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Autumn Statement 2016: Private Client Headlines

The 2016 Autumn Statement was one of the 'quieter' fiscal events of recent years.  Virtually all of the content had already been widely reported with the exception of the announcement that this would be Philip Hammond's first - and last - Autumn Statement. That is not because he is standing down as Chancellor but because, heeding recent advice from several professional bodies, he plans to reverse the Autumn Statement and the Spring Budget.  This means that there will be both a Spring and Autumn Budget next year but, from 2018 onwards, there will be a Spring Statement (which should not generally concern tax) and a tax Budget in the Autumn. The new timing will presumably bring forward the publication of the Finance Bill and so these proposals are welcome if they will thereby enable Parliament to give more scrutiny to new tax legislation, which is badly needed.

Further detail on the non-dom changes due to take effect from next April was not forthcoming and so we will have to wait for the Finance Bill on 5 December to see the final direction of travel here.  The text of the Autumn Statement simply confirms that all the changes will go ahead and states that non-UK resident trusts set up before a person becomes deemed-domiciled in the UK will not be taxed on income and gains arising outside the UK that are retained in the trust.  Crucially, however, it does not address how income and gains paid out will be taxed.  The rules for Business Investment Relief (BIR) will also change from April 2017 to increase take up, with further reforms to this relief being delivered later.

 One interesting comment is that there is to be a requirement to register offshore structures – "The government will consult on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and the related client lists".   This seems to be a new measure, in addition to the PSC register which is already in force, the previously announced register of beneficial owners of overseas companies holding UK property and a possible register of trusts if the latest EU proposals for anti-money laundering go ahead.

 On inheritance tax, relief for donations to political parties will be extended to parties with representatives in the devolved legislatures, as well as parties that have acquired representatives through by-elections.   This will put all national political parties with elected representatives on an equal footing with effect from Royal Assent of Finance Bill 2017.

 The ongoing need to tackle tax evasion and avoidance was high on the agenda once again and the Chancellor confirmed that new penalties will be introduced for anyone who has "enabled" another individual or business to use a tax avoidance arrangement that is later defeated by HMRC. In the event, there was no further detail on this in the associated documents, other than that "the new regime will reflect an extensive consultation and input from stakeholders". It is certainly to be hoped that the government has taken on board the scathing representations made by professional bodies urging HMRC to distinguish between the really serious offenders (who dream up highly artificial schemes) and those who merely advise a client in relation to a scheme (quite possibly that the client should not pursue it, but which the client ignores); if not, tax advisers will face an extremely difficult time ahead. The document also proposes to abolish the defence against penalties that reliance on non-independent advice constitutes ‘reasonable care’ in this context.   Details will be published in draft legislation shortly, so we know no more at present; but the initial concept seemed somewhat broad brush and the draft legislation will need close scrutiny when it emerges.

 

Private companies are often used by private clients for perfectly proper commercial reasons, such as limitation of liability, so the Chancellor's confirmation that the rate of corporation tax will reduce to 17% by 2020 is also welcome.  But it is not immediately evident how exactly this fits with his other announcement that, because the OBR has today highlighted the growing cost to the Exchequer of incorporation, the Government will consider how to ensure that the taxation of different ways of working are fair between different individuals. Fortunately, we are also told that they will consult on any proposed changes and so all will doubtless become clear in due course.

Sue Laing

23 November 2016

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