In his first Autumn Statement, the Chancellor took the opportunity to advise that this would be his first and last Autumn Statement as he would revert to announcing the mean fiscal measures in the Budget in future.

From a tax perspective, Mr Hammond declared that  "My priority as chancellor is to ensure Britain remains the number one destination for business”.
 
Only a little detail has been included in this statement, but further information and detail will become available on 5 December 2016 with the publication of the Draft 2017 Finance Bill.

In the meantime, we have produced a summary of the most significant tax and VAT announcements:-

In the Autumn Statement Philip Hammond confirmed that he would continue George Osborne's quest to increase the tax free personal allowance.  Therefore, from  April 2017 this will increase to £11,500 and in addition the higher rate tax threshold will increase to £45,000.  The threshold for the additional tax rate will remain at £150,000 and looks to stay at this level for the foreseeable future.

It was also confirmed that the tax free dividend allowance of £5,000 will remain unchanged in 2017/18 and the tax free savings allowance of £1,000 for basic rate tax payers and £500 for higher rate taxpayers will also remain unchanged. 

In a further boost the National Living wage will also increase from April 2017 to £7.50 per hour.  The National Minimum wage is also set to increase from April 2017 as shown below:
 

​for 21 to 24 year olds	£7.05 per hour​
for 18 to 20 year olds​	​£5.60 per hour
​for 16 to 17 year olds	​£4.05 per hour
​for apprentices	​£3.50 per hour

The Flat Rate Scheme (FRS) was introduced as a means of reducing the administrative burden on small businesses in completing VAT returns. For a number of businesses there has also been a beneficial side effect of reducing the VAT payable to HM Revenue & Customs. It has been announced today the there will be a new FRS rate of 16.5% to be applicable with effect from 1 April 2017. This new rate will apply to what HMRC have defined as “limited cost traders”....
Read more here

In April 2016 the Government abolished the use of salary sacrifice agreements whereby businesses were replacing part of a worker’s pay with tax and national insurance-free reimbursed expenses.
 
The Government still think that salary sacrifice arrangements are being set up primarily to obtain tax advantages and, therefore, in April 2017 will render such agreements ineffective unless they relate to pension contributions, childcare vouchers, the cycle to work scheme and/or ultra-low emission cars.
 
The Government have announced certain transitional provisions – any arrangements in place prior to April 2017 will be protected from the new rules until April 2018 and, furthermore, arrangements in place prior to April 2017 relating to cars, accommodation and school fees will be protected for a further three years until April 2021.
 
This is a major tax change for employers and employee alike and will warrant an overhaul and review of salary sacrifice arrangements currently in place or being considered.

The Government confirmed certain pre-announced changes in relation to Corporation Tax, including:

• A reduction in the current rate of 20% to 19% from 1 April 2017 and then 17% from 1 April 2020.
• A reform of loss relief from April 2017 which will remove the restriction on the use of losses which accrue on or after that date and are carried forward to a later period, which companies will be then free to use against different income streams to those that they currently can. This will be subject to an overall cap on the use of brought forward losses to the first £5m of taxable profits of a company (or group) in a 12 month period.
• A restriction on the deductibility of interest from April 2017 where a company (or group) has a net UK interest expense of more than £2m, whereby the amount deductible will be fixed to 30% of the company’s tax-adjusted earnings before interest, tax, depreciation and amortisation (EBITDA).

Where companies (or partnerships with at least one corporate member) own ‘high value’ residential property then there is an obligation to file an ATED return and, subject to whether relief is available, pay an annual tax charge of an amount dependent on the value of each property.
 
The ATED regime was originally introduced in April 2013, however for the first two years it only applied to dwellings individually worth at least £2m. Then in 2015 this threshold reduced to £1m and in April 2016 it was reduced further to £500,000.
 
For 2016-17 the relevant valuation date for assessing whether a dwelling falls within ATED was still April 2012, however values are re-assessed every five years under ATED, and so in April 2017 values will need to be reconsidered.
 
Furthermore, the Government have announced that the ATED charges will increase in line with inflation for the 2017-18 tax year. Both the returns and payment are due on 30 April 2017 for the 2017-18 tax year.

One aspect of employee benefits that has been a mainstay of the P11D system is that an employee can make good to their employer the cost of certain benefits and these then in turn not constitute a taxable benefit in their hands.

From April 2017 in order for an employee to make good the cost of their benefits the amount will have to have been paid to the employer prior to 6 July following the end of the tax year.  This deadline coincides with the P11D submission deadline and therefore means that any amount to be 'made good' by the employee need to have been paid prior to P11D submission.

A common benefit provided to employees is the provision of equipment or assets for private use.  The current rules for valuing this benefit take into account the value of the asset and the date it was first made available to the employee and the date the asset is withdrawn if appropriate.  This potentially creates a significant benefit for the employee even if the private use is minimal or insignificant compared to the business usage.

Therefore from April 2017 the valuation of these benefits will be clarified and will be based on the period the asset is available for private use rather than the total period of availability.

Following a consultation on this area, HMRC have confirmed some of the changes previously announced.  Namely, that from April 2017, non domiciled individuals will be deemed UK domiciled if they have been resident for 15 out of the past 20 years, or if they were born in the UK; inheritance tax will be charged on UK residential property even where this is held indirectly through an offshore structure such as a company or trust; and, changes to Business Investment Relief to make it easier for non domiciled individuals who are taxed on the remittance basis to bring offshore money onshore for the purpose of investing in a UK company.
 
However, there was no detail around these changes and we suspect that it is only when the Finance Bill is published in December that the full result of the consultation and whether changes were made to the original proposals will come to light.

Certain ‘ex gratia’ payments made on the termination of an employment have for many years been exempt from national insurance, as well as the first £30,000 being free of income tax.
 
The Government has decided to retain the £30,000 exemption but to charge employer’s national insurance (class 1 secondary) to the extent that such payments exceed that threshold.
 
Furthermore, Government plans to tackle perceived abuse of these rules whereby certain ‘post-employment notice’ entitlements were being categorised as ex gratia sums but in the Government’s view should be subject to income tax and national insurance have seemingly been reigned in, as tax will only be applied to the equivalent of an employee’s basic pay if a payment is made ‘in lieu’ of notice. The original consultation planned to categorise certain ‘expected bonus income’ as contractual and, therefore, taxable as well as basic notice pay entitlement.

No real changes to this area, except for an extension to inheritance tax relief for donations to political parties going forward to include parties with elected members in the various devolved parliaments/assemblies as well as including those that have acquired members by by-election.

As already announced the government is to give intermediaries a greater role in administering Gift Aid, simplifying the process for donors making digital donations.

The basic earnings threshold at which class 1 national insurance starts becoming due will be aligned for the employee and employer from April 2017. The level of earnings at which each will start to apply will be £157 per week, or £8,164 per annum.

From April 2017 where a worker is being provided for the public sector, there will be new legislation requiring either the public sector body (or the agent acting as intermediary) to apply PAYE income tax and national insurance in respect of such workers even if their services are being provided by a company.
 
This is a shift from the usual IR35 rules which catch intermediaries used in disguised employment engagements. Under IR35 it is up to each personal service company to decide if they think they are inside the rules or not, and to prepare their returns on that basis. Where the engagement is ultimately established for the benefit of the public sector then it is the engager rather than the provider of the worker that will need to decide whether to apply PAYE and national insurance.
 
The definition of public sector worker is quite widely drawn, so the legislation will potentially affect a significant number of workers and businesses.

Further to consultations between HMRC and a number of professional bodies the taxation of part-surrenders and part-assignments will change from April 2017.  Previously, these events were not taxed in line with the financial gain but instead based on the gross surrender value.  This basis of taxation has been seen as unfair and contested in recent cases through the courts.

From April 2017 taxpayers in this situation will be able to apply to HMRC for the chargeable gain to be calculated on a just and reasonable basis rather than based on the gross proceeds.

This is a much welcomed change in the taxation of Life insurance policies as finally common sense has prevailed.

Pensions changes to allow greater flexibility in accessing pensions were introduced in 2015 to allow access to funds in a variety of ways from the normal minimum pension age of 55. It has still been possible to continue to save into a pension after accessing pension funds, but limited to the MPAA which was set at £10,000 per annum. The proposal the government is now making is to reduce this annual limit further to just £4,000 from April 2017. This is being set out in a consultation document on which the government will seek responses by 15 February 2017.

The Government has announced that is going to consult on the valuation of living accommodation benefits in kind included on P11D returns, and will also be canvassing opinion on the valuation of any other benefits in kind where the amounts generally assessable to tax are not considered equitable.

ESS was a new type of tax-advantaged ‘HMRC approved’ share scheme which was introduced on 1 September 2013. It essentially allowed an employer to issue tax and national insurance-free shares worth up to £2,000 to an employee in exchange for the worker relinquishing certain employment rights. Furthermore, the first £50,000 of share value received by an employee under an ESS would qualify for capital gains tax exemption when the shares were sold, with no limit placed on the value of that potential exemption.  
 
The ESS scheme has been subject to exploitation since its introduction. There have been ways around the relinquishing of employment rights and the scheme has been predominantly used by high earning executives rather than the middle management workers for whom it was intended.
 
At Budget 2016 the Government announced a £100,000 cap on the capital gains tax exemption which would apply to new ESS participators, but at the Autumn Statement the Government have gone a step further and essentially abolished the scheme altogether in terms of new entrants.
 
The abolition of ESS may lead even more businesses to consider an EMI scheme as the most tax efficient way of rewarding key employees through share incentive arrangements.

The SSE is an exemption which can apply where a company makes a disposal of a shareholding of at least 10% in another trading company. It is an important exemption in terms of encouraging groups of companies to be headquartered in the UK and hence the Government have consulted on how they can simplify it and, therefore, give businesses greater assurance over whether they will qualify for it.
 
The Government are planning to remove the ‘investing condition’, which requires not only the company being sold to be predominantly a trading company, but also requires the vendor company to be trading (or the member of a trading group) immediately after the transaction, which in practice can be a particularly difficult condition to meet.
 
The Government is also planning to provide a more comprehensive exemption for companies owned by qualifying institutional investors, to encourage more investment by venture capital firms into growing trading companies in the UK.

To encourage the use of electric vehicles the Government have decided to extend the 100% first year allowances currently given to ultra-low emission cars themselves to also incorporate certain charging equipment installed to enable their use. This measure will apply from 23 November 2016 to the end of the 2018/19 tax year.
 
In reality this measure will primarily be of benefit to businesses spending more than £200,000 on qualifying plant and equipment each year, which is the level of the Annual Investment Allowance on which businesses can claim 100% relief for such capital expenditure against their taxable profits.

In Budget 2016 the Government announced new tax legislation which targets the users of tax avoidance schemes and particularly those which they term ‘disguised remuneration schemes’ used by employers and employees. The Government have announced that the scope of this legislation will now be extended to include schemes used by self-employed workers.

The government will legislate to simplify the process for applying for and agreeing PSAs. In the initial consultation, HMRC proposed that: 

• No upfront agreement should be required, with employers self assessing the items that would be included 
• PSA returns should be moved from paper forms to a digital format and more frequent submissions may be required 
• The PSA payment dates should be aligned with the P11D deadline of 19^th July (currently the PSA payment deadline is 19 October) 
• Misreporting of items in good faith should only result in an initial warning from HMRC; however, action will be taken for persistent inaccuracies  

HMRC are also proposing to more clearly define what can be included within a PSA, and to remove "minor benefits" from PSAs, given that trivial benefits are now exempt. 
 
The changes will require employers to have robust processes in place to identify which benefits are exempt, which benefits need to be reported on P11D returns and which benefits remain taxable and can be included within a PSA. This is especially prevalent for complex costs such as staff entertaining. 
 
The final changes are yet to be confirmed; however, they will have effect in relation to agreements for the 2018/19 and subsequent tax years.

Following consultation, the government will legislate to clarify and “improve” certain aspects of partnership taxation to ensure profit allocations to partners are fairly calculated for tax purposes. 
 
Legislation is proposed to confirm that the arrangements set out in the partnership or LLP agreement prove to be the overriding factor. To maintain flexibility, these could be overridden by notification to HMRC. 
 
Legislation is also proposed to provide that the basis of allocation of tax adjusted profit should be the same as the allocation of the accounting profit or loss between the partners. This is to prevent specific items of income or expenditure from being allocated to particular partners or classes of partner purely to obtain a tax advantage. 
 
This could have implications, for example, where a specific disallowable item, such as private use of a car, is allocated to a partner. In future this may need to be within the profit sharing agreement. 
 
Legislation is proposed to make it clear that a person will be treated as a partner if they are listed as a partner in the partnership return. The proposals will also 'look through' partners, who are themselves a partnership or LLP, through changes in reporting requirements in the partnership return and partnership statement. 
 
The Government has also been considering ways to improve tax administration for partnerships with investment income only, such as whether a partnership return is required at all.
 
We do not yet know whether all or just some of these changes will make the Finance Act but based on the announcement at the Autumn Statement we believe that most of them will be taken forward by the Government.

For the full Treasury document, please see:
https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016