On 25 November 2015, the Chancellor, George Osborne, delivered his Autumn Statement and Spending Review. This legal update summarises the key announcements for finance lawyers.
The Chancellor, George Osborne, delivered his 2015 Autumn Statement and Spending Review on 25 November 2015. This update summarises the key announcements for lawyers advising on finance transactions.
To support small and medium-sized enterprises (SMEs) in accessing a broader pool of lenders, the government plans to designate the following credit reference agencies (CRAs) under the Small and Medium Sized Business (Credit Information) Regulations 2015 (a draft version of which was published earlier in November 2015): Experian, Equifax and CreditSafe. The Regulations, which will be made under the Small Business, Enterprise and Employment Act 2015, will impose a duty on designated banks to provide specified information about their SME customers to designated CRAs, and a duty on designated CRAs to provide such information to other lenders, subject to the agreement of the business to which the information relates.
(2015 Autumn Statement and Spending Review, paragraphs 1.221 and 3.101.)
Peer-to-peer lending
In the Budget Report of March 2015, the government had announced that it would consult on whether to extend Individual Saving Account (ISA) eligible investments to include debt securities and equity offered by companies through crowdfunding platforms (see Legal update, March 2015 Budget: implications for finance lawyers: Peer-to-peer lending). Following a public consultation exploring the issue, the government concluded that the list of qualifying investments for the new Innovative Finance ISA will be extended in Autumn 2016 to include certain debt securities offered on crowdfunding platforms. The government believes this will provide ISA holders with greater choice over how to invest and will support the crowdfunding sector to continue to grow as a source of alternative finance for businesses. In addition, the government will continue to explore the case for extending the list to include equity crowdfunding.
(2015 Autumn Statement and Spending Review, paragraph 3.33.)
Infrastructure
The government will extend the availability of the £40 billion UK Guarantees Scheme to March 2021, to continue to help infrastructure projects raise finance from banks and the capital markets.
(2015 Autumn Statement and Spending Review, paragraphs 1.194 and 3.104.)
Loan relationships and derivative contracts
The government will introduce legislation in the Finance Bill 2016 to update the tax rules for company debt and derivative contracts to ensure they "interact correctly" with new accounting standards.
(2015 Autumn Statement and Spending Review, paragraph 3.60.)
Tax: anti-avoidance measures
Equity options
The government has announced that shares transferred to a clearance service or depositary receipt issuer as a result of the exercise of an option will be subject to stamp duty or stamp duty reserve tax (SDRT) at a rate of 1.5% of the higher of the market value of the shares or the option strike price. The aim of this measure is to prevent avoidance using "deep in the money" options, which have a strike price significantly below (for call options) or above (for put options) market value. This measure will be included in Finance Bill 2016.
The government's 2015 Autumn Statement policy costings document states that this measure will be effective from April 2016, but HM Treasury's 2015 Autumn Statement and Spending Review document states that it will apply to options entered into on or after 25 November 2015 and exercised on or after the date of the 2016 Budget.
(2015 Autumn Statement and Spending Review, paragraphs 1.153 and 3.59.)
Transactions in securities
The government has also announced that it will introduce, in the Finance Bill 2016, changes to the transactions in securities rules and a new targeted anti-avoidance rule to prevent taxpayers from obtaining a tax advantage by converting, in certain circumstances, what would otherwise be an income distribution into a capital receipt. This is intended to tackle the use of voluntary liquidation as a tax planning tool by introducing two new sets of rules the effect which will be that voluntary liquidations of companies which are then "re-opened" by the same controlling shareholders will result in an income tax liability rather than a CGT liability.
(2015 Autumn Statement and Spending Review, paragraphs 1.153 and 3.85.)
Corporate and financial assets
The government is seeking up to a further £5 billion of corporate and financial asset sales by March 2020. Subject to a value for money assessment, the government will:
Press ahead with the privatisation of the Green Investment Bank, with a sale expected to be concluded during 2016-17.
Consult on options to move operations of the Land Registry to the private sector from 2017.
(2015 Autumn Statement and Spending Review, paragraph 1.302.)
Finance Bill 2016
Many of the measures announced today will be included in the Finance Bill 2016, the draft legislation for which will be published on 9 December 2015.