If MPs were hoping for tax reform to lift the UK out of the economic crisis, the Chancellor delivered what was, in tax terms, the equivalent to the Answer Answerless which Elizabeth I delivered to parliamentarians over four hundred years ago.

Elizabeth I was exercised, as Elizabeth II’s government is today, by fiscal deficits, addressing the relationship between England and Scotland and the possibility of female succession to the throne (albeit by executing the Scottish heir to the English throne, rather than enfranchising any daughter of the Duke and Duchess of Cambridge).

Elizabeth I was not moved to alter the status quo, nor was the Chancellor.  Plusçachange.

Nothing which is likely, in tax terms, to be of much importance to the firm’s clients was announced.

Those announcements, or reannouncements, which may be of interest – such as they were are as follows:


  • A general anti-avoidance rule (“GAAR”) is to be introduced in April 2013 (as expected).
  • Three schemes involving loan relationships and derivative contracts are to be closed with effect from 5 December 2012.  New legislation will:
    • apply to a “mismatch” scheme to which a single company is party (at the moment the mismatch scheme rules only apply where a company is part of a group);
    • exclude property return swaps between connected companies (or where avoidance is involved) from the derivate contract rules;  and
    • apply to manufactured payments with respect to a benefit received in any form (e.g. the release of a liability to pay an amount).
  • Individuals will not be able to claim relief for the payment of royalties from 5 December 2012.
  • SDLT anti-avoidance rules are to be published next week.
  • HMRC’s data gathering powers are to be extended to enable HMRC to seek information from merchants in respect of credit and debt card payments made by their customers with a view to identifying businesses which do not declare their full sales or operate in the ‘hidden’ economy.
  • From May 2013 HMRC is to focus upon identifying offshore trusts which are used to ‘hide income and wealth overseas’ and investigate offshore property ownership.
  • The Government intends to seek to enter into agreements with other jurisdictions providing for information exchange on a similar basis to the FATCA Agreement entered into recently with the United States. (For our note on FATCA click here).

No new taxes ...

  • No “new” homes tax (or ‘mansion tax’) will be introduced (although the new annual SDLT charge on residential property with a value of over £2 million owned by a non-natural person) will go ahead in April 2013).
  • The fuel duty rise (3%) is to be cancelled (this had been due to be imposed in January 2013).

Help for businesses

  • The small business rate relief scheme will be extended to April 2014 (i.e. for 1 more year).
  • All newly built commercial property completed between 1 October 2013 and 30 September 2016 will (subject to state aid limits and further consultation) be exempt from empty property rates.
  • Small self-employed businesses with receipts of up to £77,000 will be able to opt for a cash basis of computing their corporation tax liability from April 2013.
  • New tax incentives for shale gas will be introduced, subject to consultation.
  • The annual investment allowance will be increased from £25,000 to £250,000, for two years, from January 2013.
  • The tax credit for video games, animation, and high end television will be introduced at the rate of 25% of qualifying expenditure from April 2013.
  • The main corporation tax rate to be reduced by 1% from April 2014 (to 21%) but banks excluded from this.
  • The bank levy to be increased to 0.13% from 1 January 2013 and, from that date, any amount paid in respect of a foreign bank levy will not be deductible for corporation tax purposes.

Measures affecting individuals

  • The lifetime allowance for pension schemes will be reduced to £1.25 million and annual allowance to be reduced to £40,000 from 2014-2015 (some potentially complex rules to allow an individual to ‘protect’ their pension up to the current lifetime limit of £1.5 million are being considered).
  • The ISA limit will be raised to £11,500 from April 2013 and the Government will consult on holding AIM shares in ISAs.
  • The higher rate threshold for income tax, CGT annual exemption amount, and IHT nil rate band to be increased by 1% in 2015/16.

The future – Budget 2013

  • Budget 2013 will include:
    • an update on the Government’s plans to help incentivise employee ownership;
    • an update on HMRC’s review of the use of offshore employment intermediaries to avoid income tax and national insurance contributions; and
    • the publication of a “comprehensive” offshore avoidance strategy.