Autumn Statement 2014: A Share Scheme Perspective
Here are the key points of interest from Mr Osborne’s Autumn Statement.
Share Schemes & Employee Benefits
The government will not be taking any action on the Office of Tax Simplification (OTS) proposals for a “marketable security” or an “employee shareholding vehicle”. Nor will there be any changes to the loans to participators rules.
One of the key measures touches on that grey area where share schemes meet tax avoidance. A new term for us all is Special Purpose Share Scheme – also known as “B Share Schemes”. This type of scheme usually operates by allowing shareholders to choose how to receive their “dividend” so that it is taxed at preferential rates. The scheme generally works by way of the issue of shares which are then quickly bought back by the company – there is no purpose to them other than to secure a tax advantage. In the future, the amount received by the shareholder will be taxed as dividend income.
Share schemes that use “B” Shares for perfectly viable reasons – for example, the use of non-voting shares under an EMI share plan – are unlikely to be affected.
The Chancellor continues to cut down on tax avoidance. In addition to the Special Purpose Share Scheme announcement noted above, the following announcements were made:
- A new Diverted Profits Tax at 25% (from 1st April 2015) will prevent multinational companies diverting profits overseas in order to avoid paying tax in the UK
- Strengthen DOTAS regime, including implementation of a DOTAS Taskforce and enabling HMRC to publish summary information about DOTAS-notified tax avoidance schemes and their promoters
- Restrict the amount of banks’ profits that can be offset by carrying forward losses (which arose as a result of the financial crisis) to 50%
- Prevent stamp duty (SDLT) avoidance where companies structure a UK takeover by way of a scheme of arrangement, cancelling and reissuing the target company's shares
- Implement OECD model for transparent country by country reporting
In other news...
- A review of business rates will be undertaken, and in the meantime the Small Business Rates Relief at 100% will be extended for another year until April 2016
- Review of "umbrella companies" – and the tax reliefs that are available to individuals working under overarching employment contracts, including looking at business expenses paid by way of salary sacrifice arrangements
- Increase in Research & Development tax credit rates from 225% to 230% for SMEs. An advance assurance scheme will be made available for business making their first claim
- Employers’ NICs (up to upper earnings limit) abolished for apprentices aged under 25
- New online process for tax advantaged venture capital schemes such as SEIS and EIS
- Restriction of Entrepreneurs’ Relief claims when individuals dispose goodwill from one business into another related close company – applies from 3rd December 2014
- Entrepreneurs' Relief can be preserved when rolling into EIS investments
- Big changes from midnight tonight in the way Stamp Duty Land Tax is calculated on purchases of residential property. The old “slab” approach (whereby you would pay the full rate on the whole purchase price) is replaced with rates applying to the portion of the purchase price within each band:
- Increase in personal allowance to £10,600 from April 2015. The higher rate threshold (above which Income Tax is charged at 40%) will be increased to £42,385.
- Increase in remittance charge for non-doms – so additional charges will apply for people who have been living in the UK for 12 of the last 14 years, and 17 of the past 20 years.
- Reform of the rules on employee benefits and expenses as recommended by the OTS
- ISA Allowance increased from £15,000 to £15,240 – also individuals can pass on their ISAs tax free to their surviving spouse/civil partner on death
- Future payments from joint life or guaranteed term annuities can be transferred by an individual who dies under the age of 75 to beneficiaries, tax free
- Even cheaper flights for all - children under 12 exempt from Air Passenger Duty from 1st May next year, and children under 16 will be exempt from the year after.
- We have a newly coined historical term – “the Great Recession”.
- Extra money will be provided for driverless car testbeds in Bristol, London, Miton Keynes and Coventry. Mind how you go…