10 Nov Autumn Statement 2015
This year’s Autumn Statement from George Osborne has seen a dramatic U-turn on tax credits helping to quell negative political feedback on a measure that was always more of a timing issue as the Universal Credit was introduced.
On an initial review, the Autumn Statement contains relatively little in the way of tax changes relevant for farmers, landowners and private clients, for which we should be grateful after the changes in the previous two Budgets. The following are some of the more detailed points.
As trailed in recent days, the Government has announced a large increase in the house building programme with reforms to the planning system to free up land for homes, which may benefit individual landowners.
However, having signalled his dislike of small private residential investors by the phased restriction of tax relief on finance costs for the purchase of let residential property in the Summer Budget, a further disincentive will be introduced from 1 April 2016 with the purchase price of a buy-to-let property or second home attracting a 3% SDLT surcharge. The details of how this will work will presumably be in the draft Finance Bill 2016 legislation published on 9 December.
In addition, from April 2019 any Capital Gains Tax due on the disposal of residential property will be payable 30 days after completion rather than, as currently, on the 31 January following the tax year in which the sale took place.
It has been announced that the Government will consult on legislation to amend the changes made by Finance Act 2015 to Entrepreneurs’ Relief, in order to ensure that relief is available on certain genuine commercial transactions.
We will have to await the detail, but this may provide relief following the restriction to Entrepreneurs’ Relief on associated disposals where there are “partnership purchase arrangements”, which from 18 March 2015 adversely affects partners looking to claim Entrepreneurs’ Relief on a market disposal when reducing their interest in a family partnership.
Deeds of variation
Deeds of variation are commonly used within two years of death to rearrange a deceased’s Estate where the beneficiaries agree that this would be beneficial. Although there are conditions upon when deeds of variation can be used, they can be used to reduce the Inheritance Tax payable on an Estate.
A review of deeds of variation was announced in the March 2015 Budget, but it has now been announced that new restrictions on how deeds of variation can be used for tax purposes will not currently be introduced, but that the position will continue to be monitored.
Averaging of farmers’ profits
A consultation on the extension of the averaging period for farmers trading profits to five years was announced in July 2015 and landtax formally responded commenting that whatever is introduced will increase the complexity of the existing system (and so the consequent cost of review). Our preference was therefore to retain the existing simple two year averaging period, but build on this in a way which is as simple as possible to understand and operate to allow for longer periods of volatility.
It would appear that our comments with those of the agricultural representative bodies may have been listened to, as the Autumn Statement advises that the averaging period for farmers will be extended from two years to five years from April 2016, but that farmers will have the option of either averaging period. Again, the details of how this will work will be in the draft Finance Bill 2016 legislation published on 9 December.
If you have any queries, please contact your usual consultant or Caroline Lovibond on 01865 261100 ([email protected])