There will be a new diverted profits tax on companies that will apply at a rate of 25% from 1 April 2015. It will apply to business activities between connected entities that are set up to achieve an "unfair tax advantage".

The purpose of the tax is to counter multinational enterprises using aggressive tax planning techniques to divert profits from the UK and reduce their UK corporation tax liability. The announcement is not surprising given George Osborne's statements in the lead up to the Autumn Statement that he would tackle tax avoidance by multinationals. However, it is disappointing that the announcement is very light on detail and does not specify how the charge will be calculated. Business will be concerned that the UK appears to be taking a unilateral approach in this area. The draft legislation is to be included in the Finance Bill 2015.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.243 and 2.142, Autumn Statement 2014: HMRC overview, paragraph 5.1a and HM Treasury: Autumn Statement 2014: policy costings, page 43.)

Six announcements concerning promoters and users of tax avoidance schemes:

(See HM Treasury: Autumn Statement 2014 , paragraphs 1.245, 1.246 and 2.157 to 2.162, HM Government: Autumn Statement 2014: policy costings, page 49 and Autumn Statement 2014: HMRC overview, paragraphs 5.3 and 5.4.)

Two changes to the miscellaneous loss relief rules will be introduced in the Finance Bill 2015 to counter avoidance of income tax involving losses from miscellaneous transactions. (Miscellaneous loss relief arises on a transaction if, assuming a profit had been made, it would have been chargeable to income tax under any of the provisions listed in section 1016 of the Income Tax Act 2007 (section 1016). For background, see Practice note, Income tax: use of losses: Other revenue losses.)

The first change, which applies to miscellaneous income or miscellaneous losses arising on or after 3 December 2014, denies loss relief if the loss or the income arises "directly or indirectly in consequence of, or otherwise in connection with" relevant tax avoidance arrangements. Relevant tax avoidance arrangements are arrangements to which the taxpayer is a party and a main purpose of which is to reduce a tax liability.

The second change, which applies from 6 April 2015, restricts loss relief to income of the same type. Currently, miscellaneous losses can be set against any income type falling within section 1016. Thus losses from intellectual property rights can be set against interest income. From 6 April 2015, the loss can only be set against income of the same type and any unrelieved loss must be carried forward and set against income of the same type in the next tax year.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.247 and 2.151, HMRC: Draft legislation: Income Tax - miscellaneous loss relief and TIIN, Income Tax: miscellaneous loss relief.)

Extension of the existing accelerated payment rules to cater for avoidance schemes giving rise to losses to be surrendered by way of group relief (see Practice notes, Tax avoidance schemes: follower and accelerated payment notices: Accelerated payment notices and Groups of companies: tax: Group relief).

This extension will apply if the existing criteria for issuing an accelerated payment notice are met (see Practice note, Tax avoidance schemes: follower and accelerated payment notices: Conditions for making accelerated payment notices) but the company undertaking the avoidance arrangements does not have any tax to pay itself. In these circumstances, the notice can prevent the company from making a group relief surrender of the disputed amount.

This measure is to be included in the Finance Bill 2015 and to have effect from Royal Assent.

(See HM Treasury: Autumn Statement 2014, paragraph 2.149 and Autumn Statement 2014: policy costings, page 33.)

The requirements regarding the location of link companies for the purposes of consortium relief will be removed with effect from 10 December 2014.

A company that is owned by a consortium may surrender losses to another company that is in the same group as a member of the consortium (a link company) (see Practice note, Groups of companies: tax: The consortium rules). Section 133 of the Corporation Tax Act 2010 (section 133) currently provides that a link company must be resident in the UK, a non-UK resident carrying on a trade in the UK or established in the European Economic Area (EEA). Where the link company is established in the EEA, the consortium relief provisions only apply if the link company is a 75% member of the same group of companies as the surrendering company or the claimant company without the involvement of a company that is not established in the EEA. Legislation will be included in the Finance Bill 2015 amending section 133 to remove the location requirements, thereby removing the differences in UK treatment of link companies.

(See HM Treasury: Autumn Statement 2014, paragraph 2.137.)

Reductions of share capital as a means of mitigating stamp duty or SDLT on a take-over effected by a scheme of arrangement will be prohibited. Historically, schemes of arrangement have been carried out by cancelling the target's share capital and issuing new shares to the acquiring company to avoid the stamp duty liability that would arise on a transfer of shares.

The government will, by early 2015, introduce regulations amending section 641 of the Companies Act 2006 to prohibit reductions of share capital in these circumstances. For background on stamp duty, see Practice note, Stamp duty on shares, and for background on the tax issues on schemes of arrangement, see Practice note, Schemes of arrangement and demergers: tax.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.249 and 2.101.)

In relation to research and development (R&D) credits, the government intends to:

(See HM Treasury: Autumn Statement 2014, paragraphs 1.144, 2.97, 2.98 and 2.99 and policy costings, pages 13 and 14.)

From 1 January 2015, business contributions to flood and coastal erosion risk management (FCERM) projects will be fully deductible for corporation tax and income tax purposes. Legislation will be included the Finance Bill 2015.

In July 2011, the Environment Agency and Defra published a national FCERM strategy for England. The strategy emphasised the need for co-operation amongst flood risk organisations and for community involvement. It also made it clear that the government could no longer pay for all FCERM measures and that additional funding would be required, for example, from developers. (For more detail, see Practice note, Managing flood risk: Flood management and funding.) It would appear that this measure is designed to encourage that additional funding.

(See HM Treasury: Autumn Statement 2014, paragraph 2.103.)

For other environmental announcements, see Legal update, 2014 Autumn Statement: key environmental announcements.

New legislation will enable the government to implement the OECD's model template for country by country tax reporting. The announcement follows the publication of the OECD's first recommendations in its Base Erosion and Profit Shifting (BEPS) project, which included the model template and instructions for its use, on 16 September 2014 (for details, see Legal update, First BEPS recommendations published).

The new rules, which will require multinational enterprises to provide HMRC with detailed annual financial information, including taxes paid in each jurisdiction in which the enterprise operates, are anticipated to take effect from 1 January 2016.

We are tracking multinational and UK developments relating to the BEPS project, including country by country reporting, in Tax legislation tracker, BEPS tracker.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.241 and 2.143, Autumn Statement 2014: HMRC overview, paragraph 5.1(b) and HM Treasury: Autumn Statement 2014: policy costings, page 44.)

Civil penalties for offshore tax evasion will be enhanced. This announcement follows a consultation launched in August 2014 on proposals first announced in the 2013 Autumn Statement (for details, see Legal update, Offshore tax evasion: HMRC consults on new criminal and stronger civil sanctions) and from the UK's commitment to implement the OECD's global standard for the automatic exchange of tax information by September 2017 (see Legal update, 51 countries sign multilateral agreement on exchange of tax information).

The Chancellor confirmed that the offshore penalties regime will be extended to include inheritance tax, and to apply to domestic offences where the proceeds of the offence are kept offshore. The government will also update its territory classification system to reflect the adoption of the new global standard for the automatic exchange of tax information. These measures will take effect from April 2016. Additionally, the government intends to introduce a new aggravated penalty of up to 50% of the unpaid tax for moving funds hidden offshore, to take effect from Royal Assent to the Finance Bill 2015. The government's original proposal to introduce a new criminal offence of failing to declare taxable offshore income and gains appears to have been dropped. HMRC will also review its existing framework for offering information on offshore tax evaders, particularly those who remain outside international efforts to achieve tax transparency.

For details of the existing offshore penalties regime, see Practice note, Tax penalties: direct tax: culpable penalties: Offshore non-compliance.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.255, 2.155 and 2.156 and Autumn Statement 2014: HMRC overview, paragraph 5.2.)

There will be a consultation on a new power to enable HMRC to close one or more aspects of a tax enquiry while leaving other aspects open.

Paragraph 32 of Schedule 18 to the Finance Act 1998 requires HMRC to issue a closure notice at the conclusion of a tax enquiry setting out the details of the outcome (see Practice note, Corporation tax self-assessment enquiries: HMRC must issue a closure notice to conclude the enquiry). While a closure notice does not need to identify and include a view on all the technical arguments of an enquiry, it currently concludes all aspects of the enquiry. The proposed introduction of the new power should be welcomed to facilitate the speedier resolution of enquiries.

(See HM Treasury: Autumn Statement 2014, paragraph 2.169.)

Confirmation that the direct recovery of debts (DRD) legislation to be introduced in a Finance Bill in 2015 will include a number of safeguards to protect against errors and to improve independent oversight. For the background to DRD and details of the proposed safeguards, see Legal update, Direct recovery of tax debts: government increases safeguards.

The government also confirmed that Scotland, where HMRC already has powers similar to DRD, will be excluded from the measures.

(See HM Treasury: Autumn Statement 2014, paragraph 2.165.)

The government will work with the private sector to introduce a single, co-ordinated approach to debt collection, using a variety of debt collection services. Although HMRC already employs private sector debt collection services, going forwards, it will do so using a single "debt market integrator".

(See HM Treasury: Autumn Statement 2014, paragraph 2.166 and Autumn Statement 2014: HMRC overview, paragraph 5.5.)

The government has adopted the vast majority of the recommendations made by the Office of Tax Simplification (OTS) to improve the competitiveness of the UK's tax system. The report, which was commissioned in the 2013 Autumn Statement and published on 9 October 2014, made 50 "key" and a number of "other" recommendations over a wide range of taxes (see Legal update, OTS final report on competitiveness of UK tax administration).

According to the Autumn Statement, the government has adopted 51 out of 58 of the OTS's recommendations and has already started work on a number of them. No details of which recommendations have been adopted have been announced, but further details will no doubt be published in due course.

(See HM Treasury: Autumn Statement 2014, paragraph 2.133.)

HMRC is to introduce a new mid-size business unit, which will provide a gateway to the specialist tax help needed by mid-size businesses. This is to include temporary access to a named individual for mid-size businesses going through a key business change with significant tax implications. HMRC is testing this approach and intends to launch it in 2015. HMRC is also piloting a new model to support the fastest growing businesses.

The government is also to increase HMRC's resources within its Large Business Directorate to improve compliance by the UK's "largest and riskiest" businesses. This is to take the form of the recruitment of additional staff, working in the Large Business Directorate, from April 2015.

(See HM Treasury: Autumn Statement 2014, paragraphs 2.170 and 2.171 and Autumn Statement 2014: policy costings, page 51.)

The government is to implement the Office of Tax Simplification's recommendations to simplify the taxation of employee benefits and expenses (see Legal update, HMRC launches employee benefits and expenses simplification consultations). In particular, legislation (expected to be in the Finance Bill 2015) will be introduced to implement the following:

(See HM Treasury: Autumn Statement 2014, paragraphs 1.162, 1.251 and 2.136 and HM Treasury: Autumn Statement 2014: policy costings pages 22 and 23.)

The government is planning to publish a discussion paper shortly on the use of umbrella companies and other employment intermediaries that enable workers to obtain tax relief on home to work travel to which they would otherwise not be entitled. The government has long been concerned that some temporary workers are paid travel expenses free of income tax and NICs by working under an overarching employment contract with the aim of changing a series of permanent workplaces (for which there is no tax relief) into temporary workplaces (for which relief is due). It is likely that the discussion paper will result in legislation to be announced in the 2015 Budget. This is part of an ongoing review of employment status and the use of employment intermediaries.

For background, see Practice note, Managed service companies.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.251 and 2.147.)

There will be an amendment in the Finance Bill 2015 to correct the legislation underpinning the penalty regime for the late filing of or non-submission of quarterly returns by employment intermediaries. The quarterly returns are required to show details of all workers supplied by the intermediary to an end client to whom payments have been made without deduction of tax under PAYE. The first return, covering the period from 6 April to 5 July 2015 must be submitted by 4 August 2015.

For information about the returns, see Legal update, HMRC consults on draft employment intermediary reporting regulations.

(See HM Treasury: Autumn Statement 2014, paragraph 2.148.)

The Chancellor announced that, with effect from 6 April 2016, no employers' national insurance contributions will be payable on earnings below the upper earnings limit paid to apprentices who are under the age of 25.

This measure will further reduce the cost to businesses of employing young people. As previously announced in the 2013 Autumn Statement, employers will no longer pay national insurance contributions for any employees under the age of 21 from April 2015.

For more information on NICs, see Practice note, Taxation of employees: National insurance contributions.

(See HM Treasury: Autumn Statement 2014 , paragraphs 1.156 and 2.53 and Autumn Statement 2014: HMRC overview , paragraph 2.2.)

The government has confirmed that travel expenses paid to councillors by their local authority will be exempt from income tax and employee NICs with effect from 6 April 2015. For the original announcement, see Legal update, Tax and NICs exemption for local councillor travel expenses). The exemption will be limited to the approved mileage allowance payment rates where it applies to mileage payments. These changes will take effect from 6 April 2015.

(See HM Treasury: Autumn Statement, paragraph 2.61.)

There were no new major pensions-related announcements at the 2014 Autumn Statement. As expected, the Chancellor confirmed that the pensions flexibility measures unveiled at the 2014 Budget affecting those with defined contribution pension savings will come into effect in April 2015. In addition, the changes to the tax treatment of death benefits announced in September 2014 will be extended to include joint life and guaranteed period annuities. As a result, if an individual who is receiving payments from such an annuity policy dies before reaching the age of 75, his beneficiary will be able to receive future payments from the policy free of tax from next April. If the individual dies after age 75, the beneficiary will be taxed on withdrawals at his or her marginal rate (unless the benefits are paid in lump-sum form, in which case a 45% charge will be levied in 2015/16 and thereafter marginal-rate taxation will apply). Alongside this change, the tax rules will be updated to allow a joint life annuity to be paid to any beneficiary of a deceased policyholder, and not merely a "dependant".

The government also announced that, following informal consultation with the pensions industry, it has decided not to extend the availability of pensions tax relief to those above age 75.

For more detail on the pensions announcements, see Legal update, 2014 Autumn Statement: pensions implications.

The government will not proceed with the introduction of an employee shareholding vehicle (safe harbour trust). HMRC consulted on this proposal in July 2014 (see Legal update, Consultation on employee shareholding vehicle (safe harbour trust) published).

(See HM Treasury: 2014 Autumn Statement paragraph 2.135.)

The government has also dropped the proposed introduction of the concept of "marketable securities" to the employment-related securities legislation. HMRC issued a consultation on the proposal, originally recommended by the Office of Tax Simplification, in July (see Legal update, HMRC publishes consultation on marketable securities).

(See HM Treasury: 2014 Autumn Statement paragraph 2.134.)

The Finance Bill 2015 will make wide-ranging changes to update, simplify and rationalise the legislation on corporate debt and derivative contracts. This will include a clearer and stronger link between commercial accounting profits and taxation, basing taxable amounts on items of accounting profit or loss. It will also include the introduction of a new relief for companies in financial distress and new rules to protect the regime against tax avoidance.

We are tracking the progress of this review in Tax legislation tracker: finance: Reform of loan relationship and derivative contract rules.

(See HM Treasury: Autumn Statement 2014, paragraph 2.138.)

HMRC has published draft legislation restricting the loan relationships rules on late paid interest. For details of the current rules, see Practice note, Loan relationships: Late paid interest.

Under the draft legislation (to be included in the Finance Bill 2015), the late paid interest provisions relating to connected parties and parties with a major interest in each other (see Practice notes, Loan relationships: Connection test and Major interest test) are repealed. Therefore, following this change, the late paid interest rules only apply in the case of loans to close companies by participators and certain loans by trustees of occupational pension schemes (see Practice notes, Loan relationships: Close company test and Pension fund test).

Similarly, the postponement until redemption of debits on deeply discounted securities (see Practice note, Loan relationships: Discount) is discontinued in relation to connected companies but remains in relation to close companies.

These changes have effect in relation to debtor relationships entered into by a company on or after 3 December 2014. For debtor relationships entered into before that date:

These changes form part of wider changes to be made under the Finance Bill 2015 to the loan relationships and derivative contracts rules, draft legislation for the vast majority of which is expected to be published on 10 December 2014. For background to this reform, see Tax legislation tracker: finance: Reform of loan relationship and derivative contract rules. HMRC notes that the scope of the affected rules was greatly restricted in 2009, applying since then only if, broadly, the creditor is in a tax haven. In addition, HMRC understands that some groups are deliberately using the rules to delay debits in order to sidestep timing restrictions in the group relief rules. HMRC notes that the wider changes to the loan relationship rules are to include the introduction of a regime anti-avoidance rule, which should replicate the original intended effect of the rules, that is, to prevent companies from securing timing mismatches in the recognition of interest and discount. This new rule will, according to HMRC, render the rules that it proposes to repeal obsolete.

(See HMRC: Draft legislation: Corporation Tax - preventing abuse of late paid interest rules and TIIN, Corporation Tax: preventing abuse of late paid interest rules.)

HMRC and HM Treasury have launched a consultation on proposed new rules to address the tax treatment of hybrid mismatch arrangements. This follows the OECD's Base Erosion and Profit Shifting (BEPS) September 2014 recommendations to prevent tax avoidance in this area and was announced on 5 October 2014 (see Legal update, Government to consult on implementing BEPS hybrid mismatch proposals). For details of the OECD's recommendations, including an explanation of the concerns that the recommendations seek to address, see Legal update, First BEPS recommendations published: Hybrid mismatch arrangements. (To track multinational and UK developments relating to the BEPS project, see BEPS tracker.)

Unsurprisingly, the proposals in the consultation document largely echo the OECD's recommendations. Following the OECD's approach, the government's proposal is to counteract hybrid mismatches by:

Following the OECD's approach, the rules would operate automatically, with no purpose test, but would apply only to structured arrangements (see Legal update, First BEPS recommendations published: Definitions) or transactions between related parties (see Legal update, First BEPS recommendations published: Definitions). The rules will only apply for corporation tax purposes (and not to arrangements between companies and individuals) but will apply to transactions solely between UK taxpayers (in which case, rule B will apply). The government believes it likely that the new rules will allow the existing UK arbitrage rules to be repealed as unnecessary (see Practice note, Financing multinational groups: tax issues: Arbitrage rules and Arbitrage rules). The OECD's recommended exclusions for timing differences and in relation to dual inclusion income are to apply (see Legal update, First BEPS recommendations published: Domestic rules). The government will provide a list of payees with special status to which the rules will not apply (see Legal update, First BEPS recommendations published: Domestic rules), to include unit trusts, OEICs, investment trusts and charities.

The government also intends to implement the OECD's recommended separate rule for dual-resident companies (see Legal update, First BEPS recommendations published: DD outcomes). Further, the government will consider introducing rules to restrict the tax transparency of reverse hybrids (see Legal update, First BEPS recommendations published: D/NI outcomes).

The government supports fully the OECD's recommendations in relation to treaties (see Legal update, First BEPS recommendations published: Treaty amendments).

The government wishes to make special provision for banks issuing intra-group hybrid regulatory capital. The consultation document sets out various options for achieving this. Consideration would need to be given to extending similar rules to insurance groups and how to define hybrid regulatory capital for these purposes.

The new rules are to apply from 1 January 2017. There would be no transitional rules given the advanced announcement of the rules. The consultation document includes examples of how the proposed rules would apply. The rules would operate through self-assessment (with normal penalty rules applying). This approach, placing the onus on taxpayers, will obviously place a substantial compliance burden on potentially affected taxpayers.

Comments are invited by 11 February 2015. The government is to publish a summary of responses in summer 2015. The responses will inform the UK's involvement in finalising the OECD's work in this area (including commentary on the proposals) by September 2015, changes to which may impact on the UK proposals. The government will also take the responses into account in developing draft UK legislation, which, following further consultation, is to be included in a future Finance Bill.

We will publish a more detailed update on this consultation shortly.

(See HMRC and HM Treasury: Tackling aggressive tax planning: implementing the agreed G20-OECD approach for addressing hybrid mismatch arrangements.)

The government will legislate so that transitional adjustments arising from the new International Financial Reporting Standard 9 (IFRS 9) accounting treatment of credit loss allowance will be spread over ten years, irrespective of when the debt falls due.

IFRS 9, a new accounting standard for financial instruments, was published in July 2014. It will require companies that apply International Accounting Standards or Financial Reporting Standard 101 to make credit loss allowances on a more forward-looking basis from 2018. This will result in an increase of credit loss allowances in the companies affected. These higher allowances will effectively bring forward tax relief, reducing corporation tax receipts following the adoption of IFRS 9. (See Legal update, IFRS 9: new financial instruments.) The purpose of the government's measure is to spread the full impact on corporation tax receipts over a ten-year period, avoiding an upfront hit to the Exchequer.

We are tracking the progress of the measure in Tax legislation tracker: finance: Changes in accounting treatment to cater for IFRS 9.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.163 and 2.174, and Autumn Statement 2014: policy costings, page 35.)

The Finance Bill 2015 will contain a new exemption from withholding of income tax from interest on qualifying private placements (a form of long-term, non-bank, unlisted debt) to help unlock new finance for businesses and infrastructure projects. This exemption is designed to encourage pension funds and other institutional investors seeking long-term, stable returns to invest in such projects (see Legal update, 2014 Autumn Statement: pensions implications: Update on the Pensions Infrastructure Platform).

For more detail on UK interest withholding and the exemptions from it, see Practice note, Withholding tax.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.170 and 2.100.)

The government will consult on introducing a withholding regime for income tax applicable to all peer-to-peer (P2P) lending platforms from April 2017. The government proposes that P2P platforms will withhold income tax at the rate of 20% from taxable (in other words, non-ISA) P2P returns. This will help many individuals to resolve their tax liability outside the self-assessment regime. For more detail on UK interest withholding, see Practice note, Withholding tax.

The government will also introduce a new relief to allow individuals lending through P2P platforms to offset any losses from loans that go bad against other P2P interest received. It will be effective from April 2016 and, through self-assessment, will allow individuals to claim relief for losses incurred from April 2015.

For a brief summary of the regulation of P2P lending platforms, see Practice note, FCA consumer credit regulation: overview of Consumer Credit sourcebook (CONC): P2P lending platforms.

(See HM Treasury: Autumn Statement 2014, paragraphs 2.184 and 2.185 and Autumn Statement 2014: policy costings, pages 29 and 30.)

The Finance Bill 2015 will contain legislation (published in draft as part of the 2014 Autumn Statement) restricting the proportion of banks' and building societies' taxable profit that can be offset by carried-forward trading losses, non-trading loan relationship deficits and management expenses to 50%. The restriction will apply from 1 April 2015 (with the usual straddle period rules) but only to reliefs accruing before that date.

If a company makes a trading loss in an accounting period, it can, among other things, carry that loss forward and use it against profits of the same trade in future periods (see Practice note, Corporation tax: general principles: Trading losses). Non-trading loan relationship deficits and excess management expenses for an accounting period are, broadly, treated in the same way (see Practice notes, Loan relationships: Relieving non-trading loan relationship deficits and Corporation tax: general principles: Expenses of management).

According to the government, the banking sector has accumulated significant losses as a result of, among other things, its performance during the financial crisis. To end what the government considers to be the inequity of banks using the reliefs outlined above (relevant reliefs) to reduce their tax, the government will restrict the rate at which building societies and banking companies authorised under the Financial Services and Markets Act 2000 and within the charge to UK corporation tax can offset relevant reliefs against their taxable profit. The restriction will apply:

The restriction will contain an anti-avoidance rule (TAAR) that applies to arrangements (widely defined) entered into from 3 December 2014 and designed to circumvent the restriction. The legislation will also contain an anti-forestalling rule intended to stop banking companies accelerating the use of their losses between 3 December 2014 and 1 April 2015.

Certain entities are excluded from the restriction, including insurance companies, investment trusts (see Practice note, Investment trusts: tax), friendly societies and credit unions. Further, the restriction applies neither to relevant reliefs arising in an accounting period ending before that in which the company began its banking activity nor, so that start-ups are unaffected, to relevant reliefs that arose in the first five years of a company's (or group's) beginning to undertake its banking activity.

Alongside the draft legislation, explanatory note and the TIIN, the government has published a technical note on the measure, which includes worked examples and guidance on the TAAR.

Following the bank payroll tax, the bank levy and the code of practice on taxation for banks (as to which, see Practice notes, Bank payroll tax, Bank levy and Code of practice on taxation for banks), the banking sector must now be resigned to its "bogeyman" status. The only consolation, if there is one, is that this latest measure is not "permanent" since it applies only to relevant reliefs that accrued before 2015-16.

(See HM Treasury: Autumn Statement 2014, paragraph 1.248, TIIN, draft legislation , technical note and Autumn Statement 2014: policy costings, page 36.)

There will be legislation introduced which will ensure that guaranteed fee income of investment managers is subject to income tax.

The draft legislation, which will be included in the Finance Bill 2015 and will be effective from 6 April 2015, is in response to arrangements entered into by private equity firms involving partnerships or other transparent vehicles to convert trading income into capital receipts. Amounts that are genuinely linked to the performance of the fund (such as, carried interest returns or returns on genuine investments made by the individual fund managers) will not be caught by the new rules.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.247 and 2.153 and Autumn Statement 2014: policy costings, page 37.)

The government will introduce a new corporation tax relief for making children's television programmes with effect from 1 April 2015. The relief will be at a rate of 25% on qualifying production expenditure. The government is also planning to consult with the television industry on a possible reduction of the minimum UK expenditure for high-end TV relief from 25% to 10% and a modernisation of the cultural test in line with the cultural test applied for film relief. There will also be a consultation early in 2015 on the introduction of an orchestra tax relief from 1 April 2016.

There has been a considerable increase in the reliefs available for cultural and creative sector activities in the last three or four years, see Practice notes, Film tax relief and Theatre tax relief.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.174-1.176 and 2.94-2.96 and Autumn Statement 2014: HMRC Overview, 3.2-3.4.)

From 1 January 2015, the supplementary charge rate will fall to 30% (from 32%). Legislation will be in the Finance Bill 2015. The government also aims to reduce the supplementary charge rate further in an affordable way, to encourage additional investment and drive higher production in the UK continental shelf.

The supplementary charge is assessable on a company's ring fence profits (the company's profits from its UK oil extraction business) that are calculated without deducting any costs of debt finance (see Practice note, Oil and gas taxation: Ring fence rules and Supplementary charge).

(See HM Treasury: Autumn Statement 2014, paragraphs 1.125 and 2.104.)

The government has published draft legislation for inclusion in the Finance Bill 2015 introducing a new high pressure, high temperature cluster area allowance that will reduce the amount of adjusted ring fence profits subject to the supplementary charge (see Practice note, Oil and gas taxation: Supplementary charge) by 62.5% of capital expenditure incurred in designated cluster areas on or after 3 December 2014.

The draft legislation, among other things, specifies that:

The draft legislation has effect in relation to capital expenditure incurred on or after 3 December 2014 and contains transitional provisions for accounting periods that straddle this date.

The government announced this measure in the 2014 Budget (see Legal update, 2014 Budget: key business tax announcements: New ultra high pressure/high temperature cluster allowance) and launched a consultation on 23 July 2014 (see Legal update, Government consults on new oil and gas cluster allowance). The consultation closed on 30 September 2014 and the government will publish its response to this on 10 December 2014.

At the 2014 Budget, the government stated that the new cluster allowance would replace the existing ultra high pressure/high temperature field allowance (see Practice note, Oil and gas taxation: Field allowances). The government has now announced that no change will be made to the existing allowance but its future will be considered as part of wider work on allowances.

(See Autumn Statement 2014: HMRC overview, paragraph 4.6, HMRC: Draft legislation: Corporation Tax - high pressure high temperature cluster area allowance and TIIN, Corporation tax: high pressure high temperature cluster area allowance.)

The Finance Bill 2015 will extend the ring fence expenditure supplement (RFES) from six to ten years for all ring fence oil and gas losses and qualifying pre-commencement expenditure incurred on or after 5 December 2013, aligning the treatment of offshore and onshore projects.

The RFES uplifts (by 10%) the value of unrelieved expenditure incurred for ring fence purposes to take account of the delay between incurring the relevant expenditure and receiving income from production against which it can be offset. The Finance Act 2014 extended the RFES from six to ten accounting periods for all onshore ring fence oil and gas losses and qualifying pre-commencement expenditure. For more detail, see Practice note, Oil and gas taxation: Ring fence expenditure supplement.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.125 and 2.105.)

Individuals, partners and trustees who transfer a business to a related close company will no longer be able to claim entrepreneurs' relief on the value of reputation and customer relationships (goodwill). This measure will apply to disposals of goodwill to related close companies on or after 3 December 2014.

The change has been introduced to stop the perceived abuse of entrepreneurs' relief on incorporation of a business, particularly where the previous owners of the business sell it to the company and leave the consideration outstanding as a credit to the director's loan account with the new company. By claiming entrepreneurs' relief, the seller could pay tax at the rate of 10% on the value of the goodwill and make future withdrawals from the loan account free of tax. The draft legislation, released alongside the Autumn Statement, inserts a new section 169LA in the Taxation of Chargeable Gains Act 1992 (TCGA 1992) denying entrepreneurs' relief on such a transfer. It includes provisions aimed at catching any avoidance arrangements put in place to circumvent the new exclusion. (See also Corporation tax relief restricted on transfer of goodwill to related company, which removes corporation tax relief on internally generated goodwill and customer relationships transferred to a company by an individual who is related to the company.)

The knock-on effect from this amendment will be that, for a business that is incorporated in exchange for shares, an election disapplying section 162 TCGA 1992 (incorporation relief) is unlikely to be beneficial. Therefore, if the business owners envisage a sale to a third party within 12 months of incorporation, they should consider their options very carefully. See Practice note, Entrepreneurs' relief and Checklist, Incorporating a partnership: tax issues.

(See HM Treasury: 2014 Autumn Statement, paragraphs 1.250 and 2.76, TIIN, Capital Gains Tax: denying Entrepreneurs' Relief for disposals of goodwill to related companies , HM Treasury: Draft legislation: Entrepreneurs' relief: exclusion for disposals of goodwill in certain circumstances, and Autumn Statement 2014: HMRC Overview, paragraph 4.2.)

The government has published draft legislation restricting corporation tax relief on internally generated goodwill and customer relationships transferred to a company by an individual who is a related party in relation to that company, or by a partnership, of which any individual member is a related party in relation to that company. The legislation to be included in the Finance Bill 2015 amends Part 8 of the Corporation Tax Act 2009, which provides for the corporation tax treatment of intangible fixed assets. (For further information, see Practice note, Intangible property: tax).

The draft legislation provides that where part of the goodwill (or other assets) transferred by the individual or partnership were originally acquired from (broadly) a third party, and there was no main tax avoidance purpose, the company will be able to claim only a proportion of the debit that would previously have been allowed. Where none of the assets transferred were acquired from a third party, no debit will be allowed. The legislation will also require the debit arising on a subsequent disposal by the company of the goodwill (or other assets) to be apportioned in the same way, with the part that relates to the internally generated goodwill being treated as a non-trading debit, thus restricting the amount than can be set against the company's other income.

The legislation will have effect for accounting periods beginning on or after 3 December 2014, and will apply to assets transferred to a related company on or after that date, unless the transfer is made under an unconditional contract entered into before that date.

The legislation will remove perceived unfairness in the current system, which does not provide relief to an unincorporated business for its internally generated goodwill or customer relationships, but does provide relief when those assets are transferred to a company on the incorporation of the business. (See also No entrepreneurs' relief on goodwill transferred to related company, which removes entrepreneurs' relief from a disposal of the value of reputation and customer relationships (goodwill) to a related close company.)

(See HM Treasury: Autumn Statement 2014, paragraph 2.146, Autumn Statement 2014: HMRC overview, paragraph 4.1, HMRC: Draft legislation: Corporation Tax - restricting relief for internally generated goodwill transfers: Draft Statutory Instrument and Explanatory note and TIIN, Corporation Tax: restricting relief for internally generated goodwill transfers.)

With effect from 3 December 2014, individuals and trustees who are eligible for entrepreneurs' relief will no longer have to forego this entitlement if they defer their gain into investments that qualify for Enterprise Investment Scheme (EIS) or Social Investment Tax Relief (SITR). Gains reinvested before this date suffer tax at the full capital gains tax rate (18% or 28%) when they come back into charge on disposal of the EIS or SITR investment. Gains deferred on or after 3 December 2014 will be eligible for entrepreneurs' relief when they come back into charge, reducing the tax rate to 10%.

This change, which restores the treatment of the deferred gain to the position that existed before 6 April 2008 under the taper relief regime, will be greatly welcomed as it removes a disincentive to invest in EIS and SITR. For other announcements relating to SITR, see Legal update, 2014 Autumn Statement: private client implications: Encouraging investment in social enterprise.

(See HM Treasury: Autumn Statement 2014, paragraph 2.77 and Autumn Statement 2014: HMRC Overview, 4.3.)

Legislation will be introduced in the Finance Bill 2015 to prevent companies that benefit "substantially" from subsidies for the generation of renewable energy from qualifying for relief under the venture capital schemes (as to which, see Practice notes, Venture Capital Trusts, Enterprise Investment Scheme and Seed Enterprise Investment Scheme). The legislation will take effect from 6 April 2015. This follows Finance Act 2014 legislation that excludes companies from the venture capital schemes if they benefit from Department of Energy and Climate Change renewable obligations certificates or renewable heat incentive subsidies. It was also confirmed that, in the future, qualifying organisations undertaking community energy generation, will be eligible for relief under the social investment tax relief scheme. At that point, such organisations will cease to be eligible for relief under the venture capital schemes.

The government also announced that a new online process for the venture capital schemes will be available in 2016.

The government has yet to provide a summary of responses to the summer consultation on the venture capital schemes (as to which, see Legal update, Venture capital schemes consultation).

(See HM Treasury: Autumn Statement 2014, paragraphs 1.167, 2.59 and 2.60 and HM Treasury: Autumn Statement 2014: policy costings page 38.)

Following a review of the tax charge imposed by section 455 of the Corporation Tax Act 2010 on loans from close companies to individuals, trusts and partnerships that are participators, the government has decided to make no changes to its structure or operation.

The government initially consulted on reforms to the close company loans tax regime on 9 July 2013, but watered down its original proposals in a consultation response published on 10 December 2013. The proposals for minor change that remained involved excluding commercial transactions where no avoidance motive exists, imposing a higher tax rate for loans made to additional rate taxpayers and the introduction of a non-statutory form clarifying the information required for a repayment of tax paid under the regime.

The prevailing view amongst practitioners has always been that, as close company loans are rarely used to avoid tax, the regime should either remain as it is or be completely abolished. Therefore, this announcement does not come as a surprise.

For more information on the original proposals see Tax legislation tracker: corporate: Close company loans to participators: reform. For more information on the regime generally, see Practice note, Close companies: tax: Close company loans and benefits to participators.

(See HM Treasury: 2014 Autumn Statement, paragraph 2.154.)

The personal allowance for those born after 5 April 1948 will increase to £10,600 and the higher rate threshold will increase to £42,385 for 2015-16.

The personal allowance was due to increase to £10,500 with the result that the higher rate threshold (tax-free amount plus basic rate band) would have been £42,285 (see Practice note, Tax rates and limits: Income tax: Allowances).

It was also announced that the:

(See HM Treasury: Autumn Statement 2014, paragraphs 1.216, 2.51 and 2.52, Autumn Statement 2014: HMRC overview, paragraph 2.1, Tax and tax credit rates and thresholds for 2015-16 and HM Treasury, Chancellor George Osborne's Autumn Statement 2014 speech.)

The government intends to abolish the option for shareholders receiving cash under a B share scheme to elect for capital treatment. Instead, where a shareholder is offered the choice of receiving capital or income, the amount received will be taxed in the same way as a dividend.

B share schemes involve the creation and issue of an additional class of shares, with cash being returned to shareholders through one of several methods, the option chosen depending on whether shareholders wish to receive income or capital, or a combination of both. Capital treatment is generally preferable for higher rate and additional rate individual taxpayers and it is not uncommon for companies to structure a return of value which allows shareholders to choose between income or capital treatment. It is not yet clear whether such payments will also be treated as distributions for company law purposes. For further detail on B share schemes, see Practice note, B share schemes.

The government will introduce legislation in the Finance Bill 2015 to remove this perceived "unfair tax advantage", with effect from 6 April 2015.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.254 and 2.152 and HM Treasury: Autumn Statement 2014: policy costings, page 39.)

When an individual who has an individual savings account (ISA) dies, their spouse or civil partner will receive an additional ISA allowance equal to the value of the deceased's ISAs. ISA status ends on the account holder's death. It appears that this will still be the case in relation to the deceased's own ISAs, but that the surviving spouse or civil partner will be able to use the additional allowance in relation to their own ISAs, regardless of whether they have inherited the funds in the deceased's ISAs. This measure will apply in relation to deaths on or after 3 December 2014, but the surviving spouse or civil partner's allowance will only be increased from 6 April 2015.

On 6 April 2015, the ISA subscription limit will increase to £15,240 and the junior ISA limit to £4,080. The current limits are £15,000 and £4,000 respectively. These rises are in line with the consumer prices index (CPI), which is the default basis for indexation unless the government decides to override it.

For more information about ISA limits and rules, see Practice note, Tax data: individual savings accounts.

(See HM Treasury: 2014 Autumn Statement, paragraphs 1.218, 1.219, 2.62 and 2.64, HM Treasury: 2014 Autumn Statement: policy costings, page 8 and Autumn Statement 2014: HMRC overview, paragraph 2.5.)

The annual charge paid by some non-UK domiciled but UK resident individuals who use the remittance basis of taxation is to increase from April 2015. The charge for those who have been UK resident for at least seven out of the nine tax years before the relevant tax year will remain at £30,000. The charge for those who have been UK resident for at least 12 out of the previous 14 tax years will increase from £50,000 to £60,0000. There will be a new charge of £90,000 for those who have been UK resident for at least 17 out of the previous 20 tax years.

The government will also consult on making an election to use the remittance basis effective for a minimum of three years, so as to prevent taxpayers from arranging their affairs so as to only pay the charge occasionally. Eligible taxpayers can currently make an election for a specific tax year. If introduced, this measure would also make it more difficult for taxpayers to assess whether it would be beneficial to claim the remittance basis for any given period.

For more information about the current rules, see Practice notes, Remittance basis: what individuals need to know: overview and Remittance basis: remittance basis charge.

(See HM Treasury: 2014 Autumn Statement, paragraphs 1.253 and 2.57, HM Treasury: 2014 Autumn Statement: policy costings, page 41 and Autumn Statement 2014: HMRC overview, paragraph 2.4.)

There will be continued discussion about the proposal to restrict the income tax personal allowance for non-residents. A more detailed consultation will be undertaken if the government decides to proceed, although no changes will be introduced before April 2017. This announcement follows the earlier consultation on the same topic, which closed on 9 October 2014 and which was originally announced in the 2014 Budget (see Legal update, Restricting income tax personal allowance for non-residents: consultation published and Private client tax legislation tracker 2014-15: Income tax: restricting personal allowance for non-residents).

The tone of both the announcement in the Autumn Statement and the earlier consultation document suggests that the government is clearly in favour of applying the restriction. However it has been recognised that a change would not be straightforward for employers or individuals and that further consideration is required.

(See HM Treasury: 2014 Autumn Statement, paragraph 2.58).

The government is to provide an online calculator that will allow taxpayers to calculate their chargeable gains for capital gains tax (CGT) purposes. Taxpayers will also be given the opportunity to pay any CGT liability ahead of the self assessment due date. Although it is unclear why a taxpayer would choose to do this, the policy costing anticipates that a number of taxpayers will indeed take up this option. This facility will be available from October 2016.

(See HM Treasury: Autumn Statement 2014, paragraph 2.78 and Autumn Statement 2014: policy costings, page 53.)

For all key private client and charity measures, see Legal update, 2014 Autumn Statement: private client implications.

The government has published draft legislation that jettisons the current so-called "slab" system, under which SDLT is levied at a single rate on the chargeable consideration for a transaction (old rules), and replaces it with a "progressive" system, under which SDLT is charged at several rates according to the portion of the total consideration falling within each of several bands (new rules). This is aimed at correcting market distortions for properties with a value close to the existing borders separating SDLT rate increments.

The new rules will apply only to residential property transactions with an effective date on or after 4 December 2014, subject to transitional arrangements (see below). Non-residential, mixed property and enveloped dwellings (as to which, see Practice note, SDLT: 15% rate on enveloping high-value residential property) are unaffected by these changes.

The residential SDLT rates applicable under the old rules (see Practice note, SDLT and stamp duty rates (for land): General rates of SDLT) will be replaced with the following bands.

For example, under the old rules, the SDLT charge on a residential property bought for £450,000 would be £13,500 (the entire consideration would be taxed at 3%). Under the new rules, the SDLT charge would be £12,500 (the first £125,000 would be taxed at 0%, the next £125,000 at 2% and the final £200,000 at 5%).

The effective rate of tax for properties with a chargeable consideration of £937,500 or less will be lower, or the same as, the effective rate of tax under the old rules. However, there will be an increase in the effective rate for most higher value properties. For example, a residential property bought for £1.25 million under the old rules would attract SDLT of £62,500 (effective rate 5%). Under the new rules, the charge would be £68,750 (effective rate of 5.5%).

Under transitional rules, buyers may elect to pay SDLT under the old rules in either of the following cases:

If a person has the right to choose to account for SDLT under the old or new rules, this is done simply by including the amount of SDLT in box 14 of the land transaction return (calculated according to which rules have been selected). Pending the development of HMRC's IT systems, a stand-alone online calculator is available (see HMRC: Stamp Duty Land Tax calculator).

The draft legislation, which will be introduced into Parliament in December 2014, will be contained in the Stamp Duty Land Tax Bill. The draft Bill contains consequential amendments to existing SDLT provisions, including the linked transactions rules and multiple dwellings relief. We will publish a separate update on these measures soon.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.206 to 1.211 and 2.121, HM Treasury: Stamp duty reforms-fact sheet, Autumn Statement 2014: HMRC overview, paragraph 1.1, HMRC: (Draft) Stamp Duty Land Tax Bill), draft explanatory notes, policy costings, page 10 and Guidance note: Stamp duty land tax: Reform of structure, rates and thresholds.)

The government intends to introduce a seeding relief from SDLT for property authorised investment funds (PAIFs) and co-ownership authorised contractual schemes (CoACSs). This follows on from industry lobbying for seeding relief, culminating in the recent consultation (see Legal update, Consultation on SDLT treatment of authorised contractual schemes and PAIFs). The government will also make changes to the SDLT treatment of CoACSs investing in property to ensure that SDLT does not arise on transactions in units (subject to resolving potential avoidance issues). These measures will be included in the Finance Bill 2016.

It is hoped that these measures will result in the transfer of a significant number of properties currently held offshore to UK vehicles.

To track the progress of these measures, see Tax legislation tracker: property, energy and environment: PAIFs seeding SDLT relief.

(See HM Treasury: Autumn Statement 2014, paragraph 2.123.)

The government will change the definition of "financial institution" in section 73BA of the Finance Act 2003 (the definition used to identify those financial institutions that may be party to arrangements qualifying for SDLT alternative property finance relief (as to which, see Practice note, Sharia-compliant transactions: tax: Stamp duty land tax). The new definition will include all persons authorised to provide home purchase plans (as to which, see Practice note, Regulated activities: home reversion and home purchase plans: What is a regulated home purchase plan?). The change will take effect from the date on which the Finance Bill 2015 receives Royal Assent.

(See HM Treasury: Autumn Statement 2014, paragraph 2.124.)

The rates of annual tax on enveloped dwellings (ATED) (as to which, see Practice note, Annual tax on enveloped dwellings (ATED)) for residential properties worth more than £2 million will be increased by 50% above inflation. The ATED filing obligations and information requirements will also be simplified.

The new rates, that will be included in the Finance Bill 2015 and will apply for the chargeable period 1 April 2015 to 31 March 2016, are:

The announcement refers to properties owned through a company and does not mention properties owned by other non-natural persons. However, we do not expect that the draft legislation will amend the scope of the ATED charge.

It was announced in the 2014 Budget that the government would consult on possible options to simplify the administration of ATED (see Legal update, 2014 Budget: key business tax announcements: Annual tax on enveloped dwellings (ATED) to be extended to dwellings over £500,000). The consultation was launched on 22 July 2014 and contained two potential options (see Legal update, Consultation on easing the administrative burden of ATED). The Autumn Statement announcement does not provide details on how the filing obligations and information requirements will be simplified. It is, therefore, expected that the detail will be included in the draft Finance Bill 2015 clauses that will be published on 10 December 2014.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.213, 2.125 and 2.139 and Autumn Statement 2014: HMRC overview, paragraph 1.2.)

The scope of multiple dwellings relief (MDR) (as to which, see Practice note, SDLT: Multiple dwellings relief) will be extended to lease and leaseback arrangements of shared ownership properties entered into with a qualifying body (for example, a housing association).

Currently, the acquisition of a superior interest subject to a lease for an initial term of more than 21 years does not attract MDR (see Practice note, SDLT: Multiple dwellings relief: Interests subject to leases). The amending legislation will be included in the Finance Bill 2015 and will take effect from the date that the Finance Bill 2015 receives Royal Assent.

(See HM Treasury: Autumn Statement 2014, paragraphs 1.139 and 2.122.)

There will be a package of measures to reduce the administrative burden imposed by the construction industry scheme (CIS) (as to which, see Practice note, Construction industry scheme (CIS)).

In the 2014 Budget, the government announced that it would consult on ways in which to improve the operation of the CIS (see Legal update, 2014 Budget: key business tax announcements: Review of construction industry scheme). The consultation, which was launched on 27 June, proposed simplification of the gross payment test, restriction of the verification process to sub-contractors claiming gross payment status and compulsory online filing of monthly CIS returns from October 2016 (see Legal update, Construction Industry Scheme: consultation on improvements). The Autumn Statement announcement does not provide any further details on the simplification measures that will be implemented. However, a summary of responses to the consultation will be published shortly.

(See HM Treasury: Autumn Statement 2014, paragraph 2.140.)

See:

The government will publish a response to its recent consultation (see Legal update, Consultation on implementing VAT rules on prompt payment discounts) on implementing the prompt payment discount measures included in the Finance Act 2014 shortly.

For background, see Tax legislation tracker: VAT: Prompt payment discount.

(See HM Treasury: 2014 Autumn Statement, paragraph 2.110.)