George Osborne has just delivered his 2015 spending review and Autumn Statement.
His speech, like his Summer 2015 Budget, was again a long one at over an hour. As expected it was full of statistics regarding improvements to the economy including:
- 1m extra jobs in the next five years
- £27bn improvement in public finances due to higher tax receipts and lower debt repayments
- £22bn efficiency savings to be found in the NHS
- No cut in the police budget
The Chancellor is still predicting a surplus from 2019/20 and the GDP growth forecast is around the 2.3 per cent to 2.5 per cent mark for the next five years. Once again, the reference to “northern powerhouse” was made very early in his speech as it was announced that the economic recovery has been better in the north than the south.
Of the Chancellor’s speech, what announcements will affect firms of solicitors?
From a tax perspective, there wasn’t that much to report.
As always, there were the usual references to anti-avoidance measures including a more costly penalty regime which will be another nail in the coffin for some of the more provocative tax schemes out there.
Stamp Duty Land Tax (“SDLT”)
The Government will consult in 2016 on changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. These changes will come into effect in 2017 to 2018.
Other changes that will impact conveyancing firms include an increased SDLT charge on second properties, including buy to lets. From 1 April 2016 these properties will carry a 3 per cent premium over and above the usual rate of SDLT, starting from a new, low threshold purchase price of just £40,000. This will not only increase the amount of SDLT collected but, and more relevantly to those firms affected, increase the number of transactions on which SDLT is due.
Capital Gains Tax (“CGT”)
From 2019, CGT due on sale of residential property will be payable within 30 days of sale on an ‘on account’ basis ahead of the usual payment date of the 31 January following the tax year end.
What was expected that didn’t materialise?
There were some predictions that didn’t materialise, such as bringing forward the proposed increase in tax on dividends from April 2016 to today - which would have affected those operating through a company - and the abolition of the 10 per cent CGT on sale of a business. Nor was there any restriction of incorporation relief for property letting businesses.
As expected, the changes to tax credits that were recently blocked by the House of Lords have been shelved. This previous announcement had received a lot of criticism and it was interesting to see the Chancellor make a full u-turn on the subject. There was also confirmation that deeds of variation are to remain, albeit kept under review.
Non tax related measures
Firms that specialise in compensation claims following motor accidents will see the government bring forward measures to reduce ‘excessive’ costs arising from whiplash claims. The right to general damages for minor soft tissue injuries will be removed and legal costs will be reduced by transferring personal injury claims of up to £5,000 to the Small Claims Court.
In summary, there weren’t too many changes announced that will have a significant impact on small solicitor firms from a tax point of view with the exception of changes to the SDLT regime. However, the potential changes regarding compensation claims is likely to have a major impact on firms that advise in this sector.
Steve Roberts is a Tax Director at Armstrong Watson and is part of Armstrong Watson’s legal sector team. The legal sector team advises law firms throughout the UK on strategic, structural and other business improvement issues as well as providing efficient accounting, tax and SRA accounts rules services. Further information.
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