Budget bingo

November 25 saw George Osborne deliver what was effectively his third budget of the year. This time, he got back to his economic roots. Tax credits took centre stage and many interested parties, such as non-doms, were left waiting for clarification.

A shift to the digital side

When the end of the tax return was announced at Budget 2015, many were wondering how the data of those without third parties reporting to HMRC, such as the self-employed and landlords, would be reported. Such people will be required to update their HMRC record at least quarterly.

While there is a consultation on this in 2016, it is likely to be a heavy administrative burden. Those with more complicated tax affairs, such as those who are in partnerships, will need to be considered in more depth.

HMRC's move towards greater digitalisation was heralded as a positive step forward. However current legislation relies on the notion of the 'tax year', not tax quartiles. Enforcing quarterly tax data updates will be burdensome for many, and means that people who cannot or do not want to do their own tax returns face paying professionals to do it four times a year instead of once; an unwelcome outcome for many.

There is a lack of understanding from HMRC about how people really live their lives - the chancellor is looking to rewrite business and human behaviour, which seems both unrealistic and unnecessary.

HMRC will have to fundamentally alter the tax landscape. The annual system benefitted businesses, where for example, final profits are unknown until the end of the year and then are formally allocated for partners in partnerships. It will be interesting to see how this is translated into the digital records. This government brought in the Office for Tax Simplification, but with regards to HMRC's digitalisation, simplification seems to have gone by the wayside.

Unkind CGT for property investors

The proposal to bring the capital gains tax (CGT) payment on residential property for UK residents in line with the 30 days allowed for non UK resident individuals from April 2019, will be a surprise to many, and will bring considerations closer to home. The new 30 days rule means you could sell your property on day one of the tax year at a gain. By the end of the tax year, a loss could be made elsewhere thus resulting in a potential overall loss.

The rule means that tax has already been paid and it is unclear what HMRC is going to do in this situation. Advisers will need to watch and wait. Overall, in practice, it shouldn't cause too large a headache as in most instances, the majority of these gains are covered by main residence relief.

That said, the change in CGT payment dates could be seen as unfair by many invested in property, when compared to the payment date for tax on all other capital gains. The administrative burden could be sizeable, especially when capital gains are more complicated to calculate than stamp duty land tax (SDLT) which currently has to be paid within 30 days.

Even here the chancellor made a change and from 2017-18 SDLT, will be payable within 14 days. While neither of these measures brings in additional tax, they do serve to add an extra layer of complexity for tax payers.

Tax evasion and avoidance

The tax avoidance portion of the statement saw the whip being cracked, although with the general anti-abuse rule (GAAR) in place, it is unclear where further avoidance will come from, given the first GAAR cases are still yet to be heard.

Osborne announced public naming of tax evasion enablers, as well as a penalty of 60 per cent of tax due, to be charged in all cases successfully tackled by the GAAR, among other new penalties.

HMRC will be seeking evidence in order to obtain a better understanding of the impact on the trend away from cash on evasion and the hidden economy. No doubt further measures will be announced following this.

Non-doms left in the dark

The 'emergency' Summer Budget 2015 brought sweeping changes to the non-dom regime and a promise to do away with the tax advantages that being a non-dom, long-term resident in the UK brings. Non-doms, therefore, will have been urgently looking for clarification on the details in the Autumn Statement.

Osborne instead left them in the dark on how the changes work in relation to other forms of relief, and indeed pensions. The much needed technical guidance for those non-doms whose UK property has been drawn into the inheritance tax net was the elephant in the room.

Investment support

The chancellor was keen to drive the message home that he was helping people onto the property ladder. His clamp down on investment property was clear when he outlined that SDLT would apply to those purchasing additional residential property valued over £40,000. From 1 April 2016, the SDLT rates will be 3 per cent higher than the current rates and will impact those purchasing buy to lets and second homes after that date.

This is disadvantageous for married couples as HMRC will view them as a single taxable unit, the rise also came as a surprise after it was omitted from the Tory manifesto. As the change follows the announced reform to mortgage interest relief, people may view the attack on buy to let as their ticket to leave the market far earlier than anticipated.

The move is likely to harm families' ability to diversify their investment portfolio into the property sector, the London market is also likely to be affected and there is likely to be a flurry of transactions being pushed through before the changes come into effect in April 2016.

Investors looking to utilise the Business Investment Relief (BIR) would have been left with mixed feelings. While BIR has the potential to encourage wealthy resident non-dom investors, the government's announcement doesn't sit well with the tightened remittance basis of taxation for long term resident non-doms, introduced in July's Summer Budget.

Additionally, the 45 day time limit for funds brought into the UK to be invested in the target company is hard to meet. The stipulation that the investment can only be made by way of a subscription for a new issue of shares or other securities, or by way of a loan also limits its attraction. Some may feel there are too many hoops to jump through and invest outside of the UK.

Deeds of variation

The Chancellor announced that the use of deeds of variation wouldn't be restricted. The retained flexibility for beneficiaries to change inheritances and to pass assets straight onto the next generation is to be welcomed. These assets do not then get caught in the beneficiaries' estate, which will alleviate inheritance tax concerns. This, combined with loved ones being able to alter how an estate is distributed within two years of date of death, will be a welcome move for many.

Looking ahead

The Autumn Statement showcased an assured chancellor who navigated the statement, and his agenda, well. Despite the House of Lords rebuffing his tax credit plans, he kept the focus where he wanted it. He didn't give much airtime to the issues affecting investors, or provide the clarification non-doms were seeking following the changes they saw in the budget, however, there was a firm message that government spending is being cut and communities are being supported.

While he still held he was 'fixing the roof while the sun shines', the question remains whether the sun will be shining on those that now need to file their tax quarterly, and digitally. Those still awaiting vital guidance or legislation will have to wait until he next takes to the stage.

Lucy Brennan is a private wealth partner at Saffery Champness