"We must collect the taxes that are due," said Osborne.
"Today I’m announcing the largest package of
measures to tackle tax avoidance, tax evasion, fraud and error
so far this parliament, and it will raise £9 billion over
the next five years."
The package includes changes to the imposition of capital
gains tax (CGT) and changes to shut down some of the tax
advantages of partnerships.
Neal Todd, partner at Berwin Leighton Paisner (BLP), said
the sentiment of ensuring the correct level of tax is paid is a
laudable objective, but questioned the impact on certainty
given that the general anti-abuse rule (GAAR) has already
been implemented and is supposed to act as a catch-all
"Imposing the most wide-ranging anti-avoidance package in
this parliament on top of the GAAR and so on after the GAAR was implemented will lead
to unnecessary uncertainty about the interplay between various
sets of anti-avoidance provisions. It can only further lengthen
the UK tax code," said Todd.
Capital gains tax
In what he referred to as a fairness issue, Osborne
announced a personal taxation change regarding capital gains
tax when an individual sells a residential property that is not
their primary residence. At present, UK residents are charged
CGT, whereas non-residents are exempt. As of April 2015,
non-residents will also be brought into that net.
"The changes to the capital gains tax regime impose
additional tax on residential property held by non-UK resident
individuals, but only from April 2015 and only on future
growth. This will be perceived as an appropriate levelling of
the playing field compared to UK resident individuals, and is
not out of step with other major economies," said Damian Bloom,
partner at BLP.
"However, these reforms ought to have been considered as
part of last year’s extensive consultation on the
taxation of UK property held by non-resident entities. To
prevent any further undermining of the stability of the UK tax
regime for international individuals, it would be helpful if
the government could confirm whether there will be any further
changes to the taxation of residential property for the
remainder of the current parliament," said Bloom.
But Rosalind Rowe, real estate tax partner at PwC, said she
is concerned about the government’s intention to
levy tax on future gains realised by non-UK resident
individuals. She claims it undermines the
government’s flagship message of being open for business.
"The tax can be easily avoided – the owner just
retains and never sells the property," said Rowe. "It is
unlikely to dampen the heat of the housing market and the costs
of policing and collection will result in a potential net loss
of revenue for the Exchequer. It also gives the wrong message
– is Britain really open for business?"
Richard Mannion, national tax director at Smith &
Williamson, pointed out that the delayed introduction of the
change will give time for many to sell CGT-free in the
In another clamp down on avoidance, Osborne announced that
stamp duty will be abolished for shares purchased in exchange
traded funds from April 2014, which Paul Rutherford of DLA
Piper said will be welcomed by the UK asset management industry
and follows moves in the March 2013 Budget to stimulate
investment into UK equities by abolishing stamp duty on AIM and
ISDX quoted shares and on UK mutual funds.
Despite the focus on anti-avoidance measures, there was no
mention of multinational corporate tax avoidance.
"Whilst wanting to avoid alienating large corporations, the
Chancellor knows that he cannot afford to be perceived as soft
on tax avoidance and these measures should gain positive
headlines and are politically correct in the current
environment," said Richard Woolich, partner at DLA Piper.
"However, I expect to see the issue resurface again soon."
Given the developments occurring at
international level, it is perhaps not surprising that
Osborne has not sought to implement domestic policies here.
Partnership tax review
The announcement of a partnership tax review aims to counter
the abusive use of partnerships by certain businesses to avoid
national insurance contributions.
But Mark Saunders, tax director at PwC, said it will be hard
to work out where the dividing line is in practice between
legitimate and disguised remuneration.
Saunders said that for a law firm where salaried partners
are off the payroll (and he adds that there are good commercial
reasons for someone having the title of partner without having
an equity stake in the business), the changes could lead to
Osborne also announced that the rate of the UK bank levy
will increase to 0.126%. This new rate will be effective from
January 1 2014. The levy’s base will also be
broadened in line with previous consultations. Osborne said the
measure will raise £2.7 billion in 2014-15 and £2.9
billion each year from 2015-16.
"Each bank levy rate rise is a double hit for the
UK’s competitiveness – it makes the UK a
less competitive location for banking business and it makes UK
headquartered banks less competitive when doing business
overseas," said Matthew Barling, PwC banking tax partner.
"Seven rate rises in three years sends a stark message
regarding whether Britain really is open for banking
Margaret Hodge, chairwoman of the UK
Parliament’s Public Accounts Committee, was also
critical of the Chancellor’s statement,
questioning the changes to the UK’s controlled
foreign companies (CFC) regime and the opportunities for tax
avoidance that it has created, as well as criticising Osborne
for not following through on previous pledges.
"The Chancellor promised £3.2 billion from Swiss bank
accounts but a meagre £440 million has been brought in,"
said Hodge. "When will the government’s rhetoric
Osborne responded that while some government initiatives
will inevitably raise less revenue than forecast, others are
bringing in more than expected. He referenced the
government’s deal with Liechtenstein as one
example of a measure bringing in more than expected.
Other measures announced in the Autumn Statement include an
extension of the film tax credit to cover regional theatre and
new tax relief for investment in social enterprises.
Business rate rises will also be limited to 2%, rather than
being linked to inflation.
"Lobbying around business rates has clearly borne fruit and
Osborne’s cap on business rates to 2% per annum is
to be applauded and will help many high street retailers
through the post-Christmas doldrums and the fierce competition
they face from online retailers," said Richard Rose, tax
partner at BDO.
The introduction of a 12 month payment plan will also be
welcomed by small businesses.
The Chancellor also reiterated the government’s
commitment to a competitive corporate tax rate.
"Corporate tax cuts have increased investment and
productivity," said Osborne, adding that the higher growth
being seen offsets much of the cost. "It would be economic
madness to raise corporation tax."
Mannion welcomed Osborne’s commitment to the
corporate tax rate falling to 20% in 2015, which he described
as "attractive" compared to many other countries in the
"This gives useful clarity which should help reassure
international and mobile businesses," said Mannion.
Perhaps surprisingly, Osborne did not mention the
UK’s Patent Box regime, which is being challenged at European level on the
grounds that it contravenes provisions in the EU’s
Code of Conduct on Taxation.
Stella Amiss, international tax partner at PwC, said the
lack of comment was disappointing "given that this has been
under the spotlight from the EU and again investors will be
looking for stability".
Desire for stability not met
After urging the Chancellor to make stability
and certainty his top priorities for the Autumn Statement,
Todd is disappointed at what he calls a "return to the bad old
days of legislative uncertainty" following
Osborne’s announcement of five new tax policies
which will take effect immediately.
"This is especially disappointing as the government has
previously pledged to introduce measures in a considered way
and had criticised the previous government for bringing in
measures too quickly," said Todd. "These measures have an
immediate, unforeseen effect on the taxpayer, which flies in
the face of reforms to the tax system and adversely impacts on
the relationship between taxpayers, businesses and
"The taxpayer should be entitled to a certain degree of
predictability on tax law, instituted by a government that
takes adequate deliberation before introducing legislative
changes," he added.
While Amiss points out the new restrictions making it harder
for some businesses to qualify for certain CFC regime
provisions is "a curve ball and will send mixed signals
to investors of the government’s commitment to
"There will now be a degree of instability surrounding the
corporate tax reforms that will not be welcomed," said