Tax Measures in UK Chancellor’s 2013 Autumn Statement

by Morgan Lewis
Contact

Statement builds on economic stability, with a focus on certainty for business.

On 5 December, UK Chancellor of the Exchequer George Osborne released the 2013 Autumn Statement with measures designed to increase investment and drive growth. Although there had been some pressure to raise the rate of corporation tax—currently 23%—this has been resisted. Instead, a report was released showing that lower rates of business taxes increase investment and productivity. Consequently, the rate of corporation tax will reduce to 21% from April 2014 and will fall further to 20% in April 2015 as planned. Other important measures from the 2013 Autumn Statement are summarised below.

UK’s Competitiveness

The Autumn Statement is fiscally neutral. Continuing the themes of the “Corporate Tax Road Map” released by the government in 2010, there is a strong focus on promoting certainty to businesses in addition to making the UK competitive. Consequently, the rate of fundamental change in the business tax area appears to be slowing, with the majority of the announcements designed either to tackle perceived avoidance or abuse or to provide incentives to build on the UK’s “financial credibility,” supporting the economic recovery with additional growth.

Onshore Oil and Gas

Because the effective rate of 62% tax for offshore oil and gas activities renders onshore exploration uneconomic, a new “onshore allowance” was announced. As proposed, up to 75% of relevant capital spend from 5 December 2013 will be granted as an allowance (instead of existing field allowances for onshore projects), resulting in a lower effective tax rate of 30%, by removing a portion of profits from the supplementary charge. The stated aim is to incentivise exploration and development of both conventional and unconventional hydrocarbons, including shale gas, and to put downward pressure on wholesale prices, increasing the UK’s security of supply. The allowance generally will be available against profit from the same site (with some ability to transfer allowances) where production is or is expected to be less than seven million tonnes.

Stamp Duty

In March 2013, the government announced an intention to abolish stamp duty on shares traded on AIM. It was not expressly confirmed that this will go ahead, but it was referred to with the announcement that exchange traded funds will be encouraged to locate in the UK by the abolition of stamp duty on shares purchased in UK exchange traded funds.

Partnerships

In May 2013, a consultation was released addressing some perceived tax abuse involving partnerships. It has been announced that the government will go ahead with various proposals from the consultation, which are largely designed to catch professional firms and private equity firms in particular.

With immediate effect from 5 December 2013, some anti-avoidance rules will take effect to prevent tax-motivated profit allocation in partnerships with “mixed membership”, i.e., both individuals and corporate members. From 6 April 2015, this will be backed up with further rules tackling partnerships where effective tax rates have been reduced by allocating profits and losses between the mixed members in such a way as to minimise taxes (while not reflecting who benefits from the profits).

However, following representations made during the consultation, it is now acknowledged that for Alternative Investment Fund Management (AIFM) partnerships (i.e., those operating within the EU AIFM regulations)—where some partners may be required to defer their distribution of profits for three to five years under the AIFM rules—there will be a substantial disadvantage to such parties if they are required to pay tax on these profits immediately. To address this, rules will be introduced from both an income tax and national insurance (NIC) perspective. Further details on how this will work are awaited.

From April 2014, rules will also be introduced to tax members of limited liability partnerships with little or no economic risk, who effectively have a fixed income, as if they were employees. This will remove current NIC advantages from their “disguised employment” arrangements. Further details on these proposals are awaited shortly.

Anti-Avoidance

The Autumn Statement announced a number of anti-avoidance measures. This has been a consistent theme in recent years, but disclosures of tax avoidance schemes reduced by 50% between 2011–2012 and 2012–2013, so the government’s view is that the clampdown on abuse is working.

The announced changes focus on specific instances of abuse and include the following:

  • Tightening of onshore intermediary rules to prevent people who are actually employees from being able to save NICs by treating themselves as self-employed
  • Further restrictions on the use of “dual employment contracts,” under which UK resident but non-domiciled individuals can avoid tax by artificially splitting their employment such that the non-UK part of the employment escapes UK tax
  • “Fixing” the new Controlled Foreign Company rules to prevent shifting of profits relating to loan relationships outside the UK
  • Ensuring the foreign tax credit rules work as intended by preventing access to double tax relief where a third party benefits from the same foreign tax repayment and by limiting foreign tax credits arising in connection with loan relationships to profits from those loan relationships

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morgan Lewis | Attorney Advertising

Written by:

Morgan Lewis
Contact
more
less

Morgan Lewis on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!