The government has announced that it will consult on a new measure to require intermediaries arranging complex offshore structures to notify HMRC of both the structures and the clients.

There is no suggested timetable in the announcement and no indication of the likely form or scope of the requirement. However, it is likely that the proposal will be controversial, given that advisers are already concerned by the recent consultation and announcements on strengthening tax avoidance sanctions and deterrents (see below).

(See HM Treasury: Autumn Statement 2016, paragraph 4.54.)

As announced in the 2016 Budget, the government has confirmed that it will introduce new measures to:

HMRC launched a consultation on proposed penalties for enablers and users of defeated tax avoidance arrangements, together with other options for deterring avoidance, in August 2016. The consultation closed on 12 October 2016.

The proposals set out in the consultation document were controversial and a number of professional bodies have objected to them, arguing that they went too far and might result in advisers being deterred from providing advice. The announcement does not state whether the new measures will be identical to those originally contemplated by the consultation document, but it is likely that the controversy will continue.

The government has stated that it will publish draft legislation shortly, but does not confirm whether it will form part of the Finance Bill 2017 or when the new measures will take effect.

For more information, see Legal update: Consultation on penalties for enablers and users of defeated tax avoidance arrangements and Legislation Tracker, Tax legislation tracker: compliance, disputes and investigations: Consequences for enablers of failed schemes.

(See HM Treasury: Autumn Statement 2016, paragraph 4.48.)

The government has announced that it will introduce new measures in the Finance Bill 2017 to require taxpayers to correct past under-declarations of income and capital gains in relation to their offshore financial interests. Taxpayers will be required to disclose information to HMRC relating to the under-declared income and capital gains by 30 September 2018. The legislation will also provide for new tax-geared sanctions for those who fail to disclose within this time period.

The measure will have effect from Royal Assent to the Finance Bill 2017.

HMRC has used information from automatic exchange of information agreements, and its own compliance interventions and administrative data to identify under-declared income and gains from offshore financial interests. However, the likely tax yield from this measure is shown as having a very high level of uncertainty in the Office for Budget Responsibility's policy costings.

For more information and to track this measure, see Private client tax legislation tracker 2016-17: Offshore tax evasion: civil and criminal sanctions.

(See HM Treasury: Autumn Statement 2016, paragraph 4.53 and HM Treasury: Autumn Statement 2016: policy costings, pages 30-31 and paragraph B.12.)

In order to tackle the hidden economy the government has announced that it will:

These proposals follow on from three consultations published in August 2016 on tackling the "hidden economy" (which the government has defined as comprising individuals and businesses evading or avoiding paying their fair share of tax).

The announcement states that further details will be provided in the government's 2017 Budget.

For more information, see Legal update, HMRC publishes three consultations on tackling the hidden economy and Practice note, HMRC criminal investigation policy.

(See HM Treasury: Autumn Statement 2016, paragraphs 4.55 and 4.56 and HM Treasury: Autumn Statement 2016: policy costings, page 32.)

The government has announced that it will invest further in HMRC in order to:

The government estimates that this will bring in an additional £450 million over the next five years (although the Office for Budget Responsibility has given this estimate a "High" score of uncertainty).

(See HM Treasury: Autumn Statement 2016, paragraph 4.49 and, HM Treasury: Autumn Statement 2016: policy costings, Table B2.)

In line with previous announcements, the government has confirmed that it will strengthen the regime for the disclosure of avoidance schemes in the context of indirect tax.

The government announced as part of its 2016 Budget that it would consult on updating the VAT disclosure regime to extend its coverage to other indirect taxes and aligning it with the Disclosure of Tax Avoidance Schemes (DOTAS) regime applicable to direct taxes. A consultation was announced in April 2016 and ran until July 2016.

Under the existing VAT Disclosure Regime, businesses are required to make a disclosure to HMRC when they derive a VAT benefit from certain VAT planning arrangements.

The government announcements state that:

This measure will be implemented by the Finance Bill 2017 and will have effect from 1 September 2017.

For more information, see Practice note, VAT disclosure regime, Tax legislation tracker: VAT: Updating and extending VAT DOTAS rules and Practice note, Disclosure of tax avoidance schemes under DOTAS: direct tax.

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 6.1.)

Following an announcement in the 2016 Budget and a consultation launched on 28 September 2016, the government has confirmed that the Finance Bill 2017 will contain legislation introducing a new 30% fixed rate penalty for participating in VAT fraud.

The penalty will apply to businesses and company officers who knew, or should have known, that their transactions were connected with VAT fraud. It will apply with effect from the date of Royal Assent to the Finance Bill 2017.

For information on the consultation, see Legal update, Consultation on penalty for participating in VAT fraud. To track progress of this measure, see Tax legislation tracker: VAT: Penalties for participating in VAT fraud.

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 6.2.)

The government has reaffirmed its commitment to the business tax roadmap published at the time of the 2016 Budget (see Legal update, 2016 Budget: key business tax announcements: Business tax road map).

The roadmap, which summarises the government's plans for reforming business taxation for the rest of the current Parliament, aims to reduce tax rates to drive growth, tackle avoidance and aggressive tax planning and simplify and modernise the business tax system. In line with the roadmap, the Chancellor confirmed in the Autumn Statement the government's intention to reduce the rate of corporation tax to 17% by 2020.

(See HM Treasury: Autumn Statement 2016, paragraph 4.23.)

The government has confirmed that it will implement reforms to the rules for relieving corporation tax losses announced in the 2016 Budget and consulted on from 26 May to 18 August 2016 (see Legal update, Consultation on reforms to corporation tax loss relief (detailed update)).

As previously proposed, the new rules will restrict the amount of profit that can be offset by carried forward losses to 50% from April 2017 (subject to a £5 million allowance for each company or group), and will allow corporation tax losses arising from 1 April 2017 to be carried forward and set against profits from other income streams within the same company and against those of other companies in the same group. The announcement confirms that the government will take steps to address unintended consequences of the new rules and to simplify the administration of the regime.

The government is expected to publish a summary of consultation responses on 5 December 2016, along with draft legislation for inclusion in the Finance Bill 2017.

To track the progress of the reforms, see Tax legislation tracker: corporate: Reform of corporation tax losses.

(See HM Treasury: Autumn Statement 2016, paragraph 4.25.)

The government has confirmed that it will amend the substantial shareholding exemption (SSE). The announcement follows a consultation that was announced in the 2016 Budget and ran from 26 May to 18 August 2016 (see Legal update, Substantial shareholdings exemption proposals for reform).

The SSE allows a company disposing of shares in another company in which it has a "substantial shareholding" and that meets certain requirements to claim exemption from corporation tax on chargeable gains. The announcement confirms that the government will abolish the "investing requirement", a term not used in the legislation, but which appeared in the consultation document, referring to the requirement for the disposing company to have been a trading company (or member of a trading group) for a certain period before and immediately after the disposal. The revised rules will also provide a more "comprehensive exemption" for companies owned by "qualifying institutional investors", although there is no further detail on what this will involve. The relaxation of the rules will be welcomed as a pro-business measure.

The changes will take effect from 1 April 2017, so draft legislation can be expected to be published shortly, for inclusion in the Finance Bill 2017.

For more information on the SSE, see Practice note, Substantial shareholding exemption and to track the progress of the reforms, see Tax legislation tracker: corporate: Review of substantial shareholdings exemption.

(See HM Treasury: Autumn Statement 2016, paragraph 4.28.)

The government has announced that it will consult, at Budget 2017, on a proposal to extend the corporation tax regime to all non-resident companies receiving taxable income from the UK.

The proposal appears to be driven by a desire to ensure that all companies subject to UK taxation are brought within the same tax regime, and in particular, subject to new revenue-raising measures such as the reform of corporation tax loss relief (see Reform of corporation tax loss relief) and the new rules on the deductibility of corporate interest expense (see Restriction of interest deductibility). It is unclear whether a motivation is to extend the territorial scope of corporation tax along the lines adopted for non-UK resident companies dealing in or developing UK land (as to which, see Practice note, Transactions in land: corporation tax: Territorial scope of corporation tax for UK land traders).

(See HM Treasury: Autumn Statement 2016, paragraph 4.26.)

The government has confirmed that it will introduce legislation to expand the deductibility of corporate contributions to grassroots sports. The measure was first announced in the 2015 Autumn Statement and subject to a consultation that ran between 24 March and 15 June 2016 (see Legal update, Consultation on deductions for corporate contributions to grassroot sports).

Legislation will be included in the Finance Bill 2017, and a summary of responses to the consultation will, presumably, be published shortly. No mention is made of the further consultation suggested at the time of the original consultation.

To track the progress of the measure to implementation, see Tax legislation tracker: corporate: Relief for contributions to grassroot sport.

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 2.2.)

The government has announced that it will introduce legislation to enable HMRC and taxpayers to conclude discrete matters in enquiries via partial closure notices. Currently an enquiry can only be finalised once all disputed matters have been resolved, causing time delays and cash flow issues in large and complex cases.

The legislation will take effect from Royal Assent to the Finance Bill 2017 and will apply to existing, as well as new cases.

This announcement follows a consultation that ran from 18 December 2014 to 12 March 2015.

Responding to the consultation, HMRC had indicated that they intended to consult on alternative models for the partial closure notices, but there has been no public consultation on this. It is, therefore, unclear to what extent concerns raised during the consultation will be addressed in the legislation. The government has indicated, however, that taxpayers (and not just HMRC) will be able to apply to a tribunal for a partial closure notice, which was the main issue arising out of the consultation.

For more information, see Legal update: Tax enquiries closure rules: HMRC publishes response to consultation and Tax legislation tracker: Closure of aspect of tax enquiry.

(See HM Treasury: Autumn Statement 2016, paragraph 4.44; HM Treasury: Autumn Statement 2016: policy costings, pages 28 and 29).

The government has announced that it will publish its response to the consultations on making tax digital in January 2017. HMRC launched the consultations on 15 August 2016.

The government has reported that if the consultations lead to any change in the policy, they will consider them in their next forecast.

For more information and to track these developments, see, Private client tax legislation tracker 2016-17: Making tax digital.

(See HM Treasury: Autumn Statement 2016, paragraph 4.42 and HM Treasury: Autumn Statement 2016: policy costings, paragraph B.32.)

The government has confirmed that it continues to work closely with the Northern Ireland Executive towards the introduction of a Northern Ireland rate of corporation tax (as provided for in the Corporation Tax (Northern Ireland) Act 2015), subject to the Northern Ireland government demonstrating that its finances have been placed on a sustainable footing.

The government has also announced that it will introduce changes to the Act in the Finance Bill 2017 which will:

For more information, see Legal update: Draft guidance on Northern Ireland corporation tax regime published.

(See HM Treasury: Autumn Statement 2016, paragraph 3.55; HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 2.1.)

The government confirmed that, as announced at the 2016 Budget, from April 2018:

However, it appears that the government has dropped its controversial proposal to tax certain "post-employment" and "expected-bonus" payments as earnings, confirming that income tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked. This change is to be monitored and the government will address any manipulation of this rule.

No mention is made of the other measures consulted on, but a response document and revised draft Finance Bill 2017 legislation is expected on 5 December 2016.

For the background, including the Office of Tax Simplification's original review, the government's July 2015 consultation, the Budget 2016 announcement and the draft legislation, see Legislation Tracker, Employment income and benefits: Termination payment rules: simplification.

For more information about the taxation of termination payments, see Practice note, Taxation of termination payments.

(See HM Treasury: Autumn Statement 2016, paragraph 4.10.)

The income tax and CGT reliefs associated with employee shareholder status (ESS) will be abolished for ESS shares acquired in consideration of an ESS agreement made on or after 1 December 2016 (except in circumstances where an employee received independent legal advice on the ESS agreement on 23 November, before 1.30 pm, in which case the effective date is 2 December 2016). For ESS arrangements entered into before 1 December 2016, the tax advantages will continue to apply.

Currently, ESS shares qualify for certain income tax and capital gains tax (CGT) reliefs, but the CGT relief was restricted, following the 2016 Budget, in relation to agreements entered into after 16 March 2016, to a lifetime allowance of £100,000 For more information on ESS, see Practice note, Employee shareholders.

The government notes that the measures to remove ESS tax advantages are in response to evidence that ESS is being used for tax planning.

ESS technically remains open for the time being, because the provisions to be included in Finance Bill 2017 do not amend the Employment Rights Act 1996 (ERA 1996). However, the government intends to close ESS to new users altogether (presumably by amending the ERA 1996) "at the earliest opportunity". However, without the associated tax reliefs, in our view it is very unlikely any new ESS arrangements will be implemented, as these were the main driver for implementing ESS arrangements.

Although it may have come as a surprise to some that ESS is being withdrawn altogether, the restriction of the CGT relief available for ESS shares earlier this year indicated the direction that the government might take in future over ESS.

(See HM Treasury: Autumn Statement 2016, paragraph 4.31, Income Tax and Capital Gains Tax: employee shareholder status, HM Treasury: Autumn Statement 2016: policy costings, page 27 and Parliament.uk: House of Commons: Written Statement HCWS277, 23 November 2016 .)

As widely predicted, the government has confirmed that it is to limit the benefits that attract tax and NICs advantages when provided as part of a salary sacrifice arrangement. The benefits that can continue to benefit from tax and NICs relief if provided through salary sacrifice will be limited to:

The limitation will take effect from April 2017. However, arrangements in place before that date will be protected until April 2018 or for cars, accommodation and school fees, until April 2021.

HMRC's response document to its August 2016 salary sacrifice consultation together with draft Finance Bill 2017 legislation is expected on 5 December 2016.

For the background to this measure, see Legislation Tracker, Employment income and benefits: Restriction of salary sacrifice.

For information about salary sacrifice arrangements, see Practice note, Salary sacrifice arrangements.

More generally, the government is looking at how the taxation of benefits in kind and expenses could be made fairer and more coherent. The clear implication is that there is a desire to align the tax treatment with that of cash remuneration. Alongside the changes relating to salary sacrifice, the Autumn Statement also announced a future consultation on valuation of benefits in kind, measures relating to aligning dates for making good on non-payrolled BIKs (see following two items below) and a call for evidence in relation to employee business expenses.

(See HM Treasury: Autumn Statement 2016, paragraph 4.13; HM Treasury: Autumn Statement 2016: policy costings, page 21.)

The government will publish a consultation on employer-provided living accommodation and a call for evidence on the valuation of other benefits in kind at the 2017 Budget.

The Office of Tax Simplification recommended revising the existing rules on employer-provided living accommodation including, in particular, changing the way in which the taxable benefit is calculated. In response, as part of the 2016 Budget, the government issued a call for evidence. For the OTS' report, see Legal update, OTS final report on employee benefits and expenses: Accommodation benefits and for the current tax treatment of employer-provided living accommodation, see Practice note, Taxation of employees benefits and expenses: Living accommodation.

(See HM Treasury: Autumn Statement 2016, paragraph 4.13.)

The government has announced that legislation will be introduced in the Finance Bill 2017, effective from April 2017, to specify a single date for making good on non-payrolled benefits in kind. The specified date for all such benefits will be 6 July in the following tax year.

HMRC consulted on aligning the dates for making good in August 2016 (see Legal update, Consultation on aligning dates for making good on benefits in kind) and had proposed two dates depending on the benefit concerned (end of tax year or 1 June following end of tax year). The move to a single, later, date is therefore a little surprising (particularly given that employers must submit P11Ds to HMRC by 6 July and, having the same date for making good is likely to give rise to practical difficulties).

A response document to the August 2016 consultation and draft Finance Bill 2017 legislation is expected on 5 December 2016. To track this measure, see Legislation Tracker, Tax legislation tracker: employment: Dates for making good benefits in kind.

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 1.2)

The government has announced that it will include in the Finance Bill 2017 provisions clarifying the basis on which employees are liable to tax on assets made available to them by reason of their employment. The intention is that employees will be liable to tax only for the period that a business asset is available to them for their private use (see Practice note, Taxation of employees: benefits and expenses). This will take effect from 6 April 2017.

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 1.3.)

With effect from April 2017, all employees called on to give evidence in court will no longer be liable to tax on legal support from their employer. Currently, the relief applies only to support received to assist employees in defending allegations against them.

(See HM Treasury: Autumn Statement 2016, paragraph 4.12.)

As announced in the 2016 Budget, the government has carried out a review of the percentage banding structure on which car benefit charges are based according to the carbon emissions of the vehicle. The result is a very welcome move to encourage the purchase of ultra-low emissions vehicles (ULEVs). For 2020-21, the appropriate percentage will be 2% for zero emission cars and between 2% and 14% for vehicles of emissions between 1g/km and 50g/km depending on the number of zero emission miles the vehicles can travel. For cars with higher emissions, the percentages will increase to a maximum of 37% for cars with emissions of 90g/km and above.

The revised percentages are substantially lower than those currently in force (9% for zero emission cars in 2017-18, 13% in 2018-19 and 16% in 2019-20, see Legal update, 2016 Budget: key business tax announcements: Company car and van benefits) and should represent a significant incentive to choose ULEVs.

(See HM Treasury: Autumn Statement 2016, paragraph 4.36 and HM Treasury: Autumn Statement 2016: policy costings, page 23.)

As announced at the 2016 Budget, the government will introduce legislation in the Finance Bill 2017 to simplify the process of applying for and agreeing PAYE settlement agreements (PSAs).

This follows a consultation that ran from 9 August 2016 to 18 October 2016 and that was launched in response to a report on employee benefits and expenses from the Office of Tax Simplification (OTS).

The consultation set out proposals to:

The OTS has confirmed that the proposals set out in the consultation largely reflect its recommendations. However, the response from the OTS indicated disappointment that the government was not proposing to loosen significantly the rules on what can be included in a PSA. The OTS suggested, therefore, introducing a "main-purpose" anti-avoidance rule, which would allow relaxation of the rules around what can be included in a PSA while addressing any potential for abuse. It remains to be seen whether the draft legislation will reflect this suggestion.

The legislation will have effect in relation to agreements for the 2018/19 tax year and subsequent tax years.

For more information, see Legal update: archive, Consultation on simplifying the PAYE Settlement Agreement process and Legislation Tracker, Tax legislation tracker: employment: Simplifying PAYE settlement agreements.

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 1.1)

From April 2017, employer and employee class 1 NICs thresholds will be aligned. From that date, employers and employees will pay class 1 NICs on earnings above £157 per week. There are no changes to NICs rates. There will be no cost to employees, and the maximum cost to business will be an annual £7.18 per employee.

(See HM Treasury: Autumn Statement 2016, paragraph 4.7, HM Treasury: Autumn Statement 2016: policy costings, page 20 and HM Treasury: Chancellor Philip Hammond's Autumn Statement 2016 speech.)

The government has announced that it will consult on removing NICs from the effects of the Limitation Act 1980. This step will align the time limits and recovery process for enforcing NIC debts with those of other taxes.

(See HM Treasury: Autumn Statement 2016, paragraph 4.9.)

The Chancellor has written to the Office of Tax Simplification (OTS) responding to the OTS' two reports on the alignment of income tax and NICs. For the OTS' first report, published in March 2016, see Legal update, OTS tax and NICs alignment review and for its second report, published in November 2016, see Legal update, OTS: Further report on alignment of tax and NICs.

The letter confirms the following:

The letter also outlines some of the simplification measures that the OTS proposed and that the government is implementing. These include the abolition of class 2 NICs and the alignment of the following:

For background and the OTS' proposals, see Tax legislation tracker: employment: Alignment of income tax and NICs.

(See HM Treasury and Office of Tax Simplification, Correspondence between the Chancellor, Financial Secretary to the Treasury and the Office of Tax Simplification regarding recent OTS publications and HM Treasury: Autumn Statement 2016, paragraph 4.13.)

The government has confirmed that, with effect from 6 April 2017, all payments by public sector engagers to workers supplied by personal service companies (PSCs) will be treated as payments of employment income on which either the engager or third party intermediary (if any) will be required to account for tax (which, we must assume, includes employers' NIC as well as appropriate deductions under PAYE) (see Legal update, Off-payroll working in the public sector consultation).

The measure is being introduced to tackle the high level of non-compliance with the existing rules for PSCs. One development since the issue of the consultation document appears to be the announcement that the 5% deduction for administrative expenses will no longer be available to the PSC as it will no longer have responsibility for determining whether employment taxes apply under the IR35 regime (see Practice note, IR35).

Included in the policy costings is the expected impact of implementing the proposals. The costing is prepared on the basis that the only impact for the Treasury will be the collection of tax on the 5% expense deduction that will no longer be available (around £25 million per year). This would be the case if 95% of the income derived by PSCs from public sector contracts were currently treated as deemed employment income under the IR35 regime. However, the previously stated intention in introducing the new provisions is to prevent owners of PSCs from paying themselves in the form of dividends and avoiding NICs.

The costing does not quantify the cost to the NHS and other public sector bodies of the additional employers' NIC and apprenticeship levy.

(See HM Treasury: Autumn Statement 2016, paragraph 4.11 and HM Treasury: Autumn Statement 2016: policy costings, page 39).

The government has published draft legislation, for inclusion in the Finance Bill 2017, introducing 100% first year allowances (FYAs) for expenditure incurred on plant and machinery for electric vehicle charging points. The enhanced allowances apply to expenditure incurred on or after 23 November 2016 until 31 March 2019 (for corporation tax payers) or 5 April 2019 (for income tax payers).

For more information on FYAs, see Practice note, Capital allowances on property transactions: Plant and machinery allowances: First year allowances.

(See HM Treasury: Autumn Statement 2016, paragraph 3.18, HMRC, Capital allowances: first-year allowance for electric charge-points and Parliament, Autumn Statement 2016: Measures with immediate effect: Written statement).

The government has postponed, indefinitely, any change to the VAT rate on energy-saving materials.

It was announced in the 2015 Autumn Statement that the rate would change as a result of an ECJ decision that the UK's reduced rate of VAT for supplies concerning energy-saving materials infringed Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (VAT Directive) (see Legal update, Draft Finance Bill 2016 legislation: key business tax measures: Reduced rate VAT for energy-saving materials). The draft Finance Bill 2016 had included provisions to amend the existing legislation, but these did not find their way into the Finance Bill 2016. The 2016 Autumn Statement policy costings state that the change has been postponed until an "unspecified future date". For the time being, therefore, the UK remains in breach of the VAT Directive on this issue.

For more information on the reduced VAT rate for energy-saving materials, see Practice note: overview, Energy efficiency in buildings: Reduced VAT rates for energy-saving materials.

(See HM Treasury: Autumn Statement 2016: policy costings, Annex B, paragraph B.5.)

For details of all environment-related announcements, see Legal update, 2016 Autumn Statement: key environmental announcements.

The government has confirmed that it will proceed with the introduction of rules limiting interest deductibility for large groups from April 2017. For background to (and details of) this measure, to be introduced in the Finance Bill 2017, see Tax legislation tracker: finance: Restrictions on interest deductibility.

In this confirmation, the government states that it will widen the provisions proposed to protect investment in public benefit infrastructure (as to which, see Legal update, Detailed consultation on revised corporate interest deductibility rules (detailed update): Public benefit project exclusion). While the nature of this expansion is currently unspecified, any such change will be welcomed given that this is protection seen as vital to avoiding disastrous consequences of the new rules for capital-intensive sectors, although how far the expansion goes in allaying fears will depend on the detail.

However, the government also states that banking and insurance groups will not be subject to specific rules, instead falling within the general regime. In its consultation document of 12 May 2016, the government stated that it would consider whether the interest restriction rules would have an unwarranted impact on groups in those sectors that suffer net interest expense and whether increased protection was needed in the case of net interest recipients (see Legal update, Detailed consultation on revised corporate interest deductibility rules (detailed update): Banking and insurance). In the case of net interest expense, it may be that the government considers the proposed general rules to provide adequate protection although, as the government stated that it would continue working with the OECD in this area, it may be that additional, targeted safeguards may be introduced at a later time. In the case of net interest income, it would appear that the government considers this situation to be sufficiently rare to be of concern, although this will be of little comfort to those entities that find themselves in the position of net interest recipients (even temporarily) and find themselves subject to deductibility restriction.

(See HM Treasury: Autumn Statement 2016, paragraph 4.24.)

HM Treasury and HMRC have announced that the Finance Bill 2017 will include provisions making "minor changes" to the hybrid mismatch rules to ensure that they operate as intended. The changes are to have effect from 1 January 2017. (For details of the hybrid mismatch rules, see Practice note, Hybrid tax mismatches.)

In a written statement on 23 November 2016, the Financial Secretary to the Treasury stated that the changes will be with regard to "financial sector timing claims" and the rules concerning deductions for amortisation. A technical note detailing the changes is to be published on 5 December 2016. Although it is difficult to assess the impact of these changes before more detail is provided, it is to be hoped that they will not add further complexity to already very complicated rules and it is disappointing that the regime is still being tweaked so near to its commencement date.

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 2.5 and Parliament: Autumn Statement 2016: Measures with immediate effect: Written statement.)

The government has announced that it will modernise the rules on the taxation of authorised investment fund (AIF) dividend distributions received by corporate investors. This measure has not previously been announced or consulted on.

AIFs may be established as an authorised unit trust or an open-ended investment company. AIFs are exempt from tax on chargeable gains but liable to corporation tax at the basic rate of income tax on income. When an AIF pays a dividend distribution to a corporate investor the distribution is split into franked investment income and unfranked investment income. UK tax-exempt investors are not subject to corporation tax on such distributions. However, they cannot generally reclaim a credit for the tax paid by the AIF.

The government proposes that the modernised rules will enable tax-exempt investors (such as pension funds) to obtain credit for the tax paid by an AIF. Draft secondary legislation will be published in early 2017. It is not clear when the new rules will take effect.

For more information on AIFs, see Practice note, Authorised unit trusts and open-ended investment companies: tax.

(See HM Treasury: Autumn Statement 2016, paragraph 4.29.)

The government has confirmed that the UK bank levy will be restricted to UK balance sheet liabilities from 1 January 2021. (For details of the bank levy, see Practice note, Bank levy; for background to this measure, see Tax legislation tracker: finance: Bank levy: territorial restriction.)

As part of the 2016 Autumn Statement, the government confirmed that certain UK liabilities relating to the funding of non-UK companies would remain within the levy and announced that UK liabilities relating to the funding of non-UK branches would also remain within the levy. This is despite the government stating in its consultation document of 9 December 2015 that a difference in treatment between subsidiaries and branches would be justified, and that keeping non-UK branches within the levy would introduce considerable further complexity (see Legal update, Bank levy consultation: territorial restriction and high quality liquid assets: Subsidiary funding). Just how complex this will render the rules remains to be seen as the government will set out details of this measure in its response to its 9 December 2015 consultation (the date for which response has not yet been specified).

The government further states that it will continue to consider the balance between revenue and competitiveness with regard to bank taxation, taking into account the implications of the UK leaving the EU. Therefore, further reforms in this area are possible, although they may not be announced for some time as the implications of the UK's decision to leave the EU slowly become clearer.

(See HM Treasury: Autumn Statement 2016, paragraph 4.27.)

Following an announcement in the 2016 Budget and a consultation launched on 9 August 2016, the government has confirmed that the Finance Bill 2017 and secondary legislation will clarify the rules concerning capital allowances, chargeable gains and investments by co-ownership authorised contractual schemes (ACSs) in offshore funds. The legislation will also include information reporting requirements on operators of co-ownership ACSs.

ACSs are regulated, UK domiciled vehicles established under the Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013 (SI 2013/1388). An ACS may be a co-ownership scheme or a limited partnership scheme. Both co-ownership and limited partnership ACSs are transparent for the purposes of the taxation of income. Limited partnership ACSs are transparent for the purposes of chargeable gains, but co-ownership ACSs are not.

The consultation sought views on measures to ensure that investors in ACSs are entitled to capital allowances due to uncertainty over whether allowances are available to co-ownership ACSs investors. Views were also sought on any additional improvements that could be made to the tax treatment of ACSs. For information on the 2016 Budget announcement and the consultation, see Legal updates, 2016 Budget: key business tax announcements: Consultation on tax rules for authorised contractual schemes and HMRC consults on reducing tax complexity for investors in ACSs.

For more information on ACSs, see Practice note, Authorised contractual schemes: tax. To track progress of this measure, see Tax legislation tracker: investment structures: Review of taxation of authorised contractual schemes.

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 2.4.)

Legislation will be introduced to provide that performance fees incurred by offshore reporting funds are not deductible when calculating an investor's liability to tax on income. However, such fees will reduce the tax payable on any gains realised on a disposal of an interest in the fund. This measure has not previously been announced or consulted on.

Investors in offshore reporting funds are liable to income tax or corporation tax on income on their share of the reported income of a reporting fund, regardless of whether it is distributed, and to tax on chargeable gains on a disposal of an interest in a reporting fund. Currently, performance fees may be deducted when calculating a reporting fund investor's liability to tax on income.

The proposed legislation will ensure that the tax treatment of performance fees incurred by offshore reporting funds and offshore non-reporting funds is the same. The measure will have effect from April 2017. However, it is not indicated whether or not the measure will be implemented in the Finance Bill 2017.

For more information on offshore funds, see Practice note, Offshore funds regime.

(See HM Treasury: Autumn Statement 2016, paragraph 4.32; HM Treasury: Autumn Statement 2016: policy costings, pages 30 and 31.)

The government has launched a consultation on draft regulations introducing a new regime for the tax treatment of insurance linked securities (ILSs). ILSs are an alternative form of risk mitigation for insurance and reinsurance firms. They offer insurance and reinsurance firms a means of transferring risk to the capital markets, and are commonly used to mitigate catastrophic risk arising from natural disasters.

This consultation follows a consultation launched on 1 March 2016, and is being carried out in conjunction with consultations on a new regulatory framework for ILSs (including draft regulations), and on the authorisation and supervision of insurance SPVs (ISPVs), which are used to issue ILSs (see Legal updates, March 2016 Budget: key financial services announcements: Insurance, 2016 Autumn Statement: key financial services announcements, HM Treasury consults on implementing a new regulatory and tax framework for insurance linked securities and FCA and PRA consult on authorisation and supervision of insurance SPVs).

The draft regulations apply to companies limited by shares that carry out the activity of insurance risk transformation (IRT, being the activity specified in Article 13A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)) and are authorised to do so under Part 4A of the Financial Services and Markets Act 2000. Such a company is a "qualifying transformer vehicle" (QTV).

Profits arising from IRT activities carried out by QTVs will not be subject to corporation tax. For these purposes, IRT activities do not include administrative or management activities, or holding investments exceeding the amount reasonably required to satisfy the "fully funded requirement" under Articles 319 and 326 of Commission Delegated Regulation (EU) 2015/35 or equivalent requirements of the Prudential Regulation Authority. (If investments cease to be so required, they are still exempt from corporation tax for 30 days. The requirement is considered from the perspective of the relevant company or the protected cell company (PCC) if relevant: see Legal update, HM Treasury consults on implementing a new regulatory and tax framework for insurance linked securities.)

No UK withholding tax applies to interest paid to investors in relation to investments made for the purpose of carrying out IRT (IRT investments).

However, these tax rules do not apply to profits arising, or payments made, in an accounting period in which any of the following conditions is met (or in any subsequent accounting period):

For loss relief and group relief purposes (see Practice notes, Groups of companies: tax: Group relief and Corporation tax: general principles: Use of losses), the core and each cell of a PCC are treated as separate companies. However, for group relief purposes, a QTV is not treated as a member of any group or consortium.

The government intends to place the final regulations before Parliament in spring 2017, to come into force the day after they are made and to have effect:

The overarching aim of the government's actions in this area is to attract ILS activity to the UK, developing the UK's position as a major global hub for specialist insurance and reinsurance. The draft regulations are also intended to make the tax treatment of ISPVs consistent with that of other investment vehicles, taxing investors as if they had invested in the underlying assets directly, and to provide rules that are simpler than those currently existing (see Practice note, Taxation of securitisation companies: Other special securitisation regimes). However, the conditions for application of the rules are intended to preclude and deter attempts at avoidance. The government states that, ahead of finalising the regulations, it will continue to consider provisions to ensure that the benefits of the regime are not available if risk is effectively retained through an insurer's investment in an ISPV. The ownership limitation in the regulations provide some protection but the government recognises the need to refine this to allow for legitimate commercial transactions under which significant investments by insurers are intended to be temporary.

(See HM Treasury: Autumn Statement 2016, paragraph 3.37, HMRC: Regulations implementing a new regulatory and tax framework for Insurance Linked Securities and HM Treasury: Tax regime for insurance linked securities.)

The government has announced that it will review the research and development (R&D) tax environment to ensure that the UK is a competitive place to undertake R&D.

The government intends to build on the "above the line" credit (an R&D credit for large companies incurring qualifying expenditure), which was introduced with effect for expenditure incurred on or after 1 April 2013. There is no indication as to when and whether a consultation document will be published.

For information on current R&D tax reliefs, including the "above the line" credit, see Practice note, R&D tax reliefs: practical aspects.

(See HM Treasury: Autumn Statement 2016, paragraph 3.30.)

The Finance Bill 2017 will contain legislation introducing provisions concerning cost-sharing arrangements into the patent box rules.

The patent box rules provide for an optional 10% corporation tax rate for profits of qualifying companies that are attributable to patents and similar intellectual property. The rules currently provide that, where a cost-sharing arrangement is in place, a company is entitled to patent box benefits if certain conditions are satisfied.

The proposed legislation is intended to ensure that companies that incur research and development costs under a cost-sharing arrangement are neither penalised nor gain an advantage by entering into such arrangements. The changes will have effect for accounting periods commencing on or after 1 April 2017.

For more information on the patent box and cost-sharing arrangements, see Practice note, Patent box: Cost-sharing arrangements.

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 2.3.)

The government has announced that it will broaden the scope of the new museums and galleries tax relief to include permanent as well as temporary and touring exhibitions.

The relief, which will enable museums and galleries to claim corporation tax relief on certain costs incurred in developing exhibitions, was first announced in the 2016 Budget and was the subject of a consultation that ran between 5 September and 28 October 2016 (see Legal update, Consultation on museums and galleries tax relief). The government has also announced that, in line with other creative sector reliefs, relief will be available for 80% of qualifying expenditure and that the rates (of the payable tax credit for which the relief can be exchanged) will be 25% for touring exhibitions and 20% for non-touring exhibitions. Relief will be capped at £500,000 of qualifying expenditure per exhibition.

The government will shortly publish a consultation response and draft legislation for inclusion in the Finance Bill 2017, with the measure due to take effect from 1 April 2017. The draft legislation will include a sunset clause, so that the relief will expire in April 2022, unless renewed. In 2020, the government will review the relief and set out its plans beyond 2022.

For more information, see Tax legislation tracker: intellectual property: Museum and gallery relief.

(See HM Treasury: Autumn Statement 2016, paragraph 4.30 and HM Treasury: Autumn Statement 2016: policy costings, page 37.)

The government has announced two measures to simplify the administration of petroleum revenue tax (PRT) following its zero rating for chargeable periods ending after 31 December 2015 under section 140 of the Finance Act 2016:

At present, under Schedule 20B to the Finance Act 1993 (Schedule 20B), it is possible for the "responsible person" for a taxable field (a body corporate or partnership nominated as such under the Oil Taxation Act 1975) to make an election that the field is not subject to PRT. However, such an election currently entails the provision of substantial data to HMRC.

Under a draft clause published by HMRC as part of the 2016 Autumn Statement, to be included in the Finance Bill 2017, Schedule 20B will be amended so that the responsible person need only elect in writing and notify HMRC. The election will be deemed to be made when the notification is sent to HMRC. An election will have effect from the start of the first chargeable period beginning after the election is made and, as at present, no allowable loss that accrues from the field after the election has been made will be an unrelievable field loss. This is to have effect from 23 November 2016, so that it is possible to use the new opt-out process for chargeable periods beginning on or after 1 January 2017. This means that the legislation will be retrospective; if the legislation is not enacted, HMRC states that companies will need to submit outstanding returns but will not be subject to penalties.

Responsible persons wishing to make an election will still need the agreement of all participators (see Practice note, Oil and gas taxation: Participators). Acknowledgements of elections should be provided by HMRC within 56 days of receipt.

The second measure (not requiring legislation) is to remove the oil allowance reporting requirements from forms PRT 1 and 2, and the tax liability instalment reporting requirement from form PRT 6. This change has effect from 23 November 2016, applying to the chargeable period ending 31 December 2016 and subsequent periods. However, as the relevant forms will not be updated until a later date, the change will be communicated through updated HMRC guidance and, for now, the affected parts of the forms should just be left blank.

(For details of the PRT regime, see Practice note, Oil and gas taxation: Petroleum revenue tax.)

(See HM Treasury: Autumn Statement 2016, paragraph 4.38, HMRC: Petroleum Revenue Tax: cutting administration costs for the oil industry and Petroleum Revenue Tax: cutting administration costs for the oil industry - technical note, and Parliament: Autumn Statement 2016: Measures with immediate effect: Written statement.)

The government has announced that legislation will be introduced in the Finance Bill 2017 to amend the Enterprise Investment Scheme , Seed Enterprise Investment Scheme and Venture Capital Trust scheme rules. The changes are stated to:

Draft legislation for these changes (together with an explanatory note and tax information and impact note) will be published on 5 December 2016.

The government also announced that it would not be changing the venture capital schemes rules to permit the use of replacement capital. (Replacement capital is the purchase of shares from existing shareholders.) The government had announced in the 2015 Autumn Statement (see Legislation Tracker, Tax legislation tracker: owner-managed business: Venture capital schemes: replacement capital) that it would introduce this flexibility subject to obtaining state aid approval.

In the July 2015 Budget, the government confirmed that a new online process for the submission of advance assurance applications would be available from the end of 2016. However, this has yet to materialise. The government has, however, announced that it will consult on options to streamline and prioritise the advance assurance service.

For information about the venture capital schemes, see

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 2.8 and Parliament: Autumn Statement 2016: Measures with immediate effect: Written statement.)

The government confirmed that, as announced in the 2016 Budget, it will introduce two new allowances that will exempt from tax the first £1000 of an individual's trading and property incomes, and that where an individual's income falls below the threshold for the applicable allowance, there will be no requirement to declare the income for tax purposes. For background, see Legal update, 2016 Budget: key business tax announcements: Trading and property income allowances.

Additionally, the government confirmed that the trading income allowance will also cover certain miscellaneous income from providing assets or services. As previously announced, the legislation will be in the Finance Bill 2017.

We are tracking the measure to implementation in Tax legislation tracker: owner-managed business: Trading and property income allowances.

(See HM Treasury: Autumn Statement 2016, paragraph 4.14.)

In the 2016 Budget, the government announced a number of measures to tackle the use of disguised remuneration (DR) arrangements, including introducing an income tax charge on outstanding DR loans not repaid by 5 April 2019 (see Legal update, 2016 Budget: key share schemes announcements: Measures to be included in future Finance Bills).

In August 2016, HMRC issued a technical consultation on the measures. That document proposed some additional measures, including denial of corporation tax relief for DR arrangements in some circumstances, and proposals to introduce legislation to deal with schemes that did not fall within Part 7A ITEPA 2003 but that had the same objective, including certain arrangements involving self-employed individuals (see Legal update, Disguised remuneration: HMRC issues technical consultation document).

In the Autumn Statement, the government announced that it will extend the measures announced in the 2016 Budget to similar schemes used by self-employed individuals. A tax charge will be imposed on any outstanding loans made under DR-type schemes used by self-employed individuals if the loans are not repaid by 5 April 2019.

The government has also announced it will take steps to deny corporation tax relief for contributions to DR schemes from April 2017 unless income tax and NICs are paid (through PAYE) at the time the contribution is made or within 12 months of the end of the accounting period in which the deduction is claimed.

The response to the HMRC consultation on the DR proposals, together with draft legislation for Finance Bill 2017, is expected to be published in the draft Finance Bill on 5 December 2016.

(See HM Treasury: Autumn Statement 2016, paragraphs 4.46 and 4.47, HM Treasury: Autumn Statement 2016: policy costings, page 25 and Autumn Statement 2016: tax updates and technical changes policy paper, page 3.)

As announced in the 2016 Budget (see Legal update, 2016 Budget: key business tax announcements: Abolition of Class 2 NICs), Class 2 NICs are to be abolished from April 2018, so that the self-employed will pay only Class 4 (the level of which is currently under review). Entitlement to various benefits that depend on the worker's having paid NICs will, from that date, be linked to the payment of Class 4 or, in the case of those with profits falling below the small profits limit, voluntary Class 3.

(See HM Treasury: Autumn Statement 2016, paragraph 4.8.)

Following a consultation launched on 9 August 2016, the government has confirmed that legislation will be introduced to amend the rules concerning the allocation of partnership profits.

Partnerships are treated as transparent for most tax purposes and the activities of the partnership are, therefore, treated as carried on by the partners. Accordingly, partners are taxed separately on their share of the profits or losses of the partnership. The profits and losses of a partnership are, subject to certain provisions, allocated in accordance with the partnership's profit sharing agreement in force during the period of assessment. The consultation proposed that legislation should be introduced to confirm that, for tax purposes, profits will be allocated according to the profit-sharing arrangements set out in the partnership agreement, with this position being overridden if the profit shares change and the nominated partner notifies HMRC. The consultation also proposed that legislation should provide that the basis of the allocation of tax adjusted profits should be the same as the allocation of the accounting profit or loss between partners. (See Legal update, HMRC consults on changes to taxation of partnerships.)

The government has announced that the draft legislation amending the rules will be published for technical consultation. However, it is not indicated when this will be or whether it will be implemented in the Finance Bill 2017.

For more information on the allocation of partnership profits, see Practice note, Partnerships: allocation of profits and losses: tax. To track progress of this measure, see Tax legislation tracker: miscellaneous: Review of partnership taxation.

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 2.7.)

The government is consulting on reducing the money purchase annual allowance (MPAA) from its current level of £10,000 to £4,000 from April 2017.

The MPAA was introduced in April 2015 as part of the pension flexibility reforms and is designed to limit the scope for individuals who are flexibly accessing a defined contribution (DC) pension arrangement to obtain further tax relief by making additional pension contributions. The MPAA is triggered when individuals flexibly access their DC pension savings in certain ways, for example by withdrawing funds under a flexi-access drawdown fund or taking an uncrystallised funds pension lump sum. For a full explanation of how the MPAA works, see Practice note, Annual allowance: overview: Money purchase annual allowance.

HM Treasury notes that the MPAA was set at its current level in order to balance the need to restrict the availability of double tax relief, which according to the consultation paper is "against the spirit of the tax system", with the legitimate desire for individuals who have flexibly accessed DC pension savings to rebuild those savings if their circumstances change.

While the consultation paper suggests that an MPAA of £10,000 was helpful to ensure a smooth introduction of the pension flexibilities, it says the government does not believe an MPAA set at this level is "needed or appropriate on an ongoing basis". Instead, HM Treasury believes an MPAA of £4,000 is "fair and reasonable", but seeks views on whether this is the best level. The consultation also seeks confirmation that a reduction would not adversely affect the auto-enrolment regime or otherwise disadvantage particular groups.

No other changes to the current MPAA regime are proposed. For example, it will still not be possible to carry forward unused MPAA from previous tax years (in contrast to the standard annual allowance).

The consultation period closes on 15 February 2017 and the government will confirm the revised level of the MPAA at the 2017 Budget.

(See HM Treasury: Autumn Statement 2016, paragraph 4.20 and HM Treasury: Reducing the money purchase annual allowance: consultation (23 November 2016)).

The government plans to consult on several measures concerning the UK tax treatment of non-UK pensions and lump sums. These include:

(See HM Treasury: Autumn Statement 2016, paragraph 4.21.)

For further details and comment on these pensions announcements, see Legal update, 2016 Autumn Statement: key pensions announcements.

The government has confirmed its commitment to increase the income tax personal allowance to £12,500 and the higher rate threshold (the sum of the personal allowance and the basic rate limit) to £50,000 by 2020-21. It is unclear when this will be enacted.

The government has also confirmed that, in 2017-18, the personal allowance will rise to £11,500 and the higher rate threshold to £45,000.

Once the personal allowance reaches £12,500, the government has announced that it will rise in line with the Consumer Prices Index (CPI), like the higher rate threshold, rather than the national minimum wage (NMW). This represents a departure from legislation enacted in Finance (No. 2) Act 2015 to link the personal allowance to the NMW when it reaches at least £12,500 (see Private client tax legislation tracker 2014-15: Lifetime planning: Income tax: linking personal allowance to minimum wage). Again, it is unclear when this change will be enacted.

For tables of income tax rates and allowances, and links to more information about income tax, see Practice note, Tax data: income tax.

To track this measure, see Private client tax legislation tracker 2016-17: Lifetime planning: Income tax: personal allowance and higher rate limit.

(See HM Treasury: Autumn Statement 2016, paragraphs 4.5 and 4.6 and Executive summary; HM Treasury: Tax and tax credit rates and thresholds for 2017-18, section 1.6; and HM Treasury: Autumn Statement 2016: some of the things we've announced, paragraph 5.)

The government has announced that the personal savings allowance will remain at its current level of £5,000 for 2017-18.

The personal savings allowance is the band of savings income that is subject to income tax at 0%. The allowance came into effect from 6 April 2016 (see Private client tax legislation tracker 2015-16: Income tax: personal savings allowance).

For more information about personal allowances generally see Practice note, Tax data: income tax

(See HM Treasury: Autumn Statement 2016, paragraph 4.19 and HM Treasury: Autumn Statement 2016: policy costings, page 41.)

As originally announced in the July 2015 Budget, followed by further announcements in the 2016 Budget and in a consultation published on 18 August 2016, the government has confirmed that measures will be implemented by the Finance Bill 2017 to provide new deemed domicile rules. These will have effect from 6 April 2017 to prevent UK-resident individuals from benefiting from permanent non-UK domiciled status.

It has also been confirmed that the previously announced inheritance tax charge on UK residential property owned indirectly by non-UK domiciled individuals will also be implemented by the Finance Bill 2017 to have effect from 6 April 2017.

Changes to business investment relief for non-UK domiciled individuals to make it easier for them to inwardly invest in UK businesses will also be introduced in April 2017 as previously announced. The government will also continue to consider further improvements to the relief rules.

The consultation published on 18 August 2016 included draft legislation for some of these measures but additional provisions will be included in draft legislation for the Finance Bill 2017 which will be published on 5 December 2016.

For more information, see Practice notes, Domicile, Residence, ordinary residence and domicile: UK tax implications, Remittance basis: what individuals need to know: overview and Taxation of offshore trusts: overview. To follow this development, see Private client tax legislation tracker 2016-17: Permanent non-domiciled tax status abolished, IHT: UK residential property owned indirectly, Remittance basis: de minimis exemption and Remittance basis: business investment relief.

(See HM Treasury: Autumn Statement 2016, paragraph 4.15.)

As announced in the 2016 Budget following a consultation published on 20 April 2016, the government has confirmed that that it will introduce legislation in the Finance Bill 2017 to prevent excessive tax charges arising on the part surrender and part assignment of life insurance policies.

The legislation will allow policy holders to make an application to HMRC to have the income tax charge recalculated on a just and reasonable basis.

To follow this development, see Private client tax legislation tracker 2016-17: Life insurance: part surrenders and assignments.

(See HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 1.4.)

The government has announced that, from 6 April 2017, the amount of investment social enterprises up to seven years old can raise through social investment tax relief (SITR) will increase to £1.5 million.

It will also make changes to the SITR scheme as follows:

The government has said that it will undertake a review of SITR within two years of its enlargement.

In the 2014 Autumn Statement, the government announced its intention, subject to obtaining EU state aid clearance, to expand SITR by replacing the current investment restriction of £275,000 over a three-year period with a new annual investment limit of £5 million per organisation, subject to an overall limit of £15 million. The government has said that its current announcement replaces its 2014 Autumn Statement expansion plan "with a targeted expanded regime to run alongside the existing scheme".

For further information about SITR and the 2014 announcement, see Practice note, Social investment tax relief (SITR).

(See HM Treasury: Autumn Statement 2016, paragraph 4.34 and HM Treasury: Autumn Statement 2016: policy costings, page 38.)

For other private client and charity announcements, see Legal update, 2016 Autumn Statement: key private client announcements.

The government has announced that the annual chargeable amount for the annual tax on enveloped dwellings (ATED) will rise in line with inflation for the 2017 to 2018 chargeable period (which begins on 1 April 2017).

For more information about ATED, see Practice Note, Annual tax on enveloped dwellings (ATED).

(See HMRC: Autumn Statement 2016: tax updates and technical changes, paragraph 2.6.)

For other property announcements, see Legal update, 2016 Autumn Statement: key property announcements. For construction announcements, see Legal update, 2016 Autumn Statement: key construction announcements.

The government has announced that it intends to consult on options for amending the VAT grouping rules.

The consultation is in response to the ECJ decisions in Beteiligungsgesellschaft Larentia + Minerva mbH & Co.KG v Finanzamt Nordenham (Case C-108/14), Finanzamt Hamburg-Mitte v Marenave Schiffahrts AG (Case C-109/14) and Skandia America Corp. (USA), filial Sverige v Skatteverket (Case C-713), the implications of which are that member states may only restrict VAT grouping to legal persons, where those restrictions are appropriate and necessary in order to prevent abuse, avoidance or evasion.

The announcement marks the beginning of the formal consultation that forms part of a process set out in an HMRC policy paper published in January 2016, and follows meetings between HMRC and business representative bodies earlier in the year with a view to developing a series of policy options for reform.

For more information, see Legal update, HMRC to consult on VAT grouping rules following Larentia + Minerva and Skandia and Legislation Tracker, Tax legislation tracker: VAT: Amendment of grouping rules.

(See HM Treasury: Autumn Statement 2016, paragraph 4.41.)

Following an announcement in the 2016 Budget and a consultation that ran from 16 March 2016 to 30 June 2016, the government has confirmed it will introduce legislation in the Finance Bill 2017 for a new scheme aimed at ensuring that fulfilment houses contribute to tackling VAT abuse by some overseas businesses selling goods online. The scheme will open for registration in April 2018.

The scheme will require fulfilment houses to meet specified standards, be registered and maintain accurate records.

For more information, see Practice note: overview, Cross-border transactions and VAT: invoices, refunds and compliance: Tackling VAT evasion on online sales by overseas businesses and Tax legislation tracker: VAT: Evasion on online sales by overseas businesses.

(See HMRC/HM Treasury: Autumn Statement 2016: tax updates and technical changes, paragraph 4.3.)

A new 16.5% VAT flat rate will be introduced for businesses with limited costs. This is a new measure that has not previously been announced or consulted on.

The VAT flat rate scheme is available for small businesses, which are entitled to select an appropriate flat rate of VAT by reference to their trade sector (see Practice note, VAT accounting, records, invoices and credit notes: Flat-rate scheme).

The government has stated that it is aware that this scheme is being abused. Consequently, with effect from 1 April 2017, limited cost traders must apply a 16.5% flat VAT rate. A "limited cost trader" will be defined in the legislation as one whose VAT inclusive expenditure on goods that are used exclusively for the purposes of the business is either:

Capital expenditure on goods, expenditure on food and drink for consumption by employees and expenditure on vehicles, vehicle parts and fuel will not be taken into account. However, expenditure on vehicles, vehicle parts and fuel will be taken into account for businesses providing transport services.

Draft secondary legislation will be published on 5 December 2016.

Anti-forestalling tertiary legislation is introduced with effect from 24 November 2016 and is contained in a revised VAT Notice 733. This provides that, when calculating VAT inclusive turnover, services provided by businesses on or after 1 April 2017 will be treated as taking place on 1 April 2017 if the business has issued an invoice, or received a payment, in respect of the services after 23 November 2016 but before 1 April 2017. If an invoice or payment concerns continuous services that span 1 April 2017 a fair and reasonable apportionment must be made.

(See HMRC: Tackling aggressive abuse of the VAT Flat Rate Scheme – technical note, VAT Notice 733: Flat Rate Scheme for small businesses, paragraphs 8.2 and 9.7, House of Commons Written Statement: Autumn Statement: 2016: Measures with immediate effect: Written statement: HCWS277, HM Treasury: Autumn Statement 2016, paragraph 4.51; HM Treasury: Autumn Statement 2016: policy costings, page 24 and Chancellor Philip Hammond's Autumn Statement 2016 speech.)

The standard rate of insurance premium tax (IPT) will increase by 2%, to 12% from 1 June 2017.

For information on IPT, see Practice note, Insurance premium tax.

(See HM Treasury: Autumn Statement 2016, paragraph 4.40 and HM Treasury: Autumn Statement 2016: policy costings, page 19.)

As part of the Autumn Statement, the government has published a letter from the Financial Secretary to the Treasury to the Office of Tax Simplification setting out the scope of future reviews and follow-up action to be undertaken. The main areas identified are:

(See Correspondence between the Chancellor, Financial Secretary to the Treasury and the Office of Tax Simplification regarding recent OTS publications.)

Following an announcement in the 2016 Budget, legislation introducing a levy on the soft drinks industry will be published on 5 December 2016.

(See HM Treasury: Autumn Statement 2016, paragraph 4.39.)