Regulation  

Osborne continues siege on tax avoidance

“Britain’s moving again; let’s keep going”, the Chancellor closed with as he reached the end of his Autumn Statement. He might more accurately have said: “I’ve focused on bashing tax avoidance and tried to leave almost everything else alone.”

There were a few minor giveaways. So, from April 2015, basic rate taxpayers are able to transfer up to £1,000 of their tax free personal allowance from one spouse or civil partner to the other; from April 2016, there will be an exemption from employer’s national insurance for those employing individuals under the age of 21.

On pensions, longer life expectancies will increase the State Pension age to 69 from the mid 2040s. We have another Individual Protection regime as a consequence of the reduction of the lifetime allowance to £1.25m in April 2014 necessitating urgent advice for larger pension funds without existing protections. There was also the normal tinkering of the Isa limit, so for 2014/15 this will be increased to £11,880.

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An unexpected change to the capital gains tax regime for principal private residences will take effect from April 2014. Under the current rules, the exemption from tax is available in full for up to three years after having vacated the property. But from April 2014 this period will reduce to 18 months, so delaying selling property may have an additional tax cost.

Non-residents owning UK residential property will be subject to tax on gains made after April 2015, but this change appears to apply only to the growth in value from April 2015.

The rules applying to business premises renovation allowance schemes will change from April 2014 to reduce the risk of the scheme being abused. The concerns of HM Revenue and Customs about marketed avoidance remain high. So from April 2014, they will have powers to collect tax from individuals before the enquiry into the avoidance scheme is settled if other similar schemes have already been defeated in the courts.

The chancellor has continued his attack on limited liability partnership structures, with fixed profit share partners being subject to higher levels of national insurance from April 2014. In addition, more creative structures which are designed to shelter profits at corporate tax rates will be subject to a new set of targeted anti-avoidance measures.

Foreign nationals claiming non-domicile status have largely been left alone, with only one measure directed at those using “dual contracts” to avoid tax on earnings that relate to overseas employment duties. This has long been a favourite piece of planning for HMRC to attack so they will be pleased to now have additional targeted measures to aid them.

Whilst we await more detail, the Chancellor’s message was clearly, “Keep calm and carry on.”

Tim Stovold is a tax partner at accountancy firm Kingston Smith.