This Autumn Statement heralded the introduction of many new anti-avoidance measures, reflecting the Chancellor’s stated aim of ensuring a fair contribution from all. These range from measures tackling individual taxpayer avoidance to multi-national profit shifting.
Restrictions to Entrepreneurs’ Relief on incorporation were also included in the detail under the heading ‘avoidance and evasion’, although we disagree with that categorisation as this was a genuine relief used as it was intended. Please see our separate Entrepreneurs’ Relief Autumn Statement article for more details of these measures.
A package of three new measures to counteract anti-avoidance in multi-national companies was announced, one of which is already known on Twitter as the ‘google tax’.
Firstly, a new consultation was launched today on the introduction of a new anti-hybrids rule to address base erosion and profit shifting strategies that exploit mis-matches between tax rules in different countries.
Secondly, Osborne announced a new Diverted Profits Tax. This tax will be levied at 25% on profits arising on UK activities which are then diverted overseas through artificial arrangements, although how they define “artificial” has yet to be announced. It will be interesting to see how this is defined, given most multi-nationals have pre-agreed transfer pricing policies with HMRC!
Lastly, Finance Bill 2015 will introduce legislation to give the UK Government power to compel multi-national entities to provide new information to HMRC. This information will take the form of details of their global profit and tax allocations, and indicators of economic activity in any country.
The Chancellor has once again targeted high value residential properties held in corporate or other similar wrappers, increasing the package of taxes levied on such dwellings. The Annual Tax on Enveloped Dwellings (ATED) will increase from April 2015 as follows:
|Value of property||Current|| New|
|Over £2m, less than £5m||£15,400||£23,350|
|Over £5m, less than £10m ||£35,900||£54,450|
|Over £10m, less than £20m ||£71,850||£109,050|
Several new measures relating to employment arrangements have been announced. The two bigger developments are in relation to special purpose share schemes commonly known as ‘B share schemes’ and salary sacrifice schemes involving travel expenses.
Special purpose share schemes usually involve the issue of shares that are then bought back by the company shortly afterwards, meaning that the ‘distribution’ paid to the shareholder is treated and taxed as capital. Going forward, the tax advantage will be removed as the amount received will be treated as dividend income.
The Government has identified increased use of employment intermediaries (umbrella companies), allowing workers to claim relief for home to work travel which would not otherwise be possible. A discussion paper will be issued in the near future with a view to legislative action being taken in the 2015 Budget.
Tax relief for employees will no longer be available on reimbursed business expenses if they are paid as part of a salary sacrifice scheme.
The Autumn Statement includes details of measures designed to remove the ability for individual taxpayers to exploit the miscellaneous loss relief provisions, a relief which has been used in artificial arrangements in the past.
Additionally, corporation tax loss relief for banks is to be restricted. The Government felt that it was unfair that many banks are not paying tax on their current profits due to large losses accumulated during the financial crisis. As such, only 50% of banks’ profits will be able to be offset using carried forward losses.
The Government feels that measures should be taken to prevent the avoidance of Stamp Duty (although their own documents refer to SDLT) on takeovers which involve cancelling shares which are then reissued directly to the acquiring company. They expect to introduce legislation to counteract this in early 2015.
The Government is to beef up the Disclosure of Tax Avoidance Scheme (DOTAS) regime, establishing a new taskforce and enabling HMRC to publish information about DOTAS schemes and their promoters.
A consultation has been announced on further methods of deterring repeat users of known avoidance schemes. This will cover various options such as additional financial costs, reporting requirements and the ability to publish the names of taxpayers who have taken part in multiple schemes.