Today's Autumn Statement delivered by Chancellor George Osborne did not, in fact, contain much detail on the Governments tax proposals, meaning the publication of the draft Finance Bill next week is eagerly awaited.
Below, we set out a selection of the announcements made today:
Introduction of a General Anti-Avoidance Rule
Tax avoidance is headline news at the moment, and the Government has committed to giving HMRC additional resources to tackle this area.
As expected, the Government has confirmed that a General Anti-Avoidance Rule (GAAR) is to be introduced in an attempt to counteract the benefits of artificial tax avoidance schemes. Whilst the intention is to not tackle "responsible tax planning", there are of course concerns that without clear boundaries being set, there may be unwanted consequences. The details released in the Autumn Statement are limited: further guidance and draft legislation should be published next week. Certain safeguards will be introduced at the same time; the application and interpretation of these will be crucial in determining the scope of the new rule.
The Government will also beef up the "Disclosure of Tax Avoidance Scheme" (DOTAS) rules, in order to curb "cowboy" advisers who sell highly aggressive tax schemes. The DOTAS rules require certain promoters of tax schemes to notify HMRC, and users of such schemes must then notify HMRC when they use a scheme.
High Value Residential Property Anti-Avoidance
In the Budget 2012, the Government announced a package of measure to deter individuals owning
dwellings through companies with a value in excess of £2 million. This included:
- a new 15% SDLT rate for acquisitions of £2 million homes by companies;
- (from April 2013) proposals for a new annual charge for companies owning £2 million homes; and
- (from April 2013) the loss of the capital gains tax exemption for non-resident companiesowning such homes.
The Autumn Statement has not provided much additional information in this regard other than theChancellor's comment below:
"We’ve already raised stamp duty on multi-million pound homes and next week publish the legislation to stop the richest avoiding stamp duty. But we won’t introduce a new tax on property. This would require a revaluation of hundreds of thousands of homes. In my view it would be intrusive, expensive to levy, raise little and the temptation for future Chancellors to bring ever more homes into its net would be irresistible. So we’re not having a new homes tax."
The Government has therefore rejected calls for a wide "mansion tax", and many consider that this must also spell the end of the proposed annual charge for companies owning high value homes. However, our view is that the fate of the annual charge (which would only apply to companies and certain other entities owning £2 million homes) is still unclear, particularly as the Chancellor stated that he would "publish…legislation to stop the richest avoiding stamp duty" next week (what could this be other than the annual charge and CGT changes?). We await 11 December with interest.
Decrease in Corporation Tax
- The main rate of corporation tax is being lowered by a further 1% to 21% from April 2014, in a move which will clearly be welcomed by business.
- The Government is also pushing ahead with existing announcements, including new tax reliefs for the creative sector which were announced in March 2012. This will be relevant to companies involved in creating video games, animation and high end television from April 2013 (subject to state aid approval).
- The "annual investment allowance" is being increased ten-fold from £25,000 to £250,000 for investments in plant and machinery from 1 January 2013 (for a period of two years). The AIA allows certain individuals, partnerships and companies to obtain a 100% tax deduction for expenditure which falls within the scheme – so this announcement is certainly welcome.
- The Government will set the full rate of the Bank Levy at 0.130 from 1 January 2013.
Restrictions on Pension Contributions
- From April 2014 the Government announced that it will reduce the lifetime allowance for pension savings from £1.5 million to £1.25 million; and the annual allowance from £50,000 to £40,000. The Government claims that this will reduce the cost of tax relief by an extra £1 billion a year by 2016-17. An attack on pension relief was well-trailed in the press and so while this change is significant, it is not surprising.
Some Respite from Empty Property Rates
The Government has announced that, subject to consultation, it will exempt all newly built commercial properties completed between 1 October 2013 and 30 September 2016 from empty property rates for the first 18 months. This is subject to certain state aid approvals. This is a very welcome announcement as empty property rates continue to be a major headache for landlords. However, it is disappointing that it this will not come into effect until 1 October 2013.
The temporary doubling of small business rate relief will also be extended for a further 12 months from 1 April 2013.
Confirmation of Employee Shareholder Proposals
The Chancellor announced that the Government intends to press ahead with its proposal to introduce the new employment category of 'Employee Shareholder' (no longer to be known as 'employee owner'), with only a few minor amendments. Under this plan, employers will be entitled to offer employees shares in their business in exchange for employees waiving certain employment rights. Further details will be announced next week: click here for more information. The confirmation comes hot on the heels of the Government's response to the consultation on the subject, which showed that a very large majority of respondents were unconvinced by the idea: only 3% of those who responded did so positively.
IR35 RUles to be strengthened
HMRC's IR35 powers have been under the spotlight recently. The IR35 rules can treat contractors whose services are engaged via intermediary companies as employees in certain circumstances (in order to stop perceived Pay As You Earn and National Insurance Contributions avoidance). Following consultation, the Government has announced that it will not be expanding these rules by creating new legislation seeking to tax certain "controlling persons". Rather, it will strengthen the existing IR35 rules (although it will keep this area under review).
Confirmation of VAT Charges
There are no headline-grabbing VAT announcements. The Budget announcements involving static holiday caravans, hot takeaway food, alterations to existing buildings and self-storage have been tweaked, and we are expecting the detailed legislation next week.