exeter - autumn statement - november 2016

SpeakerAutumn Statement updateExeter November 2016

SpeakerChairman’s welcomeJohn Endacott

pkf-francisclark.co.uk

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Housekeeping

@pkfFrancisClark#FCAS16 #Exeter

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South West Insider Dealmaker Awards 2016:Young Dealmaker of the Year – Matt Willmott

British Accountancy Awards 2016:Shortlisted for National Firm of the Year winner to be announced soon…

Awards

Programme

• What does the Autumn Statement mean for the local economy? – John Endacott

• Business tax update – Paul Collings

• Personal tax update – Helen Lewis


Speaker

What does the Autumn Statementmean for the local economy?


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The new era

• Brexit

• Philip Hammond’s first and last Autumn Statement

• Fiscal rules

• Economy and public finances


UK Economy


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Financial position

• No cash / No money

• Tax receipts lower that forecast

• No surplus in this Parliament

• Further borrowing of £161bn by 2020/21

• Income tax receipts (2016/17) £174bn


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Financial position

2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21

-20

0

20

40

60

80

100

Public sector net borrowing £bn

Autumn Statement 2015 Budget 2016 Autumn Statement 2016


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Themes

• Productivity

• Housing

• Infrastructure & Innovation

• Imbalance in economy across the UK


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Productivity

• £23bn National Productivity Investment Fund

• £7.2bn Housing & Infrastructure

• £2.6bn Transport Networks

• £0.7bn Digital Communications

• £4.7bn Research & Development

• £1.0bn more for Venture Capital (British Business Bank)


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Housing

• £7.2 billion to support construction of new homes

• Focus on infrastructure to unlock housing

• 100,000 new homes in areas of high demand

• Additional 40,000 affordable homes

• Right to buy for housing association tenants


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Infrastructure & Innovation

• £4.7 billion to enhance UK science and innovation in R&D funding

• £2.6 billion UK transport networks

• 100% First Year Allowance to install electrical charging points

• World leader in 5G technology

• 100% business rate relief on new fibre optic infrastructure


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Economic Imbalance

• “Northern Powerhouse”

• Where does that leave the South West?

• Business Rates

• Fuel duty freeze


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South West

• £191m award to South West Local Enterprise Partnerships

• Cornwall Air Ambulance to receive £1m of LIBOR fines

• Flood defence and resilience, including £50m for rail resilience projects including Dawlish

• Record number of people in work in South West

SpeakerBusiness tax updatePaul Collings


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Business Tax in a Post-Brexit World

• Corporation Tax

• Capital Allowances

• Substantial Shareholdings Exemption

• Loss Restrictions

• Incorporation

• A few loose ends


Corporation Tax Rates


• Lowest Corporate Tax rates in the G20• “Britain open for Business”

Corporation Tax Rates?

Annual Investment Allowance

Period from AIA1/6 April 2008 £50,0001/6 April 2010 £100,0001/6 April 2012 £25,0001 January 2013 £250,0001/6 April 2014 £500,0001 January 2016 £200,000

100% tax relief


1 April 2017 1 May 2010Writing Down Allowances

18% 20%

Special Rate Pool – Integral Features etc

8% 10%

Writing Down Allowances


Substantial Shareholdings Exemption (SSE)

A Limited

D LimitedB Limited C Limited

75%10%100%


Substantial Shareholdings Exemption (SSE)

A Limited

D LimitedB Limited C Limited

75%10%100%

Exemption on the sale of an interest in a trading subsidiary by a trading group


• Intention was “…to make the UK competitive as a holding company location”.

• In Budget 2016 announced intention to “make it more internationally competitive”

• Autumn Statement 2016:-a) Simplify the rules; andb) Remove the investing requirement within SSE;

SSE - Why? And What has happened?


• Company can use a trade loss against profits of the same year

• Can be carried back against profits of the previous 12 months

• Group relieved against profits of that year; or• Carried forward against profits of the same trade.

Trade Losses – Current Position


Losses – Old Rules

Year 1 Year 2

Rental Profit 300,000 300,000

Trading Profit - 50,000

Loss c/y profit (300,000) vs same trade (50,000)

Taxable Profit - 300,000Corporation Tax - 60,000

Trading Loss 500,000 200,000

Used vs Trade - year 1 (300,000) (50,000)

Loss Carried forward 200,000 150,000


• Losses incurred from April 2017, • Apply to both standalone companies and group

companies• Allow carried forward losses to be used against other

income and gains

Trade Losses – New Rules


Losses – New Rules

Year 1 Year 2

Rental Profit 300,000 300,000

Trading Profit - 50,000

Loss c/y profit (300,000) (200,000)

Taxable Profit - 150,000Corporation Tax - 30,000

Trading Loss 500,000 200,000

Used vs Trade - year 1 (300,000) (200,000)

Loss Carried forward 200,000 -


• For taxable profits in excess of £5 million, restrict to 50% the amount of profits that can be offset through losses carried forward

Trade Losses – New Rules


Cause and Effect?

1.Make the UK more “competitive”2.Bring in more Revenue to UK…but


Cause and Effect?

“…the OBR has today highlighted the growing cost to the Exchequer of incorporation.

So the government will consider how we can ensure that the taxation of different ways of working is fair……….”


• Attack on so-called “Phoenix-ism”• Clearance denied on Incorporation• Attack on Personal Service Companies in the Public

Sector

What have we already seen?


Review of incorporations announced!

Expected to be about the ways to reduce the tax differential between corporates and individuals.

Impact on Planning?

And now….Incorporation?


Property Portfolio – Tax on Mortgage Interest


Incorporation?

2020/21Gross rents £600,000

Repairs and other tax deductible costs (200,000)

Interest on mortgages (350,000)

Net rental profit 50,000

Salaries (say £8,100 x 2) (16,200)

Net taxable profit 33,800

Corporation Tax at 17% (5,746)

Retained profit 28,054

Income tax due if extracted as dividends (PA £12,500) 1,850

Total tax payable 7,596

Effective tax rate on rental profit 15.19%


• Further anti-avoidance on disguised remuneration;• Simplification of arrangements in respect of PAYE

Settlement Agreements (PSAs)• Research & Development – new “fund”• Businesses using the Flat Rate Scheme for VAT “Limited

Costs” – 16.5%• Extension of Corporation Tax deduction for contributions

to grassroots sport – April 2017

And finally…….


England 1 Iceland 2 – Are we “Just About Managing”?

SpeakerPersonal tax updateHelen Lewis


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Contents

• Just About Managing

• Salary Sacrifice

• Ultra low emissions cars

• Other income tax and NIC measures

• Pensions, Savings and Investments

• Inheritance Tax


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Just About Managing (JAMs)

• George Osborne promised to raise the personal allowance to £12,500 and the higher rate threshold to £50k by 2020

• CPI applied to personal allowance – from 2020

• Universal Credit taper – 65% down to 63%

• Letting agent fees to tenants – banned


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Just About Managing (JAMs)

• National Living Wage - £7.20 to £7.50 from April 2017

• Childcare

• Fuel duty rise cancelled

• Pensioners

• Tinkering around the edges


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Salary sacrifice

• Sacrifice of taxable pay for benefits

• Eg pension contribution, childcare vouchers, cycle to work not affected

• Phones, gym memberships, PHI, Car (other than ultra-low emission cars) etc

• Income tax and ers NIC will apply

• Limited grandfathering

• Trivial Benefits in Kind


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Ultra low emissions cars

• First year allowances (FYAs) – 100% capital allowances for electric charge points from 23.11.16

• FYA already for:• Low emission cars• Gas refuelling equipment• Zero emission goods vehicles

• Company car charges• 2016/17 – 7% of list price below 50g/km• 2017/18 – 9% of list price below 50g/km• 2020/21 – lower bands will be introduced


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Other Income Tax and NIC measures

• Employers and employees threshold will be aligned from April 2017

• Class 2 – abolished April 2018

• Termination payments over £30k exemption will be subject to ers NIC

• IR35 in the public sector


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Pensions, savings and investments

• ISA limit increased to £20,000

• NSI £3,000 investment paying 2.2% gross

• Money purchase annual allowance reduced to £4,000

• Personal savings allowance and dividend allowance

• Life insurance policies


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Inheritance Tax

• Nil rate band frozen since 2009 – until 2021

• Residence nil rate band and downsizing

• Inheritance tax relief for gifts to political parties

• Changes for non-doms

SpeakerChairman’s closing remarksJohn Endacott

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