The Chancellor, Mr Osborne, announced a number of new allowances and reliefs, and enhancements to existing allowances and reliefs with a pro-business slant in his Autumn Statement, made on Thursday 5 December. These included a new tax relief for investment in social enterprise, changes to film relief, and new allowances for the oil and gas industry. There was also significant, but probably not surprising, emphasis on anti-avoidance measures, Andrew Walker takes a closer look at these and other related matters in this month’s UK feature article.

A briefing note prepared by HMRC provides a useful overview of the tax measures announced, elements of which are reproduced below. The note is available at: https://www.gov.uk/government/news/

Personal Allowance, Rates of Tax & National Insurance Contributions for 2014/15

As announced at Budget 2013, people born after 5 April 1948 will be entitled to a basic personal allowance of £10,000 for the tax year 2014/15, up from £9,440 in 2013/14.

The ‘higher rate threshold’ (the sum of the basic personal allowance and the basic rate limit) will be £41,865. As the personal allowance will be £10,000 for 2014/15, this means that the basic rate limit will be £31,865, down from £32,010 in the current tax year. The rates of tax will be announced at Budget 2014.

For 2014/15, there are no changes to the percentage rate of contribution for Class 1, Class 1A, Class 1B and Class 4 National Insurance Contributions (NICs) but there are changes to all of the thresholds and limits. The weekly rates for Class 2 and Class 3 NICs will be increased. The Class 1 Upper Earnings Limit and the Class 4 Upper Profits Limit for NICs will continue to be aligned with the point at which higher rate tax becomes payable £41,865.

From 6 April 2015 employers will no longer be required to pay Class 1 secondary NICs on earnings paid up to the Upper Earnings Limit to any employee under the age of 21.

Recognising Marriage in the Tax System

From April 2015, a spouse or civil partner who is not liable to income tax or not liable above the basic rate for a tax year will be entitled to transfer £1,000 of their personal allowance to their spouse or civil partner provided that the recipient of the transfer is not liable to income tax above the basic rate. A maximum benefit of £200 will accrue to any qualifying couple availing of this new relief, based on the current basic income tax rate of 20%.

Capital Gains Tax (CGT)

The annual exempt amount will be £11,000 for the year 2014/15 and £11,100 for 2015/16 and subsequent years.

A number of other changes were also announced to the UK CGT regime:

• The final period exemption for principle private residence relief will be reduced from 36 months to 18 months from April 2014. This measure is designed to “reduce the incentive for those with multiple homes to exploit the rules”.
• From April 2015, CGT on gains made by non-residents disposing of UK residential property will be subject to UK CGT. A consultation on how best to introduce the new CGT charge is to be published early next year.

Creative Sector Tax Reliefs

Subject to State aid approval, from April 2014 the rate of film tax credit for surrenderable losses will be 25% on the first £20 million of qualifying core expenditure (subject to a maximum of 80% of qualifying core expenditure) and 20% thereafter (to a maximum of 80% qualifying core expenditure). The minimum UK expenditure qualification will also change from 25% to 10%.

This proposal comes in the wake of the introduction of the new creative sector reliefs available to companies from 1 April 2013 for qualifying animation and high-end television productions. Video game relief remains subject to challenge by the European Commission and is not currently available.

The Government also announced plans to introduce new support for theatres from April 2015. A formal consultation will therefore be launched early this year to consider a limited tax relief for commercial theatre productions and a targeted tax relief for theatres investing in new works or touring productions to regional theatres.

Inheritance Tax

It was announced that HMRC will be investing in a new online service which will enable people to proceed with their application for probate and submit Inheritance Tax accounts online. This is due to be available in 2016.

Miscellaneous Measures

In a move which will be welcomed by business and households alike, a freeze on fuel duty for the remainder of the current Parliament was announced.

The Government has also asked the Office of Tax Simplification to carry out a review of what can be done to improve the competitiveness of UK tax administration further, with particular regard to the World Bank’s Doing Business reports. In addition, 9 of the ‘Quick Wins’ identified by the OTS’s interim report on employee benefits and expenses will be implemented by the end of January 2014.

The complex corporation tax rules on associated companies will also be replaced with a new simpler test though this measure will have limited impact once the main and small profits rate of corporation tax merge at the planned 20% rate from 1 April 2015.

The Chancellor announced a new tax allowance taking immediate effect from 5 December 2013 to kick start the exploitation of onshore oil and gas (including shale gas) in the UK. The new tax allowance builds on the success of offshore field allowances in increasing investment in technically and commercially challenging fields. Like existing field allowances, it reduces the tax rate on a portion of a company’s profits from 62% to 30% to reflect the challenging nature of these developments. Companies will receive an allowance equal to 75% of their capital spend on these projects.

Under the badge of supporting employee ownership new measures were announced as follows:-

• a relief from capital gains tax on disposals of shares that result in a controlling interest in a company being held by a trust used as an indirect employee ownership structure;
• an annual exemption from income tax on bonuses or equivalent payments up to an amount of £3,600 paid to employees of companies that are indirectly employee owned; and
• an increase in the maximum annual value of shares that an employee can acquire with tax advantages under the Share Incentive Plans to £3,600 a year for ‘free’ shares and to £1,800 a year for ‘partnership’ shares. The Save As Your Earn savings contribution limit will be doubled from £250 to £500. This will be the first increase for these schemes in over a decade

From April 2014, the income tax relief for interest paid on loans to invest in close companies and employee-controlled companies will be extended to investments in such companies resident throughout the European Economic Area. Transfers of shares and other assets to employee ownership trusts will also be exempt from inheritance tax providing certain conditions are met.

Interestingly, the government has also launched a consultation on draft amendments to regulations which will clarify the exceptional circumstances in which HMRC will allow alternative options for VAT registered businesses that are not able to file VAT returns online. This is as a direct result of recent Tribunal decisions on this very matter.

As is now customary after the Autumn Statement, on 10 December draft Finance Bill 2014 clauses were published together with explanatory notes and other tax updates including responses to a range of consultations on different matters. The closing date for comments is Tuesday 4 February 2014.

The draft clauses include measures previously announced at Budget 2013 and legislation to give effect to the new taxation measures announced as part of the Autumn Statement, covered above. Secondary legislation setting the value of van benefit, car fuel benefit and van fuel benefit for 2014-15 has also been published, the new values will take effect from 6 April 2014.

A useful summary document on the Finance Bill draft clauses is available at https://www.gov.uk/government/publications/finance-bill-2014-draft-legislation-overview-documents.