Written Statements

Wednesday 3rd December 2014 Written Statements

Wednesday 3 December 2014

Autumn Statement 2014: Measures with Immediate Effect

Wednesday 3rd December 2014 Written Statements

[The Financial Secretary to the Treasury (Mr David Gauke)]

This Government are committed to delivering a tax system that is fair and promotes growth and competitiveness.

As part of the autumn statement 2014, the Government have announced a number of measures to reform stamp duty, land tax, help tackle tax avoidance, address unfair tax outcomes and support investment. The legislation for these measures will have immediate effect.

Stamp duty land tax: reform of structure, rates and bands

The Government are introducing legislation which reforms stamp duty land tax on purchases of residential property with effect on and after 4 December so that it will be payable at each rate on the portion of the purchase price which falls within each band, rather than at a single rate on the whole transaction value. The legislation also amends the rates and thresholds to ensure this change is introduced in a fairway.

Corporation tax: restricting relief for internally-generated goodwill transfers between related parties on incorporation

The Government are introducing legislation to restrict a company’s corporation tax relief where internally-generated goodwill and customer related intangible assets are acquired on the incorporation of a related party’s business. The change will be effective for all acquisitions occurring on or after 3 December 2014 to prevent forestalling.

Capital gains tax: restricting entrepreneurs’ relief for goodwill on incorporation

The Government are introducing legislation to prevent claims for entrepreneurs’ relief on disposals of the reputation and customer relationships associated with a business (the “goodwill”), to a close company to which the seller is related. The change will be effective for disposals of goodwill on or after 3 December 2014 to prevent forestalling.

Capital gains tax: entrepreneurs’ relief and deferred gains

With effect from 3 December, the Government will allow gains which are eligible for the 10% capital gains tax rate provided by entrepreneurs’ relief (ER), but which are instead deferred into investments which qualify for the enterprise investment scheme, or into investments eligible for social investment tax relief, to remain eligible for ER when the gain is realised. Draft legislation for this measure will be published on 10 December.

Income tax: miscellaneous loss relief

The Government are introducing legislation to counter avoidance of income tax involving losses from miscellaneous transactions. Legislation denying loss relief where a miscellaneous loss, or miscellaneous income, arises from relevant tax avoidance arrangements will have effect from 3 December 2014. Legislation will also be introduced with effect from tax year 2015-16 to limit relief to miscellaneous income of the same type as the loss.

Bank loss-relief restriction

The Government will introduce legislation in the Finance Bill 2015 to restrict the use of brought forward losses by banks. The legislation will have effect from 1 April 2015, except for anti-avoidance rules that come into effect from 3 December.

High pressure, high temperature cluster area allowance

The Government are introducing legislation to create a new cluster area allowance to support the development of high pressure, high temperature projects and encourage exploration and appraisal activity in the surrounding area or “cluster”. The allowance will exempt a portion of a company’s profits from the supplementary charge. The amount of profit exempt will equal 62.5% of the qualifying capital expenditure a company incurs in relation to a cluster area on or after 3 December 2014.

Inheritance tax exemption for medals and other awards

The Government are extending the existing inheritance tax exemption for medals and other decorations that are awarded for valour or gallantry. From 3 December 2014, it will apply to all decorations and medals awarded to the armed services or emergency services personnel, and to awards made by the Crown for achievements and service in public life. Draft legislation for this measure will be published on 10 December.

Corporate debt

The Government are introducing legislation to repeal rules concerning the tax treatment of deferred interest and discounts on debt issued to UK companies by a connected company in a non-qualifying territory. The repeal will have effect for loans entered into on or after 3 December 2014; for loans already existing at that date it will be effective in respect of interest accruing after 31 December 2015. If the creditor or the terms of an existing loan are changed between 3 December 2014 and 31 December 2015, the repeal will have effect for that loan in respect of interest accruing after the change.

Further details on the measures listed above can be found on the gov.uk website.

UN Peacekeeping Force Cyprus (Reservists)

Wednesday 3rd December 2014 Written Statements

[The Minister for the Armed Forces (Mr Mark Francois)]

A new call-out order has been made under section 56(1 B) of the Reserve Forces Act 1996 to enable reservists to continue to be called into permanent service in support of the United Kingdom’s contribution to the United Nations peacekeeping force in Cyprus (UNFICYP).

Over 100 reservists have been called out for UN operations in Cyprus over the last 12 months. Over the period this new order will be in force we anticipate calling out similar numbers, who will be fully integrated with their regular colleagues. The use of reserves in Cyprus is now considered routine business and is fully in line with our policy of having more capable, usable, integrated and relevant reserve forces.

Currently, we plan on calling out only willing and available reservists who have the support of their employer.

The order takes effect from 11 December 2014 and ceases to have effect on 10 December 2015.

Welfare

Wednesday 3rd December 2014 Written Statements

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

The Government have made significant progress in putting the welfare state on a sustainable footing—undertaking major reforms to benefits and pensions, in order to restore fairness and restore public finances at the same time.

As part of this decisive action, at Budget 2014, the Government took the unprecedented step of introducing a cap on welfare. Today, the independent Office for Budget Responsibility (OBR) has confirmed that the Government are on track to meet the welfare cap commitment.

What is more, the OBR now forecasts welfare spending outside the cap to be £2.3 billion a year lower on average over the next four years, compared to Budget 2014—contributing to a reduction in the overall welfare spending forecast in each and every year of the cap forecast.

This is a marked improvement in exercising discipline over welfare spending. Spending in scope of the welfare cap accounts for £1 in every £6 spent by the Government. Yet in spite of this, it had never previously been subject to firm controls and was allowed to increase by £48 billion under the last Government, up from £70 billion to £118 billion. This was within an overall welfare bill that increased by 60% in real terms, rising even before the recession.

This Government’s welfare reforms are set to save nearly £50 billion over this Parliament. But for these vital changes, welfare spending was set to be that much higher still.

Instead, by actively managing welfare spending, we have halted the damaging trend of welfare spending escalating out of control. Overall welfare spending has been falling as a proportion of GDP since 2012, and last year fell in real terms for the first time in 16 years —even while spending on pensioners rose. This year, working age welfare spending is forecast to be £3 billion lower in real terms than in 2009-10. Testament to the success of the Government’s long-term economic plan, there have been significant falls in spending on unemployment, down over £2 billion since the recession; and on out-of-work benefits, back to pre-recession levels by 2015-16.

Today, the OBR’s first assessment of the welfare cap shows that the Government are forecast to meet the welfare cap commitment, in each of the four years of the forecast period from 2015-16 to 2018-19. The Government are living within the rules of the cap and there has been no breach.

The detail of that assessment is set out in full in the OBR’s “Economic and Fiscal Outlook December 2014”. This explains that the use of the margin in 2015-16 and 2016-17 is due to forecast reasons, not policy changes— the margin exists to allow for such fluctuations in the forecast. As the OBR has set out in the economic and fiscal outlook, its forecast for the volume of work capability assessments for employment and support allowance has been adjusted downward, and the forecast of the number of people who are likely to receive PIP has been adjusted upward. These, alongside other changes to the incapacity and disability benefit forecasts, have increased the forecast and result in use of the margin in 2015-16 and 2016-17, then falling below the margin in 2017-18 and 2018-19. However, overall, compared to its forecasts at Budget 2014, the OBR has revised welfare spending down by £1.3 billion a year on average up to 2018-19.

Importantly, these reforms are set to save money and deliver efficiencies in the long term. That much is shown by excess spending continually falling over the four-year period, bringing spending below the level of the welfare cap in 2017-18 and 2018-19.

Above all, this reflects the full effect of the Government’s action to bring spending back under control, arresting the growth that was once left to escalate. In future years, the aim must be to continue to exercise discipline and rigour in managing welfare spending—as this Government have committed to do.