With the dust settling on the first Autumn Statement to feature a quotation from Chairman Mao’s little red book, practitioners and laypeople alike have been scouring George’s blue book for elephant traps.

Here’s our take:

Working Tax Credits – public finances ride to the rescue

The OBR has forecast an improved position in the public finances, giving the government the wiggle room it needs to drop its widely unwelcome plans to bring in an early phase-out of Working Tax Credits.  WTCs will be replaced in due course by the Universal Credit anyway so the Chancellor’s previous master stroke of phasing them out has been replaced by an even bigger master stroke of dropping the whole plan.  A lucky Chancellor indeed.

Boom! A big hit for big business

Big business will pay the cost of an ‘Apprenticeship Levy’. The Treasury’s blue book suggest that the take from this will be a whopping round £3bn rounded up.  To put that in perspective, that’s a whole 7% of the existing Corporation Tax take.  But this is not a tax rise. Oh no.  It’s a LEVY.  (We hope you can see the difference too.)

In the round, the levy will apply to larger firms with an annual payroll of greater than c. £3m. But as with other stealth taxes we think big business will take a little while to come to terms with the stomach punch they’ve received.

Woah! A near thing for small businesses

There is a complete muddle at the moment between the intersection of travel & subsistence rules, intermediary legislation, employment status and close company rules on dividends. From the Treasury’s populist perspective, tax avoiders are hiding under every rock, disguising their employment status through a wicked concoction of employment intermediaries, personal service companies and low taxed dividends.

This Autumn Statement was widely expected (due to a comprehensive set of erroneous leaks) to address a number of these issues – to the detriment of those risk-taking professionals who run their own small businesses and absolutely do NOT, despite rumours to the contrary, enjoy the benefits of employed status.

However, the steps taken this time have been incremental. As we know from a previous instalment, dividends will be taxed at higher rates to address the perceived NI pass that contractors had been getting on their income, and travel and subsistence will no longer be tax deductible for workers engaged through an employment intermediary (a debate on wisdom of this is, mercifully for us and for you, outside the scope).

The only possible new piece of intrigue is the proposed disallowing of travel and subsistence costs for companies that are caught by IR35, but as we know, instances of this are few and far between in practice, so in our view the muddle around employment status, for the time being, remains unresolved.

Winds of change

Capital Gains Tax on the disposal of residential property is to be subject to accelerated payments.  We believe this trend will continue, with the tax man taking the money first and asking questions later.  The Digital Tax Account will help with this – as will the plan for business to report their accounts to the tax man quarterly (let’s see what comes of that).

Anti-avoidance measures will be tightened, as usual.  But buried in paragraph 3.85 is a note that the government will ‘publish a consultation on the rules concerning company distributions later in the year’.  As yet, opinion is not clear whether this is some anodyne review that will go nowhere, or whether, in the words of Paul Aplin of the ICAEW Tax Faculty, could it prove to be the start of something significant?  If we were gambling people here at Aiteo, our money would firmly be on the latter.

Crumbs of comfort

Maybe more of a small meal than crumbs, but small business rates relief will stay in place for another year. The relief (or threatened lack of it) is a not insubstantial cost for small business, but we would welcome a more structured and better signalled approach on this.

What now?

That’s not all folks, but it’s most of it.

Our friends over at Accountancy Age have given us a nice summary from a practitioner and small business point of view HERE (and always read the comments below – they are often as equally informative).  If that ‘s not enough to satiate your appetite, why not read George’s detailed workings HERE.

 

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