing.
Lee is a creative Chartered Tax Adviser with 20 years’ experience of advising property investors and family businesses on tax matters. He is also an experienced tax writer, contributing to Bloomsbury Professional’s online current awareness service and is a lead writer for Property Tax Insider (taxinsider.co.uk) and its sister publications.