plymouth - autumn statement - november 2016

SpeakerAutumn Statement updatePlymouth November 2016

SpeakerChairman’s welcomeMartin Atkins

pkf-francisclark.co.uk

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Housekeeping

@pkfFrancisClark#FCAS16 #Plymouth


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


Partner appointment

Holly Bedford joins PKF Francis Clark as Tax Partner, 1 December 2016

• Based in the Plymouth office, remit across the West of the region.

• Strong corporate expertise, including transaction and international tax.

• Worked for some of the world’s largest accountancy firms, both here and in the USA.


Staff promotion & appointment

Justin Gliddon became Business Services Director, 1 October 2016

James Barrett joined PKF Francis Clark as Corporate Services Director, April 2016

Programme

• What does the Autumn Statement mean for the local economy? – Martin Atkins

• Business tax update – Ian Pring

• Personal tax update – Gordon Fox


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 – welfare spending cap/surplus aim for 2025!?

• Economy


UK Economy


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Financial position

• No cash / No money

• Tax receipts lower that forecast (despite a record breaking October)

• No surplus in this Parliament

• Further borrowing of £161bn by 2020/21

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


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Themes

• Productivity (the new buzz word!)

• 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

Is it enough??


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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

• Significant commitment to “Powerhouses” in Midlands and the North.

• Where does that leave the South West?


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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

• Impact of wage increases


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South West

Plymouth

• £1m allocated to help transform the disused Devonport Market Hall into a cutting edge digital technology hub (£5m project cost)

• Plymouth rail station frustration!

• Land Registry ‘saved from privatisation’.

SpeakerBusiness tax updateIan Pring


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Business Tax in a Post-Brexit World

• Corporation Tax

• Employment Taxes

• Other points

• Residential Property

• Incorporation


• ‘Business Road Map’ - Lowest CT rates in the G20• “Britain open for Business”

Corporation Tax Rates?


Corporation Tax Rates


• R&D – Government to review tax environment for R&D “to make the UK an even more competitive place to do R&D”

• Substantial Shareholding Exemption - simplification of rules from April 2017

• Interest – from 1 April 2017 rules will be introduced to limit the tax deductions that large groups can claim for their UK interest expenses (only relevant to large corporates with net interest expenses of > £2m)

• Loss relief – from 1 April 2017 where (group) profits over £5m utilisation of losses b/fwd will be restricted to 50% of the excess

Headlines - Corporate


• Simplifying NIC for employers from April 2017

• Alignment of primary (employee) and secondary (employer) threshold (current year thresholds £155 and £156)

• Both employees and employers start paying NIC on weekly earnings above £157 – NIC cost to employer of £7.18 per employee

• Benefits in Kind – a consultation is to take place in 2017 on the valuation of benefits including employer-provided accommodation

• Employee business expenses – call for evidence to be published at Budget 2017 on the use of income tax relief for employees’ business expenses

Headlines – Employment taxes


• The tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017

• Except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars.

• Existing arrangements in place before April 2017 will be protected until April 2018

• Arrangements for cars, employer provided accommodation and school fees will be protected until April 2021

Other Points - Salary sacrifice arrangements


• Capital Allowances – 100% FYA for expenditure on new electric charge points (effective from yesterday but will expire on 31 March/5 April 2019)

• VAT Flat Rate Scheme – introduction of a new 16.5% flat rate scheme from April 2017 for businesses with limited costs such as labour only businesses

• National Living Wage to rise from £7.20 an hour to £7.50 from April 2017 (+ HMRC NMW enforcement to be strengthened!)

• Letting Agents Fees to be banned asap *following consultation”

Other points


Residential Property – timeline of changes


Restriction of interest reliefExample – substantial property portfolioMarried couple with jointly-owned properties


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%


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……….”


Review of incorporations announced!

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

Impact on planning?

Incorporation?


England 1 Iceland 2 – are we “just about managing”?

SpeakerPersonal tax updateGordon Fox


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Just About Managing (JAMs)


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Just About Managing (JAMs)

• Reinforced commitment to raise the tax-free personal allowance to £12,500 and the higher rate threshold to £50,000 by 2020

• National Living Wage to rise to £7.50 from April 2017• Reduction in the rate at which benefits are withdrawn from

people when they start work• Letting agents fees to tenants to be banned• Freeze on Fuel Duty• Reforms to compensation for whiplash to cut the cost of

motor insurance

Income tax rates

2017/18 2016/17

Basic rate 20% 20%

Higher rate 40% 40%

Additional rate 45% 45%

Dividend tax rate (BR) 7.5% 7.5%

Dividend tax rate (HR) 32.5% 32.5%

Dividend tax rate (AR) 38.1% 38.1%

Income tax allowances

2017/2018 2016/17

Personal allowance £11,500 £11,000

Basic rate band £33,500 £32,000

Higher rate threshold £45,000 £43,000

Additional rate threshold £150,000 £150,000

Personal allowance abated by £1 for each £2 of income from £100,000 £100,000

Personal allowance lost at £122,000 £122,000

Savings

• From April 2017 a new NS&I 3-year Savings Bond offering 2.2% gross interest

• Standard ISA allowance to increase to £20,000 from April 2017

• Choice of ISA’s to include Lifetime ISA from next April

• 0% savings allowance for first £1,000 of savings income (£500 for higher rate taxpayers and no allowance for additional rate taxpayers).

£27,000 tax-free from April 2017?!

• Personal allowance - £11,500

• Tax-free interest – £1,000

• Dividends allowance - £5,000

• Rent-a-room allowance - £7,500

• ‘Occasional earnings’ allowance - £2,000

Capital Gains Tax

• Annual exemption - £11,100

• Rate• 10% for basic rate payers

• 20% for higher rate payers

• 8% surcharge on residential property

• 30 day payment window for gains arising on disposals of residential property from 6 April 2019

• Non-resident owners of residential property


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Inheritance Tax

• Nil rate band remains frozen - £325,000• Residence nil rate band - from April 2017 phased in until

it reaches £175,000 in 2020/21• RNRB on downsizing – selling and moving into lower

value property or ceasing to own home - provided they leave assets to that value to lineal descendants

• Transferable allowances


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And finally

• Pension annual allowance - £4,000 (from £10,000) when pension in payment (Consultation)

• No change to higher rate tax relief on pensions

• No more Autumn Statements!

SpeakerChairman’s closing remarksMartin Atkins

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