Philip Hammond has stressed that he wants to provide stability to business, to give them certainty in order to make their long-term investments. As such he has re-affirmed the Government’s commitment to the business tax road map principles, published in March of this year. This includes a commitment to:
• Continue to reduce taxation rates to drive growth
• Tackling avoidance and aggressive tax planning to provide a level playing field for all business
• Simplifying and modernising the tax system
In a fairly low-key performance, today’s Autumn Statement provided very little to move this agenda forward, with most measures in the detail of the roadmap already announced in March’s Budget.
The Chancellor reconfirmed his plans to cut corporation tax to 17% by 2020, with no hint of going further despite the Prime Minister’s indication to the CBI earlier this week that the UK would undercut anything that President-elect Trump might get past the US Houses.
Other plans previously announced were confirmed as being legislated for in the 2017 Finance Bill, namely:
• the restriction on interest deductions in excess of £2m a year to a maximum of 30% of a group’s earnings, effectively enacting recommendations from the OECD on its findings on Base Erosion and Profit Shifting.
• Modernising corporate loss reliefs so that losses arising after 31 March 2017 whether from trading or from other activities can be carried forward and used in future accounting periods to offset against profits from all sources and also future profits of other group companies.
• Despite the relaxation of loss relief there will at the same time be an introduction of a restriction of future loss offsets on brought forward losses where groups of companies make profits over £5m in a year, so that companies with significant profits in a year at least pay some tax.
• Taxing non-resident property developers on profits they make on developments in the UK.
In one of the very few new announcements, business rates reliefs have been further enhanced with an increase in the transitional relief rates and a doubling of rural rate relief to 100%.
And in a further step to make the UK a competitive environment to set up global headquarters and bringing the UK further into line with other jurisdictions, a review of the substantial shareholding exemption has been undertaken since March this year. This relief provides a shareholding company with an exemption from corporation tax on gains made on disposals of shares held in another company, subject to a number of conditions. The conclusion of the consultation was that the current system was over-complicated and as a result of the consultation it was announced that the investing conditions would be relaxed. There is no flesh to these bones at the moment but it may include a reduction to the 10% shareholding requirement or the ‘trading’ requirement being lifted. We await the publication of the draft Finance Bill in 2 weeks to get more detail.