Autumn Budget Statement 2016: the end of an era
It was probably no great surprise that Phillip Hammond planted his stake firmly in the employee shareholder status (ESS) corpse as part of the Autumn Statement. This was after all one of George Osborne’s “on the hoof” policy ideas which only really appealed to perhaps those who were less worthy (certainly not JAMs) of the previously rather advantageous tax treatment (especially the initial unlimited capital gains tax relief).
Please be aware that the removal does not seem to be retrospective and broadly speaking will only apply to arrangements entered into on or after 2nd December 2016 (where the independent employment advice had been given to the proposed participant before the Chancellor rose to speak (notionally at 1.30pm on 23rd November 2016).
We will also be holding a “watching brief” in relation to potential changes to the “benefits in kind” rules relating to salary sacrifice and the “making good” rules in case they do impact on the employee share schemes arena. We would certainly be looking for an appropriate exemption from any changes to the rules for Share Incentive Plans (SIPs).
While we do not advise directly on Enterprise Investment Schemes (EIS) and Venture Capital Trust (VCT) matters, it was interesting to us that HMRC are intending to make amendments to these schemes.
The government wish to clarify the EIS rules for share conversion rights, to provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures to align with EIS provisions, to introduce a power to enable VCT regulations to be made in relation to certain share for share exchanges to provide greater certainty in this area, and finally to launch a consultation regarding the advance assurance service. In relation to the “advance assurance” consultation, any streamlining options introduced will likely flow very quickly through to the Enterprise Management Incentive (EMI) advance assurance process (which we do make use of as a very useful service).
Also published as part of Autumn Statement, were letters to the Office of Tax Simplification from the Chancellor and the Treasury discussing certain aspects of their work and it is clear that the OTS work on the alignment of income tax and National Insurance will continue to be implemented by the government as the legislative process allows.
Finally, we note that the government intends to take further action on disguised remuneration (DR) tax avoidance schemes. The government announced it will extend measures announced in the 2016 Budget to similar schemes used by self-employed individuals and will take steps to deny corporation tax relief to DR tax avoidance schemes from April 2017 unless income tax and NICs are paid within 12 months of the end of the accounting period in which the deduction for corporation tax is claimed – clearly the government intends to strengthen and continue its previous good work in this regard.
If you have any questions in relation to these or any other Autumn Statement matters, please contact RM2.