The new Chancellor Philip Hammond will give his first Autumn Statement on 23 November 2016. It will also be the Chancellor’s first formal opportunity to set out the government’s economic and fiscal policy following the Brexit referendum vote. A key aim of this Autumn Statement is likely to be giving businesses some clarity and certainty for the short to medium term, and so build confidence that the UK economy is one in which businesses can invest and grow.
The Financial Times reported in late October that Mr Hammond is considering dropping the Autumn Statement in the future and so focusing key tax measures and spending decisions on the Spring Budget, but for now the Chancellor is continuing with this set-piece economic and political event.
Here are the thoughts of Osborne Clarke’s tax experts on what may be in store in the Autumn Statement 2016.
Encouraging growth and investment in the tech, media and comms sector
“We need a stable and competitive tax system to ensure that the UK can retain its reputation as a good place to do business. Tinkering with the tax rules without keeping this objective at the forefront could spell trouble for what is likely to be a delicate economy in the run up to Brexit.
We would like to see any tax changes that are proposed focusing on incentivising businesses and giving those businesses and investors the confidence to invest today, such as increasing R&D and other targeted tax breaks – including reliefs for entrepreneurs and reliefs that encourage growth and investment in the tech, media and comms sector.”
An international perspective
“In order to make a success of the post-EU referendum economy it will be vital for the Chancellor to send out a clear signal in the Autumn Statement that the UK remains the right place for multinational companies to make investments.
One way to achieve this will be to take forward the proposal to simplify the Substantial Shareholdings Exemption. If the Chancellor could also simplify the dividend exemption for large companies, this would mean the UK has a participation exemption comparable with those of other tax benign jurisdictions and so would make the UK an even more attractive holding company jurisdiction. The Chancellor will, however, also have to pull off a delicate balancing act to ensure that any changes to UK domestic rules which encourage in-bound investment take account of public sentiment. The UK’s international commitments under the BEPS Project have until now had the full backing of the UK Government. It seems unlikely that the Chancellor would scrap proposals covered in the existing BEPS consultations, such as the changes to interest deductibility rules but it is possible that their introduction could be delayed and/or grandfathering rules could be introduced.”
Supporting real estate and infrastructure projects
“Philip Hammond has signalled that his fiscal policy will support development of the country’s infrastructure, boosting roads and railways and the housing sector. We look forward to potentially beneficial tax measures as part of this and hope that Mr Hammond will remove the 3% SDLT surcharge on build to rent portfolios.
We are also expecting a response to the second consultation on corporate interest deductibility around the time of the Autumn Statement. The impact of the rules for those involved in long term real estate and infrastructure projects is potentially significant, and the industry is looking for the response to provide certainty, whilst allowing time to ensure the legislation that follows is well drafted.”
Supporting financial services
“The new Chancellor will have an interesting job on his hands in the Financial Services arena. Over recent years it has been politically and fiscally expedient to target the banks. However, with banks considering moving some operations elsewhere in the light of the Brexit vote, Mr Hammond is more in need of olive branches than brickbats. He will also hopefully be wary of causing further upset to the funds community after the successive attacks on management fees and carried interest.”
“In recent years, the trend has been towards digitisation and simplification of employee share plans. There have also been some substantive changes, such as the introduction of the £100,000 lifetime limit on CGT exempt gains available under employee shareholder status arrangements (announced by George Osborne at Budget 2016). As we have a new Chancellor and different priorities for the government following the vote to leave the EU, we do not anticipate that any significant changes to tax-advantaged plans will be announced in the Autumn Statement.
Instead, we can perhaps expect an update on the progress of various wider employee tax measures. The consultation on the draft legislation intended to simplify the tax treatment of termination payments closed on 5 October 2016, and though it is likely to be too early for any formal response the government may give an initial reaction or publish draft regulations for the necessary national insurance changes.”
Private wealth – personal tax
“We may see few, if any, personal tax announcements in the Autumn Statement. The tax regime for individuals is already undergoing huge change with new rates and thresholds for pension contributions, capital gains and savings income. Draft legislation on changes to the inheritance tax and the deemed domicile regime is due to be published on 5 December 2016, which makes any announcements on 23 November unlikely.
Politically, the Chancellor has little scope for manoeuvre in relation to rates and the press have not been running campaigns against any perceived loopholes in the system – particularly while HMRC have continued their run of victories against film schemes. This, rather than tighter control of leaks, may be the best explanation for the dearth of rumours. Expect a relaunch of measures featured in the last Budget and consultations of the last 12 months, including the proposed trust register of beneficial ownership, a feature of the Fourth Money Laundering Directive. The government has stated its intention to establish the register in full, irrespective of Brexit.”
Private wealth – entrepreneurs
“There are a raft of measures already in the legislative pipeline that will affect private clients, ranging from the disclosure of tax avoidance schemes involving inheritance tax, through to the significant changes for ‘non-doms’ and foreign owners of UK residential property. Given the delays in producing the legislation for these changes and the pressure that the Treasury will be under in planning for Brexit, I believe it is unlikely that we will see further significant changes for private clients.
Looking forward, it will be important for the UK to be pro-business, but I suspect that any changes in this regard will focus on tax at the corporate, as opposed to shareholder, level. The government has only just introduced ‘investors’ relief’ and reduced the rate of CGT, and I expect that it will want to see the impact of these measures before they introduce any further benefits for shareholders.”