Autumn Statement 2014: the highlights

Autumn Statement 2014: surprise announcements on restriction of Entrepreneurs' Relief on incorporation and new Stamp Duty Banding. Subscribers, please see your detailed version: Finance Bill 2015 tax update and rolling planner

These measures will be included in the 2015 Finance Bill.

Income Tax

• Personal allowance increased to £10,600 for 2015/16 (a £100 increase on the previously stated £10,500).
• Higher rate threshold to be increased to £42,385 from April 2015.
• NI upper earnings and upper profit limits will increase in line with the higher rate threshold
• It is confirmed no changes will come into effect before April 2017 relating to restricting the personal allowance for non-residents.  Any changes will be subject to further consultation.

Remittance Basis

• In the next Parliament, the remittance charge for non-UK domiciled individuals is set to increase for longer UK residence.
• The basic charge of £30,000 will remain unchanged, but for non-doms who have been resident in the UK for 12 out of the past 14 years, it will be increased to £60,000, and for those UK resident for 17 of the previous 20 years, it will increase to £90,000.

Pensions

• From April 2015, the 55% tax charge on inherited pensions is withdrawn, allowing unused pension pots to be passed on tax free.
• Joint life or guaranteed term annuities will also be able to be passed on tax free where death occurs before age 75.

Capital Allowances

• Enhanced capital allowances for low emissions vehicles that were due to end in 2015 are extended to 2018.

Corporation Tax

• Creative sector relief extended to include a new children’s programming TC tax relief from April 2015.
• Consultation announced to introduce a new orchestra relief from April 2016.
• Tax relief on the amortisation of goodwill acquired from a related party individual on or after 3 December 2014 is now denied, following changes to Entrepreneurs' Relief for individuals.

R&D Relief

• Tax credit for small and medium companies increased from 225% to 230% and the above the line credit will be increased from 10% to 11% from 1 April 2015.
• From 1 April 2015, the costs of materials incorporated in products that are sold will be excluded from relief.
• New advanced assurance scheme to be introduced for small businesses making their first claim and new guidance to be developed.

Employers and employees

• NEW: consultation on the temporary travel rules for employees engaged under overarching employment contracts.
• With effect from April 2016, employers will not have to pay NI contributions for apprentices aged under 25 earning up to the Upper Earnings Limit.
• From April 2015 the £2,000 annual NI ‘Employment Allowance’ is extended to employing households that employ care and support workers.
• NEW: the abolition of the £8,500 benefits threshold, a new tax exemption for paid and reimbursed expenses, the voluntary payroling of taxable benefits by employers, and a statutory exemption for trivial benefits. All these measures were suggested by the Office of Tax Simplification at Budget 2014 and were subject to consulted last summer. The new measures will apply from April 2015. 
• Proposals to introduce a new form of employee shareholding vehicle in order to reduce the costs for employee controlled companies have been shelved for the time being. 

Capital Gains Tax

• NEW – Entrepreneurs Relief (ER) will no longer be available on the disposal of goodwill on transfer of a sole trader or partnership business to a related close company (incorporation). The measure has effect for transfers on or after 3 December 2014, see Entrepreneurs' Relief new changes.
• ER will now be allowed where a qualifying gain, which has been deferred into investments qualifying for Enterprise Investment Relief (EIS) and Social Investment Tax Relief (SITR), is subsequently realised.
• NEW: there are no changes to the private residence relief election for UK residents, following consultation over the summer.

Capital Gains and Residential Property & Non Residents

• New from April 2015: non-residents individuals, trusts and companies will be subject to capital gains tax on gains made post March 2015 on the disposal of UK residential property. Exemptions will apply to institutional investors and also to certain types of accommodation such as student accommodation. A private residence election will be available provided that the 90 day test is passed, see CGT, residential property and non residents.
• Companies will be subject to two CGT regimes from 1 April 2015, see CGT: different ways of taxing UK residential property for a summary of the different tax regimes for UK and off-shore companies and individuals from 1 April 2015 and effects on their owners.

Stamp Duty

• NEW - significant changes to the Stamp Duty Land Tax (SDLT) regime for residential property.
• The old rules whereby the rate of SDLT would be determined by the purchase price of the property and applied to it in full (known as the ‘slab’ system) has been abolished with effect from 4 December 2014.
• The new rules introduce a banding system whereby the SDLT is determined by the rate applicable to the amount of the overall purchase price which falls within a given band (akin to the current income tax system)

The new bandings and rates are;

Transitional provisions are in place where contracts have been exchanged but not completed, which allow the purchaser to choose whether to apply the old or new rules. See Stamp Duty Land Tax.

Enveloped properties

• From 1 April 2015 the Annual Tax on Enveloped Dwellings (ATED) will be increased;

• It was previously announced in Budget 2014 that there would be an ATED charge of £7,500 on properties worth £1m to £2m from 1 April 2015.
• See Annual Tax on Enveloped Dwellings (ATED).

VAT

• From April 2015, search and rescue and air ambulance charities will be eligible for VAT refunds, and hospice charities will also receive refunds for VAT incurred.

Inheritance Tax

• The government will not introduce a single settlement nil-rate band for trusts, but will target avoidance through the use of multiple trusts in Finance Bill 2015.
• IHT exemption for members of armed forces extended to members of emergency services and humanitarian aid workers responding to emergency situations.
• See ISAs (below) for new IHT provisions for ISAs.

ISA’s

• ISA limit increased to £15,240 with effect from April 2015.Junior ISA and Child Trust Fund limits increased to £4,080.
• From 3 December 2014, an ISA holder can pass their ISA benefit to their spouse or civil partner on death. The additional ISA allowance will be equal to the value of the savers ISA holdings at the date of their death. This is in addition to the survivor’s own normal ISA limits.

Business Rates

• ‘High street discount’ increased from £1,000 to £1,500 from April 2015 to March 2016.
• Small Business Rate Relief doubled for a further year.

Tax enquiries

• HMRC is proposing changes to the enquiry rules so that in the course of a complex case it may close an enquiry on one aspect of the case, or refer that part to the tribunal in order to achieve closure on that part.