The main - or perhaps the only - imperative for the Autumn Budget was not to mess it up. The Chancellor may have been sorely tempted to eschew what is still a great Parliamentary set-piece and say nothing, because then he could say nothing wrong. He could have avoided any announcements that would have to be withdrawn or "explained" some days or weeks later. That would have to be balanced against the wish to do, or be seen to be doing, something positive, to help the Government directly rather than merely to prevent another crisis at which critics could worry, like dogs with a new bone.

Despite a speech of over an hour, the scale of the announcements (at least as they affect taxation or indeed Scotland) remained limited. So much of what was said (for example on housing or business rates relief) will require separate attention from the Scottish Government and Parliament. A large number of measures were mentioned in the speech which, in a bigger year, would not have made the cut. And for once, despite a significant quantity of follow-up material, there was a relative dearth of major tax announcements of real substance.

If Mr Hammond had indeed said nothing, it is not as if nothing has been said, at least on taxation. We have had the last Spring Budget, an election and one of the biggest Finance Acts ever has only just received the Royal Assent - a week before the whole process starts again. "Tail-swallowing" is a term well known in the financial world, in which those entitled to rights issues sell just enough to finance the purchase of new shares. The same concept is seen in classical literature in the Ouroboros, an ancient symbol depicting a serpent or dragon eating its own tail (look it up!), representing nature's endless cycle of life and death. Tax law seems a bit like that - less eruditely but more in keeping with the current view of politics, the seemingly endless cycle may point to an image of the tax system disappearing up its own bottom.

The wealth of recent tax legislation has received the usual highly detailed and careful consideration by Parliament - i.e. almost no such consideration. And with Brexit dominating the needs of Parliamentary time (and getting a £3 billion administrative boost in the Budget), we can perhaps expect the same attention to be given to enacting what has just been announced, with increased scope for ill-considered legislation joining our already over-burdened tax system.
And in Scotland, this Budget is of course, only Phase One. Direct Scottish references were restricted to mentions of the (relatively) new influx of Scottish Conservative MPs; a welcome VAT relief for Scottish police and fire authorities (accompanied by a dig at the Scottish Government for making the change necessary); and an even more welcome reform to oil and gas taxation.

The Scottish Budget on 14 December will have more direct relevance to Scottish individual taxpayers, with announcements on income tax rates and thresholds (on non-savings income), which seem likely to increase divergence from the rest of the UK (perhaps quite considerably); and perhaps on Scotland's stamp duty equivalent, Land and Buildings Transaction Tax. Mr Hammond closed with a headline-catching removal of the charge for first-time buyers up to a £300,000 threshold (and further relief up to £500,000). One can be sure that first-time buyers will not include the first such purchase by, say, a Panamanian investment company - but at the moment it will not extend to any first-time buyer of a house in Scotland. So the Scottish Government will have to choose whether, and how, to respond to this particular gauntlet.

Such are the vagaries of a partially devolved tax system. Even the relatively limited tax changes announced and anticipated will doubtless lead to another door-stopping Finance Bill. But the lack of high profile changes may prevent the need for higher profile reversals or other problems; and if that is the case, then Mr Hammond may, at least according to his own party, have done his job.


Income tax

The main rate of income tax for non-savings, non-dividend income is devolved to Scotland for Scottish resident taxpayers along with tax thresholds and this will be announced by the Scottish Government on 14 December 2017. The Autumn Budget 2017 sets the main rate of tax and the thresholds for those in England, Wales and Ireland. It also sets the savings and dividend rates for all UK taxpayers. For non-Scottish residents, the rates are unchanged for 2018/19, the personal allowance rises by £350 to £11,850 and the higher rate band threshold rises by £1,000 to £34,500, meaning that outwith Scotland you can earn up to £46,350 before paying the higher rate of tax. The starting rate for savings income of £5,000 is retained throughout the UK.

In a very minor change to what is a very minor allowance, it will be possible for the executors of deceased taxpayers to claim the transfer of married couple's allowance, backdated for up to four years where the relevant conditions are met. The most important condition is that both spouses or civil partners had incomes falling below the higher rate threshold.

Capital Gains Tax

The annual CGT exemption is set to rise from £11,300 to £11,700, in line with the CPI with CGT rates remaining the same as in 2017/18. Meanwhile, the proposal to require CGT to be paid within 30 days on the sale of residential property is being deferred until April 2020. There is to be a consultation on taxing non-residents' gains on UK commercial property and UK immovable property generally. This proposal, if enacted, will see commercial property fall into line with residential property and the UK's tax treatment of non-residents become aligned with elsewhere in Europe.


Another welcome development is the promise to consult on shoring up Entrepreneurs' Relief for entrepreneurs who are diluted below the necessary 5% holding by the need to attract further funding by issuing new shares to external investors.

No policy details are available yet, but any measures in this area could provide a welcome boost for private equity and risk capital investors looking to incentivise entrepreneurs and managers with equity stakes.


A consultation is to be held on the fundamental matter of employment status, with a view to making the test for that status clearer, both in relation to employment rights and taxation. Unsurprisingly, this is recognised as " important and complex issue", which may be an understatement. But there are more immediate challenges to the position of some people.

Extending new IR 35 (off-payroll working) regime to the private sector

In April 2017 the IR35 "off-payroll working" rules for engagements in the public sector were fundamentally reformed.

IR35 applies where services are provided to an end client through a personal service company or other intermediary. The aim of the rules is to ensure that individuals who work as employees are taxed as employees, even if they supply their services through a company. Under the original IR35 regime, all the tax risk fell on the personal service company, and it was difficult for HMRC to collect the tax.

Under the new IR35 Public Sector Rules, the public-sector body has to decide whether IR35 applies to particular engagements, and if it does, to operate PAYE on the payments, so that income and NICs are deducted from payments to personal service companies and employers' NICs are also paid to HMRC.

Operating the new rules has placed a significant compliance burden on public sector bodies, and the HMRC assessment tool, which is designed to help determine whether IR35 applies, often comes up with a response of "don't know".

Nevertheless, many public-sector bodies have reacted to the new rules by taking workers on as employees, which has significantly increased the tax taken from these types of engagements.

The Government has indicated that it will consult on extending these new rules to the private sector and a consultation will be launched next year. This will draw on the experience of the public sector reforms, including research already commissioned which is due to be published in 2018.

It now seems inevitable that the new IR35 rules will be extended to the private sector, but some of the challenges of the new regime will have to be ironed out first.

Benefits and expenses

The pressure on diesel car ownership increased. From 6 April 2018 the diesel supplement for company cars and car fuel benefit charge will be increased from 3% to 4% for cars that do not meet the Real Driving Emissions 2 Standard, while the charge will be removed for those diesel cars that meet the Standard, including diesel hybrids.

Employers will no longer be required to check receipts when making payments to employees for subsistence using benchmark scale rates. This relates to standard meal allowances; and overseas scale rates.

More generally, there is guidance on employee expenses; particularly travel and subsistence and the claims process to obtain tax relief. There will be further consultation on extending the scope of tax relief for work-related training costs. This follows a call for evidence on employee expenses earlier this year.

An exemption is to be introduced for allowances paid to Armed Forces personnel for renting or maintaining accommodation in the private market. The exemption will extend to Class 1 National Insurance. Elsewhere in the Armed Forces, the Seafarers' Earnings Deduction will be extended to the Royal Fleet Auxiliary.

Termination payments and foreign service

Employees who are UK resident in the year their employment is terminated will not be eligible for foreign service relief on their termination payment. Instead these employees will have the same £30,000 exemption that UK employees receive in the year of termination.


Indexation Allowance

From 1 January 2018, chargeable gains indexation allowance for companies will be frozen.

Companies will still benefit from indexation up to December 2017, but any indexation after that date will not be taken into account when calculating taxable gains.

Historically, indexation allowance allowed tax payers to account for the change in value of the acquisition costs of their assets, so that gains were effectively calculated using those historical costs in "today's money".

In April 2008, indexation wholly ceased to apply to individual tax payers - including those in business - but continued to be available to corporates; another odd anomaly of the UK tax system. In this case the Government have arguably corrected the anomaly in the wrong direction - by closing the allowance off for all.

It may seem a trifling change - a fiddle around the edges, given the current Government's policy on tax raises - but the numbers tell a different story. As indexation falls away, the Government expects to collect £1.77 billion over the course of this Parliament, with the increases rising year on year. That makes it the second biggest revenue raiser of this budget, trailing only the additional anti avoidance measures (£2.035 billion), but not by much.

Energy technology List and other water and energy efficiency equipment

There is a special scheme which allows 100% plant and machinery allowances in the first year on designated energy-saving equipment. Three new technologies are added, two are deleted and the criteria for nine others are modified.

100% first year allowances for businesses purchasing zero-emission goods vehicles and gas refuelling equipment are to be extended for a further three years from 1 April 2018.

In a similar area, First Year Tax Credits for loss-making businesses purchasing energy and water efficient technology are to be extended for five years until 31 March 2023; these allow loss-making businesses to benefit (at 2/3 of the corporation tax rate), as they have no profits against which to claim the allowances otherwise available.

Intangible fixed assets

There is to be a consultation on the Intangible Fixed Asset regime, to ascertain whether, after 15 years, it can be better targeted to encourage growth.

Carried interest

Further changes were made to remove some transitional reliefs, following amendments in the 2015 and 2016 Finance Acts to ensure that asset managers pay CGT at 28% on their full economic gain from carried interest.

Profit fragmentation

There is to be consultation on preventing UK traders from avoiding tax by arranging for income to be transferred to other entities, including the accumulation of profits offshore.


Royalties withholding tax

One of the ways in which some multinational groups achieve a lower effective tax rate is by holding intangible assets offshore in low tax jurisdictions. Profits can then be shifted offshore by arranging for royalties to be paid for the use of those assets by operating companies based in higher tax areas, such as the UK. The operating companies get a tax deduction for the royalties, which reduces the corporation tax payable in the "higher tax" jurisdiction, for example in the UK, and the royalties are subject to low or no tax.

The Government will publish a consultation on 1 December 2017 on rules to ensure that income tax is withheld from royalties paid by UK companies to low tax offshore jurisdictions. This will ensure that the UK Treasury receives tax on a greater share of the profits of these multinational groups and is part of a suite of measures to try and deal with high profile arrangements which are not unlawful but certainly reduce the tax payable by large organisations in a way which many find unpalatable.

The legislation will be included in the Finance Bill 2018-19 and the new rules will take effect from April 2019.

Let us hope that the consultation exercise ensures that bona fide commercial transactions (which, of course, is a separate subject for discussion) are not caught by these rules.

Corporate tax and the digital economy

The Government has published a position paper addressing how the corporate tax rules can respond to the modernisation of the economy and deliver appropriate results for digital businesses that generate value in unique ways. Comments are invited by 31 January 2018. The main issues are to ensure that multinational groups should be taxed in the countries where they generate value. The Government intends to achieve this by: -

  • Pushing for reforms to the international tax framework to ensure tax is paid where value is created.
  • Exploring interim options such as a tax on revenues derived from the UK market.
  • Taking action against multinational groups achieving low tax outcomes by holding intangible assets in low tax jurisdictions.

This is a much-needed attempt to level the playing fields by changing the law so as to achieve what might be described as a "fair outcome".


The rate of Research and Development Expenditure Credit for large companies (and some SMEs) is to be increased from 11% to 12% for expenditure on or after 1 January 2018.

In a further change to this important relief, an advance clearance service is to be introduced, allowing agreements for three years. There will also be a campaign to increase awareness of eligibility for R&D tax credits among small and medium-sized enterprises.

Complications in recent changes are illustrated by the apparent need for further changes in the next two Finance Bills to the new rules on restricting corporate interest, which took effect from 1 April 2017.

Changes are made to the rules on companies disposing of intangible fixed assets for consideration other than cash; and companies entering into licensing arrangements with related parties for such assets. Essentially, these changes will require the application of market value to such transactions.

Various changes are made for companies with foreign interests. These include technical changes to the hybrid and other mismatches rules; and restrictions on credits or deductions in relation to foreign tax suffered by an overseas permanent establishment (PE), where relief has been given in the foreign jurisdiction for losses allowed against profits other than those of the PE.

There is to be consultation on the tax response required on two aspects of leases _ the new accounting standard IFRS16; and the corporation tax treatment of lease payments in relation to corporate interest restrictions.
An anomaly is corrected which would otherwise make payable a postponed tax charge on the insertion of a new holding company above an overseas company, to which a UK company has previously transferred the trade and assets of a foreign branch.

An extension of an anti-avoidance rule is to be introduced in relation to depreciatory transactions within groups. These are used to depress the value of shares; when the shares later give rise to a loss, the depreciatory transactions are only taken into account for the next six years. This time limit will be removed entirely, with effect from disposals made on or after 22 November 2017.

The rather limited disincorporation relief introduced for five years from April 2013 is not to be extended beyond its 31 March 2018 expiry date.

There is to be consultation on extending security deposit rules in relation to insolvency, so that it covers corporation tax and ultimately all forms of duty.


Transferable Tax History

Hailed as a "world first" the Chancellor's announcement that the Finance Bill 2018-19 will legislate for the introduction of the transfer of tax history (known as TTH) in November 2018 for oil and gas companies.

This follows consultation with, and lobbying by, the oil and gas industry. Importantly it allows the purchase of late life assets without the buyer accepting a disproportionate burden in respect of decommissioning costs.

Until now, companies could claim tax relief on decommissioning expenditure which was calculated by reference to tax previously paid by the company carrying out the decommissioning. This could be a deterrent to new entrants as the new asset had to be able to create sufficient tax history over the remaining life in order to cover the costs of decommissioning. This change may go a long way to increase investment in late life assets.

This ground-breaking measure is important as it makes the UK Continental Shelf (UKCS) attractive to investment; more local (UK-based) investment and from less traditional sources. While the UKCS may face challenges that other worldwide fields do not, there is life in this old dog yet and an industry keen to exploit that.

An Outline of Transferable Tax History" was published by the Government and gives more detail, while acknowledging the complexities anticipated in drafting for TTH:

  • TTH will allow the transfer, to the buyer of the field, of the Ring Fence Corporation Tax (RFCT) and Supplementary Charge (SC).
  • Transfer will only occur on the sale of a field and there can be no further adjustment to the tax history as transferred.
  • The amount transferred will be a matter of negotiation between the parties, subject to safeguards. The TTH will be capped as an estimate of the buyer's share of the decommissioning costs in the decommissioning security agreement, as verified by an independent third-party appointed by both parties. The estimate must be "just and reasonable".
  • There is no need to demonstrate that the TTH is specific to the field being sold. Acknowledgement that the constituent parts of the TTH are calculated by reference to a company's profits, and not a specific field, is sufficient.
  • The transfer of losses under TTH will be on a "last in, first out" basis.
  • If multiple fields are being transferred, the TTH will be allocated to each field at acquisition.
  • The TTH is no longer available to the seller.
  • To prevent the commoditisation of the TTH, it will only become part of the company's tax history once "activated". Activation occurs when two conditions are satisfied:
    • The transferred field permanently ceases production; and
    • The total loss incurred on decommissioning of the transferred field must exceed post-acquisition tracked profits.

The difference between total loss and post-acquisition tracked profits is the activated TTH.

  • TTH remains linked to the field, meaning if the field is sold again the TTH will transfer with it.
  • Intragroup transfers of TTH will be possible for short periods before and after the asset leaves the group.

It remains to be seen how much stimulation this measure produces. The ripple effect of an increase in investment and acquisition activity, further exploration and eventual decommissioning is a welcome boost to the North-east economy and the highly skilled jobs it supports, both on and off shore.

Retained decommissioning and the PRT

The Chancellor also sought to clarify the position regarding retained decommissioning and the Petroleum Revenue Tax (PRT). Before the announcement of TTH, deals were often structured so the seller retained some or all of the responsibility for decommissioning. However, when the seller is no longer on the licence when incurring decommissioning costs, it is unable to claim a PRT deduction. The upshot is that neither the buyer nor the seller can claim this deduction.

The Finance Bill 2018-19 will amend the PRT to facilitate more flexibility over retention of decommissioning, though with the TTH announcement this deal structure is likely to be in (welcome) decline. A technical consultation will be launched in spring 2018.

Tariff Income

The third and final announcement is more housekeeping. It seeks to put beyond doubt that activities giving rise to tariff income are "oil extraction activities". There was some doubt if these activities could benefit from RFCT at 30% and the SC at 10% as well as benefiting from generous allowances. This doubt surfaced following the extension of Investment and Cluster Area Allowances to tariff receipts which highlighted inconsistencies in drafting and consolidation of tax acts.

This will be corrected and clarified by amending the offending legislation.



For the first time in a number of years, the VAT registration and deregistration thresholds are not to be raised from the current levels of £85,000 and £83,000. This freezing is to continue for a further year, until 31 March 2020. A possible radical reduction in that threshold (to a level more common elsewhere in Europe) was considered as part of the review of the VAT regime by the office of Tax Simplification; and while this was rejected for the moment, the Government will respond to and consult on various other possibilities.

Online marketplaces

There are significant worries that those operating through online marketplaces fail to account for VAT correctly. Legislation will be introduced to extend joint and several liability to the marketplace after a notice has been issued to it; and also where a non-UK business fails to account for VAT where the marketplace knew or ought to have known that the overseas business should be registered for UK VAT. The marketplace will also require to display VAT numbers of their sellers; and to check that they are valid. These are significant and potentially expensive extensions of duties to organisations which may consider themselves as conduits between suppliers and customers.

Scottish emergency services and combined authorities

An extension to section 33 of VATA 1994 will allow greater VAT recovery by a range of bodies not previously specified. Further bodies will be able to benefit without the need for fresh legislation on each establishment.

Further potential changes

A range of consultations and responses are announced: on VAT grouping; on legislation for a VAT reverse charge on labour provision in the construction industry; on split payment (including in real time) on online payments; on the timing of VAT and, on occasion, the taxable value of vouchers; and on the impact of Brexit on postponed accounting for imports.


Stamp duty land tax

SDLT relief for first-time buyers

A new SDLT relief has been introduced for first-time buyers of residential property. The relief is available in respect of properties bought in England, Wales and Northern Ireland: -

  • No SDLT is payable on houses bought for £300,000 or less.
  • If the price is up to £500,00 buyers will pay no SDLT on the first £300,000 and 5% payable on the remainder, resulting in a maximum total saving of £5,000.
  • For properties bought for a price in excess of £500,000, the relief is not available (thus creating a new “cliff-edge”).

The relief applies to transactions with an effective date (usually the date of entry) on or after 22 November 2017, regardless of the date the contract was concluded.

To qualify as a first-time buyer, you must never have owned an interest in residential property (in the UK or elsewhere) and intend to occupy the property as your main residence. These conditions must apply to all buyers, if more than one.

The relief does not affect LBTT, which is devolved to the Scottish Government. If changes are to be made here, they will be announced in the Scottish Budget on 14 December. Of course, house prices are generally lower in Scotland, so the decision may be taken not to replicate the relief. The average house price in Scotland is said to be around £145,000; the LBTT nil rate band is £145,000 and thus most first-time buyers do not pay LBTT in Scotland. In England the average house price is £244,000, so the new SDLT relief will make a significant difference to buyers in England. But at least for first-time buyers, this change completely reverses the current general position, under which lower value properties in Scotland generally attract less tax on purchase than in the rest of the UK.

Reliefs from the 3% SDLT higher rates for residential property

Some welcome changes have been introduced to remove the 3% SDLT higher rate for: -

  • buyers increasing their share of a property already owned;
  • spouses transferring property between each other;
  • families affected by a divorce court order; and
  • properties held in trust for children subject to Court of Protection orders.

There have been many unintended consequences of the 3% higher rate, where the 3% additional rate seems to apply in circumstances where it was clearly not intended, and it is good to see that the UK Government has addressed these. It would be even better if the Scottish Government followed suit.

Annual Tax on Enveloped Dwellings

The Annual Tax on Enveloped Dwellings (ATED), which applies to non-natural persons (i.e. companies and some partnerships) holding residential property with a value of £500,000 or more, will increase from 1 April 2018 in line with the September RPI increase of 3%.

The ATED payable will range from £3,600 for properties valued between £500,000 and £1,000,000 to £226,950 for properties with a value of £20,000,001 and more.

ATED applies to Scottish properties held by non-natural persons, even though Scotland has its own devolved property tax, the Land and Buildings Transaction Tax (LBTT).

Gains on disposals of land by non-residents

One significant tax change, which (incidentally) did not make the Budget speech, was the announcement that UK tax charges will be introduced for gains on UK land sold by offshore persons.

The new measures will come into effect from April 2019, and will apply to individuals and non-individuals (such as companies) on disposals of residential and commercial property alike. Additional rules will apply to tax “indirect” disposals of UK land by non-residents – i.e., the sale of interests in entities (such as companies or unit trusts) whose value is substantially derived from UK land. Corporate sellers will be subject to UK corporation tax; individuals and trustees will fall into the self-assessment regime and CGT.

In the meantime, a fairly comprehensive consultation document (published on 22 November) sets out the basis of the charges and the core principles that will inform the legislation.

Previous budgets have introduced a flurry of complex tax rules relating to offshore land owners and enveloped structures – together with (the mandatory) horrible abbreviations such as “NRCGT” and “ATED-related gains”. While tricky in practice, these earlier measures have the flavour of several pairs of tweezers used to crack one big nut, rather than the more traditional sledgehammer.

There is some softening of the blow being struck.

  • First: the status quo, under which offshore companies (for example) can sell UK commercial real estate without incurring tax on gains is not (as is often said) an exemption. It is just a function of how our gains taxes work – the default setting is that only UK residents pay UK tax on gains. So what we have here is a new basis for tax to be charged, not a relief being closed off.
  • Second: that comes with certain concomitants. Chiefly, the only gains that will be taxable will be those arising from April 2019 onwards. This will be effected by revaluing properties held offshore as at April 2019, and charging tax on any gains above that amount.
  • Third: this is really just one more big tweezer added to the array. The existing rules around NRCGT and ATED will continue to apply, and must be factored in alongside the new charges from April 2019. This means that a property sold by (e.g.) a non-resident close company could be subject to three separate bases of charge, with three independent rebasing methods used as at different dates.
  • Fourth: that said, for corporates holding commercial real estate, this is a hugely significant change to the UK tax landscape. Offshore holding vehicles are a common feature of a number of different business and investment structures. For land currently being acquired, these new rules could trigger a significant change in the business model.
  • Fifth: because we are talking about offshore jurisdictions here, the new rules will be subject to the terms of double tax treaties between the UK and those jurisdictions. While rights to tax land are generally reserved to the jurisdiction where the land is located, this does complicate matters for indirect disposals. The sale of a land-rich company could trigger different UK tax results depending on the jurisdiction in which it is based, and the actual holding structure used.
  • Sixth: unusually (but with echoes of the new failure to prevent facilitation of tax avoidance offences), there will be an obligation on UK advisors acting for offshore owners of UK land to report any sales to HMRC if they cannot be reasonably satisfied that the owners themselves have reported the sale.

Anti-forestalling measures came into effect yesterday to prevent existing offshore property holders from taking measures to circumvent the new charge. The forestalling rules work to block “treaty shopping” – i.e., efforts to try and relocate holding vehicles in different offshore jurisdictions for the purposes of avoiding the new charge.

Ultimately, these measures serve to correct a puzzling anomaly in the UK tax system – we are one of very few jurisdictions that do not charge non-residents disposing of land within our borders – but that correction could have significant implications for a number of sectors.

Mileage rates for landlords

Given the recent tide of legislation against property ownership, it is interesting to note that unincorporated property businesses will be entitled to claim a fixed rate mileage deduction instead of capital allowances and actual expenses incurred.

Rent-a-room relief

On 1 December, there will be a call for evidence on the use of rent-a-room relief, to see whether it is consistent with the stated original policy aim, of supporting longer-term lettings. This is likely to be somewhat controversial given the recent expansion of letting through Airbnb and similar organisations; and the large extension of the financial limit to £7,500.


The ISA subscription limit for 2018-19 is to remain unchanged at £20,000. For Junior ISAs and Child Trust Funds the limit increases with the CPI index to £4,260.


A number of changes have been announced to venture capital reliefs – such as the enterprise investment scheme (EIS), Seed EIS and venture capital trust (VCT) reliefs - most of which are likely to be welcomed by investee companies and investors alike.

From April 2018:

  • The amount of EIS investments that can be made into “knowledge intensive companies” (or KICs) by qualifying investors is doubled.
    • An individual can now invest up to £2 million in KICs in a single tax year. But any amounts over £1 million must be invested in one or more KICs.
    • KICs can receive investment of £10 million in a single tax year, with a “lifetime cap” of £20 million.
  • In addition, the qualifying period in which KICs can receive EIS investments is slightly extended. Under the old rules, investment in a KIC could only qualify for EIS relief if it was made no later than ten years from the first commercial sale in the course of the KIC’s trade. Under the new rules, the ten year clock starts running from the date when the KIC’s turnover exceeds £200,000.

In Finance Bill 2017/18:

  • Further restrictions will be introduced to block investment into “low risk” companies qualifying for EIS or SEIS reliefs. Unlike earlier restrictions around de-risked investments (which tended to focus on the nature of the trade carried on) this will look at the basis on which value is returned to investors over time.
  • Likewise, following the Patient Capital Review the VCT regime will be rebalanced to direct investment by VCTs into higher risk companies. This will be effected by a number of provisions including the removal of old grandfathering rules, a requirement to invest 30% of a fund raising round within 12 months; and a requirement that VCTs invest 80% of their funds in qualifying holdings.

Overall, these changes are certain to be welcomed by genuine start-up businesses looking for growth capital, as it means that available funding will not be diverted into less risky projects. However, one cannot help but baulk at the prospect of EIS and SEIS conditions being further complicated; it is already an extremely convoluted set of provisions for small companies to navigate.


A new anti-avoidance rule will be introduced to ensure that payments from an offshore trust intended for a UK resident do not escape tax when they are paid indirectly.

More generally, a consultation will be published in 2018, aimed at making the taxation of trusts simpler, fairer and more transparent. Whether these excellent aspirations also involve a higher tax burden remains to be seen.


The “benefit to donor” rules which apply to charities claiming Gift Aid are to be simplified. There is currently a mix of absolute and percentage thresholds which have to be considered when dealing with benefits which can be given to donors, without impinging on the right of the charity to claim Gift Aid. This will be replaced by two percentage thresholds: -

  • The maximum benefit for the first £100 of donation will remain at 25% of the amount of the donation;
  • For large amounts, charities will be able to offer up to 5% of the amount which exceeds £100 in additional benefit.

The total value which a donor can receive remains fixed at £2,500; and four current extra-statutory concessions on donor benefit will be formalised.


The lifetime allowance

The standard lifetime allowance (SLA) for pensions savings will increase to £1,030,000 from 6 April 2018 (from £1m in the 2017/2018 tax year).

This is an HMRC limit on the total value of an individual's pensions savings which qualify for favourable tax treatment. As previously announced by the Government, this increase broadly reflects the increase in the Consumer Prices Index (CPI) over the year ending 30 September.

This is the first time that the lifetime allowance has increased since 2010/2011 (when it rose from £1.75m in 2009/2010 to £1.8m, before very significant reductions in more recent years). Due to the level of this increase, it will not have an impact on those with a transitionally protected lifetime allowance.

Occupational master trust schemes

Earlier this year, the Pension Schemes Act 2017 introduced a framework designed to enable greater regulation of master trust schemes.

The Pensions Regulator will have new supervisory powers over such schemes and will be able to authorise and de-authorise them. This new regime is not expected to come into force until around the last quarter in 2018.

In parallel, the Government has announced changes to the tax registration requirements for master trust pension schemes. HMRC will have the ability to refuse to register or (as the case may be) de-register such a scheme where it does not hold the relevant regulatory authorisation.

Employer premiums

There will be legislation in a future Finance Bill, to modernise tax relief for employer premiums paid into life assurance schemes and certain overseas pension schemes. The extension involves policies where the employee nominates any individual or registered charity to be their beneficiary.


On 1 December, the Government will publish its response to consultation on proposals in relation to penalties for late submission and payment. There is an intention to legislate for a points-based model for late submission sanctions in an (unspecified) future Finance Bill.

In a slightly unexpected development, the end of the system of Certificates of Tax Deposit has been announced. No new ones can be purchased, with immediate effect, and existing Certificates will be honoured until 23 November 2023. Thereafter, they can (and should) be encashed for a refund, following which HMRC will attempt to make repayment. Ultimately, any balance remaining may be treated as forfeit.

There are extended announcements on the progress of Making Tax Digital. This will soon be a requirement for most businesses (including property businesses). Those below the VAT threshold will not be required to enter the system (although encouraged to do so). An updated statement of impacts will be published, which it is hoped will allow software providers the clarity to produce the relevant programmes for businesses to submit the information on the required quarterly basis.

There is to be a wider encouragement (with an element of threat) towards the use of digital platforms more generally, in turn to encourage tax compliance.



The Government continues its battle against tax avoidance and evasion. A paper published with the Budget documents summarises the action taken by successive governments since 2010, together with some new measures, which are covered below and elsewhere: -

  • Increasing the time limits for HMRC to assess offshore tax non-compliance to at least 12 years in all cases, with consultation on this in spring 2018.
  • Extending HMRC’s powers to hold online marketplaces jointly and severally liable for the unpaid VAT of all traders on their platforms.
  • Calling for evidence in spring 2018 on the role digital platforms could play to prevent their members from failing to comply with tax rules.

Disguised remuneration

Never one to miss kicking a bit of tax avoidance when it’s down, the Government has surely “put beyond doubt” that, with effect from 22 November 2017, disguised remuneration avoidance schemes (essentially offshore trusts that were structured to re-characterise amounts paid to employees and, most publicly, footballers as something other than remuneration, thereby avoiding PAYE and NIC liabilities), will be taxed as employment income regardless of how the payment was originally structured. This builds on the Supreme Court’s unanimous decision in the now well-known Rangers EBT case that put beyond doubt that payments made to the EBT were indeed employment income.


The Targeted Anti-Avoidance Rule in relation to Double Taxation Relief is refined, to extend its scope in relation to one scheme; and to remove the need for a counteraction notice to be issued.

Base erosion and profit shifting

The powers to give effect to double taxation arrangements are to be amended to ensure they are sufficient to give full effect to the snappily named Multilateral Convention to implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.

Notification of offshore structures

On 1 December 2017, a response will be published to a consultation on a proposal to require businesses or intermediaries advising on certain complex offshore financial arrangements to notify HMRC of these structures – and of the clients utilising them. This is a further extension of the new age of transparency. Further work is to take place with international partners, to see whether multinational standards are appropriate in relation to such offshore structures.

Time limits for offshore non-compliance

The time limits for assessing offshore non-compliance are to be extended to at least 12 years, after a consultation takes place in spring 2018. This will give more time to investigate what are usually complex matters. Where there is deliberate non-compliant behaviour, the time limit will remain at 20 years.


There is to be a second consultation on making access to certain licences conditional on proving that registration for tax has taken place.


A splendid new word is introduced as a potential subject for penalty, where tax payers try to avoid their tax obligations by abusing the insolvency regime. There will be a discussion document (which may or may not be different from a consultation document) in 2018.


Alan Barr


Isobel d'Inverno

Director of Corporate Tax