Overview of the Autumn Statement 2013

Autumn Statement promises "responsible recovery". 

The Autumn Statement offers support for youth employment and the struggling high street, while avoidance and property taxes are still high on the Chancellors agenda.

In an Autumn Statement underpinned by improved growth estimates and better-than-expected growth and employment figures, the Chancellor felt able to declare his strategy a success and announce that he was in it for the long haul. “We will secure the economy for the long term”, he declared, with “a serious plan for a grown up country”.

Promising “a job rich recovery for all”, the Chancellor announced measures to support apprenticeships and youth employment by abolishing employer’s NICs for the under-21s. The UK’s beleaguered high streets will benefit from a £1,000 rebate on business rates which will now only increase by 2% in 2014.

Incentives for employment and investment

The drive to boost employee ownership and extend the ‘John Lewis’ employee participation model also continues with enhanced tax incentives for all schemes, including a £3,600 tax exemption for qualifying bonuses. There were more incentives for social investment with the announcement of tax relief for social impact bonds, which allow private investors to work with charities to fund schemes with long-term social paybacks. Community Amateur Sports Clubs will also benefit from an extension of the Gift Aid scheme.

Moving towards a mansion tax?

The increasing focus on property taxes continues, although once again the opportunity to reform stamp duty land tax has been passed by. In a move likely to be popular with voters generally, capital gains tax (CGT) will be extended (after consultation) to non-residents selling UK residential property. This could have gone further, to encompass non-residential assets, but is potentially another step towards a mansion tax. The final deemed period of residence for CGT relief on former main private residences has been halved, which may disadvantage some people relocating for work reasons.

More anti-avoidance measures

There is to be no let up on the introduction of anti-avoidance measures, which the Chancellor hopes will raise £9bn over the next five years. Users of tax planning schemes will be hit with ’follower penalties’ requiring immediate payments of tax if similar schemes have already struck down by the courts, and so called ‘high risk promoters’ will be identified against new objective criteria. The ‘No Safe Havens’ project will now begin to exploit the data received from exchange agreements with British dependent and overseas territories. A crackdown on perceived tax abuse by some partnerships will see individuals who operate in partnerships as limited companies taxed at their individual rates, and further announcements on ‘disguised self-employment’ are to come soon.

Welcome simplifications

There was a welcome simplification of some of the unintended consequences of earlier anti-avoidance measures by amending the corporation tax loss relief rules on a change of ownership, and simplification of the associated company rules. Having listened to consultation the Government is also sensibly not proceeding with proposed changes to the close company loans to participators rules. In a boost to the UK’s creative industries, the film tax relief scheme will now include bigger budget productions, and possibly also regional theatre productions.

A few sweeteners…

This was an Autumn Statement with few giveaways but there were a few sweeteners: a £500 tax exemption for employee health costs borne by employers, and the widely expected transferability of a small amount of tax allowances between married couples who are basic rate taxpayers — small measures but ones which will positively impact many people. And the Chancellor reaffirmed his commitment to keep Britain on the road with a freeze on fuel duty and an extension of rural fuel rebates.

But there were few surprises: “we have stuck to our guns” the Chancellor said, and it seems he will continue to use the ammunition at his disposal to aim at familiar targets.

Jim Meakin
National Head of Tax
Baker Tilly