The new Chancellor delivered his first Autumn Statement on 23 November 2016. Although it was relatively light on big announcements it did re-affirm the Government’s commitment to a number of corporate tax measures announced prior to the historic Brexit referendum result. The Chancellor also revealed that this would be his last “Autumn Statement” as from 2018 there will be one fiscal event per year (the Budget) taking place in the Autumn. 2017, as a transitional year, will see both a Spring and an Autumn Budget.
The Autumn Statement was swiftly followed, on 5 December 2016, by the publication of draft Finance Bill 2017 legislation (and also various consultation-related and other documents).
Key developments of note from the Autumn Statement and draft Finance Bill documents include:
• business tax roadmap – the Chancellor confirmed the Government’s commitment to the business tax roadmap unveiled as part of the 2016 Budget. The roadmap sets out the Government’s business tax plans for the remainder of the current Parliament, to include the further planned reductions in the corporation tax rate to 19% (from April 2017) and 17% (from April 2020) and the Government’s ongoing commitment to the OECD’s Base Erosion and Profit Shifting (BEPS) project. See here for our earlier commentary on the business tax roadmap
• substantial shareholding exemption (SSE) – following a consultation, the Government has confirmed that it will amend the SSE. The SSE allows “substantial” share disposals by UK companies to take place without giving rise to a corporation tax charge on any gain realised, provided a number of conditions are met. See here for our earlier commentary on the consultation. The current SSE requirement, that the company making the share disposal must be a “trading” company (or at least a member of a “trading” group) both before and immediately after the disposal, is to be removed. The change, which will be welcomed as a relaxation and simplification of this valuable corporation tax exemption, will take effect from 1 April 2017. Various other useful changes will be made as well as an extension of SSE to the disposal of shares by certain qualifying institutional investors
• corporation tax interest deductions – following the 2016 Budget announcement, and publication on 12 May 2016 of a consultation document setting out the detailed design proposals of the new rules, the Government confirmed its commitment to the introduction of this new regime from April 2017. See here for our previous commentary on this measure. As part of the 2016 Autumn Statement it was confirmed that banking and insurance groups will not be subjected to bespoke rules
• corporation tax loss reform – similarly, the Autumn Statement confirmed that the corporation tax loss rules will be reformed with effect from 1 April 2017, as more fully described here
• extending corporation tax to non-resident companies – it was announced that the Government will consult on a proposal that non-resident companies in receipt of UK source income should be subject to UK corporation tax (and not, merely, UK income tax). The driver behind this would appear to be a desire that such non-resident companies will be subject to the new corporation tax interest deduction and corporation tax loss rules
• employee shareholder status (ESS) – following on from the £100k lifetime limit of exempt gains for employee shareholders imposed from March 2016, in a surprise development it was announced at the Autumn Statement that the income tax and CGT reliefs available to employee shareholders would be entirely abolished with effect from 1 December 2016. As a would-be employee shareholder must receive independent legal advice as to the effect of such status at least 7 days prior to an ESS agreement taking effect, this change meant that the tax reliefs were effectively removed for any individual who had not received such advice before 23 November 2016. Whilst it remains technically possible to still become an employee shareholder, pending amendment of the Employment Rights Act 1996, with the removal of the associated tax reliefs this announcement has effectively shut down the ESS route
• VAT group rules – on 5 December 2016, a consultation document was published on the scope of the UK’s VAT grouping legislation. Comments are invited by 27 February 2017. This follows the decisions in a number of ECJ cases which, broadly, held that member states may not (without good reason) exclude entities lacking a legal personality from joining VAT groups. The UK rules currently limit VAT group eligibility to bodies corporate – the consultation document explores the options for relaxing this restriction in order to comply with these ECJ decisions. The consultation document can be viewed here
• salary sacrifice restriction – the draft Finance Bill 2017 legislation published on 5 December 2016 includes measures to restrict the beneficial tax and national insurance contributions (NICs) treatment of so-called “salary sacrifice” arrangements, with effect from 6 April 2017 (subject to grandfathering). As previously announced, from that date the tax and NICs advantages of providing benefits through salary sacrifice will be removed, save for certain pensions, childcare, cycling and low emission car benefits provided to employees in this manner