Autumn Statement 2016

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Philip Hammond’s first (and last!) Autumn Statement…

The new Chancellor’s Autumn Statement was very much in line with expectations and the only “rabbit out of the hat” was the surprise closing statement that this will be the last one (it is to be replaced by the main Budget which will be moved from the Spring to the Autumn).

This closing remark was perhaps a relief for many who will have found today’s Autumn Statement a relatively dull affair with very little in the way of new announcements, particularly from a taxation viewpoint. This is probably a symptom of the Government’s energies currently being focussed elsewhere at the moment, such as on Brexit.

Putting taxation to one side, there were a number of welcome announcements today (even though these were also largely expected), such as increased spending on science, broadband, housing and roads (with the dualing of the A66 being excellent news locally).  Increasing business productivity was a key theme throughout the Chancellor’s statement and we can expect to hear more of this in the future (and hopefully the news that we have eventually overtaken the French and Italians!).

The main new announcements on taxation today were as follows:

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Business Taxation & Salary Sacrifice

The Chancellor committed to his predecessor’s policy of cutting the rate of Corporation Tax to 17% by 2020 (and has resisted the temptation to reduce the rate even further and “Trump!” the recently proposed US tax rate of 15%!).

The Chancellor branded salary sacrifice arrangements which lead to tax and NIC savings as “unfair”.  Childcare, pensions, pensions advice, ultra low emission cars and cycle to work schemes all remain exempt but from April 2017 any new non-exempt arrangements will not be effective for tax and NIC purposes.  Any arrangements already in place will be protected for up to a year and arrangements relating to cars, accommodation and school fees will be protected for up to 4 years to allow time to unravel them.

There will be a new consultation on partnership taxation and the Government will in due course legislate to clarify and improve certain aspects of partnership taxation to ensure profit allocations to partners are fairly calculated for tax purposes. The definition of “fairly” remains to be seen. There is also a consultation on how employer provided accommodation benefits will be valued for tax purposes.

A new consultation on incorporations and a commitment to tackle the use of disguised remuneration avoidance schemes by the self-employed were also announced.

The tax advantages for shares awarded under Employee Shareholder Status will be abolished for arrangements entered into on or after 1 December 2016.

Dotted Line2VAT – Flat Rate Scheme

A new flat rate scheme percentage of 16.5% will have to be used by all businesses whose costs are less than either £1,000 or 2% of their annual turnover.  Capital expenditure, most food and drink and most vehicle costs must be excluded when working out whether your costs pass or fail these tests. The new rules will be effective from 1 April 2017.

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Insurance Premium Tax

Given that the insurance industry has largely been absorbing the cost of this new tax (by not passing all of the increases on to their customers), they will be very disappointed to see it increase from 10% to 12% with effect from June 2017 (and a hint that it may ultimately be increased to 20% in future years!).

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Pensions

A small loop hole of recycling cash back into pensions is likely to be narrowed with the government announcing a consultation on whether the money purchase annual allowance should be reduced from £10,000 down  to £4,000.

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Savings & Investments      

The Chancellor announced that there will be a new savings bond launched from Spring 2017. It will be operated through NS&I and will be for a 3 year term, paying annual interest of 2.2% (gross) with a maximum contribution of £3,000.

Paperwork published in the Autumn Statement has also confirmed that the annual subscription limit for Individual Savings Accounts (ISA’s) will increase to £20,000 from 6 April 2017.

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Universal Credit

Very little in the way of new measures for the JAMs today, other than a small reduction in the “taper rate” (which is the rate at which benefits/credits are withdrawn as income increases) from 65% to 63% from April 2017.

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Making Tax Digital

The Government intends to publish its response to the Making Tax Digital consultations in January 2017.

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