Autumn Statement 2015: Implications for owner-managed companies and investment property owners
You may be forgiven for regarding last weeks Autumn Statement as being a little on the bland side as far as taxation goes but if you are in business or are involved with investment properties then you really do need to consider the small print.
The small print of the Statement contains an undertaking that the “government will publish a consultation on the rules concerning company distributions later in the year”. Coming on top of the unexpected 7.5% surcharge on many dividends from April 2016 – which will predominantly affect owner-managed companies – business owners would be well advised to keep an eye on developments.
A halving of the lifetime Entrepreneurs’ Relief limit to £5million was widely anticipated in the press. It didn’t happen !
However, what has emerged is that the government believes that it was, perhaps, a little over-enthusiastic in the changes to entrepreneurs’ relief which it made in Finance Act 2015. It has been announced that it will “consider bringing forward amendments to remove the restrictions for some genuine commercial transactions currently caught by the new rules”. It is not entirely clear what this means but this statement is likely to allude to the possibility that relief may be back on the agenda for companies operating in commercial joint ventures and companies which are members of partnerships. If that proves to be the case I would not count on the new provisions to be retrospective.
Property investors have now had two hard knocks. The government has already introduced legislation to restrict tax relief on buy-to-let loans to the basic rate of tax. There is now a proposed change which affects almost everyone buying a residential property other than a main residence and it is one which will significantly affect the buy to let market. There will be an SDLT surcharge of 3% on top of the normal rates on any purchase of “additional residential properties” above £40,000.
It appears as though the surcharge will not apply to “corporates and funds owning more than 15 residential properties” and it may not apply to property traders, developers or companies (and perhaps even individuals) buying residential properties to refurbish and sell on.
A period of consultation on the detail is promised; but since the surcharge applies from 1 April 2016 one wonders exactly how effective and realistic that consultation is going to be. Another one to keep an eye on.