Autumn Statement – Victoria Bishop and Brett Bennett - robinson+co’s Tax Partner and Technical Manager respectively - highlight the important tax measures from the Chancellor’s speech on 3 December 2014.
With just over 6 months before the General Election this is a Statement that must deliver for the Conservative Party – so does it? After the bombshell of Pension Reform in the Budget, Mr Osborne was always going to have a hard job to follow himself. Some measures have been announced ahead of time, such as the extra £2billion for the NHS, and flood defence for at risk areas (including Victoria’s old stamping ground of Hull and Grimsby).
Mr Osborne has continued the trend in today’s Autumn Statement of emphasising Britain’s recovering economy under his and the current government’s guidance, insisting that the chosen action plan of cutting public spending is working and has resulted in the UK being the fastest growing economy in the G7. With growth being 3%, up from the forecast 2.7% in March, 500,000 jobs being created this year, and the deficit being “cut in half” since 2010, some will argue that the government have got things right during their term in office.
This time, the government has handily issued a document called “Autumn Statement 2014: 16 things you should know” (https://www.gov.uk/government/news/autumn-statement-2014-16-things-you-should-know) but here are the things we think you need to know:
Stamp Duty Land Tax (“SDLT”)
Reform of the SDLT had been rumoured prior to the Statement and Mr Osborne did not disappoint. He has abolished – with effect from midnight on 3 December 2014 – the all or nothing system whereby £1 difference in price led to a £5,000 increase in SDLT.
Now SDLT will be charged in bands (much like income and capital gains tax) and government statistics suggest this will lead to a reduction in SDLT payable for 98% of property purchasers.
The new rates are:
£0 - £125,000
£125,001 - £250,000
£250,001 - £925,000
£925,001 - £1,500,000
For a property priced at £275,000 (the average cost of a UK family home) there will be a saving of £4,500.
Savings and Pensions
There was a welcome albeit limited change to the ISA rules. Currently on death these lose the tax-free exemptions. However in future ISAs can be bequeathed to your spouse or civil partner and retain the tax free protection.
The ISA subscription limit for 2015/16 will be £15,240.
In addition Mr Osborne confirmed the abolition of the “Death Tax” on pension pots. Effectively pension pots at death over the age of 75 will now be taxed at the nominated beneficiary’s marginal tax rate rather than a penal 55% flat rate – and there will be no tax charge if the deceased is under 75.
The changes to pension savings are far reaching and will change the way that we protect the family wealth for future generations. Jenny Armstrong, robinson+co’s Chartered Financial Planner, and Victoria are already looking at the most efficient way these changes can be utilised and articles and seminars will follow.
One other announcement on savings which may affect some of our older clients: prior to his speech Mr Osborne announced that he was going to repay all of the country’s World War I debts. This means redeeming gilts such as 31/2% War Loan and 4% Consolidated Loan. The former will be redeemed on 9 March 2015 and the latter (plus other undated gilts) at a date to be announced. Gilts are exempt from capital gains tax so this will be a non event from a tax point of view.
Research & Development / Innovation
The government has reinforced its intention for the UK to be one the leaders in the world for innovation by extending and increasing the tax reliefs for qualifying research and development. This will be achieved by announcing that the “Above the Line” credit will be increased from 10% to 11%, and also increase the uplift rate for qualifying expenditure from 225% to 230% from 1 April 2015.
Along with these increases, the government has announced that it will introduce an advanced assurance scheme that will assist new businesses to establish whether they are eligible to make a claim for R & D credits. A consultation document will be issued on this point in January 2015, and we will provide further comment when that is released.
In addition, there has been an announcement that there will be reforms to the qualifying expenditure rules on “tax credit” cases, and the introduction of new measures to “streamline the application process.”
As ever, we will work to ensure that businesses in West Cumbria continue to fully utilise these reliefs and take full advantage of being one of the leading areas of technology development in the North West.
If you have any queries please contact Brett Bennett on 019467 25808 and/or read our article here; we will also shortly be announcing details of a seminar on this topic.
With immediate effect, the government has announced that the capital gains on the disposal of a business’ “reputation” and “client base” (i.e. goodwill), will no longer attract the lower tax rate of 10%, where the business is simply transferred to a connected company. This will mean an end to some of the advantages that could be sought by small businesses that had achieved substantial growth from their creation.
However, with the use of the capital gains tax annual exemption, and the national insurance savings while operating within a company, still available, it will remain advantageous for many small businesses to operate through a limited company.
The government has continued their focus on intermediary companies, where employment relationships are attempted to be masked under “umbrella companies”, by announcing that a discussion paper will issued shortly to outline the possible changes / actions to be taken as part of the 2015 budget.
We understand that this will have an impact on certain service providers in the area, and should you wish to clarify your position, we suggest you contact your normal contact on 01900 603623, 01946 692423 or 019467 25808.
Loans to Directors
Over recent years, the government has had numerous consultations on whether a reform to the taxation of “overdrawn” director’s loans was needed. They have today announced that they do not intend to take this point any further, and therefore the current regime will remain in place.
Benefits in Kind
A few changes will make the calculation of benefits provided by an employer more straightforward. The first is that there will be a statutory exemption for trivial benefits under £50. This will put an end to over-keen Inspectors trying to tax the provision of tea and coffee or the Christmas turkey. Please note that the provision of gift vouchers is not affected – a £10 gift voucher is still taxable!
Secondly the £8,500 limit for some benefits is to be abolished. This limit had not changed for many years and, was a considerable bureaucratic headache.
A third change is that some reimbursed expenses will no longer have to be reported on a P11D – and in turn will obviate a need for a “dispensation.”
The first change will come in on 6 April 2015 and the others a year later.
Please talk to Victoria on 01900 603623 if these changes will affect you.
Value Added Tax (VAT)
Remittance of VAT based on payments received
From 1 April 2015, rules will be introduced to change the position with regard to the amount of VAT charged on goods and services that are provided under a prompt payment discount arrangement. Currently, VAT is only required to be accounted for on the discounted rate, regardless of whether the prompt payment is made and discount is received.
The new rules will alter this scenario so that if a business accounts for a sale on the discounted amount for VAT purposes, but the actual amount received is not the discounted amount, the additional VAT received on the sale will now need to be accounted for.
Announced today are new rules that will take effect from 1 April 2015, enabling UK search and rescue, and air ambulance charities, to be eligible to claim refunds of VAT on purchases of goods or services that relate to their non-charitable business operations.
Tax and National Insurance Rates
Not in the speech but in the 200+ pages of notes accompanying it are the tax and national insurance rates for 2015/16. Whilst we thought we knew that the personal allowance would be £10,500, we were awaiting confirmation of the NI primary and secondary thresholds. These are the rates at which you get a NI credit for state pension purposes without physically paying anything.
Now we know not only this threshold, which means that we at robinson+co will be contacting our clients who are directors to inform them of their 2015/16 salary, but also that the Personal Allowance is going to be £100 higher - £10,600.
This means that we have the strange situation whereby the basic rate band reduces to £31,785, but the higher rate band threshold is increasing by more than inflation to £42,385.
There were a couple of interesting amendments to national insurance contributions:
- Employer NIC for apprentices aged under 25 and earning under £42,385 will be abolished. You should note that with effect from 6 April 2015 there is also an exemption for any employee under 21 and earning up to £42,385 (see our 2014 Budget article here)
- The Employment Allowance will be extended to those employing personal carers from 6 April 2015.
If you have any queries about either of these please contact Victoria on 01900 603623.
The Small Business Rate Relief has yet again been extended for a year, this time until April 2016.
In addition the high street discount is increasing to £1,500 and the cap on annual increases of 2% will remain.
There will also be a review of the business rate regime with the results to be announced in the 2015 Budget.
- Student loans available to post graduate master students under 30
- Air ambulances will be able to claim VAT refunds from 1 April 2015 and there will also be help for hospices with their VAT bill. This will also apply to mountain rescue teams
- Money raised from penalising banks for FOREX misdemeanours will be utilised by providing up to £1billion extra funding for GPs over the next 4 years
- Exempting the under 12s from Air Passenger Duty in April 2015 and under 16s in 2016
- Fuel Duty is again frozen
- The government is looking at ways of extending Peer-to-Peer lending, and how to protect the lender
- A “Diverted Profits Tax” of 25% aimed at the likes of Google, Starbucks and Amazon who use worldwide subsidiaries to reduce the business’ overall tax rate.
As Victoria tweeted (on @robinsonco100) we are going to Mars but not Cumbria: the Northern Powerhouse apparently stopping at Manchester on the West Coast although it does reach Newcastle upon Tyne on the East Coast; dualling the A66 and A69 are proposals only; no further funds for flood defence; but this Statement has certainly been more eventful than expected and we will continue to review the notes and update the position as and when.
One last warning – whilst it is unlikely a new government will reverse the changes announced today we must be careful – who knows what will happen after 7 May 2015!
As ever, if you have any queries on any of the measures in this article please contact your normal contact at robinson+co or, in the first instance, Victoria, our Tax Partner.
These notes are not a full resume of the Autumn Statement issued on 03 December 2014.
• All care has been taken in preparing this material. However no responsibility can be accepted for any losses arising to any person acting or refraining from acting as a result of this material
• Any comments are those of Victoria Bishop and Brett Bennett and do not necessarily reflect the views of robinson+co