George Osborne failed to produce a big surprise “rabbit” out of his collection of tax measures and spending announcements set out in the Autumn Statement, but a few hares were set running amongst property investors. They will face increased Stamp Duty Land Tax charges from 1 April 2016, and accelerated payments of Capital Gains Tax from 2019.
The Chancellor delivered an Autumn Statement which focused, in the Government’s words, on protecting economic and national security. The speech, full of the usual puns and digs at the opposition, was perhaps influenced by the rebuttal by the House of Lords of the tax credit reforms which in effect forced the Chancellor to hold back on his plans in this area.
We were quietly confident that we would not see any detail from the pension tax relief consultation – but we’re preparing for a late night on Budget Day 2016!
The following covers the highlights of the Statement as it relates to international clients.
Starting rate of savings tax
The band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for the tax year 2016-17.
HMRC Response to the Lobler case ‘artificial gains’
Although not mentioned in today’s Autumn Statement, we expect to see some draft legislation in the coming days. This is about easing the burden in cases where an individual mistakenly takes a partial surrender from an onshore or offshore investment bond which results in a taxable gain that is disproportionate to the actual gain made within the investment. If they had taken the withdrawal by full surrender of individual policies this would have resulted in a more realistic tax charge.
Capital Gains Tax
Capital Gains Tax payment window
Capital Gains Tax (CGT) due on residential property is currently payable between 10 and 22 months after a disposal is made. This is out of step with the position for other taxpayers, such as those paying income tax through the Pay As You Earn (PAYE) system.
From April 2019 capital gains tax due will be payable within 30 days of completion of any disposal of residential property. A consultation document will be published in 2016.
Individual Savings Accounts
Annual subscription limits
ISA subscription limits won’t be changed in 2016-17. The ISA limit will be kept at £15,240. The Junior ISA and Child Trust Fund limits will be kept at £4,080.
ISAs: qualifying investments
The list of qualifying investments for the new Innovative Finance ISA will be extended in Autumn 2016 to include debt securities offered via crowd-funding platforms.
ISAs: tax advantages during the administration of an estate
As part of the Additional Permitted Subscription rules, the Government has announced that it will allow the ISA savings of a deceased person to continue to benefit from tax advantages during the administration of their estate. This will be introduced in 2016 after consulting with the industry.
Pension Tax Relief
As expected, there were no surprise announcements on pension tax relief, with the Government reconfirming that it will respond to the Pension tax relief consultation at the Budget 2016.
The minimum contributions needed for a scheme to meet the minimum requirements under automatic enrolment have been delayed. Minimum contributions were to have risen from 2% of qualifying earnings to 5% from October 2017, and 8% from October 2018. But now the rise to 5% will occur from April 2018 and 8% from April 2019. The Government are doing this to reduce some of the complexity that smaller employers would have faced.
Inheritance tax on undrawn pension funds in drawdown
Currently, IHT may arise where the member transfers between registered pension schemes where the member knew their life expectancy was impaired and subsequently dies within the following two years. The Government confirms that inheritance tax will not arise when a pension scheme member designates funds for drawdown but does not draw all of the funds before death. Further details will appear in the Finance Bill 2016.
Secondary market for annuities
This December the Government will provide further detail on the creation of a secondary market for annuities, including the consumer protection package.
The basic State Pension will once again be increased by the triple lock to £119.30 a week from April 2016. The new single tier pension introduced from April 2016 will be set at a maximum of £155.65 a week.
Stamp duty land tax
Stamp duty land tax: additional properties
From 1 April 2016, higher rates of Stamp Duty Land Tax will be charged on purchases of additional residential properties (above £40,000), such as buy-to-let properties and second homes. The higher rates will be 3% above the current SDLT rates.
The higher rates will not apply to companies or funds making significant investments in residential property. The government will issue a consultation on the policy detail.
Deeds of Variation
Following a consultation document earlier this year, the Government have confirmed that they won’t be making any changes to rules around Deeds of Variation.
Tax avoidance, evasion and compliance
The government will introduce a new penalty of 60% of the tax due to be charged in all cases successfully tackled by the General Anti Abuse Rule (GAAR) and will make small changes to the GAAR’s procedure to improve its ability to tackle marketed avoidance schemes.
To reduce opportunities for income to be converted to capital in order to gain a tax advantage, the Government will shortly publish a consultation on the company distributions rules, and will amend the Transactions in Securities rules and introduce a Targeted Anti-Avoidance Rule.
The government is aware that tax planning around the intangible fixed assets regime, can be used to obtain more generous corporation tax relief than is intended by the legislation. It will therefore amend the regime to stop arrangements that use partnerships to obtain relief that was not intended.
A new criminal offence for tax evasion will be introduced which removes the need to prove intent for the most serious cases of failing to declare offshore income and gains.
Civil penalties for deliberate offshore tax evaders will be increased. A new penalty linked to the value of the asset on which tax was evaded will be introduced as well as penalties for those who enable offshore tax evasion.
Tax administration – Making tax digital
The government will invest £1.3 billion to transform HMRC into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account, reducing errors through record keeping. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology. This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year. The government will publish its plans to transform the tax system shortly and will consult on the details in 2016.
We are expecting more detail soon on a number of measures that were announced by the Chancellor in the July Summer Budget, but which were not mentioned in this Spending Review.
- Dividend Tax Credit will be abolished and replaced by a new Dividend Tax Allowance of £5,000.
- The ability for savers to withdraw and replace money from a cash or stocks-and-shares ISA without it counting towards the annual ISA subscription.
- Changes to the domicile rules. The Government has consulted on this but we are still awaiting the final legislation to confirm the changes.