The Chancellor of the Exchequer has delivered his 2015 Autumn Statement and, overall, it was a case of expected policies that were not announced.
Seemingly, the Treasury has benefited from a windfall of £27bn from the combined effects of higher than anticipated tax receipts and lower debt interest. However, it is worth bearing in mind that this is a change to a forecast made only a few months ago.
The predicted crackdown on personal service companies, the scrapping of Entrepreneurs Relief and the cutback in the police service failed to materialise. Moreover, the much-criticized changes to the tax credit system have largely been dropped.
Contractors working through their own Limited Company have particular reason to celebrate. Due to a well-orchestrated campaign, not only has the draconian idea of forcing them onto the client payroll after a month been shelved but also the restriction on tax relief for travel and subsistence expenses has been watered-down only to relate to those Personal Service Companies where IR35 rules apply.
However, it would be foolhardy to believe that this has gone away for good. The consultation period on the initial discussion document on IR35 reform announced at the Summer Budget ended in September and the official HMRC line is that they are still considering the responses to this.
The overall objective to find a solution that protects the Exchequer and improves fairness remains and we fully expect a policy proposal to be published within the next few months. This does mean that any resulting change is unlikely to come into effect before April 2017 at the earliest.
Key sections of the Autumn Statement addressed the housing market. A new Help to Buy equity loan scheme for London will come into effect from early 2016 offering buyers loans for 40% of the purchase price as opposed to the current 20%.
From April 2016, Help to Buy Shared Ownership will be available to anyone who has a household income of less than £80,000 outside London or £90,000 inside London. Under the scheme, between 25% and 75% of a home can be purchased with the remainder rented with the guarantee that the annual rent will be no more than 3% of the amount left.
For example, 50% of a £250,000 property is purchased under the scheme. The annual rent for the remainder can be no more than £3,750 equating to £312.50 a month.
Again from April 2016, a higher rate of Stamp Duty Land Tax will be charged on the purchase of additional residential properties for more than £40,000. The higher rate will be 3% above the current Stamp Duty Land Tax rates and will apply to buy-to-let properties and second homes.
On many levels, this seems a sensible proposal especially for parts of the country like the West of England where much of the local population are unable to afford to buy houses due to the desirability of second homes.
For a £350,000.00 property, the Stamp Duty for a buy-to-let or second home buyer will be £16,800.00 compared to £7,500.00 for those buying their own home.
However, there has been no consideration made for those commercial buyers looking to renovate and refurbish properties thereby helping to ease the housing shortage. Worse still, announcing that this change comes into effect from next April will surely only serve to drive house prices up further.
There was some good news for small businesses with the Small Business Rate Relief scheme extended for another year. In addition, the uniform business rates regime will be scrapped to empower local councils to cut rates to make their town centres “more attractive to businesses”.
From 2020, local councils will keep money collected from business rates to spend on local services like street repairs, libraries and transport.
The investments in housing, infrastructure and science and technology together with the extension of the number and size of Enterprise Zones all represent a significant boost to the economy.
The concern remains as to whether the seeming end to the age of austerity is based on a grand illusion.
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