2013 Autumn Statement and Finance Bill 2014: Cooked to perfection or a recipe for disaster?

Practical Law UK Articles 7-551-7508 (Approx. 29 pages)

2013 Autumn Statement and Finance Bill 2014: Cooked to perfection or a recipe for disaster?

by Naomi Lawton

2013 Autumn Statement and Finance Bill 2014: Cooked to perfection or a recipe for disaster?

We asked leading tax practitioners for their views on the 2013 Autumn Statement and the draft Finance Bill 2014. An overview of their comments is set out below: click on a name to read the comment in full then use the back button on your browser to return to the overview.

To see full summaries of the 2013 Autumn Statement and the draft Finance Bill 2014, see Legal updates, Draft Finance Bill 2014 legislation: key business tax measures and 2013 Autumn Statement.

Ambience

Context is all, and this Autumn Statement and draft Finance Bill come close to the end of the current parliamentary term and the political cycle moves inexorably onwards. Perhaps rather unexpectedly, the metrics of the Autumn Statement revealed relatively strong growth. What this growth was driven by, and how it was quantified, is perhaps open for discussion, but in these circumstances it is clear that the government wanted to play it safe.

It was, as a result, what Stephen Pevsner, King & Wood Mallesons SJ Berwin described as “a reasonably low key Autumn Statement”.

On the whole, practitioners’ comments were unusually lacking in vitriol. (Some of the covering e-mails, however, were a lot more colourful and really quite marvellous. Tragically, I am not permitted to use those, so I must make do.)

The background is the inevitable tension between securing long-term growth for the UK (nice to have) and short-term votes for politicians (immediate and vital). The government’s stated aim is to create in the UK the most competitive tax regime in the G20 - inward investment is vital for a healthy economy. But it appears that votes are vital, too, and the clamour of the media in relation to tax policy and the concept of relative fairness between taxpayer groups grows ever louder. As a result, the UK government must balance the interests of actually making the UK open for business and seeking to curry favour with voters. The realities of democracy can be rather unpalatable.

Also significant is the fact that this Autumn Statement is the first since the introduction of the general anti-abuse rule (GAAR). If anyone had seriously contemplated that its introduction might reduce HMRC’s hunger for the more familiar targeted anti-avoidance rules, they would have been most disappointed. Heather Gething, Herbert Smith Freehills had been more realistic:

“the announcement of many specific fixes to prevent specific types of avoidance is recognition … that the GAAR is of little practical use to prevent avoidance and that was expected.”

Partnerships: the main course

Above all, commentators were irritated by a series of measures relating to the taxation of partnerships. Following on from a consultation process that took place over the summer, they were described by Simon Yates, Travers Smith as the “meatiest” of the proposals.

The first of these measures seeks to counter the allocation of excess partnership profits to non-individual members. It is significant that the Chancellor has now made clear that the provisions will extend to the alternative investment fund management sector. This had not been previously anticipated in the consultation documents and led Simon Yates to comment that:

“In a presumably satirical move, the condoc came out on the same day as a policy document was released emphasizing the government’s desire to make the UK as attractive as possible to investment managers.”

David Milne QC, Pump Court Tax Chambers thought that the provisions were “likely to cause howls of anguish and much lobbying (because they affect articulate groups of taxpayers such as hedge funds and large firms of accountants)”. Stephen Hoyle, DLA Piper LLP cautioned that it was “important that the new rules … [did] not prevent the use of non-UK companies by international partnerships where they are used for local regulatory purposes or to equalise income across consolidated profit pools”.

A further provision related to the treatment of salaried members. As Geoffrey Kay, Baker & McKenzie LLP noted, “the definition of “salaried member” is much broader than anticipated.

Eloise Walker, Pinsent Masons LLP did not mince her words:

“Oh boy … Imagine, if you will, almost every professional partnership - legal and accountancy - running round this morning panicking about the fact that every one of their fixed share partners is about to become an employee, because that is what the new rules will do if we’re not careful.”

With a proposed effective date of April 2014, Nikol Davies, Taylor Wessing LLP noted that potentially affected partnerships “have limited time to consider the impact of the legislation”. Brenda Coleman, Ropes & Gray International LLP complained that there “are often good commercial reasons for “salaried partners” particularly for junior and retiring partners”. Louise Higginbottom, Norton Rose Fulbright LLP noted that the “fact the new rules seem not to extend to ordinary partnerships or non-UK LLP equivalents will no doubt attract comment”.

Tripe, onions and banks

The banking sector apparently remains resolutely unfashionable at government level – a public relations nightmare – and it continues to receive a sound beating.

The announcements implementing HMRC’s duty to publish an annual report on the operation of the Code of Practice on Taxation for Banks, including the details of those banks that HMRC considers have not complied with the Code, were much maligned by commentators.

Adam Blakemore, Cadwalader, Wickersham & Taft thought that “the very approach of naming taxpaying entities for perceived lack of compliance with the, ostensibly voluntary, Code remains troubling”. Sandy Bhogal, Mayer Brown International LLP agreed, stating that:

“the amended bank code of conduct is an inappropriate way to manipulate taxpayer behaviour. Seeking to impose a form of moral barometer on a specific class of taxpayer runs completely contrary to the concept of the rule of law and sets a dangerous precedent for the future”.

Similarly, Ashley Greenbank, Macfarlanes LLP commented that the extension of this regime "beyond the most flagrant and egregious cases will further threaten the balance between revenue authority and taxpayer”. Steve Edge, Slaughter and May thought it represented “playing to the galleries perhaps with no real expectation that these powers will need to be exercised in these days of tax peace”.

It was described as a “murky” area by Andy Treavett, Hogan Lovells International LLP and (rather wonderfully) by Hartley Foster, Field Fisher Waterhouse LLP as “irretrievably vulgar”. Vimal Tilakapala noted that it represented “still an unusual case of a statutory sanction being attached to a “voluntary” code”.

The conclusion of Chris Bates, Norton Rose Fulbright LLP was that the proposals would meet with a “mixed reception” from the banks, noting that:

“Banks will approach the well trailed toughening up of the voluntary Code … with some wariness, but the great preponderance of Banks appear to have adhered to the Code.”

Land and the Great British sell-off

In the context of real estate, the biggest talking point was the clearly politically motivated announcement by the government that it would consult on the extension of capital gains tax to non-resident investors in UK residential property. It represented one of what Elaine Gwilt, Addleshaw Goddard referred to as the “politically crowd-pleasing measures”.

The proposal was very loosely worded (described by John Challoner, Norton Rose Fulbright LLP as “frustrating and possibly irresponsible in terms of creating uncertainty”). Richard Croker, CMS Cameron McKenna LLP noted that such an announcement would have been “inconceivable only a few years ago”.

The move had been widely anticipated, but Nick Beecham, Field Fisher Waterhouse LLP thought that “non-UK residents owning residential property in the UK will be relieved that the extension of capital gains tax to them will not take place until April 2015, and then only on future gains”. Richard Croker, CMS Cameron McKenna LLP also noted that there would be some “degree of overlap with the CGT regime for enveloped properties, which looks yet more bizarre in the light of this proposal”. This curdling of principles was also noted by John Barnett, Burges Salmon who nonetheless thought that the new proposals were “arguably, more logical than the half-baked ATED measures introduced last year”. Andrew Loan, Macfarlanes LLP with the benefit of hindsight, concluded that the ATED provisions had been the “thin end of a wedge”.

Charles Goddard, Rosetta Tax LLP said:

“The trouble is, these new rules don’t make much sense when you get past the headlines. The news of CGT on non-resident individuals comes just 6 months after CGT was imposed on companies selling residential properties, in a legislative package designed to persuade offshore investors to hold properties directly… What is a non-resident investor to do? A sensible conclusion might be that it is all too much trouble here and that they would be better off investing elsewhere and leaving the UK – which they can do tax-free any time up until April 2015!”

The bigger question may be where all this is going. Michael Hunter, Addleshaw Goddard wondered whether “this marks the start of a move towards taxing non-residents on UK situs assets generally.” Similarly, Tony Beare, Slaughter and May mused that it “remains to be seen whether this regime will be extended to commercial property in due course”.

Also contemplating such a possibility, Giles Bavister, King & Wood Mallesons SJ Berwin wondered whether “the risk of future changes may affect the pricing of commercial real estate and real estate vehicles, giving REITs a possible advantage in bidding for properties”.

Meanwhile, the tinkering with the provisions relating to REITs continues. John Christian, Pinsent Masons LLP noted that “the decision to allow REITs to invest as institutional investors in other REITs is welcome and responds to the property industry’s positive reaction to the consultation earlier this year on the topic”. William Watson, Slaughter and May however, thought that HMRC were “focusing on the wrong part of the close company rules here”.

Also in relation to REITs, Elliot Weston, Lawrence Graham LLP noted that “HMRC have still not dealt with the more problematic issue which is the corporation tax charge that arises to the UK REIT on distributions to “institutional investors” that are 10% corporate shareholders in the UK REIT”.

Employee incentives: the Happy Eater

However, there is near uniform joy amongst employee incentives practitioners this year. The increases in the participation limits from April 2014 for the all employee tax-advantaged SAYE and SIPs were described by Barbara Allen, Stephenson Harwood as “notable and unexpected”. Karen Cooper, Osborne Clarke said that “new legislation to provide relief for capital gains tax on share disposals to “employee-ownership trusts” are a signal that the government is serious about supporting employee-led businesses”. Judith Greaves, Pinsent Masons LLP made a similar point, noting that “leaving aside “annual” changes, the increases in SAYE and SIP limits may well be the ones with the biggest direct impact on the largest number of people. They are evidence that the Government is serious about encouraging participation across the workforce, from the largest companies to the smallest.”. Nicholas Stretch, CMS Cameron McKenna LLP noted that the landscape had “changed dramatically” over recent years. Graeme Nuttall, Field Fisher Waterhouse LLP concluded that “this may be the decade in which employee ownership enters the mainstream of the UK economy”.

The only criticism came from Colin Kendon, Bird & Bird, who complained that extending the time limit for “making good” tax liability under section 222 of ITEPA 2003 did “not really deal with the fundamental unfairness. With the extensive PAYE penalty regime now in place there is no need for the section 222 charge at all”.

Multinationals: Fish ‘n’ Chips or Nam tok moo?

For this government, the political imperative is to preserve the UK’s competitive business tax system, but also to be seen to crack down on tax avoidance (which, confusingly, is sometimes also referred to as legitimate tax planning incentives designed to encourage inbound foreign investment). As a result, many of the plethora of targeted anti-avoidance rules contained in the Autumn Statement and draft Finance Bill 2014 related to the taxation of multinationals (“no doubt reflecting the scrutiny of the Public Accounts Committee”, wrote Richard Carson, Taylor Wessing LLP). Tom Scott, McDermott Will & Emery similarly commented that a “common thread in the various proposals is their focus on reducing avoidance or evasion via cross-border planning”.

In relation to this current round of anti-avoidance tweaks to the debt cap, CFC, derivative contracts and double tax relief rules, Jonathan Cooklin, Davis Polk & Wardwell LLP said that “it’s hard to believe that there is too much juice left to be squeezed out of major corporate taxpayers from these changes”. Colin Hargreaves, Freshfields Bruckhaus Deringer described the CFC anti-avoidance change as “a limited push at a large and brightly painted stable door”.

If the partnership announcements represented the meat of the proposals, then the provisions targeted at multinationals were the garnish – complicated, delicate, a little bit pointless and tending to get in the way of the main event.

The announcements are also notable for what they do not include. In particular, Richard Sultman, Cleary Gottlieb Steen & Hamilton LLP noted:

“One area of notable silence in the Autumn Statement is in relation to the BEPS project and rules to address the taxation of multinationals. No doubt we will be hearing more on that in due course, but for now this is an indicator that the UK would prefer to act together with the international community and not on a unilateral basis”.

However, the Autumn Statement did include a reiteration by the Chancellor of the Prime Minister’s commitment to a publicly accessible central register of company beneficial ownership to help prevent money laundering, tax evasion and other crimes. The proposal is controversial, not least because no other jurisdiction has such a register. The UK government proposes to move forward unilaterally in this respect, hoping (rather unrealistically) that other jurisdictions will follow. It seems inevitable that this will seriously disadvantage the competitive position of the UK.

Andrew Prowse, Field Fisher Waterhouse LLP, for one, is not convinced by the government’s policy. He concludes that “whether it will achieve that aim is questionable, and it should be remembered that a desire for confidentiality is different from wanting to evade tax”.

Oil and Gas: this season’s speciality

Comment on provisions relating to the oil and gas industry have been unusually prominent this year. Iain Scoon, Shearman & Sterling LLP thought that, in their support for the shale gas industry, they represented “politically, at least, the most controversial aspect of the Autumn Statement … showing that the Government wishes to support this industry despite environmental opposition”. Michael Thompson, Vinson & Elkins LLP agreed that the new onshore allowance was “as generous as could reasonably be expected … and is more flexible in its use than originally proposed by the government”.

Louise Higginbottom, Norton Rose Fulbright LLP was slightly more cautious, stating that: “Although the oil industry benefits from the new regime for shale gas, and other incentives to assist with developing more difficult offshore fields, a new and seemingly complex provision in relation to the tax treatment of chartering equipment for use offshore (both limited deductions and imposing a ring fence) is proposed.”

And a Smorgasbord of other measures…

In terms of other provisions, a number of commentators commented favourably on the change in company ownership rules. David Harkness, Clifford Chance LLP thought that it was “encouraging to see a positive response following lobbying and shows that HMRC and taxpayers can work together to improve the tax code” (praise the lard).

Michael Lane, Slaughter and May noted that “the Government has finally given in to common sense”. Simon Skinner, Travers Smith described the changes as “an unexpected and very sensible early Christmas present”. (I’m not sure what passes for Christmas in the Skinner household, but speaking personally I will be distraught if this is all I get for Christmas.)

The proposals relating to tax avoidance scheme “follower” cases also attracted comment, in particular in relation to the operation of the rule of law. Liesl Fichardt, Clifford Chance LLP stated that:

“The threat of a penalty if the follower taxpayers do not amend their returns may in some cases put undue pressure on them not to pursue their appeals and may result in them not utilising the judicial system, even where they have a good chance of success. This could be seen as a mechanism to deny them fair access to justice.”

Draft legislation has not yet been published. As David Pickstone, PwC Legal LLP says, “We will need to wait until the New Year for the draft legislation before we know more”.

A number of announcements relating to stamp taxes have also been welcomed. Martin Walker, Deloitte noted that the proposed abolition of stamp tax on trading exchange traded funds (ETFs) “removes a significant barrier to setting up and marketing UK-based ETFs”. There was also an announcement to abolish stamp taxes on recognised growth markets. The draft legislation makes clear that this includes both stamp duty and SDRT and the provisions have been widely welcomed - Mathew Oliver, Bird & Bird referred to them as a “welcome boost”. Dominic Stuttaford, Norton Rose Fulbright LLP however, noted that “there will be a cost of listing on other exchanges, as that may switch off the relief, which may lead to unfortunate results”.

Erika Jupe, Osborne Clarke also referred to the abolition of the existing SDRT charge on surrenders of units in UK unit trusts and shares in OEICs, stating that “this charge has long been criticised as making the UK funds industry uncompetitive against its European rivals and this change is therefore particularly welcome”.

A number of commentators noted the new scheme that allows suppliers of broadcasting, telecommunications and electronic services (BTE) to register for VAT in one member state only – a mini-one stop shop (MOSS). The scheme allows VAT due in any member state to be accounted for and paid through an electronic portal. Michael Conlon QC, Hogan Lovells International LLP notes, however, that “input VAT incurred in member states other than that of registration cannot be recovered using MOSS. Claims must continue to be made under the Eighth Directive Procedure, which is disappointing”.

Leo Ringer, CBI also noted that “commitments to review ways to enhance equity finance and retail bonds in the UK are also welcome”.

How big are the portions?

Of course, as any seasoned tax practitioner will tell you, the ultimate and time-tested barometer of the mettle of a Finance Bill is the number of its pages. The draft legislation and explanatory notes amount to 673 pages.

On the one hand, Kerry Westwell, Hogan Lovells International LLP noted that it had “shrunk by over 400 pages this year”. But on the other, it is still enough to be described by Rob Young, Taylor Wessing LLP as a “vast swathe”, and Kate Habershon, Morgan Lewis & Bockius thought it “hard to believe that the new draft legislation addressing LLPs could not have been achieved in less than 29 pages”.

Overall dining experience

“Not memorable”, is probably the conclusion.

This year’s Autumn Statement and draft Finance Bill 2014 did not amount to delicate pan-Asian fusion cuisine. But neither was it a kebab from Dionysis on the Seven Sisters Road in Holloway. Really, it was something in between - a little bland, perhaps, but does the job for many.

So anyway, what’s for lunch?

Comments in full

Barbara Allen, Stephenson Harwood

“The Government has again demonstrated its support for employee ownership by the measures outlined in the Autumn Statement. Most notable and quite unexpected are the increases in the participation limits for the all employee tax-advantaged Save As You Earn Scheme ("SAYE") and Share Incentive Plan ("SIP") to apply from April 2014. It will be surprising if these changes do not lead to renewed interest in SAYE and SIP from companies not currently operating either plan. However, companies with an SAYE or SIP are not required to apply the new limits and may decide not to do so if this would result in unacceptable additional dilution or cost.

You may also recall that the Government first indicated its intention to introduce specific tax reliefs aimed at promoting indirect employee ownership through a trust structure in the 2013 Budget. The Autumn Statement provided more detail of these reliefs. However, the real question is whether the availability of these tax reliefs will be the driver for setting up more indirect employee ownership structures or simply a by product for those companies committed to introducing this ownership model.”

John Barnett, Burges Salmon

“Two measures stand out on the CGT side.

Halving the PPR final period from 36 months to 18 months is not unreasonable, but slightly unexpected. It will particularly affect those who cannot sell their current house and so bridge for a period. In an active property market 18 months bridging is probably reasonable, but I fear that in some parts of the country where the market is still sluggish it may not be enough. If this policy discourages house and job mobility then it may be counter-productive.

Imposing CGT on non-residents who own UK residential property was widely rumoured and, arguably, more logical than the half-baked ATED measures introduced last year. It is a shame that these changes were not properly consulted on instead of ATED-related CGT. But it is good that there will be a proper consultation and a sensible transitional period until April 2015. The seeming re-basing to April 2015 (the speech referred to “future” gains) is also welcome. The detailed rules will need some work. For instance, denying non-residents the ability to make a main-residence election is likely to be discriminatory on European grounds. But allowing such an election could drive a coach-and-horses through the provisions as non-residents would then typically elect their UK residence: their foreign one being exempt anyway.”

Chris Bates, Norton Rose Fulbright LLP

“The Autumn Statement will have a mixed reception from Banks. Banks will approach the well trailed toughening up of the voluntary Code of Conduct to introduce statutory name and shame rules with some wariness, but the great preponderance of Banks appear to have adhered to the Code. The broadening of the base of the Bank Levy will not be welcome. On the other hand there are some signs that HMRC will react favourably to remedy adverse tax consequences of the new regulatory regime which will be welcome.”

Giles Bavister, King & Wood Mallesons SJ Berwin

“The chipping away of the exemption for tax on capital gains for non-residents continues. It started with ATED related gains. The stated aim of that change was by that bringing non-resident companies within the charge to tax on capital gains made on “owner occupied” property, SDLT avoidance through using corporate wrappers would be discouraged. The Autumn Statement introduces the charge to tax on non-resident individuals that own certain high value residential property in the UK, but only for gains arising after 5 April 2015. It is expected that little tax revenue will be derived (and in any event none until tax for the year ending 5 April 2016 becomes payable when most gains will remain exempt anyway) and there is no SDLT avoidance angle, and in fact it may mean that it becomes comparatively more efficient to hold property in a company thereby undermining the previous ATED related gains provisions. It is hoped that the new charge achieves its political goal and that the chipping away of the capital gains exemption stops here, although that may be overly optimistic. In any event, the risk of future changes may affect the pricing of commercial real estate and real estate vehicles, giving REITs a possible advantage in bidding for properties.”

Tony Beare, Slaughter and May

“Some thoughts on the Autumn Statement are as follows:-

(a) perhaps the most welcome development is the proposal to restrict the rules which limit the carrying forward of losses on a change of ownership. After much lobbying, those rules are to be amended in 2014 in two important respects. First, the insertion of a new holding company on top of an existing group (a purely technical change of ownership) will no longer constitute a change of ownership. Secondly, a significant increase in capital (which is capable of triggering the application of the rules in the case of investment companies) will now require an increase of both £1m and 25%;

(b) another welcome development is the proposal to introduce regulations providing certainty to insurers in relation to Solvency 2 - compliant instruments in advance of agreement to Solvency 2. In the past year, draft regulations designed to facilitate regulatory capital issues by banks have been produced and this proposal should put insurers in a comparable position;

(c) in contrast, the property sector is unlikely to be pleased with the Chancellor’s proposals. Along with changes to the private residence exemption next year, a capital gains tax charge is to be introduced on disposals of UK residential property by non-UK residents from April, 2015. It remains to be seen whether this regime will be extended to commercial property in due course. It is certainly something of an anomaly that the UK has not so far sought to cash in on its valuable real estate; and

(d) it was interesting to note that there are to be fewer changes to the loan relationship and derivative contract rules in the FA 2014 than were first mooted when the consultation into those rules commenced. This is indicative of the complexities which are arising out of the consultation process.”

Nick Beecham, Field Fisher Waterhouse LLP

“Non-UK residents owning residential property in the UK will be relieved that the extension of capital gains tax to them will not take place until April 2015, and then only on future gains.”

Sandy Bhogal, Mayer Brown International LLP

“There is little to cause serious alarm for businesses in this year’s statement, and the existing consultation process (and the increasing use of press leaks) means that there were no surprises either. There is some evidence to suggest that the government’s strategy to make the UK tax system more competitive is working, and if moves are made in the future to simplify the substantial shareholdings regime (or allow tax relief for capital investment more generally), the desire to have the most competitive tax regime in the G8 may well come to fruition. There are still certain issues to deal with, notably any challenge to the UK patent box regime and any unilateral measures which arise under the BEPS Action Plan.

The introduction of various anti-avoidance rules is a feature of the budget process now, and many of the changes are seeking to address defects in existing legislation and one wonders if this could have been avoided had the original rules been implemented more carefully. A good example of excessive complexity can also be seen in the partnership rule changes. Whilst there is no dispute that certain changes were needed, some of the provisions will disproportionately affect the asset management industry and, although HMRC have sought to address certain related regulatory issues, the end result will see yet more piecemeal legislation. Hopefully, as the GAAR beds down, this should hopefully mean further complexity in the tax code can be avoided and such changes will become the exception rather than the rule.

Whilst it has been said many times before, it does bear repeating that the amended bank code of conduct is an inappropriate way to manipulate tax payer behaviour. Seeking to impose a form of moral barometer on a specific class of taxpayer runs completely contrary to the concept of the rule of law and sets a dangerous precedent for the future. In particular, the new “naming and shaming” powers are still not subject to sufficient checks and balances. and it is difficult to understand how a regime can be structured on a voluntary basis but also subject to sanctions which have the force of law.”

Adam Blakemore, Cadwalader, Wickersham & Taft LLP

“Despite the enactment of the UK’s general anti-abuse rule in Finance Act 2013, tax avoidance measures feature prominently in the Autumn Statement and draft Finance Bill 2014. Among the usual raft of measures aiming to tighten perceived avoidance opportunities or loopholes are a number of developments which catch the eye, if not for reassuring reasons.

The breadth of the legislation on the taxation of partnerships with mixed members appears to do little to defuse the material concerns many businesses will have with the operation of this legislation in practice. Proposed measures regarding participants in tax avoidance schemes and “follower penalties” (trailed during this Summer’s Consultation), particularly where the scheme has been defeated in a tribunal or court, continue to look penal in their nature. Also, the proposals for the publication of the names of banks which have been alleged by HMRC to have not complied with their obligations under the Code of Practice on Taxation of Banks raises serious questions regarding the rule of law. Although the proposals from the Summer Consultation have been partly ameliorated by the addition of new safeguards, including the role of an “independent reviewer” (announced in October 2013, and amplified in the Autumn Statement announcements) and the announcement of a notice period of any HMRC decision to name the offending bank which corresponds with the time constraints for any challenge by way of Judicial Review, the very approach of naming taxpaying entities for perceived lack of compliance with the, ostensibly voluntary, Code remains troubling. Even where the risk of the Code of Practice being breached is low, it is unlikely that such measures will assist smooth passage of complex financing transactions undertaken by UK-based banking institutions.”

Richard Carson, Taylor Wessing LLP

"For the corporate tax practitioner, the most striking (albeit predictable) feature of the Autumn Statement was the announcement of yet another set of "targeted" anti-avoidance rules. Overall, and no doubt reflecting the scrutiny of the Public Accounts Committee, the focus of these provisions is very much on avoidance by multinational groups – ranging from a limitation upon those loan relationship credits that qualify for partial or full CFC exemption (so as to prevent a UK multinational from avoiding full UK tax on interest by assigning an intra-group loan to a CFC) to a broadening of the concept of a UK group for the purpose of the worldwide debt cap (in order to ensure that entities which do not have a share capital - such as guarantee companies - are definitely included and that groups cannot be broken by the use of such entities).

On the other hand, the specific anti-avoidance measures that will inevitably form part of the reform of the corporate debt and derivatives codes will not be enacted until 2015. In particular, the Government has wisely accepted that it is more sensible to introduce any changes to the "unallowable purpose" rules at the same time as the main changes to the wider regimes.

On the plus side, there is going to be a long overdue amendment to the rules governing the carry-forward of losses on a change of ownership of a company so as to enable a newly formed holding company to be inserted at the top of an existing group without triggering those restrictions - although implementation will have to be by way of share for share exchange (rather than by cancellation scheme) and specific stamp duty relief sought. Meanwhile, the oil industry will welcome most of the December announcements, including the new onshore allowance (for the purpose of the supplementary charge) equal to 75% of capital expenditure incurred in relation to an onshore oil or gas site."

John Challoner, Norton Rose Fulbright LLP

“It is frustrating, and possibly irresponsible in terms of creating uncertainty, that the bald statement “from April 2015 a capital gains tax charge will be introduced on future gains made by non-residents disposing of UK residential property” is made without any further amplification. This begs a number of questions. Will it apply to the many overseas funds providing residential let accommodation in the UK (and paying income tax on all rent received)? What about overseas investors owning predominantly commercial buildings but with some incidental residential use; will they be required to file returns and pay tax on a proportion of the gain? The fact that the total projected yield from this change up to and including 2018/19 is only £125 million might suggest that there will be material exemptions. It is hoped that it will be restricted to individuals or that the exclusions which currently apply to the annual tax on enveloped dwellings, for example the exclusions for property investment businesses and alternative finance arrangements, will also apply to this charge.”

John Christian, Pinsent Masons LLP

"The decision to allow REITs to invest as institutional investors in other REITs is welcome and responds to the property industry's positive reaction to the consultation earlier this year on this topic. REITs will welcome the greater flexibility to co invest with other REITs and we will see more REIT joint ventures. The changes extend to overseas REITs which are equivalent to UK REITs and this will increase the flow of overseas REIT investment into the UK market."

Brenda Coleman, Ropes & Gray International LLP

“HMRC are concerned about the use of LLPs to disguise employment and to avoid employment taxes. However there are often good commercial reasons for "salaried partners" particularly for junior and retiring partners. All LLPs will need to review their arrangements for "salaried partners" and partners on fixed profit shares to determine whether they could be subject to PAYE/NICs."

Michael Conlon QC, Hogan Lovells International LLP

“The designation of Health Education England and Health Research Authority for the VAT Refunds scheme is welcome as it will reduce the costs of outsourcing certain NHS-type functions.

A significant volume of the draft legislation is devoted to implementing the final part of the EU VAT package on the place of supply of services. Broadcasting, telecommunications and electronic services (BTE) supplied to non-business customers will, from 1.1.2015, be subject to VAT in the Member State where the customer belongs. This is a logical result as, in principle, VAT is intended to be a tax on consumption.

The need for multiple VAT registrations will be obviated by a new special accounting scheme (the Union Scheme). This will enable a supplier of BTE to register for VAT in one Member State only and complete a single on-line VAT return. This mini-one stop shop (MOSS) will enable VAT due in any Member State to be accounted for and paid through an electronic portal at the appropriate rate. It appears, however, that input VAT incurred in Member States other than that of registration cannot be recovered using MOSS. Claims must continue to be made under the Eighth Directive Procedure, which is disappointing.

Where BTE are supplied through an intermediary (such as the operator of an e-marketplace) who acts in his own name, a new rule will apply from 1.1 2015. This will achieve uniformity in the EU by treating the transaction as a supply made to and by the intermediary.

The place of belonging of a non-taxable legal person will be changed from 1.1.2015. This will no longer be the place where the body is legally constituted but the place where its central functions are carried out, which is intended primarily as an anti-avoidance measure.”

Jonathan Cooklin, Davis Polk & Wardwell LLP

“The Autumn Statement has the feel of a Chancellor deftly preserving the UK’s competitive business tax system while at the same time being seen to crack down on domestic tax avoidance.

The corporate tax anti-avoidance measures include some pretty technical changes to the debt cap, CFC, derivative contracts and double tax relief rules - it’s hard to believe that there is too much juice left to be squeezed out of major corporate taxpayers from these changes. More international BEPS type changes to the tax regime, such as a general restriction on interest deductibility, unsurprisingly do not feature.

The tidy up of some of the glitches relating to change in ownership and losses of investment businesses are particularly welcome.

The proposed abolition of stamp duty on UK ETFs is also useful, although this may be too little too late (given the attractiveness of the Irish and Luxembourg regimes in this context). There are also some predictably political measures relating to oligarchs (CGT for non-residents disposing of UK residential property) and banks (rate of bank levy up and Code of Practice strengthened).

The well trailed proposals relating to mixed partnerships - and which are expected to raise the considerable sum of around £3bn - are draconian, and an unwelcome (and probably unexpected) seasonal gift to the AIFM world.”

Karen Cooper, Osborne Clarke

“The Finance Bill provides a welcome boost for employee share ownership.

There are some long-overdue increases to the limits on employee participation for HM Revenue & Customs approved schemes. For Share Incentive Plans, the limit for free shares is to be increased to £3,600 per individual per year and to £1,800 a year per individual for partnership shares (those which employees invest in out of their gross pay). The SAYE savings limit is doubled to £500 per month. These increases together with the self-certification and on-line filing from 6 April 2014 will make them much more attractive and accessible.

We are pleased to see that a number of the Office of Tax Simplification's proposals for unapproved schemes are being taken forwards. In particular, the extension of corporation tax relief for employee share acquisitions (to 90 days following the takeover of a company by an unlisted company) and changes to the basis of taxation of shares and options for internationally mobile employees are sensible developments.

New legislation to provide relief for capital gains tax on share disposals to “employee-ownership trusts” are a signal that the government is serious about supporting employee-led businesses.”

Richard Croker, CMS Cameron McKenna LLP

“I find the most intriguing piece the extension of CGT to non resident investors in residential property.

The Chancellor's announcement that he will consult next year on a proposed capital gains tax for non resident investors in UK residential property is another extension of the tax regime that would have been inconceivable only a few years ago. Much has changed in the UK since Labour government's move against nondoms in 2008, when some said fiscal policy showed the country no longer welcomed rich individuals. Political, economic and fiscal change elsewhere has enhanced the UK's attractiveness and the likelihood is that London dwellings will remain a magnet for the world's private wealth even if they are more highly taxed than presently. But this move is an unashamed sop to UK voters and recognises the increased intolerance of the British public for obvious tax disparities in the UK system. However, the scope of the tax will be limited, with a principal private residence exemption certain to be included and a rebasing to 2015 on the cards. There will be some degree of overlap with the CGT regime for enveloped properties, which looks yet more bizarre in the light of this proposal. Some voices will question whether this piecemeal and opportunistic approach is best for UK plc when a proper consultation on all aspects of the taxation of property held by non residents might have yielded a more coherent and long term solution which would provide some certainty. There will be plenty for the Treasury to consider in the course of the consultation. Why single out residential property in this way? How will the tax be collected? Should there be exemptions for institutional investors? And will the Chancellor or his successor come back to property for more tax in a year or two?”

Nikol Davies, Taylor Wessing LLP

"The Chancellor's aim of ensuring taxpayers pay their "fair share" of taxation has yielded yet more anti-avoidance measures. The key target this year is perceived abuse through the use of partnerships.

As expected from the consultation, the draft legislation provides for the reallocation of profits in certain situations from corporate members of partnerships to individual members who would be taxed at higher rates. The legislation goes further than was suggested in the consultation and extends to enable the allocation of partnership profits to individuals who, although not actually members of the partnership, are connected with a non-individual member of that partnership.

In an apparent about-turn, the Government is now targeting large professional partnerships and has rejected calls for "concessions" or a grace period for junior partners in LLPs. Consequently, from April 2014, those LLPs whose members receive rewards which are not variable by reference to the LLP's profits, who fail to have a significant say in the business and who have no significant capital invested into the business will be treated in the same way as employees for tax purposes. Such partnerships have limited time to consider the impact of the legislation and the targeted anti-avoidance rule which will be introduced to counter "abusive" arrangements which aim to avoid the application of these new provisions."

Steve Edge, Slaughter and May

"The Autumn Statement was obviously more about politics and economics at this stage in the cycle than it was about technical changes (though a surprising amount of material has merged from HMRC on and since the day of the statement). Given that the GAAR is now in full effect and also that recent figures disclosed much reduced DOTAS notifications, it is slightly surprising that HMRC still feel that they have so much to do in the anti-avoidance area. The "pay up front" and "abide by previous decisions" rules may be directed more at tax schemes marketed at individuals than at the corporate sector - but the toughening up of the Bank Code of Conduct regime (including "name and shame") has clearly got a different agenda (some playing to the galleries perhaps with no real expectation that these powers will need to be exercised in these days of tax peace)".

Liesl Fichardt, Clifford Chance LLP

“The proposals relating to follower cases will result in those, who are not selected as lead cases and who are users of "failed" avoidance schemes, being faced with penalties and accelerated tax payments. This causes some concern in relation to the proper administration of justice. While these type of penalties and payments may be justified in the case of aggressive tax avoidance schemes there are situations where different facts or methods of implementation from a lead case could mean that a follower case may have good prospects of success. The threat of a penalty if the follower taxpayers do not amend their returns may in some cases put undue pressure on them not to pursue their appeals and may result in them not utilising the judicial system, even where they have a good chance of success. This could be seen as a mechanism to deny them fair access to justice. Advisors and taxpayers also need to monitor closely the proposal for the possibility of wider criteria for issuing a payment notice in advance of enquiries.”

Hartley Foster, Field Fisher Waterhouse LLP

“Plus ça change, plus c'est la même chose.

In relation to anti-avoidance, the Government announced in Budget 2013, inter alia: (i) a series of targeted anti-avoidance measures ("TAARs"); (ii) the introduction of a General Anti-Abuse Rule (the "GAAR"); (iii) new rules on Government procurement (which include a requirement for certification of tax compliance by Government suppliers); (iv) a consultation on whether a Tribunal or court decision in favour of HMRC in an avoidance case should have filing consequences for other taxpayers; and (iv) a consultation on the naming and shaming of promoters of tax avoidance schemes.

8 months on, tackling avoidance remains a key theme for the Government. Yet, interestingly, given that it was indicated recently by HMRC that the VAT gap had widened to £12.9billion, there are no proposed new measures in respect of VAT.

TAARs and the GAAR

A new raft of TAARs (that address, inter alia: (i) the allocation of profits by partnerships that have both individuals and non-individuals as members; (ii) companies avoiding corporation tax by shifting their profits to other group companies in the form of payments under a derivative contract; (iii) exploitation of the 75% exemption for credits arising from qualifying loan relationships under the controlled foreign company rules; (iv) exploitation of double tax relief where no foreign tax is ultimately borne; and (v) the use of dual employment contracts whereby UK resident non-UK domiciled individuals avoid employment income tax by carrying out their duties under two employment contracts - one for their UK employment duties and one for their non-UK duties) has been introduced, most of which measures have immediate effect from 5 December 2013. Two changes to the worldwide debt cap regime with the aim of countering avoidance also have been introduced; and other new measures will include legislation to prevent a charity from being entitled to claim charity tax reliefs if one of the main purposes of establishing the charity is tax avoidance.

The GAAR was introduced under Finance Act 2013. A procedural precondition for the application of the GAAR is an officer of HMRC issuing a notice under paragraph 3, Schedule 42, Finance Act 2013 (there is no provision in Finance Act 2013 (or in the Taxes Management Act 1970) that imposes an obligation on a taxpayer to self-assess under the GAAR) setting out, inter alia, the proposed counteraction to the tax arrangements that HMRC consider are abusive. Internal HMRC approval for a paragraph 3 notice being issued must be obtained; and it has been indicated by HMRC that they consider it is unlikely that they will issue more than 2 to 3 notices per year. That the GAAR has not precluded the publication of screeds of anti-avoidance legislation annually (at least), combined with this indication from HMRC, does point to the GAAR being a measure that is focused on counteracting only the most egregious examples of abusive structures, rather than being a "broad spectrum antibiotic". No cases being authorised for counteraction would demonstrate the effectiveness of the GAAR, as a deterrent. But, as has been stated, apocryphally, to be the answer in the 1970s to the question "what is the impact of the French Revolution?" - it is too early to say.

Pillorying

Pillorying, the irretrievably vulgar, 21st century equivalent of the stocks, is a weapon that the Government is turning to increasingly.

The Government has indicated that it intends to introduce legislation in Finance Act 2014 that will enable the naming and shaming of banks that breach the Code of Practice on taxation for banks. The Code, which is voluntary, in essence, obliges banks to ensure that its tax affairs are in accordance with a penumbral anti-avoidance spirit of the law, rather than just its terms. It is intended that the legislation will provide that if the GAAR Advisory Panel has unanimously reached the view that arrangements in which a bank is involved cannot be regarded as a reasonable course of action under the GAAR counteraction procedures then that constitutes a breach of the Code of Practice.

Finance Bill 2014 will implement the proposal, set out in the August 2013 Raising the stakes consultation paper, to introduce new obligations on "high-risk" promoters. In the consultation paper, it was proposed that a promoter having failed to notify a DOTAS scheme via DOTAS or having been the recipient of a formal notice for information or documents could result in that promoter being designated high-risk. One of the consequences of that designation is that clients of such promoters must identify themselves as such to HMRC; the naming and shaming of high-risk promoters that had been proposed does not, however, appear yet. Unless there are significant numbers of schemes that should have been disclosed under DOTAS but have not been, the Autumn Statement itself, arguably, casts doubt on the importance of introducing new obligations on "high-risk" promoters; it is stated that the number of schemes disclosed under DOTAS regime "fell by almost 50% between 2011/12 and 2012/13 ... with only 17 schemes disclosed in the six months to September 2013".

Followers and Payers

The Government has become increasingly concerned that, even when HMRC has succeeded in a case against one user of an avoidance structure, other users ("followers") of the same structure continue to assert that tax is not due. Finance Bill 2014 will give HMRC power to require followers either to amend their tax returns or to face penalties if they pursue appeals on the same structure and are ultimately unsuccessful in the litigation. Following the recent decision of the Supreme Court in Cotter, HMRC also will be given power to issue to followers "pay now" notices that require the payment of the tax in dispute and the Government will consult on the issue of the issuance of pay now notices in a wider range of circumstances.”

Heather Gething, Herbert Smith Freehills LLP

"In my view the announcement of many specific fixes to prevent specific types of avoidance is recognition within HMRC and HMG that the GAAR is of little practical use to prevent avoidance and that was expected. More troubling is the further erosion of the rule of law in the field of tax. An example is the naming and shaming of banks which is in the judgement of HMRC without the involvement of the Courts. The provision to tackle high risk promoters is admirable but it seems to me that if there are agents who advise on schemes which the agents know do not secure the advertised tax outcome it would be better to have a specific criminal charge of facilitating the cheating of the public revenue which does not require any intention on the part of the customer. The most alarming technical tax change is the alteration of the CFC rules which will discourage the establishment of offshore financial companies which was expressly provided for in the rules introduced with effect from 1 January 2013! We need good consistent tax policy rooted in principle if the UK is to attract the inward capital investment it needs."

Charles Goddard, Partner, Rosetta Tax LLP

“In such a political Autumn Statement, some crowd-pleasers such as the freeze on fuel duty and eliminating vehicle tax discs were to be expected. However George Osborne also decided to hit out at a number of maligned groups in ways which are rather less justifiable.

Bankers (boo!) received their now-traditional treatment: a rise in the bank levy, and further emphasis on the Banking Code of Conduct. Accountants and lawyers (all presumably tarred with the “tax avoider” brush) have been landed in the draft Finance Bill with PAYE and NICs for “disguised salaries” (have we really reached the stage when tax legislation itself is drafted in terms which carry such connotations?). And foreign investors (what do they think they’re doing investing their money here? – send it back where they came from!) are to be subject to CGT on gains on residential property.

The trouble is, these new rules don’t make much sense when you get past the headlines. The news of CGT on non-resident individuals comes just 6 months after CGT was imposed on companies selling residential properties, in a legislative package designed to persuade offshore investors to hold properties directly. But the companies benefit from a range of exemptions - will individuals get the same benefits? If they don’t, will we see companies becoming flavour of the month again as holding vehicles for residential property? What is a non-resident investor to do? A sensible conclusion might be that it is all too much trouble here and that they would be better off investing elsewhere and leaving the UK – which they can do tax-free any time up until April 2015!

The rules for LLPs also raise difficulties. The fact that HMRC have clearly taken on board many of the points raised in the consultation process is to be welcomed. However, applying these rules in practice is going to be remarkably difficult – cue detailed discussions between professional services firms, their members and HMRC over whether partner pay is “substantially wholly fixed” or not. This and similar holes in the rules are guaranteed to keep tax lawyers happily engaged for months and years to come. Come to think of it, Cheers, George!”

Judith Greaves, Pinsent Masons LLP

“Leaving aside "annual" changes, the increases in SAYE and SIP limits may well be the ones with the biggest direct impact on the largest number of people.

They are evidence that the Government is serious about encouraging participation across the workforce, from the largest companies to the smallest.

"Self-certification" of HMRC approved plans and online filing of share plan returns is proceeding as trailed previously – this means action will be required by companies. An effect of self-certification is to pass risk to the company (in serious cases, penalties up to twice the tax and NICs relief "wrongly" enjoyed by employees). In practice, the highest penalties will affect very few but, nevertheless, companies will want to review their plans and procedures.

On “simplification” of the rules for taxing IMEs' share awards, due for awards made from 1 September 2014, the transition may be painful. The goal is a time–based system that will be easier to understand and apply than the current regime, where nuances can lead to very different tax results. The draft legislation, however, is not simple.”

Ashley Greenbank, Macfarlanes LLP

“The last few years have seen a steady increase in HMRC powers and discretion in relation to the management of the tax system. This year is no different.

The Government has answered calls for external scrutiny of decisions to name and shame banks for breaches of the Code of Conduct on Taxation for Banks by the introduction of a role for an “independent reviewer”; a person appointed by the Commissioners and whose decisions will not need to be followed if there are “compelling reasons”. The Government has also announced that the proposed high risk promoter regime will be backed-up not just by follow-on penalties but also by “pay now” notices under which those who wish to continue to litigate after a lead case has been decided have to pay the disputed tax upfront. The Government will also consult on whether “pay now” notices should be extended beyond tax avoidance schemes to other cases.

There will be little sympathy for banks that breach the Code and users of aggressive schemes, but extension of these regimes beyond the most flagrant and egregious cases will further threaten the balance between revenue authority and taxpayer.”

Elaine Gwilt, Addleshaw Goddard LLP

“In many ways there is not much to say. The Autumn Statement had few surprises and was used as an opportunity to announce the outcomes following the busy summer of consultation. The Finance Bill will need a little more time to digest.

The themes running through the recent Finance Bill are relatively consistent: banks continue to be a whipping boy and there were some politically crowd-pleasing measures impacting non-residents and high paid executives.

The increasing certainty of policy developments is welcomed. However, in certain areas one cannot help but feel that the execution of some policies is over-engineered. For example, the measures to combat tax motivated profit allocations in mixed partnerships seem complicated and problematic to apply in practice.”

Kate Habershon, Morgan, Lewis & Bockius

“It is somewhat refreshing to see what appears to be an attempt to address certainty and consistency in UK business taxes, as the rate of change of fundamental principles seems to be slowing. Given the stated goal of making the UK competitive from a tax perspective, the low tax rate and certainty resulting from less fundamental change seem to be steps in the right direction, although there is still more work to be done on the third limb of simplicity. For example, it is hard to believe that the new draft legislation addressing LLPs could not have been achieved in less than 29 pages. There were few surprises on the corporate tax side, with a continued focus on avoidance and evasion, with more tinkering around the edges (such as the changes to the worldwide debt cap rules and CFC rules) than major changes.”

Colin Hargreaves, Freshfields Bruckhaus Deringer LLP

“Again, a Budget's worth in terms of volume, albeit much of it heralded in advance. Encouraging to see some things withdrawn or at least delayed in light of consultation responses. The CFC anti-avoidance change is a limited push at a large and brightly painted stable door, indeed at something which industry might have regarded as part of the package deal on CFC reforms. The inclusion of UK REITs and foreign equivalents as 'good' institutional investors should further liberalise what can be done with REIT benefits by way of JV and even on cross border REIT mergers.”

David Harkness, Clifford Chance LLP

“Although many of the measures were geared towards anti-avoidance and revenue raising HMRC should be commended for finding space in the Finance Bill to sort out two major problems in practice with the change in company ownership rules. It was encouraging to see a positive response following lobbying and shows that HMRC and taxpayers can work together to improve the tax code. I hope this bodes well for other problems that need fixing in the tax code.”

Louise Higginbottom, Norton Rose Fulbright LLP

“The Chancellor’s need to raise funds to meet his spending commitments whilst maintaining fiscal neutrality has resulted in some unexpected targets being hit. Whilst, as is normal, a number of perceived anti-avoidance schemes were targeted, the oil industry and LLPs are also making a substantial contribution. Although the oil industry benefits from the new regime for shale gas, and other incentives to assist with developing more difficult offshore fields, a new and seemingly complex provision in relation to the tax treatment of chartering of equipment for use offshore (both limiting deductions and imposing a ring fence) is proposed. This seems likely to be a disincentive to offshore developments where equipment needs to be chartered to undertake the work (as would often be the case), since any increased cost will impact viability. As regards LLPs, the provisions treating some members as employees seem to have been extended more than expected during the initial consultation, and those affected, particularly larger LLPs, where members have limited management involvement, will need to consider their arrangements carefully. The fact the new rules seem not to extend to ordinary partnerships or non-UK LLP equivalents will no doubt attract comment.”

Stephen Hoyle, DLA Piper UK LLP

“International partnerships will be closely studying the announcements on the reform of the close company loans to participators rules and the proposals for mixed membership partnerships. Although the Government has decided not to undertake any fundamental reforms to the regime for close company loans, they have recognised the need for continuing discussion about a narrowly focused exemption where a close company is used by a partnership in an entirely commercial way. Some exemption is justified. It is also important that the new rules on mixed partnerships do not prevent the use of non-UK companies by international partnerships where they are used for local regulatory purposes or to equalise income across consolidated profit pools.”

Michael Hunter, Addleshaw Goddard LLP

“There were few real surprises: more anti-avoidance measures and some bank-bashing are more or less a staple feature of Autumn Statements and Budgets. The extension of CGT to non-residents disposing of UK residential property, whilst not previously announced, should not have come as any great shock to anyone. The question is whether this marks the start of a move towards taxing non-residents on UK situs assets generally.

The decision to introduce provisions to “clarify” the rules on joint purchasers as a result of the Court of Appeal's decision in Pollen Estates is odd. Surely it would have made more sense to have done this some time ago when the status of the provisions was in doubt?”

Erika Jupe, Osborne Clarke

“The Finance Bill draft clauses contain confirmation of the date on which two positive developments in SDRT/stamp duty will take effect. The first measure on the abolition of the Schedule 19 FA 1999 SDRT charge on surrenders of units in UK unit trusts and shares in OEICs will take effect from 30 March 2014. This charge has long been criticised as making the UK funds industry uncompetitive against its European rivals and this change is therefore particularly welcome. Secondly, the abolition of stamp duty/SDRT on shares traded on recognised growth markets such as AIM with effect from 28 April 2014 is good news for smaller companies and is hoped to give AIM listings a boost. Both measures should encourage investment into the UK. If these developments have the positive effects which are hoped for, the Chancellor might even be persuaded to resurrect the 1990's plan to abolish stamp duty in next year's Budget!”

Geoffrey Kay, Baker & McKenzie

“The Government confirmed the details of its package of measures affecting partnerships. First, there is the re-classification of salaried LLP members as employees, with a resulting substantial rise in the firm's NICs bills. The definition of 'salaried member' is much broader than anticipated. Secondly, allocating partnership profits to a corporate partner which pays tax at the lower corporation tax rates (rather than the higher or additional rate payable by individuals) will no longer be effective in many cases. A special mechanism will apply to partnerships who are obliged under the AIFMD to ring-fence deferred remuneration (on which the partnership will have to pay tax at 45% tax, which can be credited against the tax payable by individual partners when the award vests). Thirdly, a transfer pricing compensating adjustment on service company fees will no longer be available to individual partners.

The Government has dramatically increased its estimate of the tax proceeds expected to flow in over the next 6 years from its partnership tax reforms, but the increase in the effective tax rate may prompt certain affected businesses, such as fund managers, to consider, or re-consider, emigration.”

Colin Kendon, Bird & Bird

“There are many improvements in the Autumn Statement for which the Government should be congratulated but the extension of the time limit before the section 222 ITEPA 2003 applies does not really deal with the fundamental unfairness. With the extensive PAYE penalty regime now in place there is no need for the section 222 charge at all. One has to ask why is it still thought necessary to have a penal automatic charge which is visited on employees where their employer fails to operate PAYE on notional payments but not on cash. The real danger is where companies do not realize PAYE needs to be operated. The most obvious example arises from another unfairness namely the requirement to operate PAYE and NIC on shares which are not corporation tax deductible and therefore deemed to be readily convertible assets. There are often no arrangements in place to create a market in shares of this sort so it is not immediately obvious to employers that PAYE should be operated. PAYE failures relating to shares of this sort may still go undetected long after the new proposed deadline.”

Michael Lane, Slaughter and May

"I found the Autumn Statement and draft Finance Bill clauses reassuringly underwhelming. So it's also a bit surprising that, printed out double sided, they still fill a lever arch file! Amongst the usual anti-avoidance provisions and now traditional raising of the bank levy (without which no Autumn Statement or Budget is complete these days) there are a few nuggets of good news for business. The Government has finally given in to common sense and we will get a carveout from the rules which can apply to restrict the availability of losses following a change of ownership for simply inserting a new holding company on top of a group and the hair trigger for determining whether a company with investment business has significantly increased its capital is to be relaxed. That's a bear trap several groups, particularly those with an overseas top company, have walked into before now. And insurers can finally breathe a (small) sigh of relief at the first sign of the Government acknowledging their predicament in print, namely that the Prudential Regulatory Authority is demanding that insurers include in regulatory capital issued now features that Solvency II (not yet in force) is only expected to require, and extending HM Treasury's regulation making powers accordingly. Only a small sigh of relief though since what insurers really wanted was a draft equivalent of the banks' Regulatory Capital Securities Regulations to be published now and with a view to its taking effect long before next July."

Andrew Loan, Macfarlanes LLP

“In a move that was widely anticipated, the Autumn Statement last week included the proposal that all non-UK residents will be subject to UK tax on gains arising after April 2015 from disposals of UK residential property. There is expected to be a consultation on the details in early 2014. The exemption of non-residents from UK capital gains tax - or, more properly, non-residents simply falling outside the scope of the UK regime for taxation of chargeable gains, save for UK assets relating to a trade conducted through a permanent establishment in the UK - has been a structural feature of the UK tax regime for decades. The principle that non-residents are not subject to CGT was eroded by the rules that came into force in April 2013 to tax gains realised by non-resident “envelope” companies on disposals of high value residential properties worth over £2m. That change was dressed up as preventing avoidance by wealthy individuals, but was clearly the thin end of a wedge which is now being expanded to include disposals of all UK residential property (not just high value properties) by all non-residents (presumably including individuals and trusts, not just "envelopes") on grounds of fairness to UK taxpayers. The "unfairness" of the existing regime can be overstated: this measure is estimated to raise only a few tens of millions of pounds from 2015-16. The bigger issue is whether the slippery concept of "fairness" will be used to justify extending UK taxation to gains arising from disposals of other UK assets held by non-residents, not just residential real estate.

The announcement referred to "future gains", which presumably means a rebasing to April 2015 values, and so a boon for surveyors. There has not been a general rebasing for CGT purposes since 1982, and before then 1965, but it seems unlikely that the government will take the opportunity to rebase assets more generally.”

David Milne QC, Pump Court Tax Chambers

“(1) As previously announced, HMRC are going to be obliged to name and shame a bank whom (having signed up to it) they consider to have breached the Code of Conduct.

A good feature is that they cannot do so unless they have consulted the “Independent Reviewer”, yet to be appointed, but expected to be someone of the standing of a retired High Court Judge (one name springs to mind!).

Not so good is that HMRC do not have to follow the Independent Reviewer’s opinion, but they have to show at least “compelling reasons” for naming a bank when the Independent Reviewer has concluded that there has been no breach of the Code.

Of relief to a number of banks will be the confirmation that neither HMRC nor the Independent Reviewer may have regard to conduct before 5th December 2013 in determining whether there has been a breach.

Expect fireworks!

(2) A set of provisions (at pp 593 to 607 of 673) likely to cause howls of anguish and much lobbying (because they affect articulate groups of taxpayers such as hedge funds and large firms of accountants) are those aimed at “excess profit allocation” to corporate partners in mixed partnerships, in circumstances where, either what would otherwise have been the profit allocation of individual partners is deferred, or individual partners have “power to enjoy” the income of the corporate partner.

Having corporate partners in partnerships (usually, but not necessarily, LLPs) has become almost standard in recent years; it enables such mixed partnerships to arrange that profit shares which are earmarked for ploughing back into the firm are allocated to the corporate partner and so suffer tax at only the low corporation tax rate rather than at (almost invariably) the top rate of income tax which would be payable if the profit were allocated to the individual partners in the normal way before being re-invested.

Expect much wailing and gnashing of teeth from (especially) large accountants’ firms!

(3) Establishing charities for tax avoidance:

No draft clauses yet, but promised for January, with a view to being in the FA 2014.

A tightening up of tax relief for charities is overdue, not really to deal with the types of scam which have hit the headlines recently (they never worked in the first place) but for example to deal with “charities” whose main object is to channel money out of the UK into “charities” in other countries which have (even) less control over what charities do with their money than the Charity Commission does here. “Charity begins at home” is not a bad principle in this context; and if the money is going to leave the UK, relief should not be given without positive proof that it has been actually used for purposes which would qualify as “charitable” in the UK.

ITA 2007, ss543(1)(f) and 547 do on the face of it require the trustees of the UK charity to take “reasonable steps” to ensure that the payment will be applied for charitable purposes, but much anecdotal evidence suggests that it is very difficult in practice for HMRC to police this.”

Graeme Nuttall, Field Fisher Waterhouse LLP and the Government's Independent Adviser on employee ownership, author of Sharing Success: The Nuttall Review of Employee Ownership

“The Government has shown again its commitment to promoting employee ownership, as defined in the Nuttall Review. The Autumn Statement sets out major tax exemptions to promote the employee ownership business model and, in particular, to grow the number of employee trust owned companies. Many professionals are still unaware of the concept of employee ownership and what it offers to businesses at every stage in the business life cycle and, in particular, as a succession solution. These new tax exemptions will help overcome this obstacle.

The January 2012 report "All of our business" (EOA) contrasted the satisfaction Hugh Facey gets from the employee ownership succession solution at Gripple Limited with the fortunes of another business which was sold to private equity and where its former owner saw decades of business relationships unravel and the brand's reputation deteriorate. Notwithstanding all the measures to raise awareness of employee ownership over the last two years, as reported by Practical Law, and the importance of encouraging a diverse range of business models, some still think in very narrow terms regarding share plans. Not this Government.

As Chancellor, George Osborne, stated the Autumn Statement sets out "major reforms to encourage employee ownership of the kind that makes John Lewis such a success" by:

confirming details of the two new tax exemptions to support employee trust ownership on which HM Treasury had already consulted, and
announcing an extension to the existing inheritance tax relief for share transfer to EBTs.

Draft legislation on all three measures was published on 10 December 2013 together with further information on the proposed changes including the Government's response to the consultation. There are some important points of detail to consider carefully but overall these exemptions send a powerful message to professional advisers that the employee ownership model deserves careful consideration:

the CGT exemption, available from April 2014 is unlimited. This applies to disposals of shares that result in a controlling interest in a company being held by a qualifying EBT (an employee ownership trust or EOT); and
from October 2014, bonus payments made to employees of companies which are controlled by an EOT will be exempt from income tax up to a cap of £3,600 per tax year. This is the same as the increased SIP free shares award limit. There will be employer's and employee's NICs to pay on these bonuses but probably better this than a much lower income tax cap.

As HM Treasury says in its response to the recent consultation "introduction of the CGT relief will mean that advisers will be obliged to mention to the owners of companies that selling their shares into an EOT may be tax advantaged…. These exemptions will make indirect employee ownership an attractive proposition for those who are looking to dispose of a controlling interest in their company". The Gripple Limited employee ownership model involves direct ownership of shares by employees. The Autumn Statement also supports this model of employee ownership with its long overdue increases in the individual limits under the all employee SAYE and SIP share plans.

This may be the decade in which employee ownership enters the mainstream of the UK economy.”

Mathew Oliver, Bird & Bird

“Colin [Kendon] and I had a bet on whether the Chancellor would do a U turn on the shares for rights legislation, given its practical effect. I lost.

Otherwise no great surprises. For our clients the measure that will have possibly the greatest practical impact will be the introduction of the mini one stop shop. It's not exactly new though. The abolition of stamp duty on securities listed on AIM and other growth markets will also be a welcome boost.”

Stephen Pevsner, King & Wood Mallesons SJ Berwin

“It was a reasonably low key Autumn Statement. There are some interesting initiatives to aid investment and growth, the anti-avoidance provisions appear reasonably well targeted and the initial scare that the mixed partnership member rules would apply immediately proved unfounded. There are of course a number of significant consultations in progress and we are all waiting with great anticipation for next week’s publication of the new LLP salaried member rules with the hope that HMRC have listened to the concerns that overreaching legislation might seriously curtail the effective use of LLPs as commercial vehicles.”

David Pickstone, PwC Legal LLP

“The Autumn Statement includes developments aimed at users of notifiable avoidance schemes.

Firstly, where HMRC wins a case before the First-tier Tax Tribunal (“FTT”) in a DOTAS notified avoidance case, HMRC will issue a notice to all other users of the same scheme requiring them to amend their return or explain why they aren’t doing so. If they don’t amend, and they subsequently lose on the same point of law, HMRC will issue a tax geared penalty. However, unless the change amends the penalty legislation itself, the validity of any penalty would still turn on whether the taxpayer’s conduct was reasonable in all the circumstances (rather than careless, negligent, deliberate or fraudulent), not just on whether the taxpayer received a notice. We will need to wait until the New Year for the draft legislation before we know more.

Secondly, HMRC will be able to issue a “pay now” notice which will require a taxpayer who has used a tax avoidance scheme to pay the tax as soon as HMRC wins any case in the FTT which raises the same scheme. We don’t have the draft legislation yet. However, this change will be significant for those taxpayers who are standing behind other similar cases and have postponed paying the tax pending an FTT decision in their own case.

There will also be a consultation beginning in January “with a view to extending the criteria for requiring early payment of the tax in avoidance disputes”, meaning the pressure on taxpayers who have used notifiable arrangements continues to increase.”

Andrew Prowse, Field Fisher Waterhouse LLP

“I have for years patiently explained to those who are not tax practitioners that tax is not boring. I hope they didn't read the Autumn Statement this year! After several years of major change, perhaps we were due a relatively quiet year.

Of course, there was the usual smattering of anti-avoidance measures, some against specific (now historic) schemes, some more general and potentially more concerning, such as reform of the partnership tax rules, the introduction of a requirement to concede cases on schemes relying on points of law which have been defeated in the courts in other like schemes and of "pay now" notices (with a consultation on extending this concept). Whilst understandable, these developments must be implemented carefully to ensure fairness.

There were positive developments for particular sectors, notably the oil and gas sector and the media sector.

For owner managed businesses, it was good to see confirmation that the close company loans to participators are essentially to be left alone, for now. Also, the continued enhancement of the UK's share incentives rules is to be welcomed, as is the development and encouragement of employee-ownership, which is gaining traction.

Another trend, evident again this year, is the impact of the information age on the tax regime. FATCA, the US government's fiendishly complex effort to get foreign financial institutions to disclose information on the offshore assets of US taxpayers, and the proliferation of similar international reporting rules and information exchange agreements, in which the UK has played a key role, will give tax authorities increasingly voluminous information. What will they do with it all? The Autumn Statement cryptically announced that HMRC will take action to be ready to exploit the data received.

In a similar vein, there was confirmation that a publicly accessible central register of the beneficial ownership of companies will be established to prevent tax evasion and other wrongdoing. Whether it will achieve that aim is questionable, and it should be remembered that a desire for confidentiality is different from wanting to evade tax.

The Autumn Statement wasn't so boring after all, perhaps.”

Leo Ringer, Head of Tax and Fiscal Policy, CBI

“The CBI has always advocated the dual approach of tackling the deficit and driving growth – the OBR forecasts confirm it is working, so let’s stick with what works.

The pressure on the high street was recognised in the Autumn Statement and the 2% cap on business rates and discount for very small businesses are both positive, as is the reoccupation relief.

Plugging the gap in export finance is also essential to growing exports and the economy. UK Export Finance is raising its game and offering growing businesses a stronger, wider range of products. We now need to see a renewed focus on supporting our medium-sized businesses, the unsung heroes of our economy, as they try to crack new markets. We have been calling for the Government to look at securitisation of SME loans, so we’re pleased they’ve listened. Commitments to review ways to enhance equity finance and retail bonds in the UK are also welcome.

Abolishing a jobs tax on employing young people under 21 will make a real difference and help tackle the scourge of youth unemployment. Yet the Autumn Statement was a missed opportunity not to support our hard-pressed energy intensive businesses which are struggling with rising costs, and the package on housing supply could have been more ambitious.

As we enter the festive season, positive news on growth is clearly welcome but much remains to be done if the benefits of economic recovery are to reach every home in every corner of the UK.”

Iain Scoon, Shearman & Sterling (London) LLP

“The Autumn Statement contained no major upheavals in policy or approach. It contained a large number of relatively small measures, paving the way for a large, but largely technical, Finance Bill. It was very much a case of "steady as she goes" - with possibly the most difficult aspect of the Statement actually being that HMRC and HM Treasury had put content on their web-sites in such a way as to make it almost impossible to be sure that you had found all the relevant documents.

Politically, at least, the most controversial aspect of the Autumn Statement was the announcement of tax support for shale gas exploration and development, showing that the Government wishes to support this industry despite environmental opposition. The announcement of a number of anti-avoidance measures was to be expected; following recent reports, the Government does need to ensure that it does not go overboard with these types of measures so as to harm UK competitiveness. The announcement of a revenue-raising measure to tax the disposal of certain types of UK real estate by non-residents was inevitable but disappointing. Finally, the fact that there is now going to be legislation allowing HMRC to "name and shame" for perceived non-compliance with the Code of Practice on Taxation for Banks - a "voluntary" code - while, again, inevitable is an another unfortunate blurring of the line between law and perceived morality, and brings a reduction of certainty in the tax system.”

Tom Scott, McDermot, Will & Emery

“A common thread in the various proposals is their focus on reducing avoidance or evasion via cross-border planning. In relation to corporation tax, we have tightening of the CFC, DTR and debt cap rules, as well as announcements on the BEPS initiative and on offshore evasion; in relation to property, the CGT charge on non-residents: for employees, the dual employment and offshore intermediary charges; and in oil tax the leasing restrictions. Perhaps this reflects in part the current intense scrutiny of cross-border structuring, both inbound and outbound.

The UK remains in the vanguard in relation to disclosure and transparency. The Inter-Governmental Agreement with the US effectively catalysed an array of tax information sharing agreements. The Statement announces a consultation on enhanced sanctions in this area. The Chancellor also confirmed the controversial proposal to create a central register of company beneficial ownership which will be publicly accessible. In a similar vein, the proposals affecting “ high risk” promoters of tax avoidance schemes, and the “ name and shame” concept for banks both reflect HMRC’s willingness to use publicity as a tool to induce behavioural change.

In relation to the changes to the debt cap rules relating to companies without share capital, one wonders whether similar changes might be tracked through in due course to other grouping definitions. Might time be running out on the use of companies limited by guarantee in tax structuring?”

Simon Skinner, Travers Smith

“Outside the main event – the proposed partnership changes (which has a feel of déjà vu all over again following other recent poorly targeted and broadly written changes, such as disguised remuneration) – there are signs of the successes and the failures of the consultation process. Positives are there – the dropping of a wider reform of the loans to participators rules, which have their quirks but are basically reasonable well understood; and the acknowledgement of the need for a broad debt-for-equity exemption for loan relationship releases. The changes to ensure a new holding company doesn’t lead to a change of ownership for loss relief purposes was an unexpected and very sensible early Christmas present. On the negatives there is yet another consultation on the position of employment and intermediaries, where businesses will be surprised to see yet another review but relieved that there doesn’t seem to be a plan to pass tax risk beyond the intermediary to the recipient of the services; but to my mind the most troubling development is the genuinely worrying “followers notices/penalties”, which have the potential to be unfairly and inappropriately used by an under-resourced Revenue. The concerns driving this are, no doubt, real to HMRC (and I suspect not unfounded in a lot of cases), but it is disappointing that the many legitimate worries over this measure have not been properly reflected in the latest proposal. You can only hope that the measure is sensibly applied in practice: there is always hope.”

Nicholas Stretch, CMS Cameron McKenna LLP

“What happens on transactions for approved employee shares plans has changed dramatically taking Finance Act 2013 and proposed Finance Act 2014 changes together. It is easy to forget how within the space of two years we have seen income tax and NIC charges removed on most corporate actions for approved plans, and we also now have the prospect in Finance Act 2014 of further changes to remove some of the remaining rough edges, whereas previously it was a key cost and HR issue to address with participants and companies alike.

Also, we finally have self-certification round the corner. From 6 April 2014, the yoke but also the protection of the approval regime goes away. In many ways this is liberating and companies will be able (in conjunction with relaxed legislation) to operate their plans without Revenue micro-management and timing restraints, but there are also some fears about future due diligence by other advisers and Revenue PAYE audits as well as how genuine questions of eligibility to use share plans will be addressed. So far, the Revenue have promised a light touch but their approach to errors over the years - even when they had control of plans - was not always generous and so companies (and their advisers) are going to be worried going forward when the Revenue is, and will be for some time, understandably under pressure to raise tax revenues.”

Dominic Stuttaford, Norton Rose Fulbright LLP

“Delighted to see that the Government has decided to move ahead and introduce specific measures enabling insurance companies to raise capital in a Solvency II world, now that things at last seem to be moving on that front – hopefully this will mirror the generous regime offered to banks. Also pleased to see that the abolition of Stamp duty and SDRT for trading in shares quoted on so-called growth markets is proceeding, although there will be a cost of listing on other exchanges, as that may switch off the relief, which may lead to unfortunate results.”

Richard Sultman, Cleary Gottlieb Stein & Hamilton LLP

“It is good to see that one of the main traps for the unwary that a lot of companies have faced in recent times (for example on corporate restructurings), and which is helpfully being addressed, is the rule that can deny the availability of losses (including a carried forward non‑trading loan relationships deficit) when there is a change in ownership of a company with investment business, and that change in ownership is coupled with a “significant increase” in the company’s capital. Currently, an increase in capital of £1m would be regarded as significant. This was clearly inappropriate for a lot of companies and, under the new rules which will apply for ownership changes after 1 April 2014, the increase in capital also has to be by at least 25%.

One area of notable silence in the Autumn Statement is in relation to the BEPS project and rules to address the taxation of multinationals. No doubt we will be hearing more on that in due course, but for now this is an indicator that the UK would prefer to act together with the international community and not on a unilateral basis.”

Michael Thompson, Vinson & Elkins LLP

“In relation to the announced changes in oil and gas taxation, the government has shown its determination to incentivise shale gas exploration by responding positively to industry representations made in the recent consultation process. The new onshore allowance against supplementary charge is as generous as could reasonably be expected, at 75% of capital expenditure, and is more flexible in its use than originally proposed by government. Welcome tweaks are also being made to the substantial shareholding exemption and the reinvestment relief rules so as to accommodate transfers of exploration interests at a pre-trading stage.

One unexpected and unwelcome announcement, however, is a cap on deductions for intra-group leasing payments under bareboat charters of large offshore oil and gas rigs and the introduction of a ring fence for the corresponding revenue. The proposed approach of imposing a standardised rate of return for such transactions which may have little relation to a commercial return seems to evidence an increasing dissatisfaction at HMRC with normal transfer pricing rules and may well be a sign of things to come in other areas of corporate taxation.”

Vimal Tilakapala, Allen & Overy LLP

“Although some important safeguards were conceded by HMRC towards the end of the consultation on the banking code of conduct – e.g. constraints on HMRC’s ability to depart from conclusions of an independent reviewer on ‘naming and shaming’ a bank in breach of the code – this is still an unusual case of a statutory sanction being attached to a “voluntary” code. As a legal matter (and as a matter of principle) this is far from ideal.

This year there has been a widening of the bank levy base as well as another increase in rate. Although many of the changes have been presented as simplification measures, they are revenue raising and include a reported greater contribution from non-UK banks. The constant tinkering with the levy is unsettling – and there will clearly be additional costs for some banks to pay. On a more positive note, banks will welcome the fix for central clearing, so that they are not penalised for facilitating the clearing of their client’s transactions.

Blink and you might have missed the announcement of a tax free release of debt of UK banks on exercise of a statutory bail-in power. In the loan relationships context this puts the UK’s resolution toolkit for regulators on a level playing field with insolvency procedures.

There is a new and unexpected measure aimed at the use of derivatives to shift UK profits to non-UK group companies. Unhelpfully, the drafting goes much further than the stated aim: the measure potentially applies in wholly domestic intra-group contexts, and to any type of derivative where a payment equates, in substance, to all or part of the profits of the business of the payer (or a connected company). There is also no real motive defence. In its current form, the new rule will have wider than expected implications and will have to be considered in relation to a broad range of commercial arrangements involving derivatives.

Andy Treavett, Hogan Lovells International LLP

“The Government is pressing ahead with its plan to name and shame banks who don't comply with the Code of Practice on Taxation for Banks, through the publication of an annual report (prepared at "negligible" cost by HMRC).

Before determining whether a bank has breached the Code, HMRC will have to commission an "independent reviewer" (a person of "suitable stature", such as a retired High Court Judge) to report on whether the bank has breached the Code and whether the bank should be named in HMRC's annual report. The bank is given the opportunity to make representations and the reviewer must take into account exceptional circumstances that might justify not naming the bank. What is missing from both the legislation and HMRC's Governance Protocol, however, is an answer to the fundamental question of when, or perhaps why, "should" a bank be named?

Further guidance (and consultation) is promised on HMRC's views on what is meant by the "intentions of Parliament" for the purposes of the Code. It will be interesting to see what the guidance can add to our understanding of this already murky area.”

Eloise Walker, Pinsent Masons LLP

“I was all ready to describe this year’s Autumn Statement and draft Finance Bill as “a bit dull”, right until the draft legislation on the partnerships review – treatment of salaried members – came out. Oh boy! Imagine, if you will, almost every professional partnership – legal and accountancy – running round this morning panicking about the fact that every one of their fixed share partners is about to become an employee, because that is what the new rules will do if we’re not careful. Cynical managing partners, of course, will be writing letters of thanks to HMRC – because the only easy way out is to make fixed share partners cough up over 25% of their “salary” figure as additional capital contributions – hooray, some may cry, our cash-flow problems are over! And that’s after the headache of seeing the mixed member partnership proposals last week, rules of unpleasant complexity with a noble aim (to make the tests objective) but likely to cause headaches for commercial firms making sure they are not caught by accident. The sad part is all this will probably overshadow some more serious issues, notably in the banking sector, where I was concerned to see that HMRC’s plans to “name and shame” those banks that have not adopted the (in theory) voluntary Banking Code of Practice, especially those that HMRC think have not complied with it, will go forward from March 2015. I hate to see media fanfare influence policy, and I do hope this does not become a trend in the UK.”

Martin Walker, Deloitte LLP

“The proposed abolition of UK stamp tax on trading exchange traded funds (ETFs) established in the UK from April 2014 is to be welcomed as it removes a significant barrier to setting up and marketing UK-based ETFs. Such funds tend to track the performance of an underlying index or assets, so where the underlying assets are non-UK securities exempting the ETF units from charge makes perfect sense. Watch out for a possible sting in the tail in relation to UK ETFs holding a material proportion of UK shares though.

Whether the rest of the UK’s tax regime is sufficiently welcoming to entice ETFs to set up in the UK remains to be seen. However, together with the abolition of the Schedule 19 stamp duty reserve tax (SDRT) charge in relation to UK collective investment schemes at around the same time and the removal of the SDRT charge from growth market stocks (such as those listed on the Alternative Investment Market) this all adds up to a positive stamp tax charm offensive by HM Treasury to the UK funds sector.”

William Watson, Slaughter and May

"I was glad to see that it will at last be possible to introduce a new holding company without triggering the change of control rules, though the proposed dispensation seems unnecessarily restrictive.

Otherwise, from a corporate tax perspective I found the Finance Bill more notable for what it does not include than for what it does. There is almost nothing in my particular area of interest, property taxation, barring a sensible change to the SDLT exemption for charities following the Pollen Estate case (though one wonders why HMRC litigated in the first place, and the new provision is surprisingly complex). There is a further slight relaxation in the application of the close company condition to REITs, but in my view HMRC are focusing on the wrong part of the close company rules here.

Over the past couple of years I have also been following closely developments in the taxation of regulatory capital. With new regulations about to be enacted for bank issuers, the focus has now switched to the insurers but the Finance Bill does not have much to offer. Section 221 Finance Act 2012 is to be amended so that regulations can be made for insurers before the relevant EU legislation is finalised. Yet there is no sign that this will allow for a statutory instrument that has retrospective effect, so it will remain impossible for insurers to issue deductible tier 1 debt until next July at the earliest.

Finally, the major consultation on loan relationships and derivative contracts which appeared out of the blue back in June has not yet generated any drafting at all and it seems that only two of the areas under discussion will be covered in this Finance Bill. However, the measured tone of the Summary of Responses is certainly welcome; many taxpayers and practitioners will feel that less is more here."

Elliot Weston, Lawrence Graham LLP

"Whilst the inclusion of UK REITs and foreign equivalent REITs as "institutional investors" will allow such REITs to acquire a substantial or controlling interest in other UK REITs, HMRC have still not dealt with the more problematic issue which is the corporation tax charge that arises to the UK REIT on distributions to "institutional investors" that are 10% corporate shareholders in the UK REIT. Until that issue is resolved by amendment to the UK REIT legislation, such "institutional investors" will be reluctant to acquire stakes of 10% or more in UK REITs. The legitimate solutions to avoid such corporation tax charge recognised by HMRC guidance are generally expensive or impractical."

Kerry Westwell, Hogan Lovells International LLP

“It seems that someone listened to last year's outcry about the amount of paper produced as the size of the draft legislation and explanatory notes has shrunk by over 400 pages this year. Let's hope this is the start of a downward trend and a more manageable process.”

Simon Yates, Travers Smith

“Just for once a relatively low key Finance Bill, although the fact that so little of substance was spun out into over 800 pages of draft legislation and associated documents shows that this Government's serious case of verbal incontinence remains untreated.

The meatiest measure is of course the reforms to tackle alleged abuses of partnership structures. This has been a real concern in the financial services sector ever since the initial condoc was published in the summer. In a presumably satirical move, the condoc came out on the same day as a policy document was released emphasising the government's desire to make the UK as attractive as possible to investment managers.

Given what has gone before, the current state of the proposals isn't too much of a surprise. Unsurprisingly, the new rules will be very complex in both drafting and practical implementation. As many of us have long feared, the stated desire to simplify the tax system is proving hopelessly unachievable.

Finally it is deeply regrettable that implementation of the new rules will be effective from April 2014. Most existing planning involving corporate members in particular cannot reasonably be considered avoidance, as opposed to the reasonable exercise of choices conferred by an increasingly irrational tax system. Is it too much to expect that in such cases businesses should be entitled to consider how they might reconfigure themselves with the benefit of the finalised law?”

Rob Young, Taylor Wessing LLP

"Another vast swathe of new legislation, within which lie the new social enterprise relief provisions, inevitably equally lengthy and convoluted. Although welcome in principle, having to tussle with a modified form of the EIS code seems likely to be a hindrance to uptake. However, the principles are at least familiar to advisers and it is good to see that the relief extends quite broadly, in particular to include charities (although how many would choose to invest in debt issued by a charity as opposed to donate under Gift Aid remains to be seen – the rate of tax relief offered, yet to be announced, will be key here). In addition, some conditions seem inappropriate (financial health for a charity?) but this is presumably the price of avoiding a full EU State Aid approval process".

2013 Autumn Statement and Finance Bill 2014: Cooked to perfection or a recipe for disaster? | Practical Law