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Where Taxpayers and Advisers Meet
TW Ed’s Take on the Autumn 2017 Budget
29/11/2017, by Lee Sharpe, Tax Articles - Budgets and Autumn Statements
Rating: 5/5 from 1 people

Given that this was supposed to be a quite momentous occasion, (the first Autumn Budget), it is a shame that there was so little meat on the bones of this wretched beast of a Budget. TW Ed picks among the remains.


There is no denying that the current Chancellor bears little resemblance to his predecessor. It is perhaps unfortunate that the cupboard is so bare, and the course so fraught, that he is reduced to rearranging deckchairs for quips and giggles. Basically, if you’re not a first-time buyer, or a “knowledge-intensive company” (it seems one cannot be both), then this Budget has found roughly fifty different ways to either tax or bore you to death (this time, it really could be both).

Headline Good News

The main headline was the reduction in Stamp Duty Land Tax for first-time buyers, who from 22 November 2017 will pay no SDLT on consideration up to £300,000, and saving up to £5,000 on any property up to £500,000 (but with no relief for properties costing more than that): 

Portion of consideration

Current standard rates

Rate for first time buyers

Up to £125,000



Over £125,000 and up to £250,000



Over £250,000 and up to £300,000



Over £300,000 and up to £500,000




The definition of “first time buyer” will warrant careful scrutiny of the legislation – note that an interest in a residential property anywhere in the world may block eligibility.

This is pretty much the most expensive tax measure announced in this Budget (committing an extra £3billion to Brexit preparations is not a tax measure – unless perhaps it’s all going on HMRC’s IT budget) and is set to cost around £600million a year, starting round about now.

It is interesting that someone seems to think that “keeping MTD only above the VAT threshold and only for VAT” will be costing about the same at £585million by 2022/23, however; likewise holding Class IV NICs at 9% and delaying the NICs bill by a year, to 2018. But these were previously-announced measures, so don’t really count as “good news” this time around. (Figures courtesy of the Red Book p30). Nor am I counting the Fuel Duty Freeze, since it’s now practically a given and there would be armed rebellion if it were …thawed.

There are further small measures to ease some of the problems associated with the additional residential property 3% SDLT charge in Housekeeping below.


There were several announcements that basically ‘fessed up to what a bad job the government and its agencies are currently making of legislation, etc., including:

Entrepreneurs’ Relief – a consultation is promised next Spring on retaining access to ER where commercial fund-raising activities reduce entrepreneurs’ holdings below the magic 5% minimum holding threshold.

Partnership Taxation Reform – Based on some rather vague text in the OOTLAR at s1.5, it seems the ink is barely dry on the draft legislation published in September and they are already having to fix it following further consultation (as if they hadn’t consulted enough already) which basically pointed out that the draft approach was about as commercially practical as a chocolate teapot.

The TIIN (re)issued on 22 November retained the nugget: “It will be made clear that the allocation of partnership profits shown on the partnership return is the allocation that applies for tax purposes”; however the more controversial “it will be made clear that partnership profits for tax purposes must be allocated between partners in the same ratio as the commercial profits” in the September TIIN had disappeared. There had been several complaints that this single percentage approach was too simplistic, and failed to accommodate more complex allocations of profit / income streams, so its loss is unlikely to be lamented (unless, of course, it is replaced by something even more stupid). There are still new provisions relating to:

  • disputes as to profit allocation between partners,
  • partners who are bare trustees/nominees for other persons,
  • partnerships which have other partnerships as partners, and
  • partnerships that are partners in another partnership

Fixing SDLT Higher Rate for Additional Dwellings – several tweaks applying from 22 November 2017 to relieve hardship in certain scenarios, including where:

  • a court order prevents the disposal of the original matrimonial home, or
  • where a person buys a property from their spouse/civil partner, or
  • adds to their interest in their main residence
  • buys property in a child’s name (as deputy for the child)

There will also be an anti-avoidance measure to prevent manoeuvres with the main residence using spouses, also effective 22 November 2017. 

Corporate Interest Restriction – numerous technical changes to the ‘new’ corporate interest restriction regime, many of which will be deemed to have had effect from 1 April 2017, when the regime commenced; likewise hybrid mismatches but this time mostly from 1 January 2017. There will be new relieving measures to restrict the scope of existing anti-abuse provisions for VCTs, to have effect for shares issued on or after 6 April 2014 (not a typo). Finally, a measure to prevent the Substantial Shareholding Exemption regime triggering an unwanted gain on a reorganisation following the incorporation of an overseas branch of a UK company. But this time only for share disposals on or after 22 November 2017.

Unincorporated property businesses run by individuals (singly or in partnership) will again be able to apply mileage rates for business travel, with effect from 6 April 2017. This was covered by ESC up until 2013, and notably absent from the “simplified cash basis” but now fixed – and landlords will not have to wait to acquire a new vehicle, before adopting the cash basis.

The car crash wrapped in a train wreck that is Making Tax Digital will apparently be getting a makeover in the form of yet another impact assessment to be issued on 1 December. I wonder if it will be any more credible than its predecessors. On second thoughts, I do not: fundamentally, if it were all it’s cracked up to be, we would all be doing it already without its needing to be mandated (sometimes, you have to keep repeating the blindingly obvious until the penny drops).

One thing that gives the lie to the supposed nirvana of MTD is that, as mentioned above, the government’s Red Book calculates that restricting MTD only to businesses with turnover above the VAT threshold, and only to VAT matters, will be costing the government almost £600million by 2022/23. Funny, that, seeing as we were all supposed to be saving money every year thanks to MTD, based on those earlier Impact Assessments. Maybe it’s just the late filing penalties they’ll now miss out on.

The Northern Ireland educational authority will soon be exempt from Corporation Tax – with effect from its creation on 1 April 2015. Yes, 2015.

Combined authorities, the Scottish Fire & Rescue service and similar bodies will automatically be able to recover the VAT on their non-business expenditure from Royal Assent to FB 2017-18, rather than by Treasury Order as now. 

Promoting Tech / Venture Capital / “The Knowledge”

There was some play about promoting innovation and knowledge-intensive business(es). But the amounts involved do not seem particularly substantial, except perhaps for R&D – and even that is topping out at £175million a year.

The ‘large company’ regime’s “Above the Line” R&D expenditure credit will be increased from 11% to 12%, for expenditure on or after 1 January 2018. I did not see a corresponding hike in the SME regime although, on the face of it, 230% is a pretty serious incentive already. There were polite noises about increasing awareness of the regime amongst SMEs but I fear they are likely to be drowned out by the hubbub of discontent concerning HMRC’s hardening stance over eligible projects. Given HMRC’s past form in relation to government-sponsored incentives, such as Enterprise Zones, Film Schemes and Business Premises Renovation, I must admit to a growing unease over endorsing such regimes. One government’s tax break is a mere pen-stroke away from another’s dodgy tax scheme. Or even the same government’s, a short while later.

Encouraging Investment in Knowledge-Intensive Companies (KICs)

The annual limit for individuals investing in EIS will be increased to £2million, provided anything above the standard £1million in invested in one or more KICs.

The annual EIS and VCT limit on the amount of tax-advantaged investments a KIC may receive, will be increased to £10million, and there will be greater flexibility afforded KICs in relation to the maximum age requirement.

These measures will apply to shares issued and investments made on and after 6 April 2018. The TIIN suggested that there may be as few as 4,000 individuals for whom the opportunity to invest more than £1million might be relevant. So on the one hand, that is a scarily small number, but on the other, we probably know most of them pretty well already, thanks to back issues of Dragons’ Den.

Venture Capital

We have already touched on a couple of tweaks to the Venture Capital regime, including a relieving measure going back to 2014; but there are some restrictions to Venture Capital:

All relevant investments will now count towards the tax-advantaged scheme lifetime funding limit for companies, including all risk-finance investments made before 2012. The limit is £12 million for most companies and £20 million for KICs. But the change will affect only those qualifying investments made on or after 1 December 2017.

Risk-to-Capital – all investments made on or after 6 April 2018 will face a “risk-to-capital” requirement, to prevent tax relief on ‘safe’ investments, in two parts: a requirement that the company must have objectives to grow and develop over the long-term; and whether there is a significant risk that there could be a loss of capital to the investor of an amount greater than the net return.

A range of measures to “encourage high growth investment” (read: further discourage ‘safe’ investment) include:

From the date of Royal Assent:

  • VCTs may no longer offer secured loans to investee companies, and any returns on loan capital above 10% must represent no more than a commercial return on the principal

From 6 April 2018:

  • certain 'grandfathering' provisions will not apply to new investments made by VCTs
  • VCTs will be required to invest 30% of funds raised in an accounting period beginning on or after 6 April 2018 in qualifying holdings within 12 months after the end of the accounting period

From 6 April 2019:

  • the period for reinvestment of gains on disposal of qualifying holdings investments will increase from 6 to 12 months
  • the proportion of VCT funds that must be held in qualifying holdings will increase from 70% to 80%

The government has also promised to consult in 2018 on a new EIS structure, that would allow the capital raised to be deployed over a longer period. This is in response to the government’s Patient Capital Review, an approach intended to improve the UK as a place for growing innovative firms to obtain the long-term ‘patient’ finance that they need to scale up. And, finally, the advance assurance service is going to be ‘streamlined’. Which would ordinarily mean ‘improved’.

I did refer above to the knowledge. It seems that the Chancellor is quite keen on driverless cars, and the government wants to “support the technology”. There are several measures to promote electric cars (touted as an interim step) such as a charging infrastructure fund, and a plug-in car grant; also that there will be no Benefit in Kind on employees for using their employer’s electricity to charge their electric (or hybrid) cars from 6 April 2018.

This was swiftly followed by a promise that “no white van man (or woman) will be hit by these measures”. Although I did notice that there will be increases to the Van Benefit and Van (and Car) Fuel Benefit from April 2018. And I think the promise might ring more hollow yet, if further, more concrete measures are introduced to support driverless technology directly, (such as, say, committing to driverless cars on UK roads by 2021), since the livelihoods of “white van men” and cabbies must surely be most at risk from such advances. I seem to recall that the Chancellor recently argued that there was no unemployment in the UK. I had not, until this Budget, realised that he saw this as a problem he desperately needed to fix.


There are a lot of them:

Disincorporation Relief – The FA 2013 measure to allow companies/owners to postpone modest gains on extracting (extricating?) their assets from companies was set to self-destruct after 5years. The government has announced that it will allow the relief to lapse. The irony is that, come January 2018, legions of small company owners will be waking up to some very large tax bills, thanks to the dividend regime, ahem, “simplifications” announced in 2015 by Mr. Hammond’s predecessor, and may for the first time actually want seriously to consider disincorporation – just as it’s about to lapse. (2.23 OOTLAR).

VAT Registration Threshold – The Chancellor seemed to think that fiscal drag could be spun as doing UK businesses a favour by keeping the VAT registration threshold at £85,000 for another 2 years. It might be if the only alternative were to reduce the registration threshold to £3.50 a year (and I would have to applaud the breathtaking audacity of effectively making all businesses liable again to mandatory “Making Tax Digital” by the back door). But that is not the only option on the table: I might venture that, if the UK government really wanted to embrace Brexit, then nothing says “au revoir” like abolishing VAT. It is, after all, quintessentially European, and I bet you could find a lot more than 52% of any UK sample would say they loathed it. Non, merci to VAT? Quelle surprise.

Anyhew, Mr. Hammond’s munificence will be generating an extra £170million for the Exchequer by 2022/23, according to the Red Book – although I am struggling to understand how a transaction-tax measure meant to last no later than 2019/20 will still be reaping huge rewards for the government three years later.

Diesel Car Supplement – the 3% diesel supplement to the “company car” benefit in kind will be increased to 4% from 6 April 2018 for all diesel-only cars registered on or after 1 January 1998 but not certified to the new Real Driving Emissions 2 standard. Since RDE2 was introduced in September 2017, I am going to chance my arm and suggest that most diesel cars built in the last c20 years are unlikely to pass, so the 4% supplement is likely to apply pretty much universally. This will hit employees through higher BIK tax charges, and will also cost employers more through increased Class 1A NIC bills. Funny, only a couple of years ago, we were expecting the diesel supplement to be abolished. The projected annual yield of the new measure varies significantly over the next five years, but averages around £80million a year.

Elsewhere in the Budget, the government has confirmed that it intends to continue to apply the CO2 emissions-based Benefit in Kind regime as now.

Freezing of Indexation Allowance for company capital gains – companies will still be able to claim Indexation Allowance on capital gains after 1 January 2018, but the indexation will only run up to December 2017, from then onwards. I am assuming Mr. Hammond intends also to freeze inflation from 1 January 2018, since that is of course the mischief that IA is supposed to negate. Actually, I am under no illusion that this is anything other than a blatant tax grab.

I recall a tax writer recently suggesting that there was no justification for (personal) CGT to be charged predominantly at only 10%/20%, when Income Tax was chargeable at rates approximately double that. Astonishingly, she garnered support for her criticism of this “burning unfairness”. Had I the time, I might have pointed out that RPI has increased by about 70% since April 1998, when Indexation Allowance for individuals was replaced by Taper Relief. That is a very substantial amount of arithmetical gain – on which people are expected to pay tax – that is down to no more than inflationary price rises. Now thati’s burning unfairness.

I should add that I am broadly in accord with the notion that capital gains should not be taxed less harshly than more active endeavours. (I have said before that the government is probably the main cause of most “tax avoidance” activity). But only AFTER adjusting for inflation. I like the fact that the TIIN suggests that the government wants to help companies by simplifying their tax computations; I reckon that, once companies realise that this simplification is going to cost them more than £500million a year by 2022/23, they might just be prepared to put up with the current complexity.

My scan of the Red Book’s costings indicates that this will be far and away the most punitive single measure to be introduced in this Budget. And – unless the Chancellor really does manage to freeze inflation – it will only worsen over time.

Non-residential gains on immovable property – the ‘new’ regime for taxing gains on UK residential property by non-residents has proved so brilliantly popular that the government is consulting on extending the regime to commercial property and to ensuring that indirect gains on any UK property disposals are also caught.

I read a recent article in the Guardian which suggested that not likewise taxing commercial property disposals was an “egregious loophole” that permitted non-residents easily to avoid CGT by re-purposing their properties. I realise that using words like “loophole” might sell papers, but it was – yet again – clear government policy to attack only residential properties. So I laughed at this, and mightily so, up until I realised that the author was a Member of Parliament. I kid you not. To quote from the article:

“Closing this loophole could be very lucrative – estimates suggest it would raise between £5bn and £8bn per year.”

The Red Book is suggesting a rather more prudent c£150million a year. My gut tells me that there’s an MP who needs a new calculator for Christmas.

Capital Gains Tax payment window – originally announced in the 2015 Autumn Statement with an April 2019 start date, the 30-day CGT payment window for residential property gains will be postponed until April 2020. This is going to be a massive headache for anyone wanting to sell investment property. And then no doubt some MP will suggest that the entire national debt could be wiped out in a nanosecond if only the measure were also applied to commercial properties…

SDLT payment window – just five pages later in the OOTLAR, the government added that the SDLT payment window will be reduced from 30 days to just 14 days from 1 March 2019. I realise that one measure will apply to the vendor and the other to the buyer, but one has to ask: if you are going to mess around with these “windows”, would it not make sense to at least make them consistent?

Rent-a-Room – the government is going to publish a call for evidence to “establish whether it is consistent with the original policy rationale to support longer-term lettings”. With its having only just increased the annual value of the Relief to £7,500 from £4,250 (from April 2016), I should like to publish a call for evidence that the government has a clue what it is doing, tax-wise, from one year to the next.

Increase on Council Tax Empty Homes Premium – Local authorities have been able to apply a premium to council tax on long-term unoccupied/substantially unfurnished homes, since April 2013. The Chancellor has proposed to increase the maximum premium in England from 50% to 100% (it is already 100% in Scotland and Wales). Current legislation for England is to be found in LGFA 2012 s 12. I am not sure how effective this will be in encouraging the uber-wealthy to let out their nth homes, given that the current rate of council tax is unlikely to be a major concern for them. But it may generate some revenue for local councils, depending on how aggressively they pursue the regime – the Red Book reckons £5million a year by 2021/22.

Withholding Tax on royalties paid to low-tax jurisdictions – from April 2019, payments to low-tax jurisdictions for royalties, (and certain other rights), paid in connection with sales to UK customers, will be subject to a withholding tax. This measure is aimed at countering the diversion of profits out of the UK tax net and will apply regardless of where the payer is located. It is forecast to generate roughly £200milion a year from 2019/20 onwards.

Security deposit legislation – the government is intending to extend existing legislation, which requires some businesses to pay over a ‘bond’ or security to HMRC, to cover Corporation Tax and the Construction Industry Scheme from April 2019. There will be a consultation in 2018, which will consider extending the legislation to all heads of duty. While it may be understandable that HMRC might in some cases want to protect its interests, let’s say it will hardly be a shock if (when) HMRC starts to apply the regime to ‘innocent’ businesses that have minimal history of defaulting on payments. Preferential creditors by another name? This is expected to yield c£150million a year within a few years. If that projected figure represents only those deposits that are forfeit in a particular year, (which would be the norm), then deposits themselves will be much more commonplace.

Insolvency and phoenixism risks – the government will issue a discussion document in 2018, covering possible further measures to deal with those who try to avoid or evade their liabilities using insolvency and phoenixism. I am not sure what additional tools HMRC might need, providing it applies the enhanced security deposit legislation adroitly.

And we have only recently had one of the most gloriously illogical pieces of legislation I have ever seen, designed to tax 2-year-old distributions on a winding-up retrospectively as income, rather than capital. Given that the new measures were announced in the Autumn Statement 2015, I am concerned that the new incumbents at HMT have not yet twigged that they will actually take a couple of years to ‘spin up’ before anyone can work out if they have had any effect. There is eager, and there is stupid.

Taxation of Trusts – the government will publish a consultation in 2018 on how to make the taxation of trusts “simpler, fairer, and more transparent”. Which will of course mean that any new measures are likely to achieve precisely none of those criteria. We have already noted that “simplifying” Indexation Allowance is set to cost companies more than £500million a year by 2022/23 (it’s being frozen, which is not really a simplification of the calculation – although it may well be a precursor to simplification-by-outright-abolition).

Geospatial data – the UK apparently has some of the best geospatial data in the world. The potential economic value of this data is, like, “huge”. The government intends to make this data available to UK small business in particular (but let’s just assume that it might also somehow end up in the hands of some of the ubiquitous American mega-corporations, alongside our supposedly confidential medical records). Some readers will have been around long enough to remember when HMRC found the accidental loss of 25 million Child Benefit claimants’ records quite embarrassing. It seems the government’s long-term solution was not to try to improve security measures, but simply to undermine the stigma. This new development may not be directly to do with tax, but the myth of anonymised data is relevant to HMRC and was even covered in an ICAEW report a few years ago.

Penalties – Finally, Some Good News?

The government will reform the penalty system for late or missing tax returns, adopting a new points-based approach. It will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments. Regular readers will be well aware of our deep and abiding dissatisfaction with many aspects of the current penalty regime, and HMRC’s ineluctable ineptitude in dealing with “reasonable excuse” when appealing penalties. Reform is welcome, if it does indeed amount to real reform and fairness to taxpayers. We’ll be watching.

About The Author

Lee is TaxationWeb's Articles & News Editor and writes for TaxationWeb. He is a Chartered Tax Adviser with experience of advising individuals and owner-managed businesses over a broad spectrum of tax matters.
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Lambs 30/11/2017 23:05

D, I am not sure I follow your reasoning here, in relation to savers. Savers are afforded a wealth of special allowances, etc., so long as they can cut their investing cloth to fit:<br /> Starting Rate for Savings<br /> New Savings "Allowance"<br /> New Dividend "Allowance", and reasonably modest dividend tax rate for the balance of the Basic Rate Band<br /> ISAs<br /> There are also opportunities to make use of the CGT Annual Exemption in relation to the exploitation of capital growth in an investment fund. Utterly mundane and not underhand tax avoidance (to my eyes at least).<br /> There are of course issues in relation to the rate of return on savings-type investments, but that is not a tax issue per se. <br /> There is also the fact that increasing the Personal Allowance doesn't benefit you if your income was already below the Personal Allowance. I think perhaps the Transferrable Tax Allowance/Marriage Allowance could be made more generous, although for savers in a marriage/civil partnership scenario, the answer may simply be to transfer the income-generating asset(s) into the hands of the lower-income spouse, etc. (Usually will not trigger a charge to Capital Gains Tax, although there may be other implications such as IHT to consider). <br /> With regards,<br /> Lambs

despair 30/11/2017 19:03

Totally appalled that the plight of all those reliant on savings income and those on incomes below personal allowance of £11,500 have effectively been kicked in the gutter by Phillip Hammond in favour of huge tax relief for higher earners. Teresa May promised on strps of Downing St to address the plight of savers instead she has allowed Mark Carnety to ensure they are further robbed and insulted ...Its long gone time anyone earning less than PA could transfer their entire unused allowance not just the miserly marriage allowance

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