George Osborne’s first Autumn Statement as Chancellor of a conservative government produced several key statements as the government continues with its goal of clamping down on tax avoidance and evasion.
A new strict liability criminal offence (one that removes the need to prove intent) is to be introduced for what are described as “the most serious cases” of failing to declare offshore income and gains. There will also be new civil penalties for offshore tax evaders and those who enable offshore tax evasion, including public naming of those who have enabled the evasion. In a similar vein, a new penalty of 60% of tax due is set to apply to cases successfully countered by the General Anti Abuse Rule (GAAR) and there are plans for tougher measures for persistent use of tax avoidance schemes, both designed to further curtail taxpayers’ advisers' and providers' appetites for more aggressive tax avoidance. All of the above are intended for inclusion in Finance Bill 2016.
Leaving aside tax avoidance and evasion, changes to stamp duty land tax could impact the UK resident investor. From 1 April 2016 purchasers of additional residential properties above £40,000 such as second homes or buy to lets will face an extra three per cent in duty, a measure that is expected to raise an extra £1bn for the Treasury.
We can also expect a consultation to be published before the end of the year on company distributions together with rules – to be introduced via amendments to the Transactions in Securities Rules and the creation of a targeted anti-avoidance measure - designed to prevent the conversion of income to capital as a means of generating a tax advantage. The changes could have a material impact on the use of bespoke structures and particularly the extraction of value from personal investment companies and would be enacted as part of Finance Act 2016.
Changes to the taxation of carried interest have already been announced in the Summer Budget with draft legislation expected to be published on 9 December 2015.
UK resident non-domiciliaries will breathe a sigh of relief that no further tax changes were announced in this area, given that they will already be busy planning for the end of permanent non-domicile status and the associated changes referred to in our Summer Budget briefing on 3 July 2015. Detailed proposals, following closure of the consultation on 11 November, are expected to be announced in January 2016.
No further announcements were made on the inheritance tax treatment of UK property owned by offshore entities although a consultation paper is due to be published in December.
In order to further equip HM Revenue and Customs in the administration of one of the world’s most complex tax systems, the government plans to invest £1.3 billion in a new digital tax platform. The proposal is that most businesses, self-employed people and landlords will need to update the tax authority at least quarterly via their digital tax accounts. The government will consult on the details in 2016.
Although for some the 2015 Autumn Statement represents a momentary lull in a period of sweeping change for private clients, it reaffirms the government’s attitude to tax schemes and aggressive planning and includes plenty of measures that may lead both advisers and their clients to reconsider the effectiveness of existing structures, in favour of more straightforward and recognised planning.
By Simon Gorbutt, Senior Wealth Planner – Regional Head, Wealth Structuring Solutions
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This article is based on our own understanding of the UK Autumn Statement news item and whilst every care has been take in its production, no representation or warranty, whether express or implied, is made in relation to the accuracy, completeness or reliability of the information contained therein.