There’s (still) no money left

You might have thought, from the carefully-timed announcements of a road tunnel here or a flood protection scheme there, that we were as a country out of the wood.  No such luck: Gorgeous George’s ostensible bounty (more apparent than real, since much of it represents expenditure previously announced) owes a great deal more to the forthcoming election than to the sudden discovery of loose change down the side of the exchequer sofa.

No: the fact is that the years of “austerity” have done nothing to reduce government debt: despite an impressive degree of economic recovery, government finances are still much closer to Carey Street than to Threadneedle Street.  This is principally because (with echoes of the late lamented British Rail) it’s “the wrong sort of recovery”:  lots of people being employed, certainly – but at such low rates of pay that they contribute little or nothing in Income Tax.  In fact, 60% of the country’s Income Tax is now paid by just 10% of the taxpaying population; and half of that 60% is paid by the top 1% of taxpayers: when wealth is more mobile than it has ever been before, those figures must give any government sleepless nights.

So what do we have in the Autumn Statement then?  No significant tax rises, of course: that would be electorally suicidal.  But don’t for a moment imagine that there are not big tax rises and significant public expenditures cuts in the pipeline for next year, regardless of the outcome of the election.  Meanwhile what we have is a compromise between what Mr Osborne wants and what Mr Alexander will agree to (or perhaps vice versa) as the last fiscal act of coalition before the parties start to (publicly) tear each other’s throats out over the next few weeks and months.  Not that Mr Clegg is letting the grass grow under his feet in distancing himself from the Autumn Statement of the government of which he is a member: the Deputy Prime Minister spent the day in Cornwall.

The bit of the Statement which no-one can have failed to notice is the reform to Stamp Duty Land Tax (SDLT) on residential property: essentially the “slab” system has been replaced by a banding system.  This will reduce the SDLT cost on all property purchases up to about £1m, with the most striking reductions coming in at sale prices just above the break points.  If you’ve just completed on a property for, say, £260,000 you really won’t want us to tell you that you would have been almost £5,000 better off if the new rules had applied.  And no; HMRC won’t give you a refund, though if you have exchanged but not yet completed you will have the choice of paying tax under either the old or the new regime.  Beyond about £1m the new system creates increasingly higher charges.  At £2m, for example, SDLT increases by £53,750.  And if you’re in the market for a £4m house, brace yourself to pay almost £400,000 in Duty (an increase of over £100,000).

Although the SDLT changes are primarily targeted at owner-occupiers they will also benefit developers and investors (provided of course that they are not within the penal rules applying to non-natural owners of “expensive” residential property).  But the changes do not apply to commercial property.  This is unfortunate firstly because having decided that a “cliff-edge” system is inequitable it seems odd to want to preserve it for non-residential transactions; and secondly because of the complexity now introduced where a single transaction has both residential and non-residential elements.

Corporate and other “non-natural” owners of property exposed to the “Annual Tax on Enveloped Dwellings” (ATED) charge see the annual charge on properties worth more than £2million increased by 50% above inflation for the for the year to 31 March 2016.  The increase does not, apparently, affect properties worth between £1m and £2m which were brought into the ATED charge only by the 2014 Budget.

The Chancellor continues to turn the screw a little more on non-domiciled individuals.  The charge for 7-year residents remains at £30,000 but that for individuals who have been tax-resident in the UK for at least 12 out of the last 14 years is to increase from £50,000 to £60,000; and a new charge of £90,000 will apply once you have been resident here for 17 out of the last 20 years. Perhaps more significantly, the Government will consult on making the election apply for a minimum of 3 years, which would apparently have the effect of increasing to £90,000 the minimum charge to unlock access to remittance basis. This would be a significant change for taxpayers whose non-domiciled status is only occasionally relevant for UK tax purposes.  In particular this would affect people who have comparatively little offshore income but who make a one-off capital gain; they need remittance basis for only one year but would effectively be forced to “buy” three years’ access.

One opportunity which has been widely exploited in the past on incorporating a business has been the scope for selling goodwill to the new company at market value, paying tax on the gain at the Entrepreneurs’ Relief (“ER”) rate of 10% and (in some circumstances) claiming tax relief in the company to boot.  Too good to last?  Any rate, it has now been countered by the double whammy of denying both Entrepreneurs’ Relief to the vendor and tax relief to the company.  Very unsporting, we feel.  But at least transactions which have already gone through are unaffected.

On the other hand, there is good news on the ER front as well.  Until now, the crystallisation of a gain which has previously been deferred by use of the Enterprise Investment Scheme or Social Investment Tax Relief has (completely illogically) not been capable of qualifying for ER: you’ve had to choose, in effect, between taking ER and deferring the gain.  It is now very sensibly proposed that if the original gain would have qualified for ER had it not been deferred by reinvestment, it will also (to the same extent) qualify for ER when it crystallises at a later date.  But this will only benefit gains that are deferred on or after 3 December: it won’t apply to gains deferred before then even if they crystallise after that date.

The best that can be said for the enhancement to R&D tax relief (up from 225% to 230%) is that it is at least better than reducing it: but the introduction of an advance assurance scheme for small businesses making their first R&D claim is likely to be of more practical significance.  And the introduction (from April 2015) of a new Corporation Tax relief for the production of children’s television programmes is likely to be of real help to small businesses operating in that field, though sadly we suspect that a combination of modern animal welfare rules and a lack of thespian hamsters may rule out a return of Tales of the Riverbank.

As widely leaked ahead of the Autumn Statement, the Government is to review the future structure of business rates with a view to reporting by Budget 2016.  Meanwhile temporary sticking-plaster solutions include extending the doubling of Small Business Rate Relief to April 2016 and increasing to £1,500 the existing business rates discount for shops, pubs, cafes and restaurants with a rateable value below £50,000.

HMRC propose to review arrangements whereby the use of “umbrella company” structures permits employment intermediaries to afford tax relief for home-to-work travel for some temporary workers.  Employers will perhaps be delighted or aggrieved depending on whether they use the arrangements themselves or see them as unfair competition.  But most employers will be unequivocally happy to see the prospective adoption of many of the recommendations made by the Office of Tax Simplification on simplifying the rules for employee benefits and expenses.

Finally, although it wasn’t in the Autumn Statement itself, we were delighted to note one other government announcement of the same day:  next March the country will be repaying the last of the debt incurred to finance the First World War.  So there’s hope for us yet.  Eventually.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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