Autumn Statement 2015 – Capital & Business Taxes

November 26th, 2015

Capital taxes

Stamp duty land tax on buy to let and second homes

Higher rates of stamp duty land tax (SDLT) will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes, from 1 April 2016. The higher rates will be three percentage points above the current rates.

The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property. There will be consultation on the policy detail, which will include whether it is appropriate to have exemptions for corporates and funds owning more than 15 residential properties.

SDLT – changes to the filing and payment process

There will be a consultation in 2016 on changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. These changes will come into effect in 2017/18.

Annual tax on enveloped dwellings (ATED) and SDLT

The reliefs available from ATED and the 15% higher rate of SDLT will be extended to equity release schemes (home reversion plans), property development activities and properties occupied by employees from 1 April 2016.

Non-UK residents with UK residential property

The capital gains tax (CGT) computations required by non-residents on the disposal of UK residential property will be changed. With retrospective effect from 6 April 2015, a double charge that may occur will be removed and an omission will be corrected with effect from 25 November 2015. HMRC will be given powers to prescribe circumstances when non-residents are not required to make a CGT return and CGT will be added to the list of taxes that the government may collect on a provisional basis.

CGT payment on account on residential property

From April 2019, a payment on account of any CGT due on the disposal of residential property will be required within 30 days of the completion of the disposal. This will not affect gains on properties that are not liable for CGT because of private main residence relief. Draft legislation will be published in 2016.

Inheritance tax and drawdown pensions

There will be legislation to ensure a charge to inheritance tax will not arise when a pension scheme member designates funds for drawdown but does not draw all of the funds before death. This will be backdated to apply to deaths on or after 6 April 2011.

Deeds of variation

After the review announced in the March Budget 2015, there will be no new restrictions on how deeds of variation can be used for tax purposes but the government will continue to monitor their use.

Business taxes

The apprenticeship levy

The apprenticeship levy is due to begin in April 2017, and the rate has been set at 0.5% of an employer’s payroll. Employers will receive an allowance of £15,000 to set against their levy payment. As a result, only employers with a payroll of more than £3m will have to pay the levy.

Small business rate relief (SBRR)

The doubling of SBRR will be extended for a further year from 1 April 2016.

Extending averaging for farmers

The averaging period for self-employed farmers will be extended from two years to five years with effect from April 2016, with farmers having the option of either averaging period. This follows the consultation announced in the March Budget 2015.

Business investment relief

The government will consult on how to change the business investment relief rules to encourage greater use of the relief to increase investment in UK businesses.

Venture capital schemes: eligible investments

With effect from 30 November 2015, the provision of reserve energy generating capacity and the generation of renewable energy benefiting from other government support by community energy organisations will no longer be qualifying activities. In addition, these activities will not be eligible for social investment tax relief (SITR) when SITR is enlarged.

All remaining energy generation activities will be excluded from the schemes from 6 April 2016, as well as from the enlarged SITR. There will also be increased flexibility for replacement capital within EIS and VCT, subject to state aid approval.

This was legislated for in the Finance (No. 2) Act 2015.

Employee share schemes: simplification of the rules

A number of technical changes will be made to the tax rules for employee share schemes. These changes will provide more consistency and put beyond doubt the tax treatment for internationally mobile employees of certain employment-related securities (ERS) and ERS options. Any charge to tax will arise under the rules that deal with ERS options, rather than the rules for earnings.