Chancellor’s Autumn Statement 2013

Autumn Statement – 5 December 2013

George Osborne presented his Autumn Statement to Parliament amid mixed messages spilling from the Treasury, and promoted in the national press, about what he would, and would not give away.

The reported economic indicators were encouraging:

  • 1.4% growth in the UK expected for 2013, 2.2% for 2014.
  • Increase in jobs this year of 400,000.
  • National debt: gradual decreases expected with a Budget surplus forecasted for 2018-19.

A number of incentives for small businesses and changes to personal and business taxation were also confirmed. In more detail they are:

Personal taxes and related matters

Personal Tax and National Insurance 2014-15

  1. The personal allowance for persons born after 5 April 1948 is confirmed as £10,000 from 6 April 2014. From 2015-16 the personal allowance will increase in line with the Consumer Price Index (CPI).
  2. The higher rate threshold (the basic personal allowance plus the basic rate limit) will be £41,865. With the basic personal allowance at £10,000 this means that the basic rate limit will be £31,865 from 6 April 2014.
  3. There will be no percentage increases in the rates of NIC (Class 1, Class 1A, Class 1B and Class 4) for 2014-15, but there will be changes to the various thresholds. The weekly rates for Class 2 and Class 3 NICs will be increased.

Tax Credit, Child Benefit and Guardian’s Allowance 2014-15

  1. The disability elements of Tax Credits will be increased in line with CPI at 2.7%. Other rates are increased by 1%. The family element of child tax credit remains at £545.
  2. Child Benefit will be increased by 1%.
  3. Guardian’s Allowance will be increased in line with CPI of 2.7%.

NEW – Married Person’s Allowance

From April 2015 a spouse or civil partner, who is not a tax payer, or who does not pay tax above the basic rate, will be entitled to transfer up to £1,000 of their personal allowance to their spouse or civil partner. This will not advantage higher rate tax payers as the recipient of the transfer cannot be subject to tax at higher than the basic rate.

In effect, the transferor’s personal allowance will be reduced by £1,000, and the recipient’s tax will be reduced by up to £200 (if the basic rate of tax stays at 20%).

In his speech George Osborne indicated that this was “a beginning”. Perhaps the amount of the transfer will be increased in future years?

NEW – National Insurance Contributions (NIC) opportunity

From October 2015 a Class 3A NIC will be introduced to give those who reach state pension age, before 6 April 2016, an opportunity to boost their Additional State Pension.

Capital Gains Tax (CGT) – Private Residence Relief change

At present, if a property has been occupied at any time as an individual’s private residence, the last three years of ownership are disregarded for CGT purposes – even if the individual is not living in the property when it is sold, and may possibly be claiming private residence relief on a different property at the same time.

From 6 April 2014 this final period exemption will be reduced to 18 months.

TIP: Those property owners considering the sale of a property that has been a private residence at some time should take this change into account – if they can sell before 6 April 2014 they will still exempt the last three years of ownership from CGT.

The Government have also announced plans to introduce CGT on future gains by non-residents who sell UK residential property from April 2015.

CGT Annual exemption

  • For 2014-15 this will be £11,000 (for most trustees £5,000)
  • For 2015-16 and subsequent years £11,100 (for most trustees £5,500)

NEW – Social Investment tax relief

This is a new relief for investment in social enterprise and will commence April 2014.

Investment in Social Impact Bonds will also be eligible for this new relief.

Other investment incentives 2014-15

  • ISAs: Subscription limits £11,880, of which £5,940 can be invested in cash.
  • Junior ISAs and Child Trust Funds: investment limits increased from £3,720 to £3,840.
  • SAYE schemes set up to help employees save for and apply for shares to be increased from £250 to £500 per month.
  • Share Incentive Plans (SIPs): individual limits on the free shares that companies can award will be increased from £3,000 to £3,600 per year. Individual limits on the partnership shares employees can purchase will be increased from £1,500 to £1,800 per year (or 10% of an employee’s annual salary).

Fuel Duty and tax discs

The planned September 2014 increase in fuel duty has been cancelled. No further increases will be made during the current Parliament.

A further administrative inconvenience for motorists is to be abolished: the paper tax disc. It will be replaced by an electronic system.

State Pension changes

The State Pension Age (SPa) will increase to 66 years in 2020. The Government has already indicated the SPa will rise to 67 years by 2028.

It is further proposed that the SPa will rise again: to 68 years in the mid 2030s, and to 69 years by the late 2040s.

The Government estimates that it could save around £500bn from pension expenditure over the next 50 years due to these changes in SPa.

The basic State Pension will rise by £2.95 a week from April 2014.

Fuel bills

The Government has committed to delivering an average saving of £50 in household expenditure by reducing the impact of government policy on energy bills. It will do this whilst maintaining support for poorest families and providing new home owners with an incentive worth up to £1,000 to undertake energy efficiency measures.

Train fares

Average increases in fares will be capped in 2014 in line with RPI, not at 1% above RPI as previously announced.

Business taxes

Film Tax Relief

  • From April 2014 the rate of film tax credit for surrenderable losses will be:
    25% on the first £20m of qualifying core expenditure (QCE) (subject to maximum of 80% of QCE)
  • and 20% thereafter (to a maximum of 80% QCE)
  • the minimum UK expenditure qualification will change from 25% to 10%

These measures are subject to State Aid approval.

NEW – Theatre Relief

A consultation will be launched in spring 2014:

  • to introduce a limited Corporation Tax relief for commercial theatre productions, and
  • a targeted relief for theatres investing in new writings or touring productions to regional theatres.

These measures are expected to come into force from April 2015.

Tax avoidance and evasion – effective as from 5 December 2013

The following five measures have been introduced:

  1. Two changes to improve the effectiveness of the World Wide Debt Cap.
  2. Controlled Foreign Companies (CFC) profit shifting – the measure switches off the partial exemption rules for loan relationship credits of a CFC in certain circumstances.
  3. Partnership taxation – measures to restrict allocation of profits and losses between individual, and non-individual partners, where the motivation is minimising tax.
  4. Avoidance schemes using total return swaps.
  5. Double taxation relief revenue protection.

Charities established for tax avoidance purposes

The Finance Bill 2014 will contain provisions to prevent charitable tax reliefs to charities where one of the main purposes of establishing the charity was tax avoidance.

Accelerated tax payment in avoidance cases

There is evidence that tax-payers are entering into avoidance schemes in order to defer tax liabilities. To counter this activity provisions will be included in the Finance Bill 2014 to require payment of disputed tax when a formal avoidance follower penalty notice is issued at the beginning of an enquiry.

Business rates

  • A cap is to be introduced from April 2014 that will limit business rate increases in England to 2%.
  • The introduction of up to a £1,000 rates discount to help high street businesses. This includes pubs, cafes, restaurants, charity shops as well as other retailers who occupy retail premises with a rateable value of up to £50,000 in 2014-15 and 2015-16.
  • The introduction of a temporary reoccupation relief, granting a 50% discount from business rates for new occupants of previously empty retail premises for 18 months. The relief will be granted to businesses moving into long-term empty retail properties on or after 1 April 2014 and on or before 31 March 2016.
  • Extending the Small Business Rates Relief for a further 12 months from 1 April 2014.

NEW – Abolition of employers’ NICs for under 21s

From 6 April 2015 employers will not have to pay Class 1 secondary NICs on earnings paid to the under 21s up to the Upper Earnings Limit (UEL) – below £813 per week.

Investment in young people

  1. The cap on student numbers at publicly funded higher education institutions in England is to be removed by 2015-16. This should increase capacity to allow 60,000 more young people go to university every year. For 2014-15, the Government will increase the cap for HEFCE-funded institutions by 30,000.
  2. The Government will provide extra funding for science, technology and engineering students of £50m per academic year from 2015-16.
  3. The provision of £40m in additional support for people starting higher apprenticeships. This is expected to create 20,000 additional apprenticeships over the next two academic years.

Free school meals

Pupils attending state schools in England, in Reception, Year 1 and Year 2 are to get free school lunches from September 2014 at an estimated cost of £600m per year.

Capital funding will be made available to improve capacity in school kitchens. Additional funding will also be made available to enable Further Education and Sixth Form Colleges to offer free meals to disadvantaged students.


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.