How UK tax is changing after the autumn statement

Daniel Horton our consultant managing the role

The UK tax system faces some significant reforms as a result of announcements in the Autumn Statement.

The Autumn Statement has become something of a misnomer in recent years; not least because it is no longer autumn now the speech has been moved to December.

A more significant change has been the ever-shrinking distinction between it and the Budget. Back in the 1980s the Budget was the time when the chancellor announced tax and borrowing decisions, while the Autumn Statement outlined spending plans. Now, both statements contain all these elements.

For those working in accountancy and tax firms, the implications may be substantial, not least as many of the new measures will affect companies rather than individuals.

Some of the tax changes are related to people rather than companies; stamp duty changes will be of particular interest to those planning to buy a home and the rise in the personal allowance to £10,600 will be good news for most, particularly the low-paid.

Banks may need to recruit more tax experts to ensure they are compliant with the new rules that will place restrictions on their ability to avoid corporation tax on their profits. Banks who made major losses in the financial crisis have ended up paying nothing from their subsequent profits to the exchequer and chancellor George Osborne said this must change.

He remarked: "Under the rules we inherited banks can offset all their losses from the financial crisis against tax on profits for years to come.

"Some banks wouldn’t be paying tax for 15 or 20 years. That's totally unacceptable. The banks got public support in the crisis and they should now support the public in the recovery."

As a result, Mr Osborne has restricted the level of tax relief on profits for such banks to 50 per cent and cut the level of relief on bad debts. He said this will bring an extra £4 billion into the Treasury in the next five years.

While banks themselves may need to engage the accountants more, so too will multinationals who have been cleverly using tax loopholes to avoid corporation tax.

Mr Osborne revealed plans for a Diverted Profits Tax, which will levy a 25 per cent charge on profits "generated by multinationals from economic activity here in the UK which they then artificially shift out of the country". He estimated it will garner an extra £1 billion from such companies in the next five years.

While companies are the main focus of the tax loophole changes, however, there are some instances where individuals of high net worth have been targeted. Mr Osborne said he would take measures to stop tactics such as the "disguising of fee income by investment managers" and consultation on steps to stop the use of umbrella companies to dodge tax.

All the above could be keeping tax experts very busy, not least as companies will need plenty of accountants to make sure they are compliant with the legislation once it is on the statute book.

Nor may that be the end of the matter. More tax measures can be expected in the Budget speech, which will take place in March and this could be followed by yet more alterations to the tax system after May, should the general election lead to a change of government and thus the implementation of new tax policies.

 

11/04/16
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