Autumn, at least in Statement terms, has in recent years got increasingly close to Christmas. While we still have to wait until 15 December for the Scottish Budget, the UK Autumn Statement is at least close enough to autumn to allow time for reaction from the Scottish Government. It was striking quite how much of the new Chancellor's first (and, it seems, last!) Autumn Statement will not have direct effect in Scotland.

With the notable exception of measures on welfare and benefits, many of the spending announcements relate only to England and will have different effects in the devolved nations depending on decisions taken by their respective Governments _ albeit with funds that are affected by UK economic decisions.

This now applies even to fundamental income tax decisions _ thus the Chancellor wound up by confirming the intention to move to a personal allowance of £12,500 and a higher rate threshold of £50,000. Both of these look likely to end up being different in Scotland, if the Scottish Government proposals for this Parliament are carried through in years to come.

Large parts of the Statement had been telegraphed in advance and there were few genuine surprises _ even the usual raft of more detailed announcements seems more limited than usual; and much of it simply confirmed changes already announced. However, some almost throwaway remarks, on such things as benefits in kind and share schemes, may conceal significant tax rises for some; and draft legislation on a number of previous announcements will appear in the next few weeks. However, it does seem that consistency may for once be more than a mere mantra.

The decision to move to a single Autumn Budget, with a long lead-in for tax changes before they come into effect, has a further, doubtless incidental, effect, for Scotland. It will mean that a Scottish Government has the time to react to UK Budget decisions in its own Budget schedule, rather than facing the danger of being caught on the hop by changes made in March, just before the beginning of the tax year. The Westminster March performance is now intended simply to become a reaction to the latest pronouncements from the Office for Budget Responsibility. It is rare for a politician to give up an opportunity to appear centre-stage _ over recent years, the Autumn Statement has provided nearly as powerful a spotlight for Chancellors as the tradition-laden March Budget. Although the right is reserved to make changes in March driven by economic circumstances, doubtless these will extend to anti-avoidance measures for immediate effect _ and it is possible that the temptations in an election year may prove too great!

In fact, that procedural change was probably the most important announcement in the whole of Mr Hammond's first _ and last _ Autumn Statement. If it sticks, the twice yearly deluge of tax announcements may revert to a single, doubtless very powerful, stream.


In relation to rates and allowances, there was simply confirmation that there is still an intention to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament. But the Scottish Government has already announced its intention to take the personal allowance up to £12,750 (by the necessarily cumbersome route of a small nil rate band); and restrict increases in the higher rate threshold to the rate of inflation.

The National Insurance thresholds will be aligned from April 2017 at weekly earnings of £157. This alignment represents a small increase for employers, disappointingly described as a "simplification".

A limited but genuine simplification will come with the abolition of Class 2 National Insurance contributions, confirmed as coming into effect from April 2018.

And a further simplification was confirmed in the creation of separate allowances of £1,000 for property and trading income, with recipients of sums below that level no longer required to declare or pay tax on that income.


There were a number of announcements on various aspects of employment tax, but many were provisional or involve further consultation.

Benefits in kind

There will be a further consultation on employer-provided living accommodation; and further consideration of the appropriate valuation for other benefits in kind.

Salary Sacrifice

It has been announced that the tax and employer National Insurance advantages of salary sacrifice schemes will be scrapped from April 2017. Employees swapping salary for benefits will now pay the same tax as the vast majority of individuals who buy such products out of their post-tax income.

Any scheme in place before 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.

Employees in arrangements relating to pensions (including advice), childcare, cycle to work and ultra-low emission cars will escape the change and continue to benefit from the tax advantages under the current system.


The income tax reliefs and capital gains tax exemption will no longer be available with effect from 1 December 2016 on any shares acquired in consideration of an employee shareholder agreement entered into on or after that date.

Legislation will be introduced to the Finance Bill 2017 so that the full value of shares received is treated as consideration for entering into an employee shareholder agreement constitutes the earnings of the recipient and thus charged to income tax.

Similarly, the Taxation of Chargeable Gains Act 1992 will be amended so that Capital Gains Tax (CGT) will be chargeable on all gains accruing on disposals of shares received as consideration for entering into an employee shareholder agreement. Currently, there is a limited relief for the first £50,000 of qualifying shares.

Notably, these changes will not be applied retrospectively, only to shares that will be acquired in connection with employee shareholder agreements made on or after 1 December 2016.

Termination payments

Like one half of a married couple renewing his vows, the chancellor has also announced that the Government will go ahead with changes to the taxation of termination payments from 6 April 2018. The changes were consulted on widely earlier in the year, and draft legislation is expected on 5 December 2016.

The changes will include making any Payments in Lieu of Notice (PILONs) fully taxable and subject to National Insurance contributions (NICs), irrespective of whether or not they are contractual. Relief will also be withdrawn for foreign service elements of termination payments. While qualifying termination payments will still benefit from the £30,000 tax and NIC exemption, and excess over the £30,000 will be subject to income tax and employers NICs.

For more details on the changes proposed in the consultation, see here.



The Chancellor reiterated the Government's commitment to introduce changes to the IR35 regime applying to public sector bodies. From 6 April 2017, where services are provided to a public body via a personal service company (PSC) the body responsible for paying the PSC will be responsible for assessing whether IR35 applies to the contract in question and operating PAYE accordingly. The measure extends to any public bodies as defined in the Freedom of Information Acts, as well as any UK intermediaries engaging PSCs on behalf of public bodies.

To assist public sector bodies in assessing whether IR35 applies, HMRC will introduce an online tool that can be used to assess whether contracts with PSCs are captured by IR35. The latest HMRC guidance suggests that the outputs of the tool can be relied upon by public sector bodies, but care should be taken when applying the results. If the facts surrounding an engagement change these could invalidate the previous output of the tool and a previously exempt contract could be brought within IR35.

More detailed guidance from Brodies on the measure can be found here.

Contrary to some expectations, the Chancellor did not extent the public sector measures to cover the use of PSCs in the private sector but instead announced that the Government would look in to reducing tax avoidance arising from incorporation and self-employment.

Disguised Remuneration

In a rather mysterious announcement, the Chancellor also announced that certain measures directed at disguised employment income would be extended to cover disguised self-employment income. The measures in question are changes to the disguised remuneration code introduced in the 2016 budget to address the use of loans granted by third parties to employees as part of wider remuneration planning. There is no draft legislation as yet, so it is unclear how any such proposals would take effect.


Corporation Tax

In an awkward extension of an existing metaphor, it was announced that "the government is recommitting to the Business Tax Road Map from March 2016 and the principles it sets out". The main destination on this map is a corporation tax rate of 17% by 2020-21, putatively the lowest corporation tax rate in the G20. The commitment is intended to provide more certainty for businesses.

Tax deductibility of corporate interest expense

Despite calls for the introduction of the corporate interest restriction rules to be delayed, the Government confirms that the new regime will be introduced from April 2017. The new rules will apply to groups with net interest expenses of more than £2 million, where net interest expenses exceed 30% of UK taxable earnings and the group's net interest to earnings ratio in the UK exceeds that of the worldwide group. The government intends to introduce relieving measures to protect investment in public benefit infrastructure. The new rules will apply to banking and insurance groups in the same way as groups in other industry sectors.

Loss restrictions

Legislation will be introduced to restrict the amount of profit that can be offset by carried-forward losses to 50% from April 2017, though with greater flexibility about the types of profit that can be offset by carried-forward losses. For banks there will be a greater restriction to 25% of profits in view of the significant losses incurred in the sector, with a whiff of punishment for apparent past misdemeanours.

Substantial Shareholdings Exemption

Changes are to be made to the Substantial Shareholdings Exemption (SSE), which allows the shares in trading subsidiaries to be sold tax free. The investing company requirement is to be amended, which suggests that in the future SSE may be available where the selling company is not a trading company. SSE is also to be extended to qualifying institutional investors. This will make the relief much more valuable to a range of different shareholders.

Non-resident companies

The Government will consult about bringing all non-resident companies receiving taxable income from the UK into the corporation tax regime. Currently offshore companies owning UK property, for example, pay income tax rather than corporation tax on the rents. This could have a number of significant implications as it would make offshore companies subject to the corporate interest rules and loss relief restrictions.


The rise in the basic ISA limit to £20,000 in 2017-18 was confirmed. The extremely confusing starting rate for savings income of 0% is to continue at £5,000 for 2017-18, but given current rates of interest and the fact that this rate only applies to taxpayers who do not have other income above the personal allowance of this amount, it will continue to have as limited an effect for most taxpayers as it does now.

A restriction (from £10,000 to £4,000) is made in the annual allowance available to those already in receipt of money purchase pensions.

Various changes will be made so that the tax treatment of foreign pensions will be more closely aligned with the UK pension tax regime.

Authorised investment funds

The tax treatment of distributions from authorised investment funds to corporate investors is to be changed to allow exempt investors to reclaim tax paid by AIFs. This will make AIFs far more attractive to exempt investors such as pension funds. Details will be published in early 2017.


Another confirmation of a change previously announced was that Inheritance Tax (IHT) will be charged on UK residential property however it is held. Thus offshore ownership structures will no longer exclude the charge. IHT will also be included among the taxes affected by a more general change in the domicile rules deeming UK domicile to arise for those who have been UK resident for 15 out of the 20 years preceding relevant events.

That most optimistic of IHT exemptions among politicians, for donations to political parties, is to be extended to those parties with elected representatives in devolved legislatures, as well as in Westminster.


In an era where there is a statutory commitment not to raise the rates of income tax, VAT or NIC, governments must look elsewhere when seeking additional revenue. Hence the 2% increase in insurance premium tax announced in the Autumn Statement may not be the last. But fuel duty is to be frozen again; and minor changes were announced to the oil and gas regime. While company car tax rises, slightly new lower bands will be introduced for cars with the lowest emissions _ presumably after those emissions are actually proved to be as low as claimed.

Draft legislation introducing the Soft Drinks Industry Levy will be with us in good time for Christmas (by 5 December).


Further work (on VAT and stamp duty on shares) was announced for the Office of Tax Simplification, although actual fundamental simplification seems as distant as ever. Work continues (perhaps optimistically quickly) on Making Tax Digital.

A new VAT Flat Rate of 16.5% will be introduced for businesses with limited costs, from 1 April 2017.

Work against avoidance is further highlighted, including new penalties for advisers who have enabled another person to use a tax avoidance arrangement later defeated by HMRC. These will presumably be in addition to penalties which may be due from the taxpayers themselves _ who will no longer be able to use a defence of "reasonable care" if they have relied upon non-independent advice. In another possible move against advisers, they may be required to register clients involved in structures holding money offshore.

Businesses may be required to be registered for tax before they can access (unspecified) licences or services.

Substantial further sums are to be spent to counter avoidance, including taking more cases to actual litigation.

For more information please get in touch with your usual Brodies contact, or one of the individuals listed below.


Alan Barr


Isobel d'Inverno

Director of Corporate Tax