16 October 2016 5 min read

Last week the Chancellor of the Exchequer, Philip Hammond, delivered the usual Autumn Statement, setting out the Government’s position in relation to everything from measures to tackle offshore tax avoidance schemes to corporate gym memberships.

Here at Hybrid Legal, we’ve been racking our brains and considering the impact of the Chancellor’s statement in some of our core practice areas. We thought we’d share some of our thoughts with you which, we hope, you’ll find as interesting as we did.

The first key point to note is that there is to be a new format. The Autumn statement will cease to exist, as will the usual Spring budget. In a careful bid to improve economic stability and tax consistency, we will have just a single budget each year, to be delivered in the autumn. 2017 is designated as the ‘transition year’ and so it is expected that we will have two budgets, one in Spring and one in Autumn, which could make for an interesting year! 

Commercial and Corporate

Next up, we see the government marching on with their attack on complex offshore tax avoidance structures. The Autumn Statement sees a significant focus on ensuring that offshore structures are fully declared, with strengthened sanctions being put into place to deter would-be tax avoiders. As the Chancellor explains, it’s about breaking down the barriers to the so-called ‘hidden economy’ and realising the tax which the government could be benefiting from. Only time will tell whether these policies are genuine or whether it’s simply a populist reaction in the wake of the Panama Papers scandal earlier this year. 

The Chancellor has also announced that there is to be a 30% penalty rate for those found to be participating in VAT fraud, amongst some other minor measures in this area. At this stage, we’re not quite clear as to how this would work, though supposedly HMRC will be issuing guidance once the provision comes into law (when the Finance Bill 2017 is approved by Parliament and comes into effect). Given how easy it can be to become innocently and unknowingly embroiled in VAT fraud, then we would hope any guidance would make a distinction between those actively perpetrating the offence and those simply caught up in the crossfire. 

Another key reform set out in the Autumn Statement is the reform to the Corporation Tax Loss Relief process. As with many other topics, further clarification is to be provided in due course but, at this stage, we understand that the reforms will restrict the amount of profit which can be offset by ‘carried forward losses’. These are to be restricted to a maximum of 50% from April 2017 (subject to a £5million allowance for each company or group). With a £5million allowance then we would expect this rule to be relatively unimportant for the majority of SME’s, but it could have significant ramifications for larger companies. 

Another key point to note is that the Substantial Shareholding Exemption (‘SSE’) is to be amended. Insofar as the actual amendment to the SSE, it is understood that the amendment is expected to provide a more comprehensive exemption and, primarily, to do away with the strict “investing requirement”, which is an integral element of the SSE at present. On the basis that this amendment is to expand the usage of the SSE, then we would expect this provision to be well-received by the business community in general. 

The Chancellor also announced that there is to be some new legislation to clarify the EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme) rules for share conversion rights – which has been something of a grey area previously. We expect that this will simply be in the form of further guidance rather than on restrictions under the existing scheme. Worth taking note though as EIS and, particularly SEIS, typically have a pretty significant impact on tax considerations for smaller start-ups. 


Salary sacrifice is one of the headline changes in the Autumn Statement. In summary, most of the current sacrifices are being scrapped except for:

  • Enhanced Employer Pension Contributions (but only to registered pension schemes);
  • Ultra-low emission cars (bad news for “2 jags” John Prescott!);
  • Bikes under the cycle to work scheme; and
  • Childcare benefits. 

Corporate gym memberships and mobile phones,along with various other benefits, are out of the window and will no longer be able to be paid for by way of salary sacrifice. Still, we wonder just how much use that corporate gym membership was getting anyway.

The salary sacrifice changes are due to come in to force from April 2017, however arrangements in place before then will be protected for an extra year (and certain benefits such as private school fees, non-eco cars and accommodation will actually be protected until April 2021). 

Intellectual Property

Interestingly, the government have announced that they are going to be undertaking a review of the tax environment in Research and Development. We assume that this is simply to ensure that UK companies have an incentive to keep R&D in the UK, and that innovation continues to be encouraged. In addition, there was also mention of extending the ‘above the line’ credit scheme (set up in 2013), and a consultation document is expected to be published in the near future, though no dates have been confirmed yet. 

In summary then, what should you take from the Chancellor’s Autumn Statement? Well, firstly, don’t expect any overnight changes. Much of the proposed ideas are in ‘bill’ form at the moment, meaning that they still need to go through the Parliamentary approval process (which is likely to take at least a few months, if not longer). Secondly, on the whole, it looks as if the government is continuing to take steps which will benefit SME’s and provide a solid framework to support growth going forward. Generally, we think it’s a positive, if not slightly cautious, Autumn Statement; which small business owners should be encouraged by. 


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