24th November 2015
As the Chancellor prepares to deliver his Autumn Statement tomorrow, tax experts at EY run through some of the measures he may be considering…
Business tax predictions
Chris Sanger, head of tax policy at EY, says: “We expect the conclusion of the business rates review to be announced in this Autumn Statement. While this was originally set up with the constraint of being “revenue neutral” within business rates alone (as opposed to all business taxes), we might see some relaxation. Aspects of this tax have been seen to contribute to the challenges faced by UK manufacturers and the high street. This is also the first down payment on the Government’s wider Business Tax Roadmap, which has been promised for Budget 2016.”
International tax changes and anti-avoidance
Sanger says: “Overall, we can expect the Autumn Statement to maintain the existing approach taken to tackling tax avoidance and to pledge that the UK will continue to play its role on the international stage. The Chancellor has an array of existing measures to name drop in his speech such as the General Anti Abuse Rule and the Diverted Profits Tax. The Chancellor may also provide more details of those measures currently under consideration, such as the Large Business Tax Compliance proposals and the Country By Country Reporting measures, about which we may hear more on Legislation Day (9 December).
“We could also see announcements about increased resources for HMRC in focused areas, responding to the criticism by the Public Accounts Committee on service standards. This may be somewhat problematic within the overall spending reductions.
“Plus, we are also expecting more details of the UK’s revised version of the Patent Box to be published following the Autumn Statement.”
Small business and contractors
Sanger says: “Following consultation in the summer, the Government is expected to publish a new approach to addressing tax-motivated incorporation, including revising the so-called ‘IR35’ rules that apply to disguised employment. This could affect many small businesses and mark a step change in the direction of policy, driven by concern over the level of funds that are lost by the Exchequer.”
Sanger says: “The Summer Budget noted that the Government was keeping a close eye on the types of benefits that are now being provided through Salary Sacrifice and the reduction in the tax and national insurance receipts that this resulted in. At this stage, it’s not clear whether the Government will look at the underlying reliefs, as suggested by the Public Accounts Committee, or instead seek to address the Salary Sacrifice mechanism itself. Focussing on the latter would appear to be a mistake, since it can be argued that Salary Sacrifice merely represents an efficient mechanism for ensuring that employees have access to the reliefs that Parliament has intended.”
Reforming the business energy tax landscape:
Sanger says: “The Chancellor is likely to respond to the recently closed consultation on simplifying the notoriously complex web of overlapping taxes, reliefs and incentives within the business energy tax landscape. In doing so, he may confirm the combination of these mechanisms within a new version of the Climate Change Levy (CCL), with a single reporting requirement. However, pressure on the finances is likely to drive a reassessment of the existing and continued role of tax incentives such as Enhanced Capital Allowances and CCL reliefs. Incentives for behavioural change will therefore need to be carefully balanced against the cost, particularly for vulnerable industries with high exposure to energy prices and international competition such as the Steel industry.”
Jeff Soar, UK head of financial services tax at EY, says: “There has been so much tax change across the financial services sector in the last few years that it’s hard to truly gauge the overall impact it will have on the industry. Before any more significant changes are made, it’s worth the Government analysing how the changes to date have impacted not only the sector, but also the UK’s competitiveness on the global market.
“After the seismic bank tax announcements in the Summer Budget and last year’s pensions freedoms, the industry is in need of stability and a clear longer-term direction, and will no doubt be hoping this Autumn Statement brings some reassurance. That said, we’ve not managed a Budget or Autumn Statement without a headline change for financial services for some time – so you never know what might crop up. Aside from the speculation around whether challenger banks will be exempt from the levy and surcharge, some things the industry are watching closely for include: HMRC’s consultation response on the options for the deduction of tax from interest for the banking and fund industry; an update on the two measures targeted specifically at carried interest arrangements for asset managers; and insurers will be keenly awaiting an update of a wider review of perceived VAT anti avoidance.”
Personal Tax predictions
David Kilshaw, private client services partner at EY, says: “After the announcement of extensive changes to the taxation of non-UK domiciled individuals in the Summer Budget, everyone will be hoping for a ‘silent night’.
“In addition to the broader changes to non-doms announced at the Summer Budget, the Chancellor announced some changes to ensure that UK residential property held through offshore structures would fall within the UK Inheritance Tax net. Further details of how this policy might be implemented could be released around the time of the Autumn Statement.
Personal savings: “The Chancellor has previously chosen the ISA as his vehicle of choice to help savers and we may see further versions and changes here.”