Below is a summary of the key announcements that could impact Islanders:
Changes to National Insurance for the self employed
As previously announced, the UK Government will abolish Class 2 National Insurance Contributions in April 2018. At the same time, Class 4 contributions will be increased by 1% to 10%, and will see a further increase to 11% with effect from April 2019.
This change may see individuals wishing to consider more carefully whether their circumstances truly reflect that of a self-employed individual.
A 25% charge will be introduced on the transfer of funds to a QROPS scheme. The aim of this measure is to reduce the amount of pension wealth being transferred overseas. Exceptions will apply in certain circumstances where there is a genuine need to transfer the pension.
Withholding tax on interest
In order to encourage investment in the UK and make it easier for businesses to raise finance, the government will renew and extend the administrative simplifications of the Double Taxation Treaty Passport scheme to assist foreign lenders and UK borrowers. This scheme simplifies access to reduced withholding tax rates on interest that are available within the UK’s tax treaties with other countries. Currently, the withholding tax rate on interest payments made to Jersey and Guernsey resident companies is 20%.
The UK will also introduce an exemption from withholding tax for interest on debt traded on a Multilateral Trading Facility, removing a barrier to the development of UK debt markets. The government will consult in spring 2017 on implementation of the exemption.
Offshore property developers
The government will amend legislation to ensure that all profits realised by offshore property developers developing land in the UK, including those on pre-existing contracts, are subject to tax, with effect from 8 March 2017.
Promoters of Tax Avoidance Schemes ("POTAS")
New legislation will ensure that promoters of tax avoidance schemes cannot circumvent the POTAS regime by re-organising their business by either sharing control of a promoting business, or putting a person or persons between themselves and the promoting business. This will ensure that HMRC can apply the POTAS regime as intended.
Strengthening tax avoidance sanctions and deterrents
In his speech, the Chancellor reiterated his commitment to introducing a new penalty for enablers of defeated tax avoidance schemes.
The government will introduce a new penalty for a person who has enabled another person or business to use a tax avoidance arrangement that is later defeated by HMRC.
This new regime reflects an extensive consultation and input from stakeholders. The government will also remove the defence of having relied on non-independent advice as taking ‘reasonable care’ when considering penalties for a person or business that uses such arrangements.
If you have any questions, please don't hesitate to contact Justin Woodhouse or another member of our local Channel Islands team whose details appear alongside.