An update for businesses that like to get ahead and what you should be considering as a result of the Autumn Statement and Draft Finance Bill 2014. Robert Maas, one of the UK’s most respected tax commentators, and Thomas Adcock, both of CBW Tax, recently spoke about the practical implications of the Autumn Statement for businesses.

1. CBW Tax
The Autumn Statement
& Draft Finance Bill 2014
Provisions affecting
Business
9 January 2014

2. Share Schemes
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SIPPs: limits increased to £3,600 for free shares and £1,800
for partnership shares
HMRC approval replaced by self certification for all approved
schemes
Simplification?
• For HMRC
• For businesses

3. Employee PAYE payments where
tax deduction is not possible
•
From 2014/15 an employee can reimburse the
employer up to 90 days after the end of the tax
year

4. Companies owned by EmployeeOwnership trusts (EOT)
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An EOT is a new tax privileged vehicle to hold
shares in trading companies – for those who want
to pass the company on to employees (all
employees that is)
Must be solely for benefit of employees
All employees must participate ‘equally’
(= in the same manner)
Must exclude 5% shareholders
Must not make loans to beneficiaries

5. Companies owned by EmployeeOwnership trusts (EOT)
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•
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Several members can sell to the EOT
But all sales must take place in the same tax year
to avoid MV
And a vendor must not have previously sold shares
to the EOT (so is not suitable if shareholder wishes
to withdraw gradually)

6. Companies owned by EmployeeOwnership trusts (EOT)
•
•
There is a deemed disposal by the EOT if it later
loses control or the company ceases to be a trading
company
The EOT can pay each employee up to £3,600 pa
tax free out of dividends from the company

7. Investments in Social Enterprises
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Can claim income tax relief for the investment
up to 1 Million pa
but at basic rate only
Applies to a:
community interest company
community benefit society
charity

8. Investments in Social Enterprises
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Applies only for 2014/15 to 2018/19
Investment can be loan or equity
But it must be made wholly in cash; fully paid at
the time of the investment
But must be a risk investment

9. Investment in Social Enterprises
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No pre-arranged exit route allowed
No arrangements (incl insurance) to provide
protection against risk allowed
No linked loans allowed
Investment must be made for genuine commercial
reasons

10. Loan
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•
Must not be secured
Must not be entitled to a return greater than a reasonable
commercial rate
Must be subordinated to rank with lowest class of equity on a
winding up

11. Shares
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Any dividend must be contingent on successful financial
performance by the social enterprise
Must not have a right to a dividend in excess of a reasonable
commercial rate
Must not have any preferential right in a winding up
The shares must be fully paid

12. Further conditions
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•
The investor and his associates must not own over 30% of
the enterprise or of a related company
And must not be (or ever have been) an
employee, partner, trustee or paid director of the social
enterprise or a related company

13. Further conditions
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•
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The social enterprise must not be a quoted company
The value of its assets must not exceed £15 million before the
investment or £16 million after it
The social enterprise must not raise more than 200,000
euros?
The social enterprise must not have more than 500
employees

14. Further conditions
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The social enterprise must not be a quoted company
It must carry on a qualifying trade
The money must be wholly invested within 28 months
The social enterprise must not be in financial difficulty
- so that seems to rules out buying the village shop or
pub!!

15. Further conditions
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•
•
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The scheme adopts many of the EIS rules that need to be
met for the first three years
The investment must be held for at least three years
There is also a CGT hold-over relief
But only to the extent that the money reinvested qualifies for
the income tax relief

16. Other employee benefits
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Recommended medical treatment
- but only to get staff back to work quicker
Interest free employee loan limit
Pensions: standard lifetime allowance
Interest on loans to buy an interest in a close company
Company car benefit scale

17. Corporation Tax
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Small companies rate to be abolished in 2015/16
Film tax relief
minimum UK spend reduces to 10%
relief will be extended to cover first £20 million of all
qualifying films

18. Corporation Tax
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Worldwide debt cap
Change in company ownership anti-avoidance rules
CFCs: qualifying loan relationships

19. Business Premises Renovation
Allowance
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Definition of qualifying expenditure restricted from
6 April 2014
Expenditure will not qualify to the extent that it
exceeds what would have been normal and
reasonable to incur in the market conditions
prevailing

20. Business Premises Renovation
Allowance
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•
•
No relief if building used (for anything) at any time
in prior 12 months
If the work is not completed within two years of the
expenditure, the expenditure is deemed not to be
incurred until the work is completed
No balancing adjustments after 5 years

21. Other miscellaneous changes
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Mineral extraction allowance
Abolition of SDRT and stamp duty on securities
admitted to trading on a ‘recognised growth market’
No such markets currently exist
SDLT charities relief
cuts down the Pollen Estates relief

22. Other miscellaneous changes
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Corporate gift aid relief for donations to Community
Amateur Sports Clubs
Transfer pricing where disadvantaged person is
liable to income tax

23. VAT
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The Union Scheme: Mini one stop shop for electronic services
- Simplification?
Place of belonging
Supplies of electronically supplied services through an agent

24. PAYE: Agency workers
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Will apply where
a) an individual personally provides (or is personally
involved in the provision of) services (other than excluded
services) to another person (the client),
b) there is a contract between the client and the agency
under (or in consequence of) which the services are provided
and the client pays (or otherwise provides consideration for)
the services, and
c) remuneration receivable by the worker does not
otherwise constitute employment income
UNLESS…

25. PAYE: Agency workers
… it is shown that the manner in which the worker provides the
services (or the manner of the worker’s involvement in the
provision of the services) is not subject to (or to the right of)
supervision, direction or control by any person
•
What does that mean?

26. PAYE Intermediaries
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•
If a person works in the UK but is employed by a nonresident and placed in the UK by an intermediary, and the
employer does not deduct PAYE the intermediary is liable for
the PAYE (HMRC Have to go down a chain of intermediaries)
Lets the end user off the S689 hook!

27. LLPs: Salaried Members
•
Treated as an employee if:
- will perform services as a member AND it is reasonable to
expect that the amount payable by the LLP will be
‘disguised salary’
- the member does not have significant influence over the
affairs of the LLP
- the individuals partnership capital is less than 25% of his
disguised salary

28. Disguised Salary
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•
An amount is disguised salary if it is fixed or it is varied other
than by reference to the LLP’s overall profit/loss
In determining whether the provision applies no regard is to
be had to any arrangements designed to secure that they do
not apply

29. LLPs: Salaried Members
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•
The provision also applies if the salary is routed through a
corporate member to try to secure that S863A does not apply
The deemed salary is of course deductible by the LLP

30. Partnership with mixed members
•
The individual member is taxable on the profit
share of the corporate member if either
- it is reasonable to suppose such profits
represents the individual’s deferred share of
profit, or
- the individual has power to enjoy the corporate
member’s share

31. Partnership with mixed members
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•
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BUT the corporate member’s ‘appropriate notional
profit’ (ANP) remains taxable on it, not the
individual
Do not rush to get rid of corporate members
- provided that you are up for a fight!
Can you maximise the ANP?

32. ANP is the sum of:
•
•
The provision also applies if the salary is routed through a
corporate member to try to secure that s 863A does not apply
The deemed salary is of course deductible by the LLP

33. Commercial Rate of Interest
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What is a commercial rate of interest?
It must be higher than a bank would charge as a bank will
normally want security or guarantees
What if the bank wouldn’t lend at all?
If the company has been in existence for several years it
might have built up a significant amount of capital

34. Tax Planning
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Can you recycle the individual’s capital account?
Can you require the company to introduce substantial capital
into the LLP within a short period?
What if it borrows (on a full recourse basis) to introduce the
capital into the LLP?

35. Tax Planning
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Can you put a profitable function into the corporate member
and let it sell the service to the LLP?
Or take a share of profit in consideration of providing the
service?

36. Tax Planning
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There is nothing to lose (other than aggravation)
If the company’s share is taxed on the individual the company
can hand it over to the individual without further tax
The provision also applies if the individual is not a member
but his personal services company is

37. Excess Loss Allocation to Partners
who are individuals
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If an individual makes a loss in a trade as a partner
in a firm, and that loss arises wholly or partly, in
connection with arrangements the main purpose of
which is to secure that losses of a trade are
allocated to individuals (rather than to companies)
with a view to the individual obtaining loss relief, no
loss relief is to be given to the individual for his loss
This seems to be an in terrorem provision as it
denies relief for the entire loss, not merely the part
transferred

38. Alternative Investment Fund
Managers: Deferred Remuneration
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Can elect to apportion the deferred remuneration
(or part of it) to the firm
The firm will be taxed on it at 45%
When it is paid over to the individual he will be
taxable on it if he is still carrying on the trade, but
can claim credit for the tax paid by the company
And presumably a refund if his then tax rate is
below 45%

39. Disposals of income streams
through partnerships
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A new anti-avoidance provision to stop an individual
selling a right to income to a partnership
It taxes the sale proceeds as income
There is already an anti-avoidance provision to
thwart such sales to a company

40. Other Corporation Tax changes
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Derivative contracts between group members
Limit on DTR against corporation tax

41. Other goodies
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Business rates
- 2014/15 increase capped at 2%
- Continuing relief for small businesses
National Insurance
- Abolition of employer’s contributions for workers under 21
- £2,000 deduction from contns

42. Robert Maas
Tax Consultant & Tax expert
Robert is a giant in the tax world. He is widely regarded as one of the leading tax
practitioners in the UK and is a long-standing tax commentator. He has authored
extensively on tax and is always a draw card speaker.
The announcement that Robert had won the 2013 Lifetime Achievement Award was met
with a standing ovation. Robert is well-loved and much respected – with good reason.
Amongst other roles, Robert is a member of the Technical Committee of the ICAEW Tax
Faculty.
t: +44 (0)20 7309 3800
robert.maas@cbw.co.uk

43. Thomas Adcock
Tax Partner
Thomas is a specialist in helping businesses to understand the tax implications of their
actions. He works closely with entrepreneurs to manage their tax liability when engaging in
property deals, M&A, re-organisations, growth, international deals or when simply looking
to improve their tax efficiency.
He also works with ambitious and successful individuals who wish to build, spend or share
their personal wealth tax efficiently.
t: +44 (0)20 7309 3856
thomas.adcock@cbw.co.uk

44. Andy White
Tax Partner
Advising clients on their strategic tax affairs is Andy’s specialist area. He combines his deep
technical knowledge and creativity to deliver real taxation solutions that advance clients’
commercial and personal interests.
With 30 years’ general practice experience, including advising on flotation's, MBOs and
secondary buyouts, Andy makes an excellent advisor to most businesses experiencing rapid
growth or considering strategic changes.
t: +44 (0)20 7309 3917
andy.white@cbw.co.uk

45. Contact Us
CBW Tax Limited
Enterprise House
21 Buckle Street
London
E1 8NN
t:
f:
+ 44 (0)20 7309 3800
+ 44 (0)20 7309 3801
e: info@cbw.co.uk
w: cbwtax.co.uk