Skip to main content
Global HR Lawyers

Sleight of Ha(mmo)nd: Autumn Statement 2016

24 November 2016

I was all ready to write about how the Autumn Statement was an audacious piece of misdirection, using a flashy reduction of corporation tax (to the much-rumoured rate of 15%, or maybe lower) to detract from less welcome announcements.

But our new Chancellor’s style does not tend towards the flashy. The Chancellor confirmed that the corporation tax roadmap set out by his predecessor will continue to be followed, with a rate of 17% by the end of the Parliament.

Instead this was very much an Autumn Statement that allows us all to pause for thought. So what tax changes did the Chancellor use his 51 minutes in the lime light to announce?

Employee shareholder shares - we hardly knew ye

The brainchild of George Osborne has been controversial since it was introduced in 2013. The Employee Shareholder regime involved a spectacularly tax-efficient way of giving employees shares as long as they gave up certain employment rights (including some of their “unfair dismissal” employment rights). The measure was announced as a way of stimulating wider employee ownership of shares while creating a more flexible, entrepreneurial workforce. However its use in practice seemed quite focused on exactly the same management as might expect equity rewards anyway. And with fantastic tax giveaways to boot!

The ESS regime had its tax benefits significantly reduced in Budget 2016, and has now been quietly put down. The change only affects new arrangements. ESS arrangements which are already in place will be unaffected.

Making sacrifices

Salary sacrifice has been a key component of a number of employee arrangements over the years, and some of these have riled the Treasury if their effect was to abuse the availability of tax reliefs. However in legal terms salary sacrifice is simply a change of your remuneration package from A to B which should be perfectly innocuous. Salary sacrifice is also a key tool in many flexible benefit arrangements, which are seen as a cost-effective way of improving employee satisfaction by allowing employees to customise their benefits package.

Nonetheless, salary sacrifice schemes are clearly seen as a sufficient blight to warrant abolition, removing any tax benefits that may flow from taking certain benefits instead of cash. Except that the abolition has exceptions for many of the most popular benefits: employer pension contributions, cycle to work bike schemes, childcare and ultra-low emission cars. The Chancellor also confirmed that there will be a transitional period for established schemes, giving them time to adjust to the new regime.

The Autumn Statement also announced a few more changes (or intended consultations) on the taxation of benefits-in-kind, or relief provided for business expenses. Whether this is minor tinkering or major reform will emerge in due course.

Underwriting on the wall

There were very few straightforward tax hikes in this Budget, but the rise of Insurance Premium Tax from 10% to 12% is exactly that. Insurers will have to mull over how much of this they can pass on to customers.

This might encourage some businesses towards some of the alternatives to insurance. For example, employee health insurance costs might be reduced by switching to a medical benefit trust arrangement (which eschews conventional insurance in exchange for collective self-insurance, and therefore reduces or eliminates Insurance Premium Tax).

Steady as she goes

Much of the Chancellor’s speech was spent confirming that the announcements of his predecessor will be honoured. Amongst these were:-

  • Plans to increase the personal allowance to £12,500 over this Parliament will still go ahead
  • Changes to the taxation of non-domiciled individuals (removing the possibility of permanent non-domiciled status)
  • Changes to the inheritance tax treatment of UK property for non-domiciled individuals
  • Restrictions on interest relief and the carry-forward of trading losses for larger corporates
  • Increased penalty risks for those enabling, or participating in, aggressive avoidance schemes that are subsequently defeated in the courts
  • From April 2018, certain termination payments will incur employer NICs where there currently are none. This proposal has been refined following consultation. The Autumn Statement says: “Following a technical consultation, tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked, making it simpler to apply the new rules.”. Simpler? Really?

Tax relief

No, not a new tax relief. But just the relief that the Real Estate sector must feel at an Autumn Statement that doesn’t hit them with some new tax charge, or complexification. All the ATED, CGT and SDLT changes over the past few years have been exhausting to deal with. Clearly the Chancellor thinks this sector has been hit hard enough. In these times of universal brouhaha, it’s important to stop and smell the roses.


The Chancellor’s final announcement was that, after much deliberation and soul-searching, this would be his last ever Autumn Statement… <gasp!>.. because he’s abolishing the Autumn Statement. Every Chancellor, when given a platform, fancies himself as something of a comedian, and to give him credit this was a deft use of the popular pull-back-and-reveal joke form.

Jokes aside, the Chancellor was making a welcome announcement that the Budget (historically held in March) would be moved to November/December, enabling more time for consultation ahead of the introduction of any tax changes at the start of the tax year in April. March will now play host to what is being described as a “Spring Statement” although the Chancellor insists that this will not be used as the stage for grand tax announcements for the sake of it.

History tells us that few Chancellors can resist fiddling with the knobs, levers and dials of the tax system at every available opportunity. Might Mr Hammond be a noble exception to this rule? Time will tell.

Back To Top