An arsenal of anti-avoidance provisions introduced in the past 9 years has resulted in Stamp Duty Land Tax (SDLT) becoming a cash cow for the government. This is particularly the case for SDLT charged on dwellings where the rates have become much higher than those applicable to commercial or mixed property.
Today, even higher rates of SDLT were announced on purchases of buy to let residential properties and second homes, to take effect from 1 April 2016. The higher rates will be 3% above the current SDLT rates. The government will consult on reliefs for corporates or funds making significant investments in residential property, possibly by reference to a test that they own more than 15 residential properties.
It remains to be seen whether or not the increase will apply to a company purchasing a dwelling for letting to a connected individual which is already subject to the penal 15% rate.
Another Autumn Statement, another raft of measures with the aim of reducing tax avoidance: "Action against … disguised remuneration schemes and [those] who have not yet paid their fair share of tax.", "legislation to counter 2 types of avoidance", … . Further investment in the commitment to reduce avoidance. New measures announced to tackle tax evasion. As inevitable a mantra as "the sun rises".
It has been suggested that one of the key proposals will be the introduction of a tax-geared penalty of 60% where the GAAR has been applied. Given that, in its 2 years of operation, there has yet to be a case referred to the GAAR panel, the rationale for this proposal may well be pour encourager les autres, not revenue raising. This measure is projected to raise £10million in 2016. In terms of closing the tax gap, that is barely even a finger-nail in the dyke.
The criminal offence of failing to prevent tax evasion will be introduced. One of the key issues to be determined here is the standard against which a corporate will be judged, if it is held to have failed to prevent an agent from committing tax evasion; will "adequate" procedures (per s.7(2), Bribery Act 2010) be the test?
Graeme Nuttall OBE:
The glass half full view of employee share plans, based on a brief para 3.24 Autumn Statement mention, is that their policy value clearly remains recognised by the UK Government and any necessary technical tweaks, e.g. to help internationally mobile option holders, will continue to be made. However, counteracting tax avoidance remains at the forefront of this Autumn Statement including reviews of salary sacrifice arrangements and contrived entrepreneurs' relief structures together with further action on earned remuneration avoidance schemes and a new targeted anti-avoidance provision in the transactions in securities rules. Perhaps the new partial exemption for charitable trusts from the loans to participators rules keeps open the potential for an additional technical tweak to exempt loans to employee trusts from these rules. This would help maintain the current UK growth of the employee ownership business model. I'll drink to that.
Aside from another slew of anti-avoidance announcements and a further assault on second homes and buy-to-lets, it was a relatively low key affair, especially on the corporate tax front - about time (it won't last)!
"Apprenticeship" is a virtuous word and "levy" is more quaint than "tax", but the new payroll tax is a big deal. There is a £3m pay bill threshold, but it will add 0.5% to the tax bill of many businesses from April 2017, particularly people-heavy ones - like beleaguered retailers, which already have to manage the living wage. The tax is expected to raise over £11bn over five years.
The Government aims to reduce opportunities to convert income to capital gain for tax advantage. Consultation on the company distribution rules is due this year, and amendments to the transactions in securities rules, together with a new TAAR, will be included in Finance Bill 2016. The intention may be to address specific structures, involving voluntary liquidations, but having narrowed the TiS rules, a re-widening of them is unwelcome, risking uncertainty for routine transactions.
More promisingly, the Government will consider amending the FA 2015 changes to entrepreneurs' relief to ensure availability for certain "genuine commercial transactions". If the changes preventing "ManCo" structures from qualifying could be made more focused, that would be good.
More generally, the digitisation of tax administration, reiterated on Wednesday, is inevitable. Will tax payment dates, other than just CGT on residential property disposals as currently announced, be accelerated towards the taxable event…?