Autumn Statement

The new incumbent at number 11 Downing Street, Philip Hammond, had his first opportunity to show us what he had in mind for the UK economy when he presented his Autumn Statement on the 23 November.

The usual rash of speculation pointed to easing the predicament of the “just managing”, encouragement for businesses to invest, and an easing of the previous Chancellor’s aims of reducing our national debt mountain. And of course, his comments need to be considered in the light of our impending withdrawal from the EU.

One announcement that did surprise MPs was the switch to an Autumn Budget and a Spring Statement. This will mean that after the March 2017 budget and Finance Bill future budgets will be delivered in the autumn, the first taking place in autumn 2017 with the first Spring Statement the following March.

The notes set out below point to the tax and other business issues Mr Hammond has disclosed.

Announcements for businesses

£23bn National Productivity Investment Fund (NPIF)

This will provide additional spending in areas that are aimed to increase productivity. For example, transport, digital communication, housing and R & D.

There are also a number of additional funding schemes being floated to support:

  • The development of the next generation of driverless cars and other renewable fuel technologies
  • Investment in transport infrastructure
  • The trial of 5G networks and full fibre broadband initiatives
  • Increases in R & D support

Employer shareholder schemes – tax benefits withdrawn

Legislation will be enacted to remove the Income Tax reliefs on the receipt or buy-back of shares issued to an employee under an employee shareholder agreement made on or after 1 December 2016. It also removes the Capital Gains Tax (CGT) exemption relating to shares received as consideration for entering into an employee shareholder agreement on or after the same date. Shares received under agreements made before that date are not affected. Corporation Tax reliefs for employer companies are not affected.

Corporation Tax changes reaffirmed

The reduction to 17% will go ahead as previously announced by 2020.

Rural rate relief doubled

Businesses in rural areas with a population under 3,000 will benefit from a doubling of rate relief from 50% to 100% from April 2017. Businesses that will benefit are:

  • A village shop or post office with a rateable value of less than £8,500, and 
  • A public house or petrol station with a rateable value up to £12,500.

VAT flat rate scheme changes

HMRC are to introduce an additional test that will determine the flat rate percentage used by traders. It would seem that HMRC presently considers the benefits obtained by certain businesses to be excessive and not in accord with the intentions of Parliament.

Traders that meet the new definition of a “limited cost trader” will be required to use a fixed rate of 16.5%. This will include traders who are already using the FRS scheme, and many at rates lower than 16.5%.

For some businesses – for example, those who purchase no goods, or who make significant purchases of goods – the outcome of the test will be self-evident. Other businesses will need to complete a simple test, using information they already hold, to work out whether they should use the new 16.5% rate.

Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.

100% tax allowance for provision of electric vehicle charging points

This new capital allowance will have effect for expenditure incurred on or after 23 November 2016. It will expire on 31 March 2019 for Corporation Tax and 5 April 2019 for Income Tax purposes.

It will provide a 100% first-year allowance (FYA) for expenditure incurred on electric charge-point equipment.

National Living Wage

From April 2017, the National Living Wage (NLW) for the over 25s is being increased to £7.50 per hour. This is an increase from the current NLW rate set in October 2016 of £7.20 an hour. For the over 25s, this will represent a wage increase of just over 4%.

The National Minimum Wage (NMW) will also increase from the same date to:

  • For 21 to 24 year olds – from £6.95 to £7.05 per hour
  • For 18 to 20 year olds – from £5.55 to £5.60 per hour
  • For 16 to 17 year olds – from £4.00 to £4.05 per hour
  • For apprentices – from £3.40 to £3.50 per hour

The government will also be spending an additional £4.3m to ensure that employers are complying with their legal obligation to pay the NMW.

National Insurance thresholds

From April 2017, the National Insurance thresholds for employees and employers will be aligned at £157 per week. There will be no cost to employees and the maximum cost to business will be an annual £7.18 per employee.

Announcements for property owners

New home builds

Funding of £1.4bn is being provided to build up to 40,000 affordable homes by 2020-21. These will include properties for rent or shared ownership. The government are also allocating £1.7bn to speed up the construction of homes on public sector land.

Additionally, funding of £2.3bn will support infrastructure projects – new roads and water connections – to provide services for up to 100,000 new homes in areas with the most need.

Agent’s letting fees

In a welcome move for tenants, not so good for landlords, upfront renters’ fees charged in England are to be banned. At present tenants are being charged an average of £223 for these fees.

The government will be consulting with interested parties.

Tax increase enveloped dwellings

The Annual Tax on Enveloped Dwelling will increase in line with inflation from April 2017.

Announcements for individuals

Personal tax allowance

From April 2017, the personal tax allowance is due to increase from the present £11,000 to £11,500. From the same date, the amount you can earn at the basic rate of tax will rise from £43,000 to £45,000.

The Chancellor also committed to increasing the basic personal allowance to £12,500, and the higher rate tax threshold to £50,000, by 2020-21.

Salary sacrifice schemes to be taxed more fairly

From April 2017, most salary sacrifice schemes will be taxed as if cash income. There were some notable exceptions:

  • Pension payments, pensions advice, childcare, cycle to work and ultra-low emission cars will be exempt.
  • Schemes in place before April 2017 will be protected for one year, and
  • Schemes for cars, accommodation and school fees will be protected for up to 4 years.

These three points do offer opportunities to benefit from this strategy if implemented before the end of the current tax year.

Reimbursing employers for benefits in kind 

It has been confirmed that the promised legislation to allow employees to reimburse their employers for benefits provided, and thereby avoiding a tax charge, will be included in the Finance Bill 2017. Employees will need to make the reimbursement before 6 July following the end of the tax year.

Money purchase annual allowance (MPAA)

The MPAA that can be saved into a pension is to be reduced from £10,000 to £4,000 from April 2017. This measure has been put in place to prevent inappropriate ‘double tax relief’ by those aged 55 and over who have already taken money from their pension pots. The government will consult on the details of the change.

Changes to in-work benefits

To lessen the impact of benefit reductions, changes are proposed to Universal Credits that reduce the rate at which benefits are lowered when claimants start work. This should allow claimants to retain an extra 2p for every £1 they earn.

At present, the Universal Credit taper reduces benefits received by 65p for every £1 earned above an income threshold. This will be reduced to 63p from April 2017.

Car insurance premiums to drop?

The crack down on spurious whiplash claims is to continue. It is hoped that this will reduce premiums by up to £40 a year.

Insurance premium tax (IPT) increase

IPT will increase from 10% to 12% from 1 June 2017. Undoubtedly this will increase insurance premiums although it is up to insurance companies to determine if they pass on the increase.

Fuel duty frozen

For the seventh year, fuel duty is not to be increased. This could, on average, save drivers £130 a year.

New National Savings Bond

From spring 2017, the NS&I will be offering a new three-year investment bond with an indicated rate of 2.2% gross. The bond will be available to the over 16s with investments available from £100 to £3,000.

Pension scams under the microscope

Interested parties will be invited to consult on ways to deal with pension scams, including cold-calling about pension issues.

Bank fines given to charities

More than £102m of LIBOR banking fines are to be given to various projects that support armed services personnel and their families. Charities that support children’s hospitals, air ambulances, museums and memorials will also benefit.


Case Studies

The Tax Man

Minimise the stress of an investigation and make use of our extensive experience in securing best outcome for our clients

Business Valuation in Distress

Take advantage of our impartial and rigorous due diligence procedures

FD in The Cupboard

Our innovative ideas are here to improve your business performance and secure appropriate and cost effective funding

The Tax Man

The Tax Man

A new client was introduced to us via a recommendation with whom we arranged to meet on a regular basis in order to determine a number of changes that we felt were needed to their business structure. The client was at the time operating as a husband and wife partnership. The business was flourishing and had a number of large contracts with big organisations.

At the start of the process they were still heavily immersed in their day to day operations so we can get a full flavour for their ambitions, aspirations and growth plans. We quickly recognised there were sufficient tax savings which can be achieved by changing the structure from a partnership to a corporate entity. We carried out a business valuation and disposed of the goodwill from the old to the new business. Unfortunately, as often is the case with efficient tax planning, HMRC got involved and disputed our valuation.

An HMRC investigation can be a very stressful time for any client, even for those best prepared. However, our client had minimal input in the HMRC communication as we dealt with this professionally behind the scene. As an added benefit, our client could rest on the security that all work was covered by insurance and therefore all costs and time in dealing with this enquiry were covered by the fee protection policy we had put in place.

The initial approach taken by HMRC was very aggressive and they tried to present an argument that there was no goodwill in the business. We challenged HMRC’s view that the goodwill was worthless. After lengthy correspondence and numerous telephone calls, HMRC agreed 100% with our original valuation, which preserved our original tax saving plan for the client. Tax savings on this case where in the region of £75K at the outset, with ongoing savings of £6,000 per annum. We are pleased to add another happy client to our portfolio.

Business Valuation in Distress

Business Valuation in Distress

Selling a business is never an easy process, but when disputes arise, the need for a reliable third party due diligence process is even greater.

Tearle & Carver have extensive understanding of the requirements for remaining objective when managing a potentially difficult company buyout. In one such case, we were approached by the courts to act as independent accountant for an acrimonious business sale in which one partner was exiting the business and selling shares to the other. Given the circumstances, both sides had totally polar views of what their business was worth.

After arranging an initial meeting with the company, we were thorough in ensuring we completed due diligence, validating the figures in the accounting records, carrying out adjustments where appropriate, and drafting a set of reliable management figures within the framework required by the court.

A draft version of the report detailing our findings and conclusions was submitted to both parties, giving them the opportunity to voice any queries or concerns and ensure all relevant factors had been taken into account.

Through this process, we were able to submit a final report to the courts that was both binding and acceptable to both parties, effectively resolving what could otherwise have been a time consuming and costly process for all sides.

FD in The Cupboard

FD in The Cupboard

For smaller companies, it is often not possible or cost effective to pay for a full-time Financial Director.
Many of our clients therefore make use of Tearle & Carver’s extensive expertise to provide the services of an FD as and when required.

In this case, we were approached by the management team of an organisation looking to acquire the existing business via an MBO (Management buy out). Their business plan had proved ineffective for securing funding, and what they needed was financial expertise from someone with a developed understanding of the company’s internal workings.

Tearle & Carver helped deliver the solution our clients were looking through utilising our bank contacts in order to make the MBO viable, while also building a robust business plan and preparing our client for the rigorous vetting process. To help with cash flow issues, we introduced factoring which led to improved cash flow management.

We advised on the appropriate business valuation and structure, and continued to prepare monthly accounts to track profgress once the management were fully in command of all the information they needed to move their business forward.

In order to best assist these clients through the crucial first year of ownership, we attended board meetings on a regular basis, a service that we continue to provide to date.

With our continually developing understanding of their business, this client is able to remain confident that Tearle & Carver can provide any financial support they may need, now and in the future.