Truro - Autumn Statement - November 2016

Speaker
Autumn Statement update
Truro November 2016

Speaker
Chairman’s welcome
Andrew Allen

pkf-francisclark.co.uk
.
Housekeeping
@pkfFrancisClark
#FCAS16 #Truro

South West Insider Dealmaker Awards 2016:
Young Dealmaker of the Year – Matt Willmott
British Accountancy Awards 2016:
Shortlisted for National Firm of the Year winner to be
announced soon…
Awards

Cornwall Sports Awards Winners – “The Active Workplace
of the Year 2016”
Awards

Programme
• What does the Autumn Statement mean for
the local economy? – Andrew Allen
• Business tax update – Scott Bentley
• Personal tax update – Steve York

Speaker
What does the Autumn Statement
mean for the local economy?

.
The new era
• Devolutionary agenda
• EU Referendum / Brexit
• US Presidential election
• Philip Hammond’s first and last Autumn
Statement
• Fiscal rules
• Economy and public finances

The new era

UK Economy

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Financial position
• No cash / No money
• Tax receipts lower that forecast
• No surplus in this Parliament
• Further borrowing of £161bn by 2020/21
• Income tax receipts (2016/17) £174bn

.
Financial position
-20
0
20
40
60
80
100
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
Public sector net borrowing £bn
Autumn Statement 2015 Budget 2016 Autumn Statement 2016

Employment
Employment rate and unemployment rate (percentage, quarterly)

Inflation
• CPI Actual
• 2011: 5.2%
• 2015: 0%
• Sept 2016: 1.0%
• Oct 2016: 0.9%
• CPI Projected
• 2017: 2.3%
• 2018: 2.5%
• 2019: 2.1%

.
Themes
• Productivity
• Housing
• Infrastructure & Innovation
• Imbalance in economy across the UK

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Productivity
• £23bn National Productivity Investment Fund
• £7.2bn Housing & Infrastructure
• £2.6bn Transport Networks
• £0.7bn Digital Communications
• £4.7bn Research & Development
• £1.0bn more for Venture Capital (British
Business Bank)

.
Housing
• £7.2 billion to support construction of new
homes
• Focus on infrastructure to unlock housing
• 100,000 new homes in areas of high demand
• Additional 40,000 affordable homes
• Right to buy for housing association tenants
• Letting agents fees to tenants ban

.
Infrastructure & Innovation
• £4.7 billion to enhance UK science and
innovation in R&D funding
• £2.6 billion UK transport networks
• 100% First Year Allowance to install electrical
charging points
• World leader in 5G technology
• 100% business rate relief on new fibre optic
infrastructure

.
Economic Imbalance
• “Northern Powerhouse”
• Where does that leave the South West?
• Business Rates
• Fuel duty freeze
• Confirmation of 17% CT rate by 2020

.
Cornwall…..
• £191m award to South West Local Enterprise
Partnerships
• Cornwall Air Ambulance to receive £1m of LIBOR
fines
• Flood defence and resilience, including £50m for
rail resilience projects including Dawlish
• Falmouth University Launchpad funding win of
£12m
• Record number of people in work in South West

.
Cornwall…..
In Summary
• NLW Increase challenge / opportunity?
• Additional LEP funding (but how much?)
• Housing market “stimulus” – activity and directed
• Focus on transportation infrastructure and past
promises
• R&D investment in our “growing economy” and
OMB biased marketplace

Speaker
Business tax update
Scott Bentley

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Business Tax in a Post-Brexit World
• Corporation Tax
• Capital Allowances
• Substantial Shareholdings Exemption
• Loss Restrictions
• Incorporation
• A few loose ends

Corporation Tax Rates

• Lowest Corporate Tax rates in the G20
• “Britain open for Business”
Corporation Tax Rates?

Annual Investment Allowance
Period from AIA
1/6 April 2008 £50,000
1/6 April 2010 £100,000
1/6 April 2012 £25,000
1 January 2013 £250,000
1/6 April 2014 £500,000
1 January 2016 £200,000
100% tax
relief

1 April 2017 1 May 2010
Writing Down
Allowances
18% 20%
Special Rate Pool –
Integral Features etc
8% 10%
Writing Down Allowances

Substantial Shareholdings Exemption (SSE)
A Limited
D LimitedB Limited C Limited
75%
10%100%

Substantial Shareholdings Exemption (SSE)
A Limited
D LimitedB Limited C Limited
75%
10%100%
Exemption on the sale of an interest in a trading subsidiary by a trading group

• Intention was “…to make the UK competitive as a holding
company location”.
• In Budget 2016 announced intention to “make it more
internationally competitive”
• Autumn Statement 2016:-
a) Simplify the rules; and
b) Remove the investing requirement within SSE;
SSE - Why? And What has happened?

• Company can use a trade loss against profits of the same
year
• Can be carried back against profits of the previous 12
months
• Group relieved against profits of that year; or
• Carried forward against profits of the same trade.
Trade Losses – Current Position

Losses – Old Rules
Year 1 Year 2
Rental Profit 300,000 300,000
Trading Profit - 50,000
Loss c/y profit (300,000) vs same trade (50,000)
Taxable Profit - 300,000
Corporation Tax - 60,000
Trading Loss 500,000 200,000
Used vs Trade - year 1 (300,000) (50,000)
Loss Carried forward 200,000 150,000

• Losses incurred from April 2017,
• Apply to both standalone companies and group
companies
• Allow carried forward losses to be used against other
income and gains
Trade Losses – New Rules

Losses – New Rules
Year 1 Year 2
Rental Profit 300,000 300,000
Trading Profit - 50,000
Loss c/y profit (300,000) (200,000)
Taxable Profit - 150,000
Corporation Tax - 30,000
Trading Loss 500,000 200,000
Used vs Trade - year 1 (300,000) (200,000)
Loss Carried forward 200,000 -

• For taxable profits in excess of £5 million, restrict to 50%
the amount of profits that can be offset through losses
carried forward
Trade Losses – New Rules

Cause and Effect?
1.Make the UK more “competitive”
2.Bring in more Revenue to UK…but

Cause and Effect?
“…the OBR has today highlighted the growing cost to the Exchequer of
incorporation.
So the government will consider how we can ensure that the taxation of
different ways of working is fair……….”

• Attack on so-called “Phoenix-ism”
• Clearance denied on Incorporation
• Attack on Personal Service Companies in the Public
Sector
What have we already seen?

Review of incorporations announced!
Expected to be about the ways to reduce the tax differential
between corporates and individuals.
Impact on Planning?
And now….Incorporation?

Property Portfolio – Tax on Mortgage
Interest

Incorporation?
2020/21
Gross rents £600,000
Repairs and other tax deductible costs (200,000)
Interest on mortgages (350,000)
Net rental profit 50,000
Salaries (say £8,100 x 2) (16,200)
Net taxable profit 33,800
Corporation Tax at 17% (5,746)
Retained profit 28,054
Income tax due if extracted as dividends (PA £12,500) 1,850
Total tax payable 7,596
Effective tax rate on rental profit 15.19%

• Further anti-avoidance on disguised remuneration;
• Simplification of arrangements in respect of PAYE
Settlement Agreements (PSAs)
• Research & Development – new “fund”
• Businesses using the Flat Rate Scheme for VAT “Limited
Costs” – 16.5%
• Extension of Corporation Tax deduction for contributions
to grassroots sport – April 2017
And finally…….

Speaker
Personal tax update
Steve York

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Contents
• Just About Managing
• Salary Sacrifice
• Residential Property
• Inheritance Tax
• Non-Doms
• Making Tax Digital
• Anything else?

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Just About Managing (JAMs)
• George Osborne promised to raise the personal
allowance to £12,500 and the higher rate threshold to
£50k by 2020.
• CPI applied to personal allowance – from 2020
• Universal Credit taper – 65% down to 63%
• Letting agent fees to tenants - banned
• Tinkering around the edges

.
Just About Managing (JAMs)
• National Living Wage - £7.20 to £7.50 from April 2017
• Tax-free Childcare – gradual roll out
• Fuel duty rise cancelled

.
Salary sacrifice
• Sacrifice of taxable pay for benefits
• Eg pension contribution, childcare vouchers, cycle to
work not affected
• Phones, gym memberships, PHI, Car (other than ultra-
low emission cars) etc
• Income tax and ers NIC will apply

.
Residential Property
• Many changes
• Interest relief on buy to lets
• SDLT 3% supplement
• CGT at 28%
• 30 day CGT deadline from 2018
• Non resident owners

.
Inheritance Tax
• Nil rate band frozen since 2009 – until 2021
• Residence nil rate band and downsizing
• Inheritance tax relief for gifts to political parties
• Changes for non-doms

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Non Doms
• UK residential property held in a foreign wrapper – UK
sited for IHT
• Deemed domicile if UK resident 15 out of 20 years
• Born in UK with UK domicile of origin
• Rebase foreign assets for CGT – 6 April 2017?
• One year grace – separate mixed offshore funds
• Offshore trusts
• COMPLEX – take advice!

.
Making Tax Digital
• Significant change to UK tax system
• Consultation Documents
• Quarterly reporting – over £10k
• IT requirements
• From April 2018
• Response to consultations due – January 2017…

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Pensions, savings and investments
• ISA allowance £15,400 to £20,000 (April 2017)
• Pension annual allowance - £4,000 (from £10,000) when
pension in payment (Consultation)
• No change to higher rate tax relief on pensions
• Life insurance policies
• NSI - £3,000 investment paying 2.2% gross

• New allowance for property and trading income - £1,000
each
• Class 2 NIC – abolished (April 2018)
• Termination payments > £30k – employers NIC
• IR35 In the public sector
• Technical notes – 5 December 2016
Other Points

Speaker
Chairman’s closing remarks
Andrew Allen

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Truro - Autumn Statement - November 2016

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