Key announcements in Autumn Statement 2015 include:
• large business tax compliance: confirmation that the government is pressing ahead with proposals for voluntary compliance codes, the publication of large businesses’ tax strategies and special measures for persistent offenders;
• ATED and the 15% rate of SDLT: proposals to introduce new reliefs for equity release, property development and staff accommodation, and
• apprenticeship levy: more detail has been published on the levy, which will be introduced in 2017 and will raise nearly £3bn in its first year.
• an extra 3% SDLT charge will be payable on the purchase of second homes, including buy-to-let properties, from 1 April 2016;
• from April 2019, CGT on the disposal of residential property will be payable 30 days after the transaction takes place instead of by 31 January in the year following the tax year in which the transaction took place
• a new penalty of 60% of the tax due for all cases successfully tackled under the general anti-abuse rule (GAAR);
• news that the government has dropped its intention to restrict the use of deeds of variation for tax purposes, although they will be kept under review; and
• confirmation of new penalties and offences for offshore evaders, including a corporate criminal offence, for those who engage in, facilitate or fail to prevent offshore tax evasion.
New measures that are coming into effect on 25 November 2015:
• two anti-avoidance measures relating to capital allowances and leasing;
• changes to the related party rules concerning partnerships and transfers of intangible assets;
• a 1.5% stamp duty/SDRT charge on a transfer of shares to prevent stamp tax avoidance using deep in the money options (DITMOs);
• loans or advances made by close companies to charity trustees for charitable purposes will not give rise to a tax charge.
The chancellor of the exchequer, George Osborne, delivered his first all-Conservative Autumn Statement (AS 2015) on Wednesday 25 November 2015. The key message of the chancellor’s speech was that the Conservatives will ‘protect’ and ‘build’. Against a backdrop of slightly improved tax take figures and stable growth forecasts, the chancellor felt able to cancel some swinging cuts that had been widely predicted, such as to the police budgets and tax credits; and to make announcements of investments in infrastructure and new housing stock. However, it will probably be remembered most for the complete U-turn on tax credits and for the decision to use VAT raised on sanitary products to provide funding to charities supporting women in distress (the ‘tampon tax’ debacle).
From a tax perspective, the biggest surprise was the announcement of yet another measure targeting buy-to-let investors and second home buyers – imposing a surcharge on SDLT at 3% above the normal rates. However, the chancellor appears to have, for once, done what he promised to do, and not treated the Autumn Statement as a mini-budget, as there were not a large number of tax announcements.
Since it is the beginning of a new parliament, AS 2015 was delivered alongside the Spending Review. HMRC’s settlement includes high expectations of efficiency savings, amounting to a 21% reduction in baseline resource costs over the next five years. This is largely to be delivered through reduced workforce and the consolidation of offices from 170 to 13 regional centres that was announced earlier this month, and which has not been received well by taxpayer representative groups. There was, as expected, a continued focus on increasing the tax take through measures to tackle avoidance and evasion, including a renewed commitment to the £800m funding to support those efforts, which are expected to generate an additional £7.2bn in tax revenues over the next five years.
HMRC also expects to take large steps towards becoming ‘one of the most digitally advanced tax administrations in the world’, enabling taxpayers to view their tax affairs in real time online through their ‘digital tax accounts’ by 2016/17. This is also expected to reduce the number of calls to HMRC from 38m in 2015/16 to 15m in 2019/20, which is presumably expected to contribute significantly to the efficiency savings. Many taxpayers will hope that this reduces call waiting times.
Draft clauses, for inclusion in Finance Bill 2016 (FB 2016), are expected to be published on Wednesday, 9 December 2015.
Apprenticeship levy
As part of its strategy to see a marked increase in the number of apprenticeships offered by employers, the government intends to introduce an apprenticeship levy, payable by large employers as from April 2017. The concept of the apprenticeship levy was first announced in the Summer Budget 2015 and was then the subject of a consultation which closed on 2 October 2015. Following that consultation, the government has now announced that the levy will be set at 0.5% of an employer’s pay bill and that it will be collected via the PAYE system. As explained in Annex B of the response to the consultation, the measure of an employer’s pay bill is to be determined by reference to the total amount of earnings paid to the employer’s employees; it will not include benefits in kind.
To ensure that the levy is effectively targeted at the largest employers, there is to be a threshold of £15,000 before any payment will have to be made. This means that at the rate of 0.5%, only those employers whose pay bill is £3m or more will actually contribute.
The apprenticeship levy will apply to employers across the UK. In England, the funds that the levy generates (along with potential top-ups from government) will be administered through a digital account which all employers will be able to access to meet apprenticeship training needs with approved training providers. Different rules may apply to how the apprenticeships funds may be used in Scotland, Wales and Northern Ireland as skills policy is a devolved matter.
The Department for Business, Innovation and Skills, and its counterparts in the devolved administrations will be engaging with employers and stakeholders on the development of the systems under which employers can access apprenticeship funds and the rules for how those funds may be applied.
Legislation on the imposition and collection of the apprenticeship levy is to be included in Finance Bill 2016.
See AS 2015, para 3.56.
Asset managers’ performance-based rewards
Following a consultation launched at Summer Budget 2015, the government will introduce legislation in FB 2016 which will determine when performance awards received by asset managers will be taxed as income or capital gains. Broadly, an award will be subject to income tax, unless the underlying fund undertakes long-term investment activity. At the time of the consultation, private equity carried interest was expected to be taxed as a capital gain (depending on the investment strategy of the fund) but AS 2015 did not provide any more detail on carried interest in this context.
See AS 2015, para 3.90.
ATED and higher rate SDLT for non-natural persons: extension of reliefs
From 1 April 2016, relief from annual tax on enveloped dwellings (ATED) and the 15% SDLT charge which applies to non-natural persons is to be extended to:
See AS 2015, para 3.73.
Automatic enrolment for pensions
The obligation to automatically enrol employees in a workplace pension already applies to employers with more than 30 employees and will apply to all employers by 1 April 2017. The minimum rates of pension contributions required under the automatic enrolment regime start off at a low level but are set to rise in two steps, with those increases currently scheduled to be applied on 1 October 2017 and 1 October 2018. The dates for those increases in minimum contributions will be delayed to April 2018 and April 2019, respectively. These changes should simplify the administration involved in the scheme, especially for smaller businesses.
See AS 2015, para 1.137.
Bank levy
As announced at Summer Budget 2015, the government will consult on restricting the scope of the bank levy to UK operations from 1 January 2021.
See AS 2015, para 3.62.
Capital allowances and leasing
Two anti-avoidance measures relating to capital allowances and leasing are coming into effect immediately, i.e. for transactions taking place on or after 25 November 2015. The new rules have been introduced to counter schemes that have been revealed to HMRC under the disclosure of tax avoidance (DOTAS) rules.
The first measure seeks to counteract the manipulation of disposal values, which in turn leads to excess capital allowances being claimed.
The existing legislation in CAA 2001 s 215 restricts the capital allowances available in transactions that have an avoidance purpose. The measure announced today broadens the scope of this rule, so that it applies where the purpose of the relevant transaction or scheme is to enable a company to obtain a tax advantage in the form of a reduced balancing charge or an increased allowance. Where the relevant conditions are met, the disposal value is to be adjusted on a just and reasonable basis by reference to the payment received. The term ‘payment’ is widely defined and includes any form of value receivable.
The second measure is intended to counteract arrangements that generate non-taxable consideration received in return for agreeing to take over tax-deductible lease payments. Anti-avoidance legislation that relates to leasing transactions is already contained in CTA 2010 Part 20; however, HMRC does not consider the scope to be wide enough to catch the disclosed schemes. The new legislation will ensure that the company will be chargeable to corporation tax on any consideration received when taking over lease payment obligations.
See AS 2015, para 3.86.
CGT payment on disposal of residential property
From April 2019, a payment on account of any CGT due on the disposal of residential property must be made within 30 days of completion. The draft legislation will be subject to consultation in 2016 with a view to the provisions being legislated in Finance Bill 2017.
It is not expected that the existing rules will change, meaning that if the disposal is fully covered by principal private residence (PPR) relief then no tax will be payable.
Currently the cashflow advantage sits with the taxpayer, as the tax is not due until 31 January after the end of the tax year. This may be almost 22 months after the date of disposal. Accelerating the due date for payment will ensure that the cash flow advantage sits with HMRC, although how relief for capital losses will be given effect in-year is, as yet, unclear.
There are two points to note:
It is possible that the conveyancing solicitor could withhold the estimated CGT from the proceeds on completion and pay this over to HMRC.
See AS 2015, para 3.76.
Childcare, tax-free
The chancellor announced further changes to the new system of ‘tax-free’ childcare, which is to be introduced from early 2017:
See AS 2015, para 1.160.
Close company loans to participators: partial exemption for charities
The government previously consulted (in 2013) on reforms to the loans to participators rules but no action was taken, although it did raise awareness of the application of these rules to charities.
Under the loans to participators rules, if a close company (very broadly speaking, companies controlled by five or fewer participators) makes a loan to a participator (again, broadly speaking, their shareholders), the company is liable to a tax charge of 25% of the loan. The tax charge is due on the day following nine months after the end of the accounting period in which the loan or advance is made.
The government is of the view that some of the transactions caught by this charge did not fit the original rationale of the policy on the grounds that, where a loan is made to trustees of a charitable trust as participator of the close company, the funds could not end up in the hands of an individual for their personal use. This contrasts with the position in corporate structures, where the rules were designed to discourage individuals from extracting value from close companies and using the funds for personal purposes.
In order to deal with this difference, the government has announced that it will introduce legislation which ensures that loans or advances made by close companies to trustees of charities for charitable purposes are exempt from the tax charge. The exemption will apply where the trustee receives a loan or advance which it applied wholly for the purposes of the charitable trust. This will allow charities to retain this money to further their charitable objectives.
The measure will apply to loans or advances made on or after 25 November 2015, and legislation introducing the exemption will be incorporated in FB 2016. Charities do not need to account for the tax charge which could arise between 25 November 2015 and royal assent to FB 2016 on the basis that they have nine months after the end of the accounting period in which the loan or advance is made to pay the charge, although they would still be liable to the charge if the exemption is not ultimately approved by Parliament.
See consultation document Reform of close company loans to participators rules and AS 2015, para 3.39.
Climate change levy
The government has announced that following consultation, a transitional period for electricity suppliers to apply the CCL exemption on renewably sourced electricity generated before 1 August 2015 will end on 31 March 2018. See AS 2015, para 3.67.
Company car benefits: diesel cars
Currently the appropriate percentage used to determine the amount of tax due on an employee’s use of a company car is three percentage points higher if the car in question runs on diesel. That 3% supplement was due to be abolished for 2016/17 onwards. The supplement will now remain in place until April 2021.
See AS 2015, para 3.66.
Company distributions
As announced at Summer Budget 2015, the government will consult on the rules concerning company distributions. However, the AS 2015 documentation includes further information as to the government’s thinking. It appears that:
These measures are presumably being introduced because from April 2016 the tax rates on dividends for individuals will be higher and therefore the tax differential between an income and capital receipt will increase.
It is possible that this will impact profits retained in the company which can be currently extracted as capital on an exit or liquidation.
Legislation is expected in Finance Bill 2016, so it is hoped that more detail will be available in December 2015.
See AS 2015, para 3.85
Corporate debt and derivative contracts
Several amendments have been made to the loan relationships regime recently. The latest changes relate to the clarification of the relationship between tax and accounting, the introduction of a regime-wide anti-avoidance rule, and the introduction of a new corporate rescue relief (F(No. 2)A 2015 s 31 and Sch 7). The government has announced that it will include legislation in Finance Bill 2016 to update the rules relating to loan relationships and derivative contracts so that it interacts correctly with new accounting standards in three specific circumstances. Although not entirely clear from the documents published with AS 2015, the three circumstances are likely to be the expected updates to the rules on the tax treatment of:
which were originally announced in AS 2014 but, for various reasons, not included in either FA 2015 or F(No. 2)A 2015.
The new rules in FB 2016 should represent the concluding part of the three-year project to update, simplify and rationalise the regimes for the taxation of loan relationships and derivative contracts.
See AS 2015, para 3.60.
Deductions for grass-roots sports
A consultation will be published at Budget 2016 that will set out the government’s proposals for providing corporation tax relief for contributions to grass-roots sports.
See AS 2015, para 3.58.
Deeds of variation
At March Budget 2015, the chancellor announced that it would review the use of deeds of variation for tax purposes, although nothing further was mentioned about the review at Summer Budget 2015.
A deed of variation is a deemed lifetime transfer from a beneficiary of a deceased person to the recipient. Without relief from IHT and CGT, the beneficiary would be treated as making a transfer of value for IHT and CGT purposes. If the deed of variation is made within two years of the deceased’s death, IHT and CGT are calculated on the deceased’s estate as if the variation had been effected by the deceased.
Deeds of variation varying the will or intestacy of the deceased are often used to correct mistakes so as to avoid expensive litigation or to make legitimate use of available business and agricultural property reliefs. The deed of variation is not always used for tax reasons and is not viewed as a tax avoidance tool.
The government has now announced that they will not be introducing restrictions on how deeds of variation can be used for tax purposes. The government will, however, continue to monitor the use of deeds of variation.
See AS 2015, para 3.37.
Devolution
There were no major announcements regarding tax devolution for the home nations, but the AS 2015 documentation contains a helpful summary of the current position:
See AS 2015, paras 1.226, 1.228 and 2.141.
Digital tax accounts
The chancellor confirmed the government’s intention to invest £1.3bn in ‘making tax digital’. He originally announced ‘the end of the annual tax return’ in Budget 2015 and since then HMRC has published its plans for a digital personal tax account and business tax account for each taxpayer by 2016/17. Initially it was clear how employment income and most investment income could be fed through to HMRC automatically to pre-populate the digital tax account. HMRC already has the required links with employers, banks and company registrars. It was less obvious how landlords and small businesses could avoid the annual tax return because most of the information can only be provided by the taxpayers themselves.
In recent months, HMRC has been consulting with software developers on its application programming interface (API) strategy. The aim is to develop tax software packages that enable taxpayers and their agents to feed information into the digital tax accounts, in the same way that agents currently use commercial software to file tax returns. However, instead of collecting all the information and filing it once a year, the key difference will be that the update will be piecemeal and incremental.
AS 2015 states that by 2020 ‘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. Necessary software will be available free of charge. So, instead of an annual tax return, a quarterly tax return will be required. For VAT-registered businesses, the additional filing required will be minimal. But those who stuff all their records in a ‘brown paper bag’ and deliver them to their accountant once a year will need to reorganise. Employees and pensioners will not be required to update their digital tax account unless they have secondary incomes of more than £10,000 per year.
AS 2015 says nothing explicit about payment of tax, although it could be inferred that quarterly instalments will be required. The government plans to consult on the details in 2016. It is interesting to note that it is forecasting a significant increase in tax revenue of £300m by 2019/20 arising from ‘reducing errors through record keeping’.
See AS 2015, paras 1.288 and 3.93.
Disguised remuneration: future retrospection warning
The government obviously remains concerned that its rules on ‘disguised remuneration’ in ITEPA 2003 Part 7A are not secure enough to guard against all attempts to avoid tax on earnings.
In a move reminiscent of the then paymaster general’s statement of 2 December 2004 warning that future anti-avoidance measures could be introduced with retrospective effect, the Statement included a warning that future Finance Bill measures needed to counter any further new schemes intended to avoid tax on earned income may be enacted to have effect from 25 November 2015.
It is not at this stage clear whether the government or HMRC has any particular arrangements in its sights for this type of retrospective counteraction. While there is currently little definitive detail in regard to this particular announcement, it has the potential to be far-reaching and, especially if it is retrospective, potentially significant.
See AS 2015, para 3.87.
Employment status review
The government will take forward the majority of the Office of Tax Simplification’s recommendations relating to employment status, but has not specified when such changes might take effect.
See AS 2015, para 3.97.
Employment-related securities: internationally mobile employees
Finance Bill 2016 will include technical changes to simplify the rules for internationally mobile employees receiving employment-related securities (ERS) under tax-advantaged or non-tax-advantaged employee share schemes. These changes will ensure that any charge to tax will arise under the rules that deal with ERS options, rather being taxed as earnings.
See AS 2015, para 3.24.
Entrepreneurs’ relief: contrived structures
The government will consider amending the changes made by FA 2015 to CGT entrepreneurs’ relief, ‘in order to support businesses by ensuring that the relief is available on certain genuine commercial transactions’. FA 2015 made a number of changes to entrepreneurs’ relief, including removing relief for the value of goodwill realised on incorporation, and changes to the rules on associated disposals. The announcement in AS 2015 suggests that some of these changes may have caught transactions that were not their intended target. There are no further details at this stage.
See AS 2015, para 3.92.
Farmers: averaging of profit
Although farmers will be able to average their profits over five years from April 2016 (as announced in Budget 2015), they will have the option of retaining the two-year average if this is more beneficial. This is welcome news. The two calculation mechanisms for five-year averaging which were discussed in the July 2015 consultation document were complicated and potentially time-consuming, meaning there was the risk that the professional fees incurred in working out whether the farmer should average his profits may have negated the tax and national insurance benefits of doing so.
See AS 2015, para 3.21.
GAAR penalty
In its consultation on Strengthening sanctions for tax avoidance, the government set out proposals for the application of a new penalty in cases successfully tackled by the application of the general anti-abuse rule (GAAR). The chancellor announced today that the new penalty will be set at a rate of 60% of the tax at stake. This new penalty will be legislated for in Finance Bill 2016 along with some other minor changes to the GAAR regime in relation to marketed avoidance schemes.
It is not yet clear how the penalty would interact with other penalties potentially involved in respect of the same tax charge, such as a penalty for failure to comply with an accelerated payment notice. Parallel legislation is likely to be needed to apply the new GAAR penalty to NICs liabilities.
See AS 2015, paras 1.152 and 3.84.
Gift aid small donations scheme
The gift aid small donations scheme (GASDS) applies to small donations collected from 6 April 2013 and allows eligible charities and community amateur sports clubs (CASCs) to claim a gift aid style payment on cash donations of £20 or less from individuals without a gift aid declaration from the donor. These top-up payments are only available for small cash donations up to a total of £5,000 each year (meaning that generally speaking the maximum total top-up payment is £1,250). To claim a top-up payment a charity must also make a matching claim for gift aid on income that represents at least 10% of the amount on which a top-up payment is claimed.
The GASDS is separate from gift aid. Furthermore, unlike gift aid, top-up payments are not a tax relief. Donors who are higher rate tax payers will not be entitled to tax relief on donations on which a top-up payment is claimed.
The government has announced it will publish a call for evidence in December 2015 to ensure GASDS is operating as effectively as possible.
See AS 2015, para 3.38.
High risk promoters
As expected, and further to the changes to the ‘promoters of tax avoidance schemes’ rules which were legislated in FA 2015, Sch 19, there are to be amendments introduced by Finance Bill 2016 to widen the regime to include ‘promoters whose schemes are regularly defeated’. This follows the proposals in Chapter 6 of the consultation document published in July 2015.
See AS 2015, para 3.83.
Hybrid mismatch arrangements
Following the conclusion of its consultation at the beginning of 2015, the government will introduce legislation to combat abusive hybrid mismatch arrangements. A summary of responses to the consultation has yet to be published.
Although the detailed legislation is awaited, the new UK rules will be closely aligned with the principles set out under Action 2 (neutralising the effects of hybrid mismatch arrangements) of the G20/OECD base erosion and profit shifting (BEPS) Action Plan.
It seems likely that the UK will achieve this by adopting the OECD’s recommended ‘linking rules’ approach. This seeks to align the tax treatment of an instrument or entity in one jurisdiction with the tax treatment of the same instrument or entity in a counterparty jurisdiction. The approach comprises:
In contrast to the UK’s current anti-hybrid legislation, the new rules are unlikely to include a ‘main purpose’ (or ‘motive’) test. The domestic UK law changes are likely to be reinforced by various changes to the OECD’s model tax convention.
Draft legislation is expected to be published on 9 December 2015 and will be subject to further consultation. The UK has, however, consistently and publicly stated its intention to be an early-adopter of, and to implement in full, the OECD’s anti-BEPS recommendations. As a result, the new rules will be included in FB 2016 and will take effect from 1 January 2017.
See AS 2015, para 3.88.
Intangible assets, related parties and partnerships
Draft legislation has been published today that intends to counteract current arrangements involving intangible assets, partnerships and LLPs, by clarifying when intangible fixed assets (IFAs) held by a partnership come within the IFA rules.
In order to be taxed under the IFA regime, the asset must be created or acquired from a person that is not a related party, by a company on or after 1 April 2002. Assets falling outside the IFA regime are taxed under the chargeable gains regime. The application of the related party rule is unclear in respect of partnerships.
Prior to the changes announced today, the arrangements enabled a corporate member of a partnership to circumvent the related party rules to obtain a deduction under the IFA regime when establishing the profits of a corporate member; however, HMRC considered the asset should be taxed under the chargeable gains regime. The related party definition has now been widened by including the participation test in the transfer pricing legislation. Transfers will also be treated as taking place at market value.
The legislation will apply to transactions involving IFAs that take place on or after 25 November 2015. The changes will also apply to accounting debits or credits accruing on or after 25 November on a time apportionment basis, where the transaction had already taken place prior to this date. It would appear that HMRC is seeking to prevent any future benefit from being achieved where planning has already been implemented.
See the TIIN, draft legislation and draft explanatory notes for further details.
The government has announced that it will also consider a review of the IFA regime as part of the Business tax roadmap, due to be published in April 2016.
See AS 2015, paras 1.154 and 3.89.
ISAs
The tax-free status of an individual’s ISAs will be retained by his personal representatives following his death. Currently the deceased’s ISAs are taxable during the administration period. This is subject to a technical consultation with ISA providers but is expected to be legislated in Finance Bill 2016. See AS 2015, para 3.34.
As announced in Budget 2015, the list of qualifying investments for ISAs is to be extended from autumn 2015 to include crowdfunded debt-based securities. See AS 2015, para 3.33.
The ISA, junior ISA and child trust fund annual subscription limits are to be frozen at 2015/16 levels in 2016/17. See the Individual savings accounts guidance note. See AS 2015, para 3.32.
Large business tax compliance
Following consultation earlier this year, the government has confirmed that legislation will be included in Finance Bill 2016 to introduce the following measures:
See AS 2015, para 3.91.
London Anniversary Games and World Athletics and Paralympics Championships
Non-UK resident competitors in the 2017 World Athletics and Paralympics Championships and the 2016 London Anniversary Games will be exempt from UK income tax on any income received as a result of their earnings from the games.
The government confirmed that 2016 will be the final year the exemption is granted.
See AS 2015, para 3.19.
Museums and galleries, relief for
Further support will be provided to museums and galleries that develop creative new exhibitions and display their collections for wide audiences. Details have not been provided, however a consultation will be launched to gather opinions from interested parties. Given the introduction of other creative sector tax reliefs in recent years, it is possible that the future relief made available to museums and galleries will be structured in a similar way, although this remains to be seen.
See AS 2015, paras 1.210 and 3.57.
Non-domiciliaries: business investment relief
Unusually for recent years, there were no major announcements with regard to non-domiciliaries. The summary of responses and draft legislation in respect of the deemed domicile changes announced in Summer Budget 2015 is expected in December 2015.
Having said this, there was a minor point within the AS 2015 documentation on business investment relief; the mechanism introduced from 6 April 2012 which allows non-domiciliaries to invest foreign in-come and gains in UK companies without triggering a remittance.
The conditions for business investment relief are complicated and there are practical difficulties in disposing of the shares within 90 days should the conditions be broken. This is thought to be the reason why there has been lower take-up of the relief than expected.
The government is to consult on legislative changes which will encourage greater use of the relief.
See AS 2015, para 3.22.
Non-resident capital gains tax
Since 6 April 2015, non-residents have been subject to UK capital gains tax on the disposal of UK residential property. These provisions are known as the non-resident capital gains tax (NRCGT) rules (see FA 2015 Sch 7). The NRCGT rules are to be tweaked in Finance Bill 2016 to:
See AS 2015, para 3.75.
Offshore tax evasion: offences and penalties for offshore evaders and their enablers
On 16 July 2015, the government published a consultation on a new package of measures against offshore tax evasion. The consultation closed on 8 October 2015.
As proposed, the government will introduce the following:
In addition, the government will consult on an additional requirement for individuals to correct any past off-shore non-compliance, with new penalties for failure to do so.
AS 2015, paras 3.77–3.81.
Pensions
There were a number of pension-related announcements.
Secondary market for annuities
With the aim of providing flexibility for individuals who have already purchased an annuity and are therefore not currently able to benefit from the pension freedom reforms, the government plans to create a secondary market for annuities, thereby allowing individuals to sell their right to future income streams from annuities in exchange for a cash lump sum. As part of these reforms, the government will remove the tax restrictions on people seeking to assign their annuity income to firms wishing to purchase it and enable individuals to take the proceeds of their assignment and save or spend them as they see fit, taxed only at their marginal rate. A consultation on these proposals, Creating a secondary annuity market: call for evidence, ran from 18 March to 18 June 2015.
The government has now announced that it will set out further details on this measure, including the framework for the consumer protection package, in its consultation response in December 2015. Legislation implementing the changes is expected in Finance Bill 2017.
See AS 2015, para 3.30.
Bridging pensions
The government intends to introduce legislation in FB 2016 to enable the pension tax rules on bridging pensions to be aligned with the Department for Work and Pensions legislation. This legislation will follow the introduction of the single tier state pension in April 2016. See AS 2015, para 3.28.
Dependant scheme pensions
The government will introduce legislation in FB 2016 to simplify the test that takes place when a dependant’s scheme pension is payable. The test refers to the limit on dependants’ pensions before tax charges apply. The limit was introduced from A-Day (6 April 2006) and applies only when the original scheme member dies aged 75 or over. The aim of the current limit is to deter avoidance of the lifetime allowance but the test is not restricted to those with large pensions and is therefore potentially burdensome for some schemes. The proposed simplification is welcome, given that the tranche of pensioners who retired in the months after A-Day at age 65 will reach age 75 next year. See AS 2015, para 3.27.
State pension
The government has confirmed that the starting rate for a new full single tier state pension will be set at £155.65 per week when it is introduced in April 2016, which is in line with expectations. The basic state pension will be increased by the triple lock for 2016/17, meaning that it will rise to £119.30 per week. This will be the biggest real terms increase in the state pension for 15 years. See AS 2015, para 3.48.
Tax relief consultation
Further to the announcement at Summer Budget 2015, the government has now consulted on fundamental changes to pension tax relief. One of the options is that instead of receiving tax relief on the contribution, the savings would work more like an ISA, with a government top-up and tax-free extraction on retirement. The government will give a response at Budget 2016. See AS 2015, para 3.26.
Undrawn pension funds in drawdown pensions
The IHT charge on alternatively secured pensions (ASP) was removed with effect from 6 April 2011 when ASP funds became re-designated as drawdown pension funds. Since that change further reforms have introduced more flexibility and choice into the use of pension funds both in lifetime and on death. The key principle that keeps pension funds out of the inheritance tax net is that distribution is at the discretion of the pension trustees, and not at the direction of the pension member. However, the new opportunities for drawdown funds leave room for doubt as to whether the fund remains outside the control of the member.
Legislation is planned for Finance Bill 2016 that will ensure that an inheritance tax charge does not arise when a pension scheme member has designated funds to drawdown and has not drawn all the funds before death. The provision will be backdated to 6 April 2011.
See AS 2015, para 3.36.
Uprating of pension credit
The single rate of the standard minimum guarantee will rise in line with earnings by £4.40 to £155.60 per week, and the couple rate will rise by £6.70 to £237.55 per week. The savings credit threshold will rise to £133.82 for a single pensioner and to £212.97 for a couple, which will reduce the single rate of the savings credit maximum by £1.75 to £13.07 and the couple rate by £2.68 to £14.75. See AS 2015, para 3.49.
Salary sacrifice
The government has reiterated its concern about the growth of salary sacrifice schemes and is gathering further evidence, including from employers, in order to inform its decision on whether to take any action in regard to salary sacrifice arrangements.
See AS 2015, para 3.25.
Savings income, starting rate of tax
AS 2015 confirms that the band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2016/17.
See: AS 2015 (para 3.31)
SDLT: changes to the filing and payment process
Under the current rules, notification of chargeable land transactions and payment of SDLT must be made within 30 days of the effective date.
The government will consult in 2016 on changes to the filing and payment process, including whether to reduce the filing and payment window from 30 days to 14 days.
Any changes made as a result of the consultation will come into effect in the 2017/18 tax year and legislation will be incorporated in FB 2017.
See AS 2015, para 3.72.
SDLT: new charge on additional residential properties
The government is to consult on an increase to the SDLT due on purchases of second or additional residential properties, such as buy-to-let properties, that complete on or after 1 April 2016. The rate applied will be 3% above the current SDLT rate.
The extra revenue raised from this measure will be used for communities in England where the impact of second homes is particularly acute (Cornwall was mentioned in the chancellor’s speech as an example).
The use of the property is irrelevant and so it will apply whether it is to be rented or used as a second home. However, the fact that it will apply to buy-to-let properties means that this measure is another tax disincentive to the buy-to-let market, following on from the introduction of the restrictions to tax relief for finance costs legislated in F(No. 2)A 2015, s 24 which apply from 2017/18.
Although the government is to consult on the detail, the government has stated that the new higher rates will not apply:
There are many areas that are yet to be clarified, including:
There are two points to bear in mind when advising clients:
See AS 2015, para 3.70.
SDLT relief: application to certain authorised property funds
After several years of lobbying, and as originally announced in AS 2014, the government has confirmed that an SDLT seeding relief will be introduced, with effect from the date FB 2016 receives royal assent, for both property authorised investment funds (PAIF) and co-ownership authorised contractual schemes (CoACS).
The detailed rules are expected to be published on 9 December 2015 as part of the draft FB 2016 but they will be based around the following core principles:
Transactions in units in CoACSs investing in property are expected to be exempt from SDLT.
These measures will remove the two main obstacles faced by funds that invest in real estate and wish to adopt PAIF or CoACS status.
See AS 2015, para 3.71.
Self-assessment time limits
Draft legislation is to be published ahead of Finance Bill 2016 to clarify that the time allowed for making a self-assessment is four years from the end of the tax year. No further information is included in the AS 2015 documentation but it is possible that this has been prompted by a recent case on tax administration.
See AS 2015, para 3.96.
Serial avoiders
Also following on from the consultation on Strengthening sanctions for tax avoidance, the government is to introduce a series of additional measures applicable to taxpayers who repeatedly use avoidance schemes. The additional measures outlined in the consultation would apply to any individual who has received a warning notice following use of an avoidance scheme that is defeated, and would include a new reporting requirement and a surcharge on the additional tax due as a result of a failed scheme.
The names of serial avoiders could be published and those who persistently abuse reliefs could face restrictions on them accessing certain tax reliefs for a period. The legislation on serial avoiders is to be included in Finance Bill 2016.
See AS 2015, para 3.83.
Simple assessment
The government is to simplify the tax payment process for taxpayers within the self-assessment system where HMRC already holds all the data it needs to calculate the tax liability. Rather than requiring the taxpayer to file a return, instead HMRC will send a legally enforceable payment demand, which the taxpayer can challenge or appeal. This is expected to be introduced from 2016/17.
This procedure has parallels with the old pre-self-assessment days, although it is to be hoped that improved information technology will avoid the endless round of estimates, appeals, and counter claims that characterised tax practice before 1995.
See AS 2015, para 3.99.
Small business rate relief
Under the small business rate relief scheme for England, a ratepayer qualifies for relief if the rateable value of its property is less than £12,000 with the maximum amount of relief being 50%. A sliding scale operates where maximum relief of 100% (i.e. a doubling of the usual rate of 50%) is granted to small properties with a rateable value less than £6,000. Relief is reduced by 1% for every £120 rateable value by which the property exceeds £6,000 rateable value, up to the £11,999 threshold where no relief is available.
The government announced that it will extend this doubling of the relief for a further year (it was due to be withdrawn on 31 March 2016).
This measure will have effect from 1 April 2016 until 31 March 2017.
See AS 2015, para 3.74.
Sporting testimonials
In Summer Budget 2015, the government announced a consultation into the simplification of the tax treatment of sporting testimonials. Following the consultation, the government has confirmed that all income from sporting testimonials and benefit matches for employed sportspersons will be liable to income tax.
An exemption of up to £50,000 will be available for employed sportspersons with income from sporting testimonials that are not contractual or customary where the sporting testimonial is granted or awarded on or after 25 November 2015, and the testimonial takes place after 5 April 2017.
Legislation is due to be included in FB 2016 and the measure will come into effect on 6 April 2017.
See AS 2015, para 3.18.
Stamp taxes and deep in the money options (DITMOs)
To prevent the avoidance of stamp taxes using deep in the money options (DITMOs), legislation will be included in Finance Bill 2016 to impose a 1.5% stamp duty or SDRT charge (as appropriate) on a transfer of shares in certain circumstances. A DITMO is an option with an exercise price (or strike price) that is significantly below (for a call option) or above (for a put option) the market price of the underlying asset. The charge will arise on a transfer of shares to a clearance service or depositary receipt issuer, as a result of the exercise of an option on or after Budget 2016 that was entered into on or after 25 November 2015.
This would mean that the exercise of a DITMO call option will attract stamp duty (or SDRT as relevant) at 1.5% of the market value of the shares, when it is transferred to a clearance service or depositary receipt issuer.
See AS 2015, paras 1.153 and 3.59.
Tax credits
Following the government defeat in the House of Lords, the chancellor has abandoned the changes to the income threshold, the income disregard and the taper rate for tax credits announced at Summer Budget 2015. The AS 2015 documentation contains no mention of the proposed restriction of the child element (which was not to be payable in respect of the third or subsequent child born on or after 6 April 2017), however it is assumed that this amendment has also been dropped. See AS 2015, para 3.41.
The government believes that there is confusion amongst tax credits claimants about when joint claims should be filed instead of single claims. There is to be a consultation on how to make this requirement clearer. See AS 2015, para 3.51.
Following a successful initial contract, HMRC is to continue to use the private sector to chase historic tax credit debt by phone calls, text messages and letters. See AS 2015, para 3.54.
Travel and subsistence: workers provided by intermediaries
In July this year, the government launched a consultation on restricting tax relief for travel and subsistence for workers engaged through employment intermediaries, so that the amount of relief available to such workers would be in line with the rules applicable to employees. The consultation proposed that the restrictions should apply to workers engaged through any type of intermediary (including employment businesses and umbrella companies) to provide personal services to the engager if they are under the right of supervision, direction or control of any person. However, following the consultation, the proposals are to be modified so that the restrictions on tax relief for travel and subsistence will only apply to workers providing services through personal service companies where the intermediaries legislation (also known as IR35) applies. The new restriction will be imposed from 6 April 2016. (Note that this is separate from the HMRC discussion paper on tax relief for business travel and subsistence expenses to which responses can be made until 16 December 2015.)
See AS 2015, para 3.20.
VAT
The chancellor did not announce any significant changes with regards to VAT. The changes that were announced are as follows:
VAT on sanitary products: equivalent donation for women’s charities
A new fund will make available £15m a year (equivalent to the annual VAT collected on supplies of sanitary products) to support women’s charities over the course of this Parliament, or until EU rules are amended enabling the UK to apply a zero-rate of VAT for sanitary products. Women’s sanitary products are currently liable to the reduced rate of VAT as the government cannot currently tax these items at the zero-rate under EU law.
VAT reduced rate for energy saving materials
The government will consult on legislation for Finance Bill 2016 that will ensure that the reduced rate of VAT on energy saving materials is maintained in line with EU law.
Sixth form colleges
As part of the government’s one-off restructuring of post-16 education and training, Sixth Form Colleges in England will be given the opportunity to become academies which will enable them to recover VAT incurred on their non-business expenditure.
Venture capital schemes: risk finance investments
The chancellor stated in his speech that energy-generation would be an excluded activity for the purposes of the enterprise investment scheme (EIS), venture capital trusts (VCT) scheme and seed enterprise investment scheme (SEIS).
In fact most energy-generating activities are already excluded for the purposes of these schemes (including changes which apply with effect from 30 November 2015 which were legislated in F(No. 2)A 2015 s 27), however any energy-generation activity which is not currently excluded will be so from 6 April 2016 in provisions expected in Finance Bill 2016.
Finance Bill 2016 will also contain provisions to increase the flexibility for replacement capital for EIS and VCTs (subject to state aid approval).
See AS 2015, para 3.23.
Wartime compensation payments
It has been the practice of HMRC under ESC F20 to provide an exemption from inheritance tax for the value of compensation received for wrongs suffered during the World War II era. A number of schemes have been set up by various European organisations, some of them relatively recently. Historically the exemption has applied to the original victims and surviving spouses. Often the compensation is received late in life and the sum would become chargeable to IHT without the exemption. The government will legislate for the concession in Finance Bill 2016 and specifically include a recent scheme known as the child survivor fund, which makes payments to survivors who were children during the Holocaust.
See AS 2015, para 3.35.
The above commentary was derived from Tolley Guidance and Lexis®PSL Tax and Private Client services. Tolley Guidance is an online service that combines tax technical commentary with practical guidance. The Lexis®PSL Tax and Private Client services provide advisers with practice notes and precedents, with links to trusted sources.
Key announcements in Autumn Statement 2015 include:
• large business tax compliance: confirmation that the government is pressing ahead with proposals for voluntary compliance codes, the publication of large businesses’ tax strategies and special measures for persistent offenders;
• ATED and the 15% rate of SDLT: proposals to introduce new reliefs for equity release, property development and staff accommodation, and
• apprenticeship levy: more detail has been published on the levy, which will be introduced in 2017 and will raise nearly £3bn in its first year.
• an extra 3% SDLT charge will be payable on the purchase of second homes, including buy-to-let properties, from 1 April 2016;
• from April 2019, CGT on the disposal of residential property will be payable 30 days after the transaction takes place instead of by 31 January in the year following the tax year in which the transaction took place
• a new penalty of 60% of the tax due for all cases successfully tackled under the general anti-abuse rule (GAAR);
• news that the government has dropped its intention to restrict the use of deeds of variation for tax purposes, although they will be kept under review; and
• confirmation of new penalties and offences for offshore evaders, including a corporate criminal offence, for those who engage in, facilitate or fail to prevent offshore tax evasion.
New measures that are coming into effect on 25 November 2015:
• two anti-avoidance measures relating to capital allowances and leasing;
• changes to the related party rules concerning partnerships and transfers of intangible assets;
• a 1.5% stamp duty/SDRT charge on a transfer of shares to prevent stamp tax avoidance using deep in the money options (DITMOs);
• loans or advances made by close companies to charity trustees for charitable purposes will not give rise to a tax charge.
The chancellor of the exchequer, George Osborne, delivered his first all-Conservative Autumn Statement (AS 2015) on Wednesday 25 November 2015. The key message of the chancellor’s speech was that the Conservatives will ‘protect’ and ‘build’. Against a backdrop of slightly improved tax take figures and stable growth forecasts, the chancellor felt able to cancel some swinging cuts that had been widely predicted, such as to the police budgets and tax credits; and to make announcements of investments in infrastructure and new housing stock. However, it will probably be remembered most for the complete U-turn on tax credits and for the decision to use VAT raised on sanitary products to provide funding to charities supporting women in distress (the ‘tampon tax’ debacle).
From a tax perspective, the biggest surprise was the announcement of yet another measure targeting buy-to-let investors and second home buyers – imposing a surcharge on SDLT at 3% above the normal rates. However, the chancellor appears to have, for once, done what he promised to do, and not treated the Autumn Statement as a mini-budget, as there were not a large number of tax announcements.
Since it is the beginning of a new parliament, AS 2015 was delivered alongside the Spending Review. HMRC’s settlement includes high expectations of efficiency savings, amounting to a 21% reduction in baseline resource costs over the next five years. This is largely to be delivered through reduced workforce and the consolidation of offices from 170 to 13 regional centres that was announced earlier this month, and which has not been received well by taxpayer representative groups. There was, as expected, a continued focus on increasing the tax take through measures to tackle avoidance and evasion, including a renewed commitment to the £800m funding to support those efforts, which are expected to generate an additional £7.2bn in tax revenues over the next five years.
HMRC also expects to take large steps towards becoming ‘one of the most digitally advanced tax administrations in the world’, enabling taxpayers to view their tax affairs in real time online through their ‘digital tax accounts’ by 2016/17. This is also expected to reduce the number of calls to HMRC from 38m in 2015/16 to 15m in 2019/20, which is presumably expected to contribute significantly to the efficiency savings. Many taxpayers will hope that this reduces call waiting times.
Draft clauses, for inclusion in Finance Bill 2016 (FB 2016), are expected to be published on Wednesday, 9 December 2015.
Apprenticeship levy
As part of its strategy to see a marked increase in the number of apprenticeships offered by employers, the government intends to introduce an apprenticeship levy, payable by large employers as from April 2017. The concept of the apprenticeship levy was first announced in the Summer Budget 2015 and was then the subject of a consultation which closed on 2 October 2015. Following that consultation, the government has now announced that the levy will be set at 0.5% of an employer’s pay bill and that it will be collected via the PAYE system. As explained in Annex B of the response to the consultation, the measure of an employer’s pay bill is to be determined by reference to the total amount of earnings paid to the employer’s employees; it will not include benefits in kind.
To ensure that the levy is effectively targeted at the largest employers, there is to be a threshold of £15,000 before any payment will have to be made. This means that at the rate of 0.5%, only those employers whose pay bill is £3m or more will actually contribute.
The apprenticeship levy will apply to employers across the UK. In England, the funds that the levy generates (along with potential top-ups from government) will be administered through a digital account which all employers will be able to access to meet apprenticeship training needs with approved training providers. Different rules may apply to how the apprenticeships funds may be used in Scotland, Wales and Northern Ireland as skills policy is a devolved matter.
The Department for Business, Innovation and Skills, and its counterparts in the devolved administrations will be engaging with employers and stakeholders on the development of the systems under which employers can access apprenticeship funds and the rules for how those funds may be applied.
Legislation on the imposition and collection of the apprenticeship levy is to be included in Finance Bill 2016.
See AS 2015, para 3.56.
Asset managers’ performance-based rewards
Following a consultation launched at Summer Budget 2015, the government will introduce legislation in FB 2016 which will determine when performance awards received by asset managers will be taxed as income or capital gains. Broadly, an award will be subject to income tax, unless the underlying fund undertakes long-term investment activity. At the time of the consultation, private equity carried interest was expected to be taxed as a capital gain (depending on the investment strategy of the fund) but AS 2015 did not provide any more detail on carried interest in this context.
See AS 2015, para 3.90.
ATED and higher rate SDLT for non-natural persons: extension of reliefs
From 1 April 2016, relief from annual tax on enveloped dwellings (ATED) and the 15% SDLT charge which applies to non-natural persons is to be extended to:
See AS 2015, para 3.73.
Automatic enrolment for pensions
The obligation to automatically enrol employees in a workplace pension already applies to employers with more than 30 employees and will apply to all employers by 1 April 2017. The minimum rates of pension contributions required under the automatic enrolment regime start off at a low level but are set to rise in two steps, with those increases currently scheduled to be applied on 1 October 2017 and 1 October 2018. The dates for those increases in minimum contributions will be delayed to April 2018 and April 2019, respectively. These changes should simplify the administration involved in the scheme, especially for smaller businesses.
See AS 2015, para 1.137.
Bank levy
As announced at Summer Budget 2015, the government will consult on restricting the scope of the bank levy to UK operations from 1 January 2021.
See AS 2015, para 3.62.
Capital allowances and leasing
Two anti-avoidance measures relating to capital allowances and leasing are coming into effect immediately, i.e. for transactions taking place on or after 25 November 2015. The new rules have been introduced to counter schemes that have been revealed to HMRC under the disclosure of tax avoidance (DOTAS) rules.
The first measure seeks to counteract the manipulation of disposal values, which in turn leads to excess capital allowances being claimed.
The existing legislation in CAA 2001 s 215 restricts the capital allowances available in transactions that have an avoidance purpose. The measure announced today broadens the scope of this rule, so that it applies where the purpose of the relevant transaction or scheme is to enable a company to obtain a tax advantage in the form of a reduced balancing charge or an increased allowance. Where the relevant conditions are met, the disposal value is to be adjusted on a just and reasonable basis by reference to the payment received. The term ‘payment’ is widely defined and includes any form of value receivable.
The second measure is intended to counteract arrangements that generate non-taxable consideration received in return for agreeing to take over tax-deductible lease payments. Anti-avoidance legislation that relates to leasing transactions is already contained in CTA 2010 Part 20; however, HMRC does not consider the scope to be wide enough to catch the disclosed schemes. The new legislation will ensure that the company will be chargeable to corporation tax on any consideration received when taking over lease payment obligations.
See AS 2015, para 3.86.
CGT payment on disposal of residential property
From April 2019, a payment on account of any CGT due on the disposal of residential property must be made within 30 days of completion. The draft legislation will be subject to consultation in 2016 with a view to the provisions being legislated in Finance Bill 2017.
It is not expected that the existing rules will change, meaning that if the disposal is fully covered by principal private residence (PPR) relief then no tax will be payable.
Currently the cashflow advantage sits with the taxpayer, as the tax is not due until 31 January after the end of the tax year. This may be almost 22 months after the date of disposal. Accelerating the due date for payment will ensure that the cash flow advantage sits with HMRC, although how relief for capital losses will be given effect in-year is, as yet, unclear.
There are two points to note:
It is possible that the conveyancing solicitor could withhold the estimated CGT from the proceeds on completion and pay this over to HMRC.
See AS 2015, para 3.76.
Childcare, tax-free
The chancellor announced further changes to the new system of ‘tax-free’ childcare, which is to be introduced from early 2017:
See AS 2015, para 1.160.
Close company loans to participators: partial exemption for charities
The government previously consulted (in 2013) on reforms to the loans to participators rules but no action was taken, although it did raise awareness of the application of these rules to charities.
Under the loans to participators rules, if a close company (very broadly speaking, companies controlled by five or fewer participators) makes a loan to a participator (again, broadly speaking, their shareholders), the company is liable to a tax charge of 25% of the loan. The tax charge is due on the day following nine months after the end of the accounting period in which the loan or advance is made.
The government is of the view that some of the transactions caught by this charge did not fit the original rationale of the policy on the grounds that, where a loan is made to trustees of a charitable trust as participator of the close company, the funds could not end up in the hands of an individual for their personal use. This contrasts with the position in corporate structures, where the rules were designed to discourage individuals from extracting value from close companies and using the funds for personal purposes.
In order to deal with this difference, the government has announced that it will introduce legislation which ensures that loans or advances made by close companies to trustees of charities for charitable purposes are exempt from the tax charge. The exemption will apply where the trustee receives a loan or advance which it applied wholly for the purposes of the charitable trust. This will allow charities to retain this money to further their charitable objectives.
The measure will apply to loans or advances made on or after 25 November 2015, and legislation introducing the exemption will be incorporated in FB 2016. Charities do not need to account for the tax charge which could arise between 25 November 2015 and royal assent to FB 2016 on the basis that they have nine months after the end of the accounting period in which the loan or advance is made to pay the charge, although they would still be liable to the charge if the exemption is not ultimately approved by Parliament.
See consultation document Reform of close company loans to participators rules and AS 2015, para 3.39.
Climate change levy
The government has announced that following consultation, a transitional period for electricity suppliers to apply the CCL exemption on renewably sourced electricity generated before 1 August 2015 will end on 31 March 2018. See AS 2015, para 3.67.
Company car benefits: diesel cars
Currently the appropriate percentage used to determine the amount of tax due on an employee’s use of a company car is three percentage points higher if the car in question runs on diesel. That 3% supplement was due to be abolished for 2016/17 onwards. The supplement will now remain in place until April 2021.
See AS 2015, para 3.66.
Company distributions
As announced at Summer Budget 2015, the government will consult on the rules concerning company distributions. However, the AS 2015 documentation includes further information as to the government’s thinking. It appears that:
These measures are presumably being introduced because from April 2016 the tax rates on dividends for individuals will be higher and therefore the tax differential between an income and capital receipt will increase.
It is possible that this will impact profits retained in the company which can be currently extracted as capital on an exit or liquidation.
Legislation is expected in Finance Bill 2016, so it is hoped that more detail will be available in December 2015.
See AS 2015, para 3.85
Corporate debt and derivative contracts
Several amendments have been made to the loan relationships regime recently. The latest changes relate to the clarification of the relationship between tax and accounting, the introduction of a regime-wide anti-avoidance rule, and the introduction of a new corporate rescue relief (F(No. 2)A 2015 s 31 and Sch 7). The government has announced that it will include legislation in Finance Bill 2016 to update the rules relating to loan relationships and derivative contracts so that it interacts correctly with new accounting standards in three specific circumstances. Although not entirely clear from the documents published with AS 2015, the three circumstances are likely to be the expected updates to the rules on the tax treatment of:
which were originally announced in AS 2014 but, for various reasons, not included in either FA 2015 or F(No. 2)A 2015.
The new rules in FB 2016 should represent the concluding part of the three-year project to update, simplify and rationalise the regimes for the taxation of loan relationships and derivative contracts.
See AS 2015, para 3.60.
Deductions for grass-roots sports
A consultation will be published at Budget 2016 that will set out the government’s proposals for providing corporation tax relief for contributions to grass-roots sports.
See AS 2015, para 3.58.
Deeds of variation
At March Budget 2015, the chancellor announced that it would review the use of deeds of variation for tax purposes, although nothing further was mentioned about the review at Summer Budget 2015.
A deed of variation is a deemed lifetime transfer from a beneficiary of a deceased person to the recipient. Without relief from IHT and CGT, the beneficiary would be treated as making a transfer of value for IHT and CGT purposes. If the deed of variation is made within two years of the deceased’s death, IHT and CGT are calculated on the deceased’s estate as if the variation had been effected by the deceased.
Deeds of variation varying the will or intestacy of the deceased are often used to correct mistakes so as to avoid expensive litigation or to make legitimate use of available business and agricultural property reliefs. The deed of variation is not always used for tax reasons and is not viewed as a tax avoidance tool.
The government has now announced that they will not be introducing restrictions on how deeds of variation can be used for tax purposes. The government will, however, continue to monitor the use of deeds of variation.
See AS 2015, para 3.37.
Devolution
There were no major announcements regarding tax devolution for the home nations, but the AS 2015 documentation contains a helpful summary of the current position:
See AS 2015, paras 1.226, 1.228 and 2.141.
Digital tax accounts
The chancellor confirmed the government’s intention to invest £1.3bn in ‘making tax digital’. He originally announced ‘the end of the annual tax return’ in Budget 2015 and since then HMRC has published its plans for a digital personal tax account and business tax account for each taxpayer by 2016/17. Initially it was clear how employment income and most investment income could be fed through to HMRC automatically to pre-populate the digital tax account. HMRC already has the required links with employers, banks and company registrars. It was less obvious how landlords and small businesses could avoid the annual tax return because most of the information can only be provided by the taxpayers themselves.
In recent months, HMRC has been consulting with software developers on its application programming interface (API) strategy. The aim is to develop tax software packages that enable taxpayers and their agents to feed information into the digital tax accounts, in the same way that agents currently use commercial software to file tax returns. However, instead of collecting all the information and filing it once a year, the key difference will be that the update will be piecemeal and incremental.
AS 2015 states that by 2020 ‘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. Necessary software will be available free of charge. So, instead of an annual tax return, a quarterly tax return will be required. For VAT-registered businesses, the additional filing required will be minimal. But those who stuff all their records in a ‘brown paper bag’ and deliver them to their accountant once a year will need to reorganise. Employees and pensioners will not be required to update their digital tax account unless they have secondary incomes of more than £10,000 per year.
AS 2015 says nothing explicit about payment of tax, although it could be inferred that quarterly instalments will be required. The government plans to consult on the details in 2016. It is interesting to note that it is forecasting a significant increase in tax revenue of £300m by 2019/20 arising from ‘reducing errors through record keeping’.
See AS 2015, paras 1.288 and 3.93.
Disguised remuneration: future retrospection warning
The government obviously remains concerned that its rules on ‘disguised remuneration’ in ITEPA 2003 Part 7A are not secure enough to guard against all attempts to avoid tax on earnings.
In a move reminiscent of the then paymaster general’s statement of 2 December 2004 warning that future anti-avoidance measures could be introduced with retrospective effect, the Statement included a warning that future Finance Bill measures needed to counter any further new schemes intended to avoid tax on earned income may be enacted to have effect from 25 November 2015.
It is not at this stage clear whether the government or HMRC has any particular arrangements in its sights for this type of retrospective counteraction. While there is currently little definitive detail in regard to this particular announcement, it has the potential to be far-reaching and, especially if it is retrospective, potentially significant.
See AS 2015, para 3.87.
Employment status review
The government will take forward the majority of the Office of Tax Simplification’s recommendations relating to employment status, but has not specified when such changes might take effect.
See AS 2015, para 3.97.
Employment-related securities: internationally mobile employees
Finance Bill 2016 will include technical changes to simplify the rules for internationally mobile employees receiving employment-related securities (ERS) under tax-advantaged or non-tax-advantaged employee share schemes. These changes will ensure that any charge to tax will arise under the rules that deal with ERS options, rather being taxed as earnings.
See AS 2015, para 3.24.
Entrepreneurs’ relief: contrived structures
The government will consider amending the changes made by FA 2015 to CGT entrepreneurs’ relief, ‘in order to support businesses by ensuring that the relief is available on certain genuine commercial transactions’. FA 2015 made a number of changes to entrepreneurs’ relief, including removing relief for the value of goodwill realised on incorporation, and changes to the rules on associated disposals. The announcement in AS 2015 suggests that some of these changes may have caught transactions that were not their intended target. There are no further details at this stage.
See AS 2015, para 3.92.
Farmers: averaging of profit
Although farmers will be able to average their profits over five years from April 2016 (as announced in Budget 2015), they will have the option of retaining the two-year average if this is more beneficial. This is welcome news. The two calculation mechanisms for five-year averaging which were discussed in the July 2015 consultation document were complicated and potentially time-consuming, meaning there was the risk that the professional fees incurred in working out whether the farmer should average his profits may have negated the tax and national insurance benefits of doing so.
See AS 2015, para 3.21.
GAAR penalty
In its consultation on Strengthening sanctions for tax avoidance, the government set out proposals for the application of a new penalty in cases successfully tackled by the application of the general anti-abuse rule (GAAR). The chancellor announced today that the new penalty will be set at a rate of 60% of the tax at stake. This new penalty will be legislated for in Finance Bill 2016 along with some other minor changes to the GAAR regime in relation to marketed avoidance schemes.
It is not yet clear how the penalty would interact with other penalties potentially involved in respect of the same tax charge, such as a penalty for failure to comply with an accelerated payment notice. Parallel legislation is likely to be needed to apply the new GAAR penalty to NICs liabilities.
See AS 2015, paras 1.152 and 3.84.
Gift aid small donations scheme
The gift aid small donations scheme (GASDS) applies to small donations collected from 6 April 2013 and allows eligible charities and community amateur sports clubs (CASCs) to claim a gift aid style payment on cash donations of £20 or less from individuals without a gift aid declaration from the donor. These top-up payments are only available for small cash donations up to a total of £5,000 each year (meaning that generally speaking the maximum total top-up payment is £1,250). To claim a top-up payment a charity must also make a matching claim for gift aid on income that represents at least 10% of the amount on which a top-up payment is claimed.
The GASDS is separate from gift aid. Furthermore, unlike gift aid, top-up payments are not a tax relief. Donors who are higher rate tax payers will not be entitled to tax relief on donations on which a top-up payment is claimed.
The government has announced it will publish a call for evidence in December 2015 to ensure GASDS is operating as effectively as possible.
See AS 2015, para 3.38.
High risk promoters
As expected, and further to the changes to the ‘promoters of tax avoidance schemes’ rules which were legislated in FA 2015, Sch 19, there are to be amendments introduced by Finance Bill 2016 to widen the regime to include ‘promoters whose schemes are regularly defeated’. This follows the proposals in Chapter 6 of the consultation document published in July 2015.
See AS 2015, para 3.83.
Hybrid mismatch arrangements
Following the conclusion of its consultation at the beginning of 2015, the government will introduce legislation to combat abusive hybrid mismatch arrangements. A summary of responses to the consultation has yet to be published.
Although the detailed legislation is awaited, the new UK rules will be closely aligned with the principles set out under Action 2 (neutralising the effects of hybrid mismatch arrangements) of the G20/OECD base erosion and profit shifting (BEPS) Action Plan.
It seems likely that the UK will achieve this by adopting the OECD’s recommended ‘linking rules’ approach. This seeks to align the tax treatment of an instrument or entity in one jurisdiction with the tax treatment of the same instrument or entity in a counterparty jurisdiction. The approach comprises:
In contrast to the UK’s current anti-hybrid legislation, the new rules are unlikely to include a ‘main purpose’ (or ‘motive’) test. The domestic UK law changes are likely to be reinforced by various changes to the OECD’s model tax convention.
Draft legislation is expected to be published on 9 December 2015 and will be subject to further consultation. The UK has, however, consistently and publicly stated its intention to be an early-adopter of, and to implement in full, the OECD’s anti-BEPS recommendations. As a result, the new rules will be included in FB 2016 and will take effect from 1 January 2017.
See AS 2015, para 3.88.
Intangible assets, related parties and partnerships
Draft legislation has been published today that intends to counteract current arrangements involving intangible assets, partnerships and LLPs, by clarifying when intangible fixed assets (IFAs) held by a partnership come within the IFA rules.
In order to be taxed under the IFA regime, the asset must be created or acquired from a person that is not a related party, by a company on or after 1 April 2002. Assets falling outside the IFA regime are taxed under the chargeable gains regime. The application of the related party rule is unclear in respect of partnerships.
Prior to the changes announced today, the arrangements enabled a corporate member of a partnership to circumvent the related party rules to obtain a deduction under the IFA regime when establishing the profits of a corporate member; however, HMRC considered the asset should be taxed under the chargeable gains regime. The related party definition has now been widened by including the participation test in the transfer pricing legislation. Transfers will also be treated as taking place at market value.
The legislation will apply to transactions involving IFAs that take place on or after 25 November 2015. The changes will also apply to accounting debits or credits accruing on or after 25 November on a time apportionment basis, where the transaction had already taken place prior to this date. It would appear that HMRC is seeking to prevent any future benefit from being achieved where planning has already been implemented.
See the TIIN, draft legislation and draft explanatory notes for further details.
The government has announced that it will also consider a review of the IFA regime as part of the Business tax roadmap, due to be published in April 2016.
See AS 2015, paras 1.154 and 3.89.
ISAs
The tax-free status of an individual’s ISAs will be retained by his personal representatives following his death. Currently the deceased’s ISAs are taxable during the administration period. This is subject to a technical consultation with ISA providers but is expected to be legislated in Finance Bill 2016. See AS 2015, para 3.34.
As announced in Budget 2015, the list of qualifying investments for ISAs is to be extended from autumn 2015 to include crowdfunded debt-based securities. See AS 2015, para 3.33.
The ISA, junior ISA and child trust fund annual subscription limits are to be frozen at 2015/16 levels in 2016/17. See the Individual savings accounts guidance note. See AS 2015, para 3.32.
Large business tax compliance
Following consultation earlier this year, the government has confirmed that legislation will be included in Finance Bill 2016 to introduce the following measures:
See AS 2015, para 3.91.
London Anniversary Games and World Athletics and Paralympics Championships
Non-UK resident competitors in the 2017 World Athletics and Paralympics Championships and the 2016 London Anniversary Games will be exempt from UK income tax on any income received as a result of their earnings from the games.
The government confirmed that 2016 will be the final year the exemption is granted.
See AS 2015, para 3.19.
Museums and galleries, relief for
Further support will be provided to museums and galleries that develop creative new exhibitions and display their collections for wide audiences. Details have not been provided, however a consultation will be launched to gather opinions from interested parties. Given the introduction of other creative sector tax reliefs in recent years, it is possible that the future relief made available to museums and galleries will be structured in a similar way, although this remains to be seen.
See AS 2015, paras 1.210 and 3.57.
Non-domiciliaries: business investment relief
Unusually for recent years, there were no major announcements with regard to non-domiciliaries. The summary of responses and draft legislation in respect of the deemed domicile changes announced in Summer Budget 2015 is expected in December 2015.
Having said this, there was a minor point within the AS 2015 documentation on business investment relief; the mechanism introduced from 6 April 2012 which allows non-domiciliaries to invest foreign in-come and gains in UK companies without triggering a remittance.
The conditions for business investment relief are complicated and there are practical difficulties in disposing of the shares within 90 days should the conditions be broken. This is thought to be the reason why there has been lower take-up of the relief than expected.
The government is to consult on legislative changes which will encourage greater use of the relief.
See AS 2015, para 3.22.
Non-resident capital gains tax
Since 6 April 2015, non-residents have been subject to UK capital gains tax on the disposal of UK residential property. These provisions are known as the non-resident capital gains tax (NRCGT) rules (see FA 2015 Sch 7). The NRCGT rules are to be tweaked in Finance Bill 2016 to:
See AS 2015, para 3.75.
Offshore tax evasion: offences and penalties for offshore evaders and their enablers
On 16 July 2015, the government published a consultation on a new package of measures against offshore tax evasion. The consultation closed on 8 October 2015.
As proposed, the government will introduce the following:
In addition, the government will consult on an additional requirement for individuals to correct any past off-shore non-compliance, with new penalties for failure to do so.
AS 2015, paras 3.77–3.81.
Pensions
There were a number of pension-related announcements.
Secondary market for annuities
With the aim of providing flexibility for individuals who have already purchased an annuity and are therefore not currently able to benefit from the pension freedom reforms, the government plans to create a secondary market for annuities, thereby allowing individuals to sell their right to future income streams from annuities in exchange for a cash lump sum. As part of these reforms, the government will remove the tax restrictions on people seeking to assign their annuity income to firms wishing to purchase it and enable individuals to take the proceeds of their assignment and save or spend them as they see fit, taxed only at their marginal rate. A consultation on these proposals, Creating a secondary annuity market: call for evidence, ran from 18 March to 18 June 2015.
The government has now announced that it will set out further details on this measure, including the framework for the consumer protection package, in its consultation response in December 2015. Legislation implementing the changes is expected in Finance Bill 2017.
See AS 2015, para 3.30.
Bridging pensions
The government intends to introduce legislation in FB 2016 to enable the pension tax rules on bridging pensions to be aligned with the Department for Work and Pensions legislation. This legislation will follow the introduction of the single tier state pension in April 2016. See AS 2015, para 3.28.
Dependant scheme pensions
The government will introduce legislation in FB 2016 to simplify the test that takes place when a dependant’s scheme pension is payable. The test refers to the limit on dependants’ pensions before tax charges apply. The limit was introduced from A-Day (6 April 2006) and applies only when the original scheme member dies aged 75 or over. The aim of the current limit is to deter avoidance of the lifetime allowance but the test is not restricted to those with large pensions and is therefore potentially burdensome for some schemes. The proposed simplification is welcome, given that the tranche of pensioners who retired in the months after A-Day at age 65 will reach age 75 next year. See AS 2015, para 3.27.
State pension
The government has confirmed that the starting rate for a new full single tier state pension will be set at £155.65 per week when it is introduced in April 2016, which is in line with expectations. The basic state pension will be increased by the triple lock for 2016/17, meaning that it will rise to £119.30 per week. This will be the biggest real terms increase in the state pension for 15 years. See AS 2015, para 3.48.
Tax relief consultation
Further to the announcement at Summer Budget 2015, the government has now consulted on fundamental changes to pension tax relief. One of the options is that instead of receiving tax relief on the contribution, the savings would work more like an ISA, with a government top-up and tax-free extraction on retirement. The government will give a response at Budget 2016. See AS 2015, para 3.26.
Undrawn pension funds in drawdown pensions
The IHT charge on alternatively secured pensions (ASP) was removed with effect from 6 April 2011 when ASP funds became re-designated as drawdown pension funds. Since that change further reforms have introduced more flexibility and choice into the use of pension funds both in lifetime and on death. The key principle that keeps pension funds out of the inheritance tax net is that distribution is at the discretion of the pension trustees, and not at the direction of the pension member. However, the new opportunities for drawdown funds leave room for doubt as to whether the fund remains outside the control of the member.
Legislation is planned for Finance Bill 2016 that will ensure that an inheritance tax charge does not arise when a pension scheme member has designated funds to drawdown and has not drawn all the funds before death. The provision will be backdated to 6 April 2011.
See AS 2015, para 3.36.
Uprating of pension credit
The single rate of the standard minimum guarantee will rise in line with earnings by £4.40 to £155.60 per week, and the couple rate will rise by £6.70 to £237.55 per week. The savings credit threshold will rise to £133.82 for a single pensioner and to £212.97 for a couple, which will reduce the single rate of the savings credit maximum by £1.75 to £13.07 and the couple rate by £2.68 to £14.75. See AS 2015, para 3.49.
Salary sacrifice
The government has reiterated its concern about the growth of salary sacrifice schemes and is gathering further evidence, including from employers, in order to inform its decision on whether to take any action in regard to salary sacrifice arrangements.
See AS 2015, para 3.25.
Savings income, starting rate of tax
AS 2015 confirms that the band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2016/17.
See: AS 2015 (para 3.31)
SDLT: changes to the filing and payment process
Under the current rules, notification of chargeable land transactions and payment of SDLT must be made within 30 days of the effective date.
The government will consult in 2016 on changes to the filing and payment process, including whether to reduce the filing and payment window from 30 days to 14 days.
Any changes made as a result of the consultation will come into effect in the 2017/18 tax year and legislation will be incorporated in FB 2017.
See AS 2015, para 3.72.
SDLT: new charge on additional residential properties
The government is to consult on an increase to the SDLT due on purchases of second or additional residential properties, such as buy-to-let properties, that complete on or after 1 April 2016. The rate applied will be 3% above the current SDLT rate.
The extra revenue raised from this measure will be used for communities in England where the impact of second homes is particularly acute (Cornwall was mentioned in the chancellor’s speech as an example).
The use of the property is irrelevant and so it will apply whether it is to be rented or used as a second home. However, the fact that it will apply to buy-to-let properties means that this measure is another tax disincentive to the buy-to-let market, following on from the introduction of the restrictions to tax relief for finance costs legislated in F(No. 2)A 2015, s 24 which apply from 2017/18.
Although the government is to consult on the detail, the government has stated that the new higher rates will not apply:
There are many areas that are yet to be clarified, including:
There are two points to bear in mind when advising clients:
See AS 2015, para 3.70.
SDLT relief: application to certain authorised property funds
After several years of lobbying, and as originally announced in AS 2014, the government has confirmed that an SDLT seeding relief will be introduced, with effect from the date FB 2016 receives royal assent, for both property authorised investment funds (PAIF) and co-ownership authorised contractual schemes (CoACS).
The detailed rules are expected to be published on 9 December 2015 as part of the draft FB 2016 but they will be based around the following core principles:
Transactions in units in CoACSs investing in property are expected to be exempt from SDLT.
These measures will remove the two main obstacles faced by funds that invest in real estate and wish to adopt PAIF or CoACS status.
See AS 2015, para 3.71.
Self-assessment time limits
Draft legislation is to be published ahead of Finance Bill 2016 to clarify that the time allowed for making a self-assessment is four years from the end of the tax year. No further information is included in the AS 2015 documentation but it is possible that this has been prompted by a recent case on tax administration.
See AS 2015, para 3.96.
Serial avoiders
Also following on from the consultation on Strengthening sanctions for tax avoidance, the government is to introduce a series of additional measures applicable to taxpayers who repeatedly use avoidance schemes. The additional measures outlined in the consultation would apply to any individual who has received a warning notice following use of an avoidance scheme that is defeated, and would include a new reporting requirement and a surcharge on the additional tax due as a result of a failed scheme.
The names of serial avoiders could be published and those who persistently abuse reliefs could face restrictions on them accessing certain tax reliefs for a period. The legislation on serial avoiders is to be included in Finance Bill 2016.
See AS 2015, para 3.83.
Simple assessment
The government is to simplify the tax payment process for taxpayers within the self-assessment system where HMRC already holds all the data it needs to calculate the tax liability. Rather than requiring the taxpayer to file a return, instead HMRC will send a legally enforceable payment demand, which the taxpayer can challenge or appeal. This is expected to be introduced from 2016/17.
This procedure has parallels with the old pre-self-assessment days, although it is to be hoped that improved information technology will avoid the endless round of estimates, appeals, and counter claims that characterised tax practice before 1995.
See AS 2015, para 3.99.
Small business rate relief
Under the small business rate relief scheme for England, a ratepayer qualifies for relief if the rateable value of its property is less than £12,000 with the maximum amount of relief being 50%. A sliding scale operates where maximum relief of 100% (i.e. a doubling of the usual rate of 50%) is granted to small properties with a rateable value less than £6,000. Relief is reduced by 1% for every £120 rateable value by which the property exceeds £6,000 rateable value, up to the £11,999 threshold where no relief is available.
The government announced that it will extend this doubling of the relief for a further year (it was due to be withdrawn on 31 March 2016).
This measure will have effect from 1 April 2016 until 31 March 2017.
See AS 2015, para 3.74.
Sporting testimonials
In Summer Budget 2015, the government announced a consultation into the simplification of the tax treatment of sporting testimonials. Following the consultation, the government has confirmed that all income from sporting testimonials and benefit matches for employed sportspersons will be liable to income tax.
An exemption of up to £50,000 will be available for employed sportspersons with income from sporting testimonials that are not contractual or customary where the sporting testimonial is granted or awarded on or after 25 November 2015, and the testimonial takes place after 5 April 2017.
Legislation is due to be included in FB 2016 and the measure will come into effect on 6 April 2017.
See AS 2015, para 3.18.
Stamp taxes and deep in the money options (DITMOs)
To prevent the avoidance of stamp taxes using deep in the money options (DITMOs), legislation will be included in Finance Bill 2016 to impose a 1.5% stamp duty or SDRT charge (as appropriate) on a transfer of shares in certain circumstances. A DITMO is an option with an exercise price (or strike price) that is significantly below (for a call option) or above (for a put option) the market price of the underlying asset. The charge will arise on a transfer of shares to a clearance service or depositary receipt issuer, as a result of the exercise of an option on or after Budget 2016 that was entered into on or after 25 November 2015.
This would mean that the exercise of a DITMO call option will attract stamp duty (or SDRT as relevant) at 1.5% of the market value of the shares, when it is transferred to a clearance service or depositary receipt issuer.
See AS 2015, paras 1.153 and 3.59.
Tax credits
Following the government defeat in the House of Lords, the chancellor has abandoned the changes to the income threshold, the income disregard and the taper rate for tax credits announced at Summer Budget 2015. The AS 2015 documentation contains no mention of the proposed restriction of the child element (which was not to be payable in respect of the third or subsequent child born on or after 6 April 2017), however it is assumed that this amendment has also been dropped. See AS 2015, para 3.41.
The government believes that there is confusion amongst tax credits claimants about when joint claims should be filed instead of single claims. There is to be a consultation on how to make this requirement clearer. See AS 2015, para 3.51.
Following a successful initial contract, HMRC is to continue to use the private sector to chase historic tax credit debt by phone calls, text messages and letters. See AS 2015, para 3.54.
Travel and subsistence: workers provided by intermediaries
In July this year, the government launched a consultation on restricting tax relief for travel and subsistence for workers engaged through employment intermediaries, so that the amount of relief available to such workers would be in line with the rules applicable to employees. The consultation proposed that the restrictions should apply to workers engaged through any type of intermediary (including employment businesses and umbrella companies) to provide personal services to the engager if they are under the right of supervision, direction or control of any person. However, following the consultation, the proposals are to be modified so that the restrictions on tax relief for travel and subsistence will only apply to workers providing services through personal service companies where the intermediaries legislation (also known as IR35) applies. The new restriction will be imposed from 6 April 2016. (Note that this is separate from the HMRC discussion paper on tax relief for business travel and subsistence expenses to which responses can be made until 16 December 2015.)
See AS 2015, para 3.20.
VAT
The chancellor did not announce any significant changes with regards to VAT. The changes that were announced are as follows:
VAT on sanitary products: equivalent donation for women’s charities
A new fund will make available £15m a year (equivalent to the annual VAT collected on supplies of sanitary products) to support women’s charities over the course of this Parliament, or until EU rules are amended enabling the UK to apply a zero-rate of VAT for sanitary products. Women’s sanitary products are currently liable to the reduced rate of VAT as the government cannot currently tax these items at the zero-rate under EU law.
VAT reduced rate for energy saving materials
The government will consult on legislation for Finance Bill 2016 that will ensure that the reduced rate of VAT on energy saving materials is maintained in line with EU law.
Sixth form colleges
As part of the government’s one-off restructuring of post-16 education and training, Sixth Form Colleges in England will be given the opportunity to become academies which will enable them to recover VAT incurred on their non-business expenditure.
Venture capital schemes: risk finance investments
The chancellor stated in his speech that energy-generation would be an excluded activity for the purposes of the enterprise investment scheme (EIS), venture capital trusts (VCT) scheme and seed enterprise investment scheme (SEIS).
In fact most energy-generating activities are already excluded for the purposes of these schemes (including changes which apply with effect from 30 November 2015 which were legislated in F(No. 2)A 2015 s 27), however any energy-generation activity which is not currently excluded will be so from 6 April 2016 in provisions expected in Finance Bill 2016.
Finance Bill 2016 will also contain provisions to increase the flexibility for replacement capital for EIS and VCTs (subject to state aid approval).
See AS 2015, para 3.23.
Wartime compensation payments
It has been the practice of HMRC under ESC F20 to provide an exemption from inheritance tax for the value of compensation received for wrongs suffered during the World War II era. A number of schemes have been set up by various European organisations, some of them relatively recently. Historically the exemption has applied to the original victims and surviving spouses. Often the compensation is received late in life and the sum would become chargeable to IHT without the exemption. The government will legislate for the concession in Finance Bill 2016 and specifically include a recent scheme known as the child survivor fund, which makes payments to survivors who were children during the Holocaust.
See AS 2015, para 3.35.
The above commentary was derived from Tolley Guidance and Lexis®PSL Tax and Private Client services. Tolley Guidance is an online service that combines tax technical commentary with practical guidance. The Lexis®PSL Tax and Private Client services provide advisers with practice notes and precedents, with links to trusted sources.
