Lump Sums from Pensions Schemes – Budget takes effect

avatar Posted on July 21st, 2014 by Andrew Prowse

Our Pensions team has published a client alerter explaining the issues around the new provisions allowing lump sums to be paid by Pension Schemes to Scheme Members. 

You can view the alerter here.

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Helping owners and their businesses

avatar Posted on June 30th, 2014 by Andrew Prowse

The Fieldfisher Tax & Structuring Group has launched a new brochure, aimed at owner managed businesses.  The brochure explains how we can help business owners and their businesses.  Thinking about the tax position of the business owners as well as the tax position of their business is often overlooked, which can lead to disjointed advice.  We take a more holistic view.  You can take a look at our brochure here.  To mark our recent office move to Riverbank House, we have included a picture of our new offices on the front cover of the brochure!

 

 

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Employee ownership trusts – HMRC explanation of report stage amendments

avatar Posted on June 26th, 2014 by Graeme Nuttall

The Government tabled a series of amendments to Schedule 33 to the Finance Bill 2014 (Companies owned by employee-ownership trusts (“EOTs“)) on 25 June 2014.

HM Revenue & Customs has explained in an email to those who have engaged with the Government on the introduction of this legislation that:

“… these amendments are to provide protection against abuse without creating unfairnesses which might expose the UK to legal challenge.

They provide for relief from capital gains tax ["CGT"] to be withdrawn, and for further claims to relief to be barred, if certain events occur. They also amend the relief requirements which must be met for a claim to be made. Where relief is withdrawn and further claims barred, this will supplant the deeming of a gain or loss on the trustees. The amendments are intended to prevent abuse of the relief where an EOT exists only for a short time.

… we have defined ‘disqualifying events’ at section 236O TCGA in terms similar to the relief requirements at section 236H(4), and if a disqualifying event occurs then a gain or loss is treated as accruing to the trustees of the EOT. As a result of the new amendments:

  1. it becomes a condition for the CGT relief to be claimed that the relief requirements in section 236H(4) must not cease to be met at any time during the year in which the disposal occurs (a requirement may be met for only part of the year, but once it has begun to be met it may not cease).
  2. if a disqualifying event occurs during the tax year following that in which the disposal to the trustees occurs, any CGT relief given is withdrawn and no new claims may be made.
  3. section 236O will continue to apply when disqualifying events occur at other times.

We recognise that these rules are new to the scheme, and so they will not apply to disposals of shares to trustees which took place on or after 6 April 2014 but before 26 June 2014.”

The amendments are available on the Parliament website at http://services.parliament.uk/bills/2014-15/finance/documents.html There is an accompanying explanatory note.

For additional information on these EOT reliefs see the article The employee ownership business model and Nuttall Review of Employee Ownership – quick guide to source materials

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Upper Tribunal confirms right of appeal: protracted correspondence amounts to opening an enquiry and issue of a closure notice

avatar Posted on June 18th, 2014 by Nick Beecham

In the case of Portland Gas Storage Limited FTC/123/2013, the Upper Tribunal has confirmed that our client has a right of appeal against HMRC’s decision to reject its amendment of an SDLT return on the basis that the amendment was (according to HMRC but disputed by our client) made out of time.  In doing so, the Upper Tribunal allowed our client’s appeal against the decision of the FTT to strike out the appeal.

In VAT and SDLT matters, the statute prescribes only limited matters against which there can be an appeal to a tax tribunal.  One of the prescribed matters is the issue of a closure notice by HMRC (Paragraph 35(1)(b) Schedule 10 FA 2003).  HMRC asserted that in rejecting our client’s amendment of its SDLT return on the basis that it was out of time, it had neither enquired into the amendment, nor issued a closure notice, so that our client had no right of appeal.

The Upper Tribunal held that although HM Revenue & Customs’ initial letter rejecting the amendment did not amount to the opening of an enquiry (on the basis that the only examination carried out by HMRC at that stage was to ascertain that the filing date of the original return was more than 12 months before the amendment was sought) the subsequent protracted correspondence between HMRC and our firm amounted to HMRC opening an enquiry and issuing a closure notice, against which our client has a right of appeal.

This raises a point of considerable public importance by preventing HM Revenue & Customs from regarding itself as the final arbiter in such matters.

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Convictions for tax fraud up 143%

avatar Posted on June 11th, 2014 by George Gillham

There are three figures we track that reveal the extent of HMRC’s criminal investigations activity, and the extent of its success (or failure):

  1. warrants executed by HMRC (“raids”);
  2. decisions by the Crown Prosecution Service (“CPS”) to charge for tax offences (“prosecutions); and
  3. convictions for tax offences in the courts (“convictions”).

 

All three are tracked because they deal with different stages in the prosecution cycle. It often takes between 12-24 months between a raid and a prosecution; and a similar period again between a prosecution and any conviction. From a combination of Parliamentary Answers and Freedom of Information Act requests, we can provide the figures for 2010/11 to 2013/14 (save the prosecutions figure for 2013/14 which has yet to be released):

 

Year Raids Prosecutions Convictions
2010/11 498 420 280
2011/12 731 545 401
2012/13 793 770 522
2013/14 744 ? 682

 

There has been a dramatic increase, particularly in convictions, from 2010/11 to 2013/14: up a startling 143%. (Prosecutions were up 83% to 2012/13; and it will be interesting to see the figure for 2013/14 when it is released.) The number of raids increased markedly between 2010/11 and 2011/12, but the increase slowed and then the trend reversed, with there being fewer raids in 2013/14 than in 2012/13. It is too early to reach a definite conclusion regarding this; perhaps the obvious candidates for a raid have already been served with a warrant; or perhaps the HMRC Criminal Investigations team have reached peak capacity.

In September 2010, the Chief Secretary to the Treasury, Danny Alexander, pledged to make funding available to HMRC for a five-fold increase in criminal prosecutions for tax evasion; and in January 2013, the incumbent Director of Public Prosecutions, Kier Starmer QC, said, in respect of non-organised tax fraud, that the CPS was aiming to prosecute seven times as many people in 2014/15 as it had done in 2010/11.

It seems pretty clear that both these targets were rather over-ambitious.

But missing these targets is not in itself a bad thing. I have always been a bit uneasy with the concept of ‘targets’ for prosecutions. Absent a five-fold increase in staffing in HMC’s criminal investigations team, a five-fold increase in number of prosecutions could be achieved by the CPS ‘lowering the bar’ on the chances of a conviction before proceeding to charge. That, almost certainly, would lead to lower conviction rates going forward, and the incurring of significant amounts of unnecessary costs for both accused and accusers.

Added to which criminal investigations are enormously time consuming for HMRC and I suspect, absent the unquantifiable deterrent effect, unprofitable.

 

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An employee ownership health check

avatar Posted on May 20th, 2014 by Graeme Nuttall

Extract from the Foreword to the Nuttall Review One Year On Report:

“There are key questions asked by the Nuttall Review, the answers to which provide a health check for the state of employee ownership. These questions are set out below, and I would encourage all those promoting employee ownership, whether in Government or not, to use this health check to monitor their progress towards making employee ownership a mainstream part of the UK economy.

An employee ownership health check

How well can these questions be answered?

  • Is the meaning of employee ownership sufficiently clear?
  • Does the expertise and experience exist among professional advisers and more generally across the business community to support employee ownership?
  • Are the benefits of employee ownership understood and are they demonstrated by success stories, backed up by research?
  • Are there practical tool kits in use to implement every form of employee ownership?
  • Is there Government support for employee ownership backed up by incentives and a commitment to remove obstacles?
  • Do we have the necessary champions of employee ownership?
  • Is there an ambitious target against which we are measuring success?”
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One minute on life, the universe and employee ownership with the Tax Journal

avatar Posted on May 16th, 2014 by Graeme Nuttall

Tax Journal is the leading tax publication for the UK corporate and business community: it publicised employee ownership to its readers in a recent article …

One minute with Graeme Nuttall, Partner, Field Fisher Waterhouse LLP

How did you end up in tax?

Unusually for my generation of lawyers, I started in tax. A perceptive managing partner encouraged me to qualify into tax. He predicted law firms would develop full service tax consultancies.

Who in tax do you most admire?

My (business) partner of many years, Nicholas Noble. He combines a tremendous breadth of technical expertise with an instinct for practical solutions.

Looking back on your career, what is the key lesson you’ve  learnt?

If you get out there, good things happen.

What are you working on?

Everything relates to a core philosophy that organisations need the right ownership and governance structure to work well. Businesses, not for profits and private wealth all need the right structure. Standard answers are not necessarily the best solution. In particular, I am working with clients and the UK government to get the employee ownership business model much more widely adopted. It works well at every stage of the business life cycle: in start-ups, as a way to achieve and sustain growth, in business turnarounds and, especially, as a succession solution. The idea works across all sectors and sizes of business.

You are a government adviser on employee ownership, and made numerous recommendations in Sharing Success: The Nuttall review of employee ownership, designed to promote employee ownership. What’s been achieved now that we’re more than one year on?

The BIS One year on report confirmed progress against all 28 recommendations and in over half this is significant. There is now a government minister for employee ownership. Company law changed from 30 April 2013 to allow private companies greater flexibility to buy back shares and hold shares in treasury, which improves liquidity for employee share plans. New tax exemptions in this year’s Finance Act will promote the ownership of companies by employee trusts and the idea of selling a controlling stake to an employee-ownership trust. Why sell to a lifelong competitor when you can sell to your employees?

What’s your view on the new employee shareholder rules?

Thankfully, the chancellor changed the confusing original name of this new employment law status from ‘employee ownership’  status. This is not a Nuttall review recommendation. Nick Clegg calls this measure ‘niche’. The measure sparked a helpful and lively debate, in which almost everyone said they preferred the Nuttall review vision of employee ownership – a significant chunk of a company owned by or on behalf of all staff, without giving up employment rights.

If you could make one change to UK tax, what would it be?

Only one more change? It would be great not to worry about the loan to participator rules when a close company lends to an employee trust.

Would you describe life as a tax lawyer as adventurous?

It can be. I was on the last seat of the last plane out of Skopje when the Kosovo war started. I was working with the Federation of Trade Unions of Macedonia on a collective employee ownership model and realised, when I was the only civilian left in my hotel, that I was a little too close to the war zone for comfort and for my family’s peace of mind.

This article was first published on 7 March 2014 by Tax Journal

www.taxjournal.com

http://tinyurl.com/1minwithGJN

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The life-changing power of employee ownership

avatar Posted on April 22nd, 2014 by Graeme Nuttall

Why would you want your employees, in Nick Clegg’s words, to own “a big chunk” of your company? The answer is simple – for many companies, employee ownership improves business performance, economic resilience, employee commitment and engagement.

“Employee ownership (EO) is a distinctive business model, a different perspective. And for some companies this is life-changing.”

The following interview is reproduced from HSBC Corporate World, Spring 2014 issue:

“The re-launched UK employee ownership index looks at listed companies with 3% or more employee ownership (excluding main board directors). The total return for shareholders in companies like this rose by 53% in 2013 compared to 21% for the FTSE All-Share Index. Clearly something better is happening in companies with this level of employee share ownership.  The 10% index performed even better in 2013 than the 3% version. The total return from listed companies with 10% or more employee ownership was 65% compared to the 21% for the FTSE All-Share Index.

Employee ownership (EO) is a distinctive business model, a different perspective. And for some companies this is life-changing. EO takes a conventional company, with a board of directors chosen because of their skill-set, and changes how it is traditionally owned, so that all employees have an ownership stake in the company, not just senior executives or key individuals.

That stake must be significant and meaningful. It must underpin structures that promote employee engagement in the company. Over the last two years, there’s been tremendous support from the UK government for EO. There’s now greater awareness of the concept, more resources to support EO and it’s become easier to implement. There are guidance materials and precedent documents on government websites, and we even had the first EO Day in the UK last July. But there’s still a long way to go.

We have to move away from companies introducing EO in the UK because of serendipity or because they’ve invented it from scratch. We have to get to a position where EO is as well-known a concept as establishing a charity or franchising or a management buyout. Until the last few months, most companies with EO introduced it because a manager or owner once worked for one of the UK’s flagship employee-owned companies, such as the John Lewis Partnership or Arup, or otherwise met someone from the EO sector. 

Last year the UK government changed company law. These changes help direct employee ownership, by making it easier for a company itself to buy shares from employees who leave and cancel them, or hold them in treasury.  There’s a consultation going on over abolishing the 125-year perpetuity period for employee trusts. If a charity or a pension scheme can exist forever, why not an employee trust? There is also a consultation on new tax exemptions that support the indirect (or trust) model of EO.

The government is introducing a capital gains tax exemption to encourage EO as a succession solution and an income tax exemption for bonuses. These measures could be key to maintaining the EO momentum in the UK. My hope is that the framework for obtaining these tax reliefs will be commercially acceptable, to the point of setting a new benchmark for the design of employee trusts. In other words, companies will set up employee ownership trusts of this sort because this is what is right for them commercially, as an employee ownership solution, not because they want to get the tax breaks.”

HSBC Corporate World is the bank’s publication for UK mid-market businesses, those with turnover of £25m – £800m.

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Employee ownership trusts – explanation of changes following consultation

avatar Posted on March 27th, 2014 by Graeme Nuttall

On EO Day 2013 HM Treasury announced that “Following the findings of the Nuttall Review and in order to support this sector, the Government has decided to introduce two tax reliefs to encourage, promote and support indirect employee ownership”. The Finance Bill (see clause 283 and schedule 33) published on 27 March 2014 contains helpful changes in response to the consultation on the original drafts of these reliefs. An earlier article on the new CGT and income tax exemptions for employee ownership trusts explained that some important amendments and clarifications were needed.  The following is an explanation from HM Revenue & Customs of the changes made, as sent to those involved in the consultation (hyper-links have been added):

“…The government has today published the Finance Bill 2014. It contains legislation introducing tax reliefs for indirectly employee owned companies, a draft of which was published for technical consultation on 10 December 2013. We have made changes to the legislation reflecting views we received and I wanted to write to you to set out how those changes affect the legislation.

We received 22 responses to the technical consultation ranging from small businesses that are employee owned or considering becoming employee owned, through to big businesses with a degree of employee ownership, as well as professional advisors and representative bodies.

The general theme of the responses was that although the tax reliefs are welcome, respondents thought that some of the conditions around the reliefs and the employee ownership trust (EOT) in particular were too restrictive and would result in companies having to set up another trust or trusts to ensure that, while they were able to claim the tax reliefs, they could retain a degree of flexibility in dealing with their remaining shares.

What has changed?

Structure of the Employee Ownership Trust (EOT)

1. We recognise that many trusts that were set up for employee ownership before the publication of our draft clauses will have been set up as employee benefit trusts (EBTs). While compliant with the existing legislation that gives an IHT exemption, such trusts may have been incapable of meeting the stricter EOT conditions without amendment to their trust deeds.

2. It is not our intention to require that companies whose trusts have been operating quite genuinely for the benefit of all of their employees and which already held a significant shareholding on 10 December 2013 should have to incur costs in amending their trust deeds (or, in some cases, setting up an entirely new trust) in order to meet the all-employee benefit requirement and hence qualify as an EOT.

3. The amended legislation therefore introduces an alternative way for certain pre-existing trusts to qualify for the tax reliefs: the “behaviour requirement”. The behaviour requirement looks at the actions of the trustees to see if they would meet the intentions of the EOT legislation over a specified period of time. If the actions of the trust meet the criteria then the trust is deemed to meet the all-employee benefit requirement, and may be treated as an EOT subject to the other relevant requirements.

4. A number of respondents have told us that, even with the behaviour requirement, their structures will not qualify for the tax reliefs and suggested the criteria be made less restrictive. In particular, several companies are partly owned by trusts which operate at least in part for the benefit of charitable organisations rather than their employees. The set-up is such that the structure will not qualify as an EOT e.g. because a single trust will never hold more than 50% of the company shares with the necessary voting rights (so the controlling interest requirement is not met). While we are sympathetic to the businesses that are affected, and recognise that these structures were set up prior to the EOT legislation and have been operating in a way similar to employee trust owned companies, we have decided not to accommodate these structures. To do so would add a great deal of complexity to the legislation.

5. Respondents told us that the legislation was not flexible enough to accommodate hybrid models of direct and indirect ownership because the EOT will not be able to be used for warehousing shares that the company intends to use for plans that award shares directly to employees. For example they suggest if an EOT holds 71% of the company’s shares, then the trust should be permitted to use say 20% of those shares for direct share ownership plans, as long as a more than 50% of the shares remain in the trust.

6. We propose to facilitate the role of the EOT in the conduct of share schemes operated by the company. In order to do this, we have amended the legislation so that shares to which the new CGT relief applied when they were acquired by the trustees will be pooled separately from other shares of the same class, and when they make a disposal the trustees will be able to specify from which pool the disposal occurs. We have not provided a specific tax relief for shares warehoused in the EOT that are transferred into share schemes; in order to meet the all employee benefit requirement the trust will have to dispose of the shares to the share scheme at market value. However, the pooling arrangements will prevent the trustees’ gains on the disposal of shares to a share scheme being inflated by the deemed acquisition cost of shares to which the CGT relief applied.

7. We were also told that the deeds of most trusts created for the purpose of employee ownership require the trustees to waive their right to receive dividends in relation to the company shares they hold. This is because it is more tax-efficient for the trust to be funded as necessary by gifts or loans from the company rather than pay tax on dividend income. Such a waiver was prohibited under the draft legislation because it prevented the trustee from being entitled to profits available for distribution. We have amended the legislation to ensure that the requirement to waive dividends will not disqualify the trust from being an EOT. And we have gone further by ensuring that where there is no compulsory dividend waiver, but the trustees voluntarily waive a dividend, this will also not be a disqualifying event.

8. Trustees may use their shares in the company which they control as security for a loan. We are content that such security arrangements should not constitute arrangements whereby the trustees may cease to have a controlling interest in the company. We have amended the legislation to ensure that the mere existence of such arrangements will not result in the trustees failing to meet the controlling interest requirement. However, if the trustees actually lose control of the shares e.g. because they default on the loan under such an agreement then they will cease to meet the controlling interest requirement.

9. To prevent potential unfairness and difficulties on cessation of the business or disposal by the trustees of all their shares, we have amended the legislation so that in these circumstances the eligible employees to whom distributions may be made by the trustees must include employees who ceased employment in the preceding 24 months.

10. A further issue that has been raised by respondents as causing concern is that where a controlling interest in a company is held by an EOT (with a corporate trustee) the company may not be able to operate a Share Incentive Plan (SIP) or other tax advantaged share scheme. SIPs are widely used by companies as they represent a tax-advantaged way to remunerate employees with shares; they facilitate direct employee share ownership rather than the indirect employee ownership that the EOT represents.

11. The draft legislation has been amended to confirm that a company owned indirectly by its employees through an EOT (with a corporate trustee) can also operate one of the tax advantaged share schemes. We have amended the legislation relating to the tax-advantaged share schemes (SIP, SAYE, CSOP and EMI) to allow a company controlled by a corporate trustee of an EOT to operate such schemes, subject to the other relevant conditions being met. As the EMI scheme is a notified State Aid, the change will only take effect once any necessary clearance is obtained from the EU Commission.

12. Concerns have been raised about the fact that the EOT is not permitted to transfer any settled property into another trust. This restriction is intended to prevent the trust getting round the EOT conditions by creating new trusts on different, less stringent, terms and transferring property to them. However, we accept that without amendment this might unduly restrict the transfer of trust assets to a new EOT where that is desirable or necessary for bona fide commercial reasons including those related to the expiry of the 125 perpetuity period under UK trust law. The Department of Business Innovation and Skills is currently consulting on the perpetuity rules and one of their proposals is to abolish them so that trusts would be able to continue indefinitely. We cannot be sure of the outcome of that consultation and have decided to amend our legislation to accommodate transfers from one EOT to another.

13. We have also clarified that the EOT conditions will be met where the EOT gives the trustees power to amend the terms of the trust such that the assets are held on trusts which continue to meet the conditions in the future.

14. We have decided to make a further change in relation to office-holders. The change will require trustees to make payments to office-holders as eligible employees to the extent that the trust deeds permit them to do so. Where such payments are made they must be made to all persons (including office-holders) on the same terms. We recognise that many existing trusts specifically exclude office-holders from being beneficiaries and so this change will be permissive – that is to say it will only apply if the trust deeds enable the trusts to make such payments. Where no such provision exists, the equality requirement will not be breached if office-holders are excluded.

Capital gains tax (CGT) relief

15. Stakeholders have provided us with feedback that the limited participation requirement, which seeks to deny CGT relief in some cases where the ratio of participators to employees who benefit from the EOT is greater than 2/5, is too restrictive. Stakeholders were concerned that actions which were outside the control of the trustees (for example, an employee resigning), could in some circumstances result in a CGT charge on the trustees. We have therefore amended the legislation to ensure that the EOT is allowed a ‘grace period’. If the participation fraction test is failed for six months or less, and for reasons beyond the control of the trustees, then the trust can continue to be treated as an EOT and no CGT charge will arise.

16. There was concern that some provisions of the equality requirement appeared to work against one another. For instance, a distribution of settled property by trustees based on employees’ salaries might be permitted by one part of the legislation, but could have results which suggest another part of the legislation would prohibit it. We have amended the legislation to remove any contradiction.

Exemption from income tax on bonus payment

17. We have amended the legislation to provide flexibility when an employee dies or is asked to leave their employment. There will be circumstances when the company wants to pay a bonus to a former employee and circumstances when they don’t want to do so. We think it is right to give employers some discretion and have amended the legislation so that either making or not making a bonus payment to somebody who was an employee in the last 12 months doesn’t disqualify the bonus payments made to the rest of their employees from the income tax exemption. Some stakeholders have suggested extending this to employees who have left in the last 24 months, but we consider that a 12 months period should capture all or most of the former employees a company might wish to reward.

18. We have considered the treatment when an employee is subject to disciplinary proceedings. There will be occasions when a person remains in employment having had a finding of gross misconduct made against them. We do not want our legislation to require that bonus payments are made to the employee in those circumstances. Where the finding of gross misconduct has been made within the previous 12 months of the award being determined, or the employee is subject to disciplinary proceedings for gross misconduct at that time and is not subsequently cleared, the participation requirement will not be infringed by their being excluded from the award. However, if the outcome of the disciplinary proceedings is that the employee is cleared, the employer must pay the bonus on the same terms as other employees within a reasonable timeframe.

19. Similarly, stakeholders have suggested that there are occasions when they will want to exclude an employee from benefiting from a bonus payment. This might be the case for an employee who has been made bankrupt. We do not think it would be right for government legislation to support not making funds available for creditors of a bankrupt employee and have not therefore amended the legislation to permit this.

20. We think there may be a risk from small companies being set up in an EOT structure to benefit from the income tax exemption, where the only employees are also the office holders (directors). We have introduced a further requirement that the proportion of directors and office holders to other employees must be less than a certain fraction in order for the exemption to be claimed. If we take an example of a qualifying company where there are two directors and six employees, one of whom is connected to a director, the ratio of directors and connected persons to unconnected employees is less than 2/5 so the employer is able to pay tax-exempt bonuses.

21. However, we acknowledge that in small companies the loss of one employee could have a significant impact. To ensure that these restrictions don’t have too harsh an affect we would allow companies a grace period to remedy inadvertent breach of this new requirement.

22. Stakeholders have requested greater flexibility for employers to differentiate between individual employees or between particular units of the organisation. While we are happy to accommodate arrangements which don’t pay an equal sum to all employees, we don’t think that performance related pay (whether that be the performance of the individual or of a specific part of the business) particularly fits with the policy rationale, which is to allow companies to reward their employees in their role as owners of the business. We therefore do not intend to accommodate this.

Inheritance tax relief

23. We have made only minor consequential changes to the inheritance tax parts of the legislation, but the legislation has been substantially restructured to make it easier to understand.”

Explanatory notes on Schedule 33 to the Finance Bill as published on 27 March 2014 are available. Full background materials on these tax exemptions are listed (with hyper-links) in the article “Nuttall Review of Employee Ownership – quick guide to source materials

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UK Budget: tax break for North Sea fields & venture capital relief curtailed for certain renewables

avatar Posted on March 26th, 2014 by Andrew Prowse

In the UK’s annual budget speech on 19 March 2014, the Chancellor announced that the government will consult on the introduction of a new North Sea tax allowance. Its aim would be to encourage billions of pounds of extra investment in the UK’s maturing oil & gas industry. The proposed incentive relates to the development of ultra-high pressure, high temperature fields (u-HPHT) that typically demand higher spending to exploit because of the technical difficulties of bringing hydrocarbons to shore.

The Ultra-High Pressure, High-Temperature Cluster Allowance would exempt a portion of a company’s profits from the Supplementary Charge (which is currently 32%).  The amount of profit exempt will equal at least 62.5% of a company’s qualifying capital on u-HPHT projects. It is expected HM Treasury will launch a consultation in relation to the Ultra-High Pressure, High-Temperature Cluster Allowance over the summer of 2014, and that the allowance will be included in Finance Bill 2015.  This allowance will be similar in structure to the onshore allowance announced in the Autumn Statement (and reconfirmed in this year’s Budget) that we reported previously here.

Maersk Oil and BG Group have announced that the new u-HPHT allowance will help enable the development of two new projects, which will lead to investment of £6 billion across new fields.  They estimate that these two big projects will create more than 700 new jobs and close to 8,000 more jobs will be supported along the supply chain. These jobs will be spread across the country, with about half likely to be in Scotland.

The Chancellor also said the government would take forward all the recommendations of Sir Ian Wood’s recent report and that the government would review the tax regime for the entire oil & gas sector to make sure it is fit for purpose having regard to the maturing nature of the asset.

Aside from his measures affecting the oil and gas industries, the Chancellor also announced that investment in companies benefiting from Renewables Obligation Certificates and/or the Renewable Heat Incentive scheme with effect from Royal Assent of Finance Bill 2014 will not be eligible for EIS (enterprise investment scheme) or SEIS (seed enterprise investment scheme) relief, or for VCT (venture capital trust) relief.  The renewables sector, particularly solar and wind projects, has in recent times benefited from substantial venture capital investment and this change, which is understandable in terms of the policy of the reliefs (which are aimed at investing in risk opportunities, rather than those backed by government subsidies producing a reliable income stream), may have a marked effect on access to and the nature of funding in this area.

Click here for a link to the UK Budget Speech

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