George Osborne spoke for sixty seven minutes in his combined Comprehensive Spending Review and Autumn Statement. As a rough estimate maybe two or three of those minutes were about taxation. So no tax changes then? Well not quite.
As we know the Chancellor introduced his famous five year tax lock earlier this year that means he cannot raise the headline rates of the main taxes. So he has to look for other ways to increase revenue and today he found a few. As is the way in the modern world of taxation however, the dates on which the measures will come into play vary enormously.
There was a continued attack on owners of buy-to-let and other second homes. For those properties purchased after April 2016, stamp duty will be charged at an increased rate of 3% above standard rates. This comes on top of the restriction in tax relief for interest payments by individuals on buy-to-let mortgages. Capital gains tax on residential properties was also singled out as being payable within 30 days of sale as from 2019 onwards. The principle residence relief will remain, so again this will be targeted at owners of buy-to- let and second homes.
The new Apprenticeship levy for businesses with an annual payroll in excess of £3m will be payable from April 2017, sooner than some anticipated. This is estimated to bring in revenues of over £11bn for the four years starting in April 2017 and thus outweigh the anticipated savings to businesses from the lower rates of corporation tax announced in the summer for the later years of the Parliament. When coupled with the National Living Wage and increases in auto-enrolment contributions, the gross payroll bill is set to increase significantly.
A new penalty is to be introduced equal to 60% of the additional tax due for cases which fall foul of the General Anti Abuse Rule which has been in place since 2013. Although this particular weapon has not been much used by HMRC to date, the expectation is that with these punitive penalties it will be more widely deployed.
There are other tough new measures for those who persistently enter into tax avoidance schemes that HMRC are successful in defeating, which include surcharges and naming and shaming of ‘serial avoiders’.
There was confirmation that changes will come in from 6 April 2016 to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary. However there is still no detail available on how this is to work in practice and to what extent those operating through personal service contracts will be affected.
The brave new world of digital taxation
The Chancellor announced a £1.3bn investment strategy in digital technology to ensure HMRC is set up to have access to digital accounts for all individuals and businesses by 2020. As part of the implementation of these new systems, HMRC will consider payment dates for tax, almost certainly resulting in an acceleration of the payment of tax for individuals and businesses, including tax on dividends for example.
And what wasn’t mentioned?
There were a number of areas of tax that had been tipped for inclusion today, but none of those below face immediate changes – next Spring perhaps?
– Contractors working through personal service companies and the IR35 provisions: change is almost certainly coming, it is more of question of when and exactly how.
– Enterpreneurs’ relief: there had been concerns that the relief would be restricted in some way as it does represent a significant cost to the Treasury.
– Further restriction of relief on pension contributions: restrictions to higher rate tax relief seem almost certain at some stage, so higher rate tax payers should perhaps be giving thought to making additional contributions before April next year.
-Salary sacrifice arrangements: these are very popular and whilst no changes were announced today, HMRC have said they will keep a watching brief as they are concerned about the number and cost of such arrangements.
Head of Taxation Services
Burgis & Bullock
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