The Chancellor, Phillip Hammond, has announced a major investment in housebuilding and an increase in insurance tax in his Autumn Statement.
Insurance premium tax will rise from 10% to 12% next June, creating immediate speculation that this will hoover up any savings for the consumer from the controversial crackdown on whiplash claims. The Ministry of Justice is currently consulting on whether to cap whiplash claims or scrap them altogether—the consultation is not due to end until 6 January.
The Association of Personal Injury Lawyers tweeted in response: “Motorists could wave goodbye to the supposed £40 saving from PI reforms.”
Property lawyers will be pleased at Philip Hammond’s promise of an extra £1.4bn to build 40,000 affordable homes and a £2.3bn housing infrastructure fund to help provide 100,000 new homes in high-demand areas.
Letting agency fees are to be banned—pleasing housing charity Shelter, which has campaigned against “unfair” fees. However, the Association of Residential Letting Agents argues that the cost of administration will be passed on to tenants through higher rents.
Corporation tax will be reduced to 17% and the rural rate Relief is to be increased, giving small businesses in rural areas a tax break worth up to £2,900 per year. Tax savings on benefits in kind are to be stopped, with exceptions for low-emission cars, cycling, childcare and pensions.
The Chancellor also announced that the Budget is to be moved to the autumn from March.
Stuart Thomson, head of public affairs at Bircham Dyson Bell, says: “The biggest change announced was the abolition of the Autumn Statement itself. Otherwise this was not a speech full of large pronouncements.
"Whilst Hammond may wish to simplify the tax system, just lessening the opportunities for Chancellors to fiddle will be insufficient. Future Chancellors will not be able to resist making tweaks and changes to make themselves look in control. There are very big set piece political occasions for Chancellors to show what they are made of. Future Chancellors will feel less constrained than Mr Hammond.”
Reflecting on the announcement of the scrapping of lettings agency fees, The University of Law’s Mark Johnson notes there won’t be an immediate cost to tenants or landlords, but there could be a long-term impact: “Letting agents and their landlord clients will have contractual arrangements in place so they will not be able to change their fees and charging structures unilaterally. It may mean therefore that letting agents bear the brunt of this at the outset until they can terminate and renegotiate contracts with landlords.
“As regards tenants, any rent increases can only be carried out in accordance with the terms of a lease—so tenants already signed up will not suffer rent increases. However, many tenants will occupy pursuant to assured shorthold tenancies, which after their fixed term can be terminated by the landlord on notice. Landlords may want to do this in order to increase rent if they find themselves shouldering increased costs passed on by letting agents.”
In relation to planned changes to business rates, Jason Tann, head of commercial real estate at Pemberton Greenish LLP, says: “Whilst the permanent exemption for small firms will no doubt be welcomed, the new transitional relief levels will offer little comfort to medium and large firms that pay the vast majority of the £28bn business rates bill.
"The biggest impact of the overhaul of the business rates system will be on large business in Central London with consequences not only for occupiers but also for landlords who are likely to find that significant increases in rates bills have a depreciating effect on rental income especially at rent review.
"In a country with not only the highest property tax in the world but one which is also facing an uncertain post-Brexit trading future, it is not surprising that the property industry is disappointed that the Chancellor did not announce a further rethink of business rates.”
Reacting to the announcement of a consultation on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and the related client lists, Jason Collins, head of tax at Pinsent Masons, says:
“This brand new reporting burden will potentially affect lawyers, accountants, banks, fund providers and trust and company service providers, located both in the UK and overseas.”
“One has to wonder why this is needed given that the Common Reporting Standard is effective this year and will provide much of this information anyway. The CRS is a step taken by countries in unison. This is a step taken by HMRC on its own—and another example of the UK wanting to drive the agenda.”
“HMRC is also pressing ahead with the, widely criticised, plans to penalise those who ‘enable’ another person’s avoidance where HMRC ‘defeats’ the avoidance, in court or otherwise.”
“No detail has been provided today but the Government has said the new rules will ‘reflect’ responses to the consultation over the summer. Given the almost universal response from the professions and banks was that the measure was too broad and too aggressive, it is hoped that the penalty will only apply to avoidance dreamt up by promoters and mass-marketed to taxpayers, rather than a taxpayer taking bespoke professional tax advice on their individual circumstances. If it applies to the latter, you will have trouble finding anyone willing to give tax advice anymore, and that would be unacceptable and counterproductive.”
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