UK: Autumn Statement 2016: An Emerging Picture

In what we have today learnt will be the last Autumn Statement, Philip Hammond set out a number of confirmations and marked his tenure with a re-arrangement of the fiscal calendar. That, of course, was not all, and there remains a focus on offshore evasion and the potential introduction of more far reaching disclosure requirements.

Non-domiciled individuals

In line with the promise of greater certainty, the changes to the reform of the remittance basis, most recently set out in the Consultation Document issued in August, are recapped in today's statement. There remain a number of open questions, and it is to be hoped these will be conclusively addressed when draft legislation is released. The good news is that it appears that there will be no unwelcome changes from the previous proposals that:

  • Non-doms who have set up a non-UK resident trust before they become deemed domiciled will not be taxed on income and gains arising outside the UK and retained in the trust; and
  • The rules on business investment relief will be amended from April 2017 to ease the tax efficient remittance of offshore monies which are used to invest in UK businesses.  

It also seems that inheritance tax will be charged on UK residential property held by a non-domiciled individual indirectly through an offshore structure. This confirms the position set out in the Consultation Document issued in August.

The confirmation that there will be 'grandfathering' of some of the deferral benefits applying to non-UK resident trusts set up by non-doms is to be welcomed, and we look forward to the further details in the draft legislation, in particular on the treatment of distributions.

Offshore evasion and avoidance

As is the norm nowadays, it would not be an Autumn Statement (or indeed a Spring Budget) without some comments on tax evasion and tax avoidance. Perhaps the most interesting item to be announced was that the government will be consulting on a proposal whereby intermediaries who arrange 'complex structures for clients holding money offshore' will be required to notify HMRC of 'the structures and the related client lists'. A consultation paper on this will be released in due course which will hopefully clarify what is intended by this, but at first blush it would seem to be doubling up on the information which will be reported as part of the OECD's Common Reporting Standard ('CRS'), or which must already be provided for UK domiciliaries establishing foreign trusts. First reporting under the CRS is due to take place next year in respect of 2016 and so one might question what further information the government are looking to obtain from this measure. At the very least it would seem to be an additional burden to be added to an already long list of disclosure and compliance requirements, which will affect not only the people providing the information but also HMRC who have to review it all.

Apart from this new disclosure requirement, there is the familiar idea that 'all individuals and businesses have a responsibility to pay the tax they owe'. It is noted that since 2010, almost £130 billion in additional tax revenue has been raised through combating avoidance, evasion and non-compliance and that the UK's tax gap is amongst the lowest in the world. To build on this, the new regime of penalising those who enable tax avoidance arrangements that are later defeated by HMRC (which has been the subject of extensive consultation already) will be included in the draft legislation expected on 5 December.

A new legal requirement is being introduced to correct past failures to pay UK tax on offshore interests within a defined period of time, with new sanctions for those who fail to do so. And there will (possibly) be adequate resources at HMRC to deal with all of this, as the government is investing further in HMRC (though it is not clear by how much) to increase its activity on countering avoidance and litigating. It seems clear that, for the few people remaining who have not regularised their offshore affairs, the time to do so is now.

Offshore companies

There is to be a consultation on making non-UK resident companies which receive taxable income from UK companies subject to UK corporation tax. This would mark a significant change from the present position and it will be important to make sure that the implications of any changes for existing structures are carefully considered, although they may ultimately be beneficial.

Employee shareholders

With the Chancellor concentrating his limited firepower on the extension of the personal allowance for basic rate taxpayers, there was limited scope for relief for higher earners. Indeed this was confirmed with respect to employee shareholder status, a concept trumpeted during the George Osborne era, which allowed employees to trade employment rights for a tax advantaged stake in their employer, and which is to be effectively reversed and abolished from 1 December.

Offshore insurance bonds

There was some cheer for the insurance industry with confirmation that, following consultation, the changes to the punitive way in which the partial surrender rules on life insurance operate, as well as a loosening of the assets which may be invested in via insurance policies, will be tabled in next year's Finance Bill.


The only consultation paper released with the Autumn Statement relates to the lowering of the money purchase annual allowance ('MPAA') from £10,000 to £4,000 from 6 April 2017. This will limit the opportunity to 'recycle' retirement benefits as tax-relieved contributions. The MPAA only applies to individuals who have accessed benefits flexibly (on or after age 55) and wish to make further contributions to money purchase pension schemes in future.

Some interesting changes were also announced regarding overseas pensions. Foreign pensions and lump sums will become fully taxed for UK residents (currently only 90% of the actual amount of a foreign pension is taxable) and taxing rights will be extended from 5 to 10 years for recently emigrated non-UK residents receiving foreign lump sum payments from funds that received UK tax relief. An update to the eligibility criteria of overseas schemes for tax purposes is also expected.

Farewell Autumn Statement, welcome greater certainty?  

We have now become rather used to having an Autumn Statement and a Spring Budget. No more. There will now be a Spring Statement and an Autumn Budget. It seems that the Budget will remain the mechanism for announcing tax changes, and the Statement will respond to the forecast from the Office for Budget Responsibility.

It could be that this will be one means of delivering on the promise of greater certainty. The Autumn Statement proclaims that 'providing certainty is central to the government's aims for the tax system. The government's intention is to move to a single fiscal event in the autumn each year to provide more stability for businesses and individuals'.

The benefit of an Autumn Budget is that there will be a greater interval between announcements of changes and the start of the tax year in April. In theory therefore (provided that there is not greater use of anti-forestalling measures) taxpayers will have the benefit of a reasonable period between Budget announcements in the Autumn and those announcements coming into effect the following April. This is to be welcomed if it does indeed lead to greater certainty.

Draft Legislation

Draft legislation on the tax treatment of non-domiciled individuals will hopefully be released on 5 December. We will produce a detailed update when this is available.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Lindsay Brown
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