26 Nov 2015 03:54pm

What the Autumn Statement means for private wealth

Osborne cools on tax credits but keeps the heat on property investors

Osborne’s U-turn on tax credits was probably the least expected measure in the combined spending review and Autumn Statement. Non-doms were not addressed and other components of the statement merely served to support measures already announced and will require interested parties to sit back and wait. The tax avoidance portion of the statement was a key example of this; although the whip was cracked, with the GAAR in place it is unclear where further avoidance will come from given the first GAAR cases are still yet to be heard.

The hard line approach on tax evasion and avoidance continued regardless. Osborne announced a penalty for and public naming of tax evasion enablers as well as a penalty of 60% of tax due, to be charged in all cases successfully tackled by the GAAR, amongst other new penalties. HMRC will be seeking evidence in order to obtain a better understanding of the impact on the trend away from cash on evasion and the hidden economy. No doubt further measures will be announced following this.

HMRC’s move towards greater digitalisation was also heralded as a positive step forward. However, enforcing quarterly tax data updates will be burdensome for many and means that people who can’t or don’t want to do their own tax returns now face paying experts to do it four times instead of one, an unwelcome outcome for many. The chancellor is looking to rewrite business and human behaviour and HMRC will have to fundamentally alter the tax landscape. The annual system benefitted businesses, for example, where final profits are unknown until the end of the year for partners in partnerships and we wait to see how this is translated into the digital records. This government brought in the office for tax simplification, in regards to HMRC’s digitalisation, simplification seems to have gone by the wayside.

The proposal to bring the CGT payment on residential property for UK residents in line with the 30 days allowed for non UK resident individuals from April 2019 will be a surprise to many, and will bring considerations closer to home. In practice, it shouldn’t cause too large a headache as in most instances the majority of these gains are covered by main residence relief. That said, the change in CGT payment dates could be seen as unfair by many invested in property when compared to the payment date for tax on all other capital gains. The administrative burden could be sizeable, especially when capital gains are more complicated to calculate than SDLT, which currently has to be paid within 30 days. Even here the chancellor made a change and from 2017-18 SDLT will be payable within 14 days. Neither of these measures bringing in additional tax, but adding to the complexity for tax payers.

The chancellor was keen to drive the message home that he was helping people onto the property ladder. His clamp down on investment property was clear when he outlined that stamp duty land tax would apply to those purchasing additional residential property valued over £40,000. From 1 April 2016 the SDLT rates will be 3% higher than the current rates and will impact those purchasing buy to lets and second homes after that date. This is disadvantageous for married couples as HMRC will view them as a single taxable unit, the rise was also omitted from the Tory manifesto, making it quite a shock. As the change follows the announced reform to interest relief, people may view the attack on buy to let as their ticket to leave the market far earlier than anticipated.

The Autumn Statement showcased an assured Chancellor who navigated the statement, and his agenda, well. Despite the House of Lords rebuffing his tax credit plans, he kept the focus where he wanted it. He didn’t give much airtime to the issues affecting investors, or provide the clarification non-doms following the changes they saw in the budget, although there was a firm message that government spending is being cut and communities are being supported. While he still held he was “fixing the roof while the sun shines”, the question remains whether the sun will be shining on those that now need to file their tax quarterly, and digitally. Those still awaiting vital guidance or legislation, such as non-doms, will have to wait until the Chancellor next takes to the stage.

Lucy Brennan is a private wealth partner at Saffery Champness


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