Budget Alert Autumn 2017 - EY

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Budget Alert Autumn 2017 - EY
Budget Alert
Autumn 2017
Autumn Budget alert
 2017

Introduction
Whilst this Autumn Budget is the Chancellor’s second Budget           the value they generate from the UK market and specifically the
of 2017, it is the first one in the Government’s new legislative      value generated by the participation of UK users. While noting the
timetable and, against a backdrop of heightened uncertainty, the      Government was willing to act unilaterally, it recognises the need
first Autumn Budget in two decades. The Chancellor presented          to work with other countries to minimise business burdens and
his proposals to ‘look forwards’, ‘to embrace change’, ‘to meet       distortion and picks up the topic currently being hotly debated in
challenges head on’, and ‘to seize opportunities for Britain’.        the EU and at the OECD.
Faced with challenges, the expectations on the Budget were few.       Focus on learning
In a Budget replete with 35 tax measures, the Chancellor gave         There was considerable focus on investment in skills as the
away £25bn, of which £7bn was in the tax area. Whilst the largest     Government continues to work with employers on supporting the
tax giveaway, being the freezing of fuel duty, is likely to pass by   apprenticeship levy. The Chancellor announced its support for
unremarked, some of the other changes and some of the policy          maths with an investment of £40mn to train maths teachers and
areas now open for consultation will draw attention.                  a commitment to computer science with up to £83mn to upskill
Ahead of the Budget we highlighted five areas upon which the          computer science teachers.
Chancellor was likely to focus and, in setting out his vision for a   Housing
‘Global Britain’, which he described as an ‘outward looking, free-
                                                                      Whilst the main news on housing was on the spending side, the
trading nation’, the Chancellor was clearly thinking along the
                                                                      Chancellor did introduce a new permanent relief for first time
same lines.
                                                                      buyers on transactions on or after Budget day. This removes all
Stability for business                                                Stamp Duty Land Tax (SDLT) on properties up to £300,000 for
In an environment where business wants certainty, the net effect      first-time buyers, retaining this exemption even as the price rises
of the Chancellor’s many measures appears to have avoided             to £500,000. This is slightly surprising as it marks a return to the
creating much negative disruption whilst nevertheless providing       slab system of SDLT, at least for some first time buyers, removing
some good news. Bringing the move from RPI to the (lower)             one of the simplifications of the shift delivered by his predecessor.
CPI indexation forward from 2020 to 2018 is a welcome move            As well as reducing the tax costs on sales to first time buyers,
for those businesses facing the burden of business rates. The         the Chancellor also proposed a number of measures to stimulate
Chancellor also reiterated his commitment to a competitive            housing including giving local authorities power to charge 100%
corporation tax rate, with no reversal of the cut to 17% planned      council tax premiums on empty properties.
from 1 April 2020.                                                    Employment
Digital and innovation                                                As predicted, the Chancellor heralded a consultation on the
The Chancellor wanted the Budget to be about the future and,          taxation of the off-payroll workers, with the express consideration
on the tax side, this was represented both by the one percentage      of extending the rules currently applied just to public sector
point increase in the Research and Development (R&D)                  bodies, to all companies. With the current rules facing particular
expenditure credit and the announcement of a consultation on          operational challenges, it will be important that the rules are fully
making sure that the UK’s intellectual property regime, designed      reviewed before being rolled out more widely.
at the turn of the millennium, is still fit for purpose. Increasing   So, the Budget was a veritable smorgasbord of measures, focused
R&D expenditure credit to 12% delivers the highest rate for large     on a range of issues and objectives. If this is truly the foundation
companies since the introduction of the R&D tax credits regime        Budget for the future, the tax measures announced in this Budget
and reinforces the UK’s message that it wants to be the home for      should help Britain meet the forthcoming challenges head on and
innovation.                                                           provide the necessary groundwork to weather the changes to
With respect to the digital economy, the Government’s position        come. Do they? Read this alert which explores the detail and give
paper on corporate tax and the digital economy, which was             us your views.
released alongside the Budget, noted that it is essential that the
international corporate tax rules ensure that the UK corporation
tax payments of the digital economy are commensurate with

                                                                                                                                          1
Autumn Budget 2017

EY ITEM Club

There are pretty dramatic downgrades to the UK GDP growth            As a consequence of the lower GDP forecasts over the medium-
forecasts by the Office for Budget Responsibility (OBR) in the       term, the expected budget shortfalls (Public Sector Net Borrowing
Budget. The 2017 GDP growth forecast has been cut from               excluding banks – PSNBex) have been revised up significantly.
2.0% to 1.5% (which is largely baked-in given that data has been     This is despite the near-term PSNBex projections being cut due
released for the first three quarters) while the 2018 projection     to the much lower-than-expected shortfalls over the first seven
has been cut from 1.6% to 1.4%. These new forecasts match the        months of fiscal year 2017/18. Specifically, PSNBex in 2017/18
current EY ITEM Club projections.                                    is now expected to come in at £49.9bn rather than £58.3bn – a
                                                                     reduction of £8.4bn. The expected shortfall in 2019/20 has also
It seems that the OBR may now be erring on the side of
                                                                     been edged down to £39.5bn from £40.8bn.
caution on UK productivity growth, having been repeatedly
over-optimistic in recent years. Obviously, the longer-term UK       However, with the longer-term GDP growth forecasts cut
GDP growth forecasts will be substantially influenced by Brexit      markedly, the Chancellor is now expected to have a budget deficit
developments. However the productivity expectations may now          of £32.8bn instead of £20.6bn in 2020/21. It is still expected
be overly pessimistic.                                               to be as high as £25.6bn in 2022/23. This means that the
                                                                     Chancellor would still achieve his target of getting the cyclically-
Specifically, the OBR has cut forecast UK GDP growth to just 1.3%
                                                                     adjusted budget deficit below 2.0% of GDP in 2021/22, although
in both 2019 and 2020, rising to 1.5% in 2021 and 1.6% in 2022.
                                                                     he would have a buffer of around £13bn instead of £26bn. With
This means that at no stage over the period through to 2022
                                                                     an expected budget deficit of £25.6bn in 2022/23, it looks
does the UK see growth of 2.0% – indeed it struggles to grow by
                                                                     increasingly questionable as to whether the Chancellor will be
more than 1.5%. Previously, the OBR had expected growth to be
                                                                     able to get the budget into balance by the middle of the next
1.7% in 2019, 1.9% in 2020 and 2.0% in 2021.
                                                                     decade.
The OBR has repeatedly assumed in recent years that there will
                                                                     In terms of the overall fiscal stance, the Budget is stimulative
be a marked pick-up in the UK’s productivity performance, but this
                                                                     in the near-term. Specifically, the OBR observes that the
has failed to materialise. Consequently, the OBR has now come to
                                                                     Government’s measures “add £2.7bn to borrowing next year and
the conclusion that some of the temporary factors that it believed
                                                                     a larger £9.2bn (0.4 per cent of GDP) in 2019/20”.
were holding back productivity are having a permanent impact.
Back in March, the OBR forecast that productivity growth (output     The Chancellor has stuck to his fiscal targets and delivered a
per hour worked) would rise from 1.4% in 2017 to 1.5% in 2018        pretty low-key Budget overall. Given the major uncertainties
and then get up to 1.8% in 2020 and 2021. Now the OBR expects        facing the economy, the Chancellor is clearly concerned that
productivity growth to be just 0.9% in 2017 dipping to 0.7% in       investor confidence in the UK could be damaged if he abandons
2018 before rising gradually to 1.1% in 2021 and 1.2% in 2022.       the fiscal framework that was adopted only a year ago. It is
These forecasts look very cautious to us. The marked downward        also likely that the Chancellor wants to keep some room for
revisions to productivity growth are also only modestly countered    manoeuvre should the economy suffer a slowdown over the
by the OBR cutting its estimation of the UK’s equilibrium            coming years as the Brexit process develops.
unemployment rate from 5.0% to 4.5%.

2
Autumn Budget 2017

Employment tax

Taxation of employee business                                         Electric cars
expenses                                                              The Chancellor has confirmed that legislation will be
Following HM Treasury’s call for evidence on the taxation             introduced in the 2018/19 Finance Bill to exempt
of employee business expenses, published on 20 March                  employer-provided electricity from being taxed as a benefit
2017, the Government has introduced the following                     in kind from April 2018.
changes in areas where concerns were raised:                          This change will apply to electric provided in workplace charging
►► Abolition of receipt checking for subsistence benchmark            points for electric or hybrid cars owned by employees.
   scale rates
                                                                      This confirmation will give clarity to employers and
   From April 2019, employers will no longer be required to           employees and is a welcome move by the Government which
   check receipts when making payments to employees for               aims to encourage the use of electric cars.
   subsistence using benchmark scale rates.
   Currently employers who wish to reimburse employee                 Ability to pause Save-As-You-Earn
   subsistence expenses using the benchmark scale rates must
   ensure that a cost is incurred (i.e. by checking receipts). This   (SAYE) contributions
   change will not apply to bespoke rates or industry rates.          Employees on maternity and parental leave will be able to pause
►► Legislation for existing overseas scale rates for                  their SAYE contributions for up to 12 months from 6 April 2018.
   accommodation and subsistence                                      Previously employees could only pause their contributions for a
                                                                      period of 6 months.
   Existing concessionary overseas scale rates for
   accommodation and subsistence are to be put on a statutory         This is a welcome increase which outlines the Governments’
   footing.                                                           understanding that employees may take leave for longer than six
                                                                      months.
   The Government will legislate in Finance Bill 2018/19 so that
   the status of the existing overseas scale rates is put on a
   statutory footing.                                                 Reform to the intermediaries’
►► Improved guidance on employee expenses                             legislation for private sector
   Following the call for evidence HMRC is committed to               engagements
   improving guidance around the taxation of employee
   expenses as well as enhancing the online process for claiming      Following on from the changes introduced for public sector
   tax relief on non-reimbursed expenses.                             engagements from 6 April 2017, the Government has
                                                                      announced its intention to consult on extending these rules
   HMRC is committed to improving the published guidance
                                                                      into the private sector.
   in respect of employee expenses, in particular travel and
   subsistence claims, to raise awareness of the rules. The           The current rules for workers providing their services to a public
   improvements will extend to simplifying the online process         sector body via a personal service limited company (PSC) passes
   for claiming tax relief on employment related expenses.            the responsibility for paying the correct employment taxes to the
   HMRC will seek consultation with external stakeholders in          public sector body or agency paying the company. Different rules
   order to implement these improvements.                             apply where the engager is a private sector business.
►► Self-funded training                                               Currently, where a worker provides services to a private sector
                                                                      business through their PSC, that individual is responsible for
   The Government is to consult on extending the scope of tax
                                                                      deciding whether the intermediary legislation (commonly referred
   relief for costs incurred by employees and self-employed
                                                                      to as IR35) applies. The consultation will consider whether that
   individuals on self-funded training
                                                                      responsibility should pass to the private sector employer, agency
We welcome the commitment by HMRC to reduce the                       or other third parties who pays the PSC to match the rules in the
administrative burden of employers and improving their                public sector.
published guidance.                                                   The consultation will be issued early in 2018 and so any
                                                                      implementation is unlikely to take place before April 2019,
                                                                      particularly as engagers have already expressed concerns over
                                                                      the rules being extended into the private sector.

                                                                                                                                       3
Autumn Budget 2017
                                                                                         Employment tax

Employment status consultation                                        Changes to company cars and vans
The Government has announced that it will shortly publish             ►► F
                                                                          rom April 2018 the existing diesel supplement on company
a consultation as part of its response to Matthew Taylor’s                car tax will be increased from 3% to 4%.
review of modern working practices which will consider                ►► Carbon dioxide figures compatible with the current New
options for reform to make the employment status tests                   European Driving Cycle test procedure will be used by HMRC
for both employment rights and tax clearer.                              for the purposes of determining the company car tax charge
                                                                         until April 2020.
This is a far ranging and complex area of law and is likely to be a
lengthy process.                                                      ►► The van benefit charge and fuel benefit charge for cars and
                                                                         vans will increase by the RPI.
No date for the consultation has yet been announced, but we
expect that a response could be issued in the next few weeks.
                                                                      National insurance contributions (NICs)
Tackling disguised remuneration                                       ►► The Budget confirms that the implementation of measures
avoidance schemes                                                        affecting NICs which were previously announced in the last
                                                                         Budget, including the abolition of class 2 NICs, reforms to
The Chancellor has announced further legislation to tackle               the NICs treatment of termination payments (excluding the
the existing and future use of disguised remuneration                    changes to the payments in lieu of notice rules which will
tax avoidance schemes. The Part 7A disguised                             apply from 6 April 2018) and changes to the NICs treatment
remuneration legislation will now apply regardless                       of sporting testimonials, has been delayed until 2019.
of whether contributions to disguised remuneration                    ►► The Government has indicated that some employees
avoidance schemes should previously have been taxed as                   have abused the NIC employment allowance and avoided
employment income. This change takes effect from                         paying the correct amount of NIC, often using offshore
22 November 2017. In addition Part 7A will be amended                    arrangements. From an unspecified date in 2018 (it is not
to ensure that liabilities arising from the loan charge are              clear whether this will be from April 2018), HMRC has said
collected from an appropriate person where the employer                  that employers with a history of avoiding paying NIC in this
                                                                         way will be required to provide upfront security.
is located offshore. This change will have effect from the
date of Royal Assent for the Winter Finance Bill.
Following the original announcement in the 2015 Autumn                Termination Payments – Foreign service
Statement a package of measures had been introduced in the
2016 Budget and 2017 Spring Budget. This was followed by
                                                                      relief
further draft legislation published on 13 September 2017, to be       ►► As
                                                                          announced previously, the reform of foreign service relief
included in the Winter Finance Bill, to be published on 1 December        for termination payments will come into effect where the
2017. This introduced a ‘close companies’ gateway’ with effect            date of the employees termination is on or after 6 April 2018
from 6 April 2017 and required all employees and self-employed            and the payment or benefit is received after 13 September
individuals who have received a disguised remuneration loan to            2017. The changes mean that employees who are UK
provide information to HMRC by 1 October 2019.                            resident in the tax year their employment is terminated will
                                                                          not be eligible for foreign service relief on their termination
The Government’s commitment to tackle specific perceived                  payments.
tax avoidance schemes continues with additional legislative
measures. However, in the absence of further details, scrutiny
of the Winter Finance Bill clauses will be needed when these are
published on 1 December 2017.

4
Autumn Budget 2017

Personal tax

Rates and allowances                                                  Reform of the domicile rules and
The personal tax allowances and capital gains tax annual              offshore trusts
exemption figures have been announced for the tax year                No further amendments were announced to the new
2018/19.                                                              deemed domicile and offshore trust rules. However,
The Government will increase the personal allowance to £11,850        previously announced changes to the taxation of offshore
from 6 April 2018. The income tax basic rate limit for 2018/19        trusts will be included in the Winter Finance Bill to take
will increase to £34,500, so most individuals will begin paying       effect from 6 April 2018.
higher rate tax on income above £46,350 (but see below for
Scotland).                                                            The Government confirmed that legislation will introduce
                                                                      additional anti-avoidance rules, to take effect from 6 April 2018,
There are no changes to the personal income tax and capital gains     in relation to the taxation of income and gains arising to offshore
tax rates for 2018/19.                                                trusts.
The capital gains tax annual exemption for individuals has            Draft legislation was published on 13 September 2017, which
increased to £11,700.                                                 included:
As previously announced, the dividend allowance for 2018/19           ►► A benefits charge for settlors and close family members that
will reduce from £5,000 to £2,000 from 6 April 2018. However,            will largely impact settlor interested trusts, where benefits
the starting rate for savings income is unchanged at 0% and the          would otherwise not be taxable under certain existing income
starting rate limit for savings will remain at its current level of      tax anti-avoidance rules.
£5,000 for 2018/19.
                                                                      ►► A provision stating that capital payments to non-residents
From April 2017, powers to vary the tax rates and thresholds of          and to migrating beneficiaries may be disregarded when
non-savings and non-dividend income for Scottish taxpayers were          attributing capital gains of offshore trusts.
devolved to the Scottish Parliament. The Scottish draft Budget
2018/19 is scheduled for 14 December 2017.                            ►► The attribution for certain income and gains charges to a
                                                                         settlor where benefits are received by close family members;
The total amount that individuals can save each year into all ISAs       and the attribution of capital gains and of deemed income to
from 6 April 2018 will remain at £20,000 which includes limit of         recipients of onward gifts.
£4,000 for savings into a Lifetime ISA. The annual subscription
limits for Junior ISAs and Child Trust Funds for the tax year         These measures follow the broader changes to the taxation
2018/19 have been increased to £4,260.                                of non-UK domiciled individuals included in Finance (No. 2)
                                                                      Act 2017 which introduced the concept of deemed domicile
The increase to the personal allowance is not as generous as          for income tax and capital gains tax as well as inheritance tax
it might first appear, since it has only risen by inflation. The      purposes.
reduction in the dividend allowance will increase the number of
people who need to pay tax on dividend income.
                                                                      Venture Capital Schemes
                                                                      A raft of measures are to be introduced to encourage and
                                                                      target investment in high-growth, innovative firms under
                                                                      the Enterprise Investment Scheme (EIS) and Venture
                                                                      Capital Trusts (VCTs) while restricting relief where the
                                                                      purpose of the business is to preserve capital rather than
                                                                      grow.
                                                                      Following the consultation issued by the Government in response
                                                                      to the Patient Capital Review, it was acknowledged that high-
                                                                      growth, innovative businesses require high levels of capital
                                                                      upfront to succeed while the risk of loss to the investor is higher.
                                                                      ‘Knowledge intensive’ companies
                                                                      Legislation is to be introduced to further encourage investment in
                                                                      via EIS and VCT. From 6 April 2018:

                                                                                                                                         5
Autumn Budget 2017
                                                                                                      Personal tax

►► The
   ►	  annual allowance for an individual investment in EIS will
   increase from £1mn to £2mn
                                                                       Pensions
                                                                       Contrary to some speculation prior to the Budget, no major
►► The
   ►	  annual investment that can be raised through EIS and
   VCT will increase from £5mn to £10mn
                                                                       changes have been announced to the existing limits on
                                                                       tax relief for pension savings or to the taxation of pension
►► There
   ►	    will be increased flexibility in how the 10 year              withdrawals.
   maximum age test is applied.
                                                                       The lifetime allowance for pension savings will rise from
These add to the incentives already available to knowledge-            £1,000,000 to £1,030,000 with effect from 6 April 2018. This is
intensive companies.                                                   in line with the Government’s announcement in the 2015 March
‘High Growth’ companies                                                Budget that the lifetime allowance would increase in line with the
                                                                       Consumer Price Index from 2018/19.
Encouraging investment in ‘knowledge-intensive’ companies seeks
to redirect capital away from low-risk EIS and VCT qualifying          The Government will legislate to allow tax relief on employer
investments. The Government will legislate to tackle perceived         premiums paid into life assurance products and certain overseas
‘capital preservation’ investments currently qualifying for tax        pension schemes where an employee nominates an individual or
reliefs.                                                               registered charity as a beneficiary. This change will be effective
                                                                       from 6 April 2019.
From 6 April 2018, a “risk-to-capital condition” will be introduced
for new investments. This will form two parts and will ask             Following a number of years of significant changes to the
whether:                                                               pension tax regime, pension savers and pension schemes will
                                                                       welcome a Budget without significant announcements.
►► The
   ►	  company has objectives to grow and develop (mirroring
   an existing test), and                                              The adjustment to the treatment of life assurance and overseas
                                                                       pension premiums is a positive change as it will remove a
►► There
   ►	    is a significant risk of loss of capital for the investor     perceived anomaly in the existing legislation which means
   which could exceed the net return of the investor.                  that current premiums for employer funded death benefits in
VCTs                                                                   un-registered schemes may not be eligible for tax relief.

Further measures specific to VCTs will be introduced including:
►► From
   ►	    6 April 2018, 30% of funds raised in a period must be         Taxation of trusts
   invested in qualifying investments within one year of the end       In 2018, the Government will publish a consultation on how to
   of the accounting period                                            make the taxation of trusts simpler, fairer and more transparent.
►► From
   ►	    6 April 2019, the time limit for VCTs to reinvest             We do not have further details at this stage but the consultation
   investment gains will be doubled from 6 to 12 months                may cover the taxation of both UK and non-UK trusts.

►► The
   ►	  VCT must hold at least 80% of funds in qualifying
   investments, increased from 70%.
Pension funds
To further unlock the opportunities of fast growth, long term,
venture capital investments, the Pension Regulator will clarify
guidance on how trustees can access such investments while
the Treasury will seek to remove barriers restricting illiquid
investments being held in pensions.
The Government is promoting investment in innovation and
is extending the tax reliefs for entrepreneurial investment.
However, there is a clear desire to restrict tax reliefs on low risk
venture capital investments.

6
Autumn Budget 2017

Indirect taxes

Indirect tax consultations                                        treatment of vouchers with effect from 1 January 2019.
                                                                  These will simplify the VAT treatment of vouchers,
VAT registration and deregistration thresholds                    including the point at which they will become subject
The VAT registration and deregistration thresholds will           to VAT, and in some cases their value for taxation. A
remain at £85,000 and £83,000 respectively for a two              consultation paper will be published on 1 December 2017.
year period, ending on 31 March 2020. The Government              The proposed changes in the UK VAT legislation on vouchers
will consult on the design of the VAT registration threshold.     are expected to be consistent with the new EU rules which
The increase in VAT registration and deregistration thresholds    were announced last year. The current UK rules on vouchers
year on year has become a familiar feature of the Budget.         are complex, having developed over a number of years. Any
However, following the recent publication of the Office of Tax    increase in clarity is likely to be welcomed by businesses.
(OTS) Simplification’s review of the VAT system, which proposed   Businesses involved in the provision or redemption of vouchers
the need to review the threshold and the fact that the UK’s VAT   may wish to review the impact of future developments.
registration threshold is the highest in the EU, it is no great   Other indirect tax consultations and calls for evidence
surprise that the Government has decided to defer any increase
and consult before making further changes. The possibility of     The Government will also publish:
a reduction in the threshold as proposed by the OTS remains a     ►► A
                                                                      consultation in early 2018 on gaming duty return periods
future possibility therefore.                                         to seek views on bringing the administration of gaming duty
VAT grouping                                                          by casinos more into line with the other gambling duties. It
                                                                      will also seek views on the removal of the requirement to
At Autumn Statement 2016, the Government launched a                   make payments on account.
consultation on potential changes to the UK VAT grouping
                                                                  ►► A
                                                                      call for evidence in early 2018 on how the tax system or
provisions. The Government will publish a summary of
                                                                      charges could help to reduce the amount of single-use plastic
responses on 1 December 2017. It will then consider                   waste.
whether any changes are required to the current UK VAT
grouping regime.
The consultation follows recent European case law. As part of     VAT: Postponed accounting for VAT
the consultation, HMRC is reviewing certain aspects of VAT        following Brexit
grouping such as eligibility for membership, the VAT treatment
of cross-border supplies involving branches and the interaction   The Government recognises that businesses currently benefit
between VAT grouping and the cost sharing exemption.              from postponed accounting for VAT when importing goods
                                                                  from the EU. This provides an important cash flow advantage
VAT fraud on the provision of labour in the construction          for businesses as they account for VAT through the VAT return
sector                                                            and do not make a payment at the time goods arrive in the UK
                                                                  from the EU. The Government will take this into account when
Aimed at combatting perceived VAT fraud on the provision          considering potential changes following Brexit and will look at
of labour in the construction sector, the Government will         options to mitigate any cash-flow impacts for businesses that a
publish a technical consultation on draft legislation for a       border between the UK and EU might create.
VAT reverse charge in spring 2018, with a final draft of the
                                                                  Businesses importing goods from the EU using postponed
legislation and guidance to be published by October 2018.
                                                                  accounting will welcome this consideration of the mitigation of
This follows the conclusion of the consultation announced         VAT cash-flow impacts following Brexit although customs duties
at Spring Budget 2017. The changes will take effect on or         and tariffs on trade into the EU will still be a significant concern.
after 1 October 2019.
Reverse charge accounting is increasingly the default response
to supply chain fraud as it places the onus for accounting for
                                                                  VAT: Split payment for on-line sales
VAT on the recipient of the supply. The long lead time will be    Building on the measures introduced in Budget 2016, to
welcomed by businesses preparing for the changes.                 combat perceived avoidance on 1 December 2017, the
VAT and vouchers                                                  Government will publish, a response document to the call
                                                                  for evidence to develop a split payment model for on-line
The Government will implement changes in the VAT                  sales.

                                                                                                                                     7
Autumn Budget 2017
                                                                                                   Indirect taxes

This is a measure to tackle the non-payment of VAT by some              The Government also intends to explore with digital platforms
overseas businesses trading on-line with UK customers. A split          opportunities to promote better tax compliance by their users,
payment mechanism allows VAT to be extracted from on-line               before publishing a call for evidence in spring 2018 on what more
payments in real time. The Government has reported that the             digital platforms could do to prevent non-compliance.
responses to the call for evidence were broadly positive about
                                                                        The proposed measure continues the Government’s approach of
the concept but highlighted the complexities of implementation.
                                                                        making online marketplaces responsible for the VAT compliance
The response document will set out plans for further engagement
                                                                        of the sellers who trade through them.
with external stakeholders, in preparation for a full consultation in
2018.

Usually VAT is collected and paid by the taxpayer on the basis          VAT: Refunds to combined authorities,
of transactions performed during the reporting period. The              fire and rescue authorities, the
split payment mechanism changes this approach in that the
purchaser pays the net price to the supplier and any VAT due            Scottish Fire and Rescue Service, and
is paid direct to HMRC or an appointed third party. Whilst              the Scottish Police
this would be yet another change for online marketplaces to
manage, this measure is intended to reduce their underlying             The Government will legislate to include combined
risk, as they can currently be held jointly and severally liable        authorities and various emergency services in the current
for any UK VAT under-declared by traders operating on their             VAT provisions which allow for the recovery of VAT.
platforms.
                                                                        Local authorities and other specified bodies are able to recover
                                                                        the VAT they incur when undertaking their statutory obligations.
VAT: Extension of joint and several                                     However, the definition of a local authority does not currently
                                                                        include a ‘combined authority’, which has resulted in these types
liability on the online marketplaces                                    of bodies having to be subject to specific Treasury Orders in order
and further measures to encourage                                       to ensure VAT recovery. Typically, a combined authority is a group
                                                                        of two or more bodies collaborating across boundaries.
compliance by users of digital
                                                                        This measure will remove the need for individual Treasury Orders
platforms                                                               and will extend the current VAT recovery mechanism to combined
The Government has announced that it will legislate in                  authorities, including the Scottish Fire and Rescue Service and
                                                                        the Scottish Police Authority.
the Winter Finance Bill to hold online marketplaces jointly
and severally liable for the UK VAT liabilities of businesses           The measure will have effect on and after the date of Royal
selling goods through their platforms.                                  Assent to the Winter Finance Bill.

The Government will extend the scope of existing joint and several      The Government’s change in policy will introduce significant
liability rules to hold online marketplaces liable for:                 savings for the emergency services involved. There will however
                                                                        be no refund of VAT, which was not recoverable by these
►► Any
   	   future VAT that a UK business selling goods via the             authorities in previous years.
   online marketplace fails to account for after HMRC has
   issued a notice to the online marketplace, ensuring that all
   sellers are in scope;                                                Air passenger duty
►► Any
   	   VAT that a non-UK business selling goods via the
                                                                        The air passenger duty long-haul standard rate will rise to
   online marketplace fails to account for, where the business
                                                                        £172 and the long-haul higher rate will rise to £515 from
   was not registered for VAT in the UK and where the online
   marketplace ‘knew or should have known’ that the non-UK              1 April 2019.
   business should be registered for VAT in the UK.                     For tax year 2019/20, short-haul rates and the long-haul reduced
The Government will also legislate to require online marketplaces       rate for the economy passengers will be frozen at 2018/19
to verify the VAT numbers of third party sellers on their websites.     levels with tax rates for 2020/21 set out at Budget 2018. In
                                                                        early 2018, the Government will publish a call for evidence on
The changes will have effect on and after Royal Assent to the           the impact of VAT and air passenger duty on tourism in Northern
Winter Finance Bill.                                                    Ireland, to be reported on at Budget 2018.

8
Autumn Budget 2017
                                                                                                    Indirect taxes

The commitment to freeze rates for short-haul flights and                ►► Registration requirements will be extended to taxable
long-haul economy flights should be welcomed after a period                 persons making disposals at places other than permitted
of sustained rate increases which the industry has consistently             landfill sites.
lobbied against.
                                                                         ►► New exemptions will be implemented so that landfill tax is not
                                                                            charged at permitted sites on material currently outside the
Carbon price support and climate                                            scope of the tax.

change levy                                                              From 1 April 2018, the standard and lower rates of landfill tax
                                                                         will rise in line with RPI to £88.95 per tonne and £2.80 per tonne
Revised indicative carbon price support rates were                       respectively.
announced for tax year 2020/21 and minor amendments
                                                                         The Landfill Communities Fund value for 2018/19 will be
were made to climate change levy exemptions for energy                   £33.9mn, with contributions by landfill site operators remaining
used in mineralogical and metallurgical processes.                       capped at 5.3% of their landfill tax liability.
Climate change levy (CCL) main rates for tax years 2017/18,              These legislative changes come as no surprise and have
2018/19 and 2019/20 were announced in Budget 2016 and                    previously been published by HMRC in a policy paper and draft
remain unchanged.                                                        legislation during Autumn 2017. They are in line with general
                                                                         policy measures aimed at tackling tax evasion and should be
The rates for liquefied petroleum gas will be frozen at the
                                                                         welcome by legitimate operators in the waste sector.
2019/20 rate for the tax years 2020/21 and 2021/22 to level
the playing field for the off grid market. All other rates for taxable
commodities for 2020/21 and 2021/22 will be announced in
Budget 2018.
                                                                         Aggregates Levy: Continued rate freeze
                                                                         and no increase in exemptions
Revised indicative carbon price support (CPS) rates have been
published for the tax year 2020/21, this is in line with the             As expected, aggregates levy will remain at £2 per tonne
Government’s policy announced in the Spring 2017 Budget to               for 2018/19. The rate has been frozen since 2009 but the
target a total carbon price with specific CPS rates set at a later       Government has announced an intention to return to index-linked
date.                                                                    rate increases in the longer term.

Minor amendments to the exemptions from CCL for energy                   Following consultation in 2016, current aggregates levy
used in mineralogical and metallurgical processes will be made           exemptions will not be extended to include aggregate produced
in the Finance Bill 2018/19. These amendments will take effect           from laying underground utility pipes.
from spring 2019 and are aimed at ensuring the exemptions
remain operable post-Brexit.
                                                                         Tobacco duties
                                                                         Duty rates on all tobacco products will increase by 2%
Landfill tax                                                             above RPI inflation, with the exception of hand-rolling
Legislative changes to the scope of landfill tax and an                  tobacco which will increase by 3%. Also, the tobacco
increase in the landfill tax rates will come into effect from 1          minimum excise tax will be set at £280.15 per 1,000
April 2018.                                                              cigarettes. These changes come into effect from 6pm on
                                                                         22 November 2017.
Following consultations in 2016 and 2017, landfill tax legislation
will be amended in the Winter Finance Bill taking effect from 1          The minimum excise tax (MET) will be set at £280.15 per 1,000
April 2018. As set out in the September 2017 policy paper, the           cigarettes which will target the cheapest cigarettes. This means
key changes are expected to be as follows:                               that the total excise duty on a packet of cigarettes will be the
►► Landfill tax will be extended to include disposals made at            higher of either the MET or the usual application of duties i.e.,
   sites without an environmental disposal permit in England             specific plus ad valorem duties at 16.5% of the retail price. This
   and Northern Ireland. Non-compliance by those involved in             therefore increases the price of cigarettes from £4.15 to £4.34
   or knowingly facilitating the disposal resulting in penalties or      per a 20 pack of cigarettes.
   criminal prosecutions.
                                                                         Duty on hand-rolling tobacco will increase from £209.77/kg to
                                                                         £221.18/kg.

                                                                                                                                            9
Autumn Budget 2017
                                                                       Indirect taxes

Finally, the Autumn Budget 2017 also announced that tobacco
duty rates will increase by a minimum of 2% above inflation
until the end of this Parliament.

Alcohol duties
Duties on white ciders will increase from 1 February 2019.
Duty rates on other beer, cider, wine, made-wine and spirit
products have been frozen.
The Government intends to introduce a new duty band for still
cider of a strength of at least 6.9% but not exceeding 7.5% abv.
Additionally, HMRC will be reviewing wine and made-wine dilution
practices of businesses which are carried out after the excise duty
has been calculated. The objective is to create consistency across
all alcohol sectors regarding the calculation and payment of excise
duty.

Vehicle excise duties
Vehicle Excise Duty (VED) rates for cars, vans and
motorcycles registered before 1 April 2017 and first year
rates for cars under the post-April 2017 VED system
will increase by RPI with effect from 1 April 2018. The
Government will also legislate for the rates on new diesel
cars registered from 1 April 2018 to increase by one
band. Fuel duty rates will remain frozen for the tax year
2018/19.
The band increase will apply to all new diesel cars that do not
meet the Real Driving Emissions step 2 (RDE2) standards. VED
for HGVs and HGV levy rates remain frozen for the tax year
2018/19. The Government will also publish a call for evidence
to update the existing HGV Road User Levy so that hauliers that
plan their routes efficiently are incentivised in efforts to improve
air quality.

In addition, the Government will review whether existing fuel
duty rates for alternatives to petrol and diesel are appropriate
ahead of making decisions at Budget 2018. In the meantime, the
Government will no longer be bound by the duty escalator policy
for liquefied petroleum gas road fuel.

Finally, zero-emission capable taxis will be exempt from the VED
supplement that applies to expensive cars from April 2019. The
Government will consult on how to define zero-emission capable
taxis ahead of this date.

Despite the VED increase for cars, vans and motorcycles,
the rates freeze on HGV VED and Road User levy rates will
be viewed as positive by hauliers and road freight operators.
The increase in rates for new diesel cars is in line with the
Government’s actions on reducing carbon emissions.

10
Autumn Budget 2017

Business taxes and administration

Corporate tax and the digital economy                                 A tax on revenues that businesses generate from the provision of
                                                                      digital services to the UK market is favoured by the Government
The Government has announced its view on the challenges               as the interim solution, though this would require careful design
raised by the digital economy on the international                    to target the relevant risks. As a more immediate action, the UK
corporate tax system and how the international community              intends to take action against multinational groups who achieve
should go about tackling these. The Government considers              low-tax outcomes by holding valuable intangible assets in low-tax
                                                                      jurisdictions where a royalty is paid in connection with UK sales.
that international agreement will be required to address
the challenges effectively, but has stated that it will take          The Government has clearly set out its position and areas of
unilateral action if necessary. A policy paper has been               concern which should help inform the international debate and
published setting out the Government’s position, inviting             work of the OECD and the European Commission. There remains
comments by 31 January 2018.                                          a potential for business models that are not the target of the
                                                                      reforms to be adversely impacted but the UK’s position paper
In the short term, the Government has announced that,                 should help more clearly focus the debate.
subject to treaties, it will levy withholding tax on royalties
                                                                      Whilst there is still considerable detail to be thought through,
made to a low/no tax jurisdiction in connection with                  businesses would be well advised to consider the potential
UK sales, even if the payer does not have a UK taxable                impact of these reforms, together with other proposed changes
presence. This will come into effect from April 2019                  in other territories, on their operating model.
following a consultation on the detailed implementation.
There is widespread concern that the existing international tax       Amendments to corporate interest
framework is not sufficient to address the challenges of modern       restriction and hybrid mismatch rules
business practices, particularly digitalised businesses, and work
is currently being undertaken by both the OECD and European           The Government has announced a number of technical
Commission to identify ways to address these.                         changes to the recently introduced corporate interest
                                                                      restriction rules and rules targeting hybrid and other
The Government’s policy paper emphasises that it supports
                                                                      mismatches to allow these to operate as intended. The
the principle that profits should be taxed where the value is
                                                                      measures announced include:
generated, although it notes that existing rules do not always
capture value-generating activities. The paper sets out a             Corporate interest restriction rules
number of different business models, identifying those where
the Government considers problems arise with profit allocations       ►► A
                                                                          mending the treatment of derivatives hedging items in a
under existing transfer pricing rules and those where the UK does         non-banking financial trade so that debits and credits are
not perceive issues.                                                      not inappropriately excluded (derivatives hedging items
                                                                          unrelated to the capital structure of a company are typically
The Government wants to target the user-generated value in                excluded from calculations, although this default treatment is
businesses where the participation of the user is central to the          already adjusted for banking trades)
business model (and which is not captured under the existing
international tax framework). The Government also considers that      ►► Removing the effect of the ‘above the line’ R&D credit from
certain activities, which may be considered as routine functions         the calculation of the group earnings before interest, tax,
for other businesses (such as market penetration and sustaining a        depreciation and amortisation (EBITDA), to mirror the
user base) should be given more weight in the allocation of profits      treatment for the calculation of taxable EBITDA
for digital platforms.                                                ►► Amending the public infrastructure rules to limit the impact
The Government considers that longer term reform should                  of insignificant amounts of non-taxable income, allow the
focus on certain narrowly defined activities, giving countries           election into the rules to be made any time before the end
the right to tax profits of foreign companies deriving value from        of the period in which it is to first apply and to prevent the
user-generated material and an active user base within their             acquirer of an asset from a qualifying infrastructure company
jurisdiction, even where no permanent establishment is created           automatically being treated electing into the regime. Anti-
currently. However, it considers that it may be appropriate to           avoidance for related party debts is also to be introduced
consider more pragmatic approaches to achieve the taxing              ►► Amending the definition of a group to allow closer alignment
objectives, such as allocating income using a user or market-            with accounting standards and prevent otherwise unrelated
based metric.                                                            businesses being grouped together as a result of asset
                                                                         managers

                                                                                                                                      11
Autumn Budget 2017                      Business taxes and administration

►► Requiring
               companies to amend tax returns where the
     interest restriction rules amend the tax position (currently
                                                                     Intangible fixed assets regime: Targeted
     returns are treated as if they were amended)                    anti-avoidance measures and 2018
Hybrid and other mismatch rules
                                                                     consultation
►► Clarifying withholding taxes should be ignored for the            The Government has announced targeted changes to the
   purposes of the definition of ‘tax’                               treatment of intangible assets to close down what HMRC
                                                                     refers to as a specific ‘related party step-up scheme’
►► Amending the rules to disregard taxes charged at a nil rate
                                                                     and ensure consistency between cash and non-cash
►► Allow capital taxes to be taken into account in relation to       transactions, as well as announcing a wider consultation
   hybrid instruments, hybrid transfers and controlled foreign       on the UK tax rules relating to intellectual property to take
   companies                                                         place in 2018.
►► Clarifying that a proportional counteraction will be applied      The Government changed the law in 2015 with regard to certain
   where some investors in a hybrid entity do not treat it as a      related party arrangements involving transfers of intangible assets
   hybrid                                                            (referred to as ‘related party step-up schemes’). The announced
►► Clarifying the scope of the legislation in relation to            changes involve the introduction of two measures which together
   ‘multinational companies’ (those with an establishment in         broadly have the effect of extending the market value rule to
   another territory)                                                the granting of a licence between related parties (as it applies
                                                                     to transfers) and amending the existing legislation defining
►► Allowing transactions generating taxable income in a payee        ‘proceeds of realisation’ to include the market value of any non-
   but no deduction in a payer to be taken into account when         monetary consideration received. Both changes take effect from
   quantifying certain mismatches                                    22 November 2017. The changes are a natural extension of those
►► Confirming certain income taxable in two jurisdictions (dual      announced in 2015 and are in line with the Government’s wider
   inclusion income) can be taken into account when applying         plans to continue to be tough on tax avoidance.
   the rules relating to imported mismatches                         There were no significant details released in respect of the
►► Allowing the rules to take into account certain accounting        proposed consultation into the intangible fixed asset regime, just
   adjustments which reverse prior period counteracted hybrid        that it will take place during 2018 and will consider whether there
   mismatches                                                        is an economic case for updates to the regime, so that it better
                                                                     supports UK companies investing in intellectual property.
The rules restricting the tax deductibility of corporate interest
expenses (in line with the G20/OECD’s BEPS Action 4) were            The changes announced are consistent with the general
recently enacted as part of Finance (No. 2) Act 2017 and apply       direction of travel of UK tax law over recent years, addressing
from 1 April 2017. Rules targeting hybrid and other mismatches       the potential for tax inconsistencies in related party
(in line with BEPS Action 2) were introduced in Finance Act 2016     transactions relative to the underlying economics. Despite the
with effect from 1 January 2017.                                     way the changes were announced by HMRC, it is the change
                                                                     to the meaning of ‘proceeds of realisation’ which ensures that
Whilst the underlying principles behind the corporate interest       ‘related party step up schemes’ no longer lead to a one-sided
restriction rules are straight forward, the legislation to achieve   tax result in the case of both transfers and licences of intangible
these goals is complex, as is the legislation relating to hybrid     fixed assets. The introduction of a market value rule for licences
and other mismatches. Although corrections to clarify and            sits alongside the rule that has always been in place for related
remove unintended consequences have already been made                party transfers of assets, although, as currently drafted,
to both sets of rules, the complexity means that further             there are some notable differences. The announcement of the
inconsistencies continue to be identified, many of which are         consultation on the taxation of intellectual property is likely
only apparent when working through the detail.                       to be well received, as it is recognised that certain aspects of
                                                                     the intangible fixed asset regime are potentially outdated and
The amendments announced as part of the Autumn Budget                that the changes to the treatment of goodwill and customer
2017 cover some, but not all, of the inconsistencies that            intangibles in 2015 may need reconsideration. The consultation
have been raised with the Government. Given the complexity,          into the regime is expected to focus on whether certain
companies will need to carefully look at the rules as applied        targeted changes to the regime could be made, such that the
to their facts and circumstances to ensure that they do not          regime continues to encourage growth.
give rise to unexpected results and to take action where
appropriate.

12
Autumn Budget 2017                   Business taxes and administration

Double taxation relief: Permanent                                      with more recent TAARs that do not include requirements for
                                                                       counteraction notices. The second change slightly widens the
establishment losses                                                   scope of schemes or arrangements to which the DTR TAAR can
                                                                       apply and businesses will need to look at the rules as applied to
From 22 November 2017, amendments will be made to
                                                                       their facts to ensure that they take action where appropriate.
the double taxation relief (DTR) legislation to restrict the
amount of DTR available to a UK company for foreign tax
paid on income of an overseas permanent establishment                  Removal of time limit for depreciatory
(PE) with losses.
                                                                       transactions
The DTR legislation provides credit relief for foreign tax paid on a
company’s qualifying income from a PE against corporation tax on       The six year window that currently operates to determine
the income. The changes will amend the DTR legislation to limit        whether a company, whose shares are being sold, has
the amount of DTR available to a company for foreign tax paid          undertaken any depreciatory transaction, is being
on income of an overseas PE where losses of the PE have been           abolished for disposals on or after Budget day.
relieved against income other than those of the PE in the foreign
                                                                       Capital losses arising on the sale of shares can be reduced or
territory. The amount of DTR available will be determined by
                                                                       eliminated if the company or group being sold has undertaken any
reference to the amount of foreign tax suffered by the overseas
                                                                       ‘depreciatory transactions’ within the previous six years, broadly
PE, less the amount of the reduction in foreign tax which results
                                                                       any transaction with other group companies that result in a loss in
from the PE’s losses being relieved against non PE profits in the
                                                                       its value, for instances transfers of assets at below market value.
foreign territory in the same or earlier periods.
                                                                       This six year time limit is being abolished for disposals on or after
The measure affects companies with an overseas PE where the            Budget day, reversing a change originally introduced in 2011.
losses of the PE have been relieved against non-PE profits in the
                                                                       The need to consider depreciatory transactions can be a
foreign jurisdiction. For companies with an accounting period
                                                                       considerable compliance burden when calculating a capital loss
that straddles 22 November 2017, the transitional rules will
                                                                       arising on a disposal of shares (or on a negligible value claim),
apply which may lead to computational complexities.
                                                                       as potentially there is a need to examine every asset transfer
                                                                       in the underlying group being sold, whether arising in a UK or
Double taxation relief: Changes to                                     non UK company. The 2011 restriction to six years provided
                                                                       welcome relief to this, so whilst the Government’s intention to
targeted anti-avoidance rules                                          tackle potential tax avoidance can be understood, in the vast
                                                                       majority of cases this rule simply increases an already onerous
The Government announced that two changes will be made
                                                                       compliance burden.
to the double taxation relief targeted anti-avoidance rule
(DTR TAAR).
The DTR TAAR is an anti avoidance rule which applies if there          Postponed gains on foreign branch
is a scheme or arrangement where the main purpose or one of            incorporations
the main purposes is to obtain a credit for foreign tax and the
scheme is a prescribed scheme that meets one or more of the            The Government has corrected an anomaly under
descriptions as set out in the legislation. Where it applies, the      which chargeable gains that have been deferred on the
existing legislation requires HMRC to issue a counteraction notice     incorporation of a foreign trading branch can be brought
requiring the taxpayer to make such adjustments necessary to           back into charge on a subsequent reorganisation, even
counteract the effect of the scheme.                                   though the reorganisation itself may be tax exempt.
The first change removes the requirement for HMRC to issue a           Chargeable gains deferred on the incorporation of a foreign
counteraction notice before the DTR TAAR applies and will have         trading branch are brought into tax if there is a subsequent
effect for returns with a filing date on or after 1 April 2018.        disposal of the subsidiary company’s shares. Where those shares
The second change extends the scope of one of the categories of        are subject to a further reorganisation this generally does not
prescribed schemes to which the DTR TAAR applies to include tax        count as a disposal for these purposes. However where this
payable by any connected persons. This change will have effect         reorganisation would also qualify as an exempt disposal under the
for payments of foreign tax made on or after 22 November 2017.         substantial shareholdings exemption then this takes precedence
                                                                       over the reorganisation rules. The way the rules are currently
The removal of the requirement for the counteraction notice will       drafted means that such a transaction is then viewed as a disposal
require companies to consider whether the DTR TAAR applies             for tax purposes, leading to the crystallisation of the deferred
as part of the self-assessment process and aligns the DTR TAAR

                                                                                                                                         13
Autumn Budget 2017
                                     Business taxes and administration

gain. For disposals on or after Budget day, the rules are amended
so that such reorganisations do not result in the triggering of the
                                                                      allowances and first year tax credits
deferred gain.                                                        The Government has undertaken its annual review of
The interaction of the substantial shareholding exemption and
                                                                      technologies qualifying for enhanced capital allowances,
reorganisation rules has until now created a potential tax cost       and maintained the first year tax credit for loss-making
in what essentially are internal restructuring transactions, so       businesses and the enhanced relief for zero-emissions
the Government’s correction of this technical anomaly is to be        goods vehicles which were due to expire.
welcomed.                                                             The Government has continued to show its support for companies
                                                                      investing in green technologies by:

Research and development expenditure                                  ►► Extending
                                                                                    for five years, the first year tax credit for loss-
                                                                           making businesses purchasing designated energy-efficient or
credit (RDEC) rate increase and                                            water-saving technologies
introduction of Advanced Clearance                                    ►► Extending
                                                                                     for three years, the 100% first year allowance for
Service                                                                    companies investing in zero-emission goods vehicles and gas
                                                                           refuelling equipment
The RDEC headline rate has been increased from 11% to
12% from 1 January 2018 and the an Advanced Clearance                 ►► Updating
                                                                                     the list of technologies and products covered by the
Service has been introduced to provide greater certainty                   enhanced capital allowances scheme, which provides a 100%
for claimants.                                                             first year allowance on qualifying expenditure

The latest round of consultation undertaken by the Government         Whilst extending the first year tax credit for an additional five
concluded that businesses wanted an increase in the RDEC              years, the Government has also reduced the rate of relief obtained
headline rate and for the regime to provide greater certainty to      for loss-making companies. For expenditure prior to 31 March
claimants.                                                            2018, this has been fixed at 19% of the qualifying expenditure
                                                                      incurred. However, from 1 April 2018 this will drop to an amount
It appears that the Government has listened to businesses and         equal to two thirds of the prevailing corporation tax rate.
gone some way to address their main concerns with the current
regime. The surprise increase in the RDEC headline rate will be       The changes to the Energy Technology List include adding
very well received. The new headline RDEC rate will increase the      evaporative air coolers, saturated steam to electricity conversions
net RDEC benefit from the current 8.8% to 9.7% (using a 19%           and white LED lighting modules to the list of technologies
corporation tax rate) which is also welcome. This represents the      qualifying for enhanced capital allowances. At the same time,
highest benefit rate for large companies since the introduction       two technologies have been removed from the list, localised rapid
of the R&D regime for large companies.                                steam generators and biomass fired warm air heaters, and the
                                                                      eligibility for relief for nine technologies will be modified.
The introduction of the Advanced Clearance Service for RDEC
claimants will provide a pre-filing agreement for three years.        Whilst some loss-making companies will be disappointed to
It will be interesting to understand what conditions need to be       see the reduction in the first year tax credit for designated
satisfied by the claimant in order to obtain this clearance when      plant and machinery, the Government has continued to signal
further details are announced later in the year.                      its support through the tax system for companies investing in
                                                                      green technologies.
The changes to the RDEC regime demonstrates the
Government’s continued ongoing commitment to innovation in
the UK.                                                               Lease taxation
                                                                      It was announced in the Budget that two consultations
Capital allowances: enhanced capital                                  will be published on 1 December 2017 in relation to lease
                                                                      taxation.
                                                                      The introduction of a new accounting standard for leasing (IFRS
                                                                      16) creates the need for certain changes to the tax legislation. A
                                                                      consultation document will be published to discuss the changes
                                                                      required to ensure that the income and corporation tax rules
                                                                      for leased plant and machinery continue to operate as they

14
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