South: KPMG advises what to expect on tax in the Autumn Statement
Looking ahead to the Autumn Statement which the chancellor is due to present on November 25, Julian Cockwell, KPMG’s head of tax for the south region, said: “The Autumn Statement is always a big event and this year is unlikely to be any exception – especially as it is being combined with a spending review.
“In what is his third major set-piece economic event of the year, the chancellor has a huge amount to cover in his speech. Much attention is focused on where he will seek to make savings in his spending review, details of his plans for changes to tax credits and perhaps a hint at the direction of travel on potentially major changes to pensions.
“Setting out his priorities for the Autumn Statement earlier this month, George Osborne said he planned to "seek further savings from avoidance, evasion and imbalances in our tax system". So we can expect measures to strengthen HMRC in its fight against criminal activity, changes to legislation where government perceives that existing rules may have been abused and attempts to address any areas where government believes the playing field may need levelling.
"But what can we expect on some specific areas of tax?"
Businesses
“It is very likely, in the wake of the OECD’s BEPS deliverables published in October, that we will receive more detail on how the UK plans to implement the OECD’s proposals. Some consultations have already been opened including proposals on how the UK’s Patent Box should be modified to comply with BEPS Action 5 and a consultation on the UK’s rules on the deductibility of corporate interest expense and how this is impacted by BEPS Action 4. A comprehensive plan is unlikely at this stage, however, as the Government has said it will be considering the recommendations set out in the BEPS reports as part of the development of a new business tax roadmap which is expected to be published in spring 2016.
“Another key area where we may see an update at the Autumn Statement is the large business compliance consultation that ran from July to October this year. The consultation featured proposals for large companies to be required to publish their tax strategies, to allow greater scrutiny of their tax affairs. Also proposed were a voluntary code of practice on taxation for large businesses, which would set out what HMRC expects from large taxpayers, along with giving HMRC new powers to tackle a small number of companies that persistently engage in ‘aggressive tax planning’ or refuse to engage with HMRC. These measures have provoked lively debate, and it remains to be seen how the Government will respond.
“There are a number of other areas where we may see developments including a consultation on company distributions that was promised for the autumn.
“As mentioned above, we’re expecting a business tax roadmap next year which is likely to have details of plans for corporate tax and other taxes affecting business, but any hints as to what that might contain (in addition to BEPS implementation measures) would be very helpful.”
Employers
“For employers, the Autumn Statement is another piece in an ongoing jigsaw of consultation and change that looks set to continue for a while yet. We should hear more about the next steps in some of the consultations that have been going on over the past few months, most notably into changes to the treatment of termination payments and IR35 (the tax and National Insurance contributions legislation that may apply when people work for a client through an intermediary and for freelance workers).
“There could also be news about pensions which will be of great interest to employers as pension contributions can form a key part of remuneration strategies. Notwithstanding recent news stories regarding the deferral of any decision until 2016, employers are also likely to look with interest for any indication of how the Government intends to take forward the proposals in the Pensions Green Paper.
“There are a number of changes we already know are coming with effect from April 6, 2016 so employers should already be preparing for them:
- The introduction of voluntary payrolling and a business expenses exemption;
- The abolition of the £8,500 threshold for benefits in kind;
- Increased National Insurance Contributions Employment Allowance (from £2,000 to £3,000 a year);
- Exemption from employers’ NIC for apprentices aged under 25, which means that no employers’ NIC will be due on amounts up to the Upper Earnings Limit (currently £815 per week) and
- The introduction of restrictions on travel and subsistence relief for those engaged through intermediaries.
“Beyond what we know is coming, there are some things we’d like to see included in the Autumn Statement for employers. For example, at last year’s Autumn Statement, the Government confirmed that there would be a post-implementation review of Real Time Information, under which employers report PAYE data in real time. An active commitment to take this review forward, and to address the problems that remain with RTI, would be welcome.
“It would also be good to see a review and simplification of the extremely complicated rules around how internationally mobile workers are taxed with the overall aim of ensuring that the UK remains an attractive destination for expatriate employees, and that those employees are encouraged to use their money in the UK for the benefit of the UK economy.”
“Additionally, we hope to see a softening of HMRC’s position with regard to the items that may be included on an employer’s PAYE Settlement Agreement (PSA). The Office of Tax Simplification has continued to lobby HMRC for greater flexibility in this area, to accommodate the wide array of miscellaneous benefits on which an employer may wish to settle the tax and NIC on behalf of employees, and we would welcome the announcement of any administrative simplifications to the current process.
In summary
“The chancellor seems to always manage to pull a few rabbits out of his hat on these occasions and even though he’s already had two Budgets this year we are expecting a few surprises.”
