ALVAREZ & MARSAL TAXAND UK UK BUDGET 2016

ALVAREZ & MARSAL TAXAND UK UK BUDGET 2016

16 March 2016 Ta x a n d

COMMENT FROM HEAD OF A&M TAXAND UK Ta x a n d

● This was a Budget designed to appeal to smaller businesses and middle class voters. Multi-national and other large businesses remain the target for antiavoidance and other measures which are expected to bring substantial additional revenues into the Treasury. ● The Government’s Business tax road map sets the scene for the rest of this parliament. A corporate tax rate cut to 17% by 2020 is balanced by a significant extension of the anti-hybrid rules, by the introduction of interest restrictions following Base Erosion and Profit Shifting (BEPS) Action 4, and by restricting loss reliefs to 50% of profits for larger groups, all be it the off set will be more flexible. For banks the loss relief will be restricted to 25% of profits. ● A new rate of 5% stamp duty land tax on commercial property is accompanied by a significant increase in lease duty where the Net Present Value (NPV) of rents is over £5 million. ● A major reform of business rates will take many smaller businesses out of the tax entirely. Larger businesses will benefit from an improved compliance regime and more regular revaluations, but the overall level of tax raised from such businesses is not likely to decrease substantially. ● The oil and gas industry, currently suffering from historically low oil prices, will benefit from the removal of the Petroleum Revenue Tax (PRT) (in the form of a 0% rate) and the halving of the Supplementary Charge to 10%. ● There will be generous new ISA limits for savers and a hint at what a future pension regime might look like with the introduction of a new Lifetime ISA with a 25% top up from the state. ● The threshold for the basic rate of income tax and the higher rate of income tax have been raised to £11,500 and £45,000 respectively. Capital gains tax rates will be reduced to 20%/10% from the current 28%/18%, but significantly not for residential property or carried interests.

Head of Tax A&M Taxand UK LLP

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CORPORATE TAX Ta x a n d

Business Tax Road Map ● For the first time since the early days of the previous coalition Government in 2010, the Government has published the Business tax road map alongside all of the other usual publications on Budget Day. This document sets out the principles for reform of the business tax environment and progress since 2010, business tax reform to 2020 and beyond and also includes a timetable for the reforms that have been announced today. Included in the Corporate tax road map that was published in 2010 were five guiding principles: – – – – –

Lowering rates while maintaining the tax base Maintaining stability Maintaining a level playing field for taxpayers Being aligned with modern business practice Avoiding complexity

● The Government has reaffirmed its commitment to this approach in the current Parliament. It also sets out the approach going forward to 2020 and includes the following commitments: – Continue to reduce tax rates to drive growth including supporting small business – Build on progress from the last Parliament to tackle avoidance and aggressive tax planning and ensure a level playing field – Simplify and modernise the tax regime The level to which these aims have been achieved with tax legislation in the intervening period from 2010 to date is a point for some debate. Complexity has been avoided in some areas but has certainly been created in others. For example, anti-avoidance relating to the utilisation of losses followed by today’s announcements which should make losses easier to offset against profits going forward. The document is clearly focused on countering avoidance and it may be easy for the objective of simplification to be lost along this path to reform.

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Corporate Tax Rate ● A further reduction in the corporate tax rate to 17% from 1 April 2020 was announced. The tax rate was already due to fall to 19% from 1 April 2017 and then 18% from 1 April 2020. Today’s announcement therefore represents an additional 1% cut to that which was previously announced at Summer Budget 2015. The Chancellor clearly believes that a low corporate tax rate should be at the heart of a strategy to attract increased foreign direct investment. However the quid pro quo for this is a broadening of the tax base with significant changes to the availability of reliefs and the introduction of even more anti avoidance measures. Payment Dates for Large Companies ● The Government has announced that it is going to delay the introduction of the accelerated tax payment dates for large companies. The measures, which will require companies with profits in excess of £20m to make corporate tax payments in the third, sixth, ninth and twelfth months of their accounting periods, will now apply to accounting periods starting on or after 1 April 2019. Whilst businesses will welcome the deferral as it will give them more time to adjust for the transition and to amend their business plans the fact remains that this represents a huge one off permanent injection into the Treasury coffers that will be paid for by the affected companies. Restriction on Relief for Corporation Tax Losses ● From 1 April 2017 only 50% of taxable profits can be offset by carried-forward losses. The restriction is intended to apply to profits in excess of £5m. Where a number of companies are in a single group, the £5m allowance will apply per group, rather than per company. The group will then have discretion as to how it applies the allowance, for example, the £5m allowance could be applied to a single company within the group, or shared between multiple companies within the group. Most of the G7 countries operate similar restrictions on loss utilisation. The £5m allowance will mean that the majority of corporate tax payers should not be affected by the restriction but clearly large companies that have unutilised tax losses will now have their relief deferred over a significantly longer period. This is reflected in the fact that the package of loss measures taken together is expected to be revenue generative for the Exchequer from 2017-2018 onwards.

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Use of Corporation Tax Losses ● For corporation tax losses incurred on or after 1 April 2017, companies will be able to use carried forward losses against profits from other income streams or from other companies within a group. Currently losses carried forward can only be used by the company that incurred the loss, and not used in other companies in a group. In addition, some losses carried forward can only be set against profits from certain types of income, for example trading losses can only be set against future profits of the same trade. This move is a welcome step towards modernising the UK regime and will bring the rules more in line with those that apply in other major jurisdictions. Restriction on Interest Relief ● The Government has published some of its proposals on how the UK will implement the recommendations from the OECD on BEPS Action 4 – restricting interest deductibility. The UK will implement a fixed ratio rule limiting UK corporation tax deductions for net interest expense to 30% of a group’s UK EBITDA (earnings before interest, tax, depreciation and amortisation). If it gives a more favourable answer, groups will be able to use a group ratio rule to determine whether additional interest amounts are deductible in the UK. This will be based on the net interest to EBITDA ratio of the worldwide group. The rules will not apply to groups with net UK interest expense under £2m. Whilst the Government is proposing to repeal the worldwide debt cap provisions, it is also proposing to incorporate certain aspects of them into these rules. As a result there will still remain some additional restrictions on interest deductibility over and above the 30% fixed ratio rule where the UK group is deducting more interest than the group’s net third party interest expense. The rules will be introduced from 1 April 2017 and there will be further consultation on the detailed design of the rules before any legislation is drafted. These provisions will have a significant impact on UK companies. This is a step change because the UK has always enjoyed a very generous interest deductibility regime. As a result, businesses have been eagerly awaiting an announcement on the ratio to be used in the fixed ratio rule and the method to be used for a group ratio. The proposal to use the maximum fixed ratio of 30% recommended under the OECD proposals is welcome. For a number of groups, this could still substantially limit interest deductibility so the application of the group interest rule will be important. The de minimis threshold should exclude many smaller entities/groups from the application of the provisions.

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Restriction on Interest Relief (continued) It is unsurprising the Government has chosen to use a group EBITDA ratio rule rather than a debt/equity type rule which can be hard to operate. The group ratio rule is unlikely to be of significant benefit to groups who have highly leveraged UK activity and activity outside the UK that is not as leveraged (perhaps because of the nature of the activity being carried out). There is no suggestion that third party interest expense will escape the restrictions as this would be contrary to the OECD recommendations with which the Government wishes to comply. There will be some exemptions for private finance on public infrastructure in the UK. The provisions will also address volatility in earnings and interest. No further details have been published at this stage. There are still many unanswered questions such as how the group calculations will be carried out, the treatment of loss making entities/groups, the allocation of disallowances/deductions and the treatment of carried forward amounts. Groups will keenly await the outcome of the further consultation process. The provisions apply to corporation tax and it is not yet clear whether it will be introduced for Non Resident Landlords. Groups could see significant increases in their effective tax rate and cost of borrowing, particularly in the property and infrastructure sectors. All businesses will need to carefully consider these rules given the change in approach to interest deductibility. Hybrid Mismatch Arrangements ● The Government has previously announced it will introduce legislation with effect from 1 January 2017 to implement the agreed OECD recommendations for addressing hybrid mismatch arrangements. The new rules are intended to prevent multinational enterprises avoiding tax through the use of certain cross-border business structures or finance transactions. Draft legislation has already been published for inclusion in Finance Bill 2016. The Government is now extending the scope of the proposed provisions to include mismatches arising from permanent establishments. This is expected to be included in Finance Bill 2016. Targeting permanent establishments goes beyond the OECD recommendations and will significantly extend the scope of the proposed anti-hybrid rules. This change is expected to raise an additional £1bn over the next four years. This will be a key measure for the Government in hitting its target of raising £12bn from additional anti-avoidance measures. As well as impacting financing structures this could have an adverse impact on groups who operate their trading activity through branch structures if payments are being made between branches and/or the head office. It will be necessary to assess the detailed impact of these proposals once revised draft legislation has been published.

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Royalty Withholding Tax ● New measures were announced concerning the withholding of income tax on royalty payments. Firstly a new domestic anti-abuse rule will apply to royalties paid to connected parties on or after 17 March 2016. This rule is aimed at countering treaty shopping situations where groups have organised their arrangements to benefit from the UK’s double taxation agreements in circumstances where relief is contrary to the object and purpose of the agreement. There will also be a rule that broadens the range of royalties to which the duty to withhold tax applies. Finally the rules determining what constitutes a UK source will be updated so that all royalties connected with a UK permanent establishment of a non-resident company will be considered to be from a UK source. Draft legislation is not yet available for these latter two measures but they will be included in the Finance Bill and effective from the date of Royal Assent. The measures to counter treaty shopping are a direct outcome of the OECD’s recent BEPS work. The widening of the scope of the withholding tax rules to include additional classes of income from intangible assets such as trademark royalties and payments for the use of trade names is an interesting development. The UK has long been an outlier when it comes to the taxation of royalties and these changes will bring the UK’s approach more in line with the internationally accepted definition of a royalty payment. Companies which are currently paying royalties without deducting the full rate of income tax either because of the application of a double tax agreement or because the payments are not currently subject to withholding under domestic law should review the draft legislation carefully once it becomes available to determine whether their obligations have changed. Substantial Shareholdings Exemption (SSE) and Double Taxation Treaty Passport (DTTP) ● The Government has announced in the Business tax road map that the SSE and DTTP scheme will be reviewed. The SSE review will focus on the extent to which it is still delivering on its original policy objective and whether it could be changed to increase its simplicity, coherence and international competitiveness. The DTTP scheme, which was introduced in 2010, will also be reviewed to ensure it meets the needs of UK borrowers and foreign lenders. The Government will also consult on extending the DTTP scheme to include other types of foreign investor such as sovereign wealth funds, pension funds and partnerships. SSE can be a very complex area of tax law and the UK regime is often criticised as being far too complicated when compared to the participation exemption regimes of other countries. Simplification in this area would certainly be welcome. In our view the DTTP scheme has been a success and a consultation to extend its ambit can only be a good thing.

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Updated Transfer Pricing Guidelines ● As anticipated, the Government is formally adopting the OECD’s transfer pricing deliverables from BEPS Actions 8-10 (Aligning Transfer Pricing Outcomes with Value Creation). The Government will amend the definition of "transfer pricing guidelines” for domestic law purposes so that it now refers to the updated guidelines published on 5 October 2015 by the OECD. ● The updated transfer pricing guidelines will apply in respect of accounting periods beginning on or after 1 April 2016. Salient features of the guidelines include: – New guidance on applying the arm’s length principle – Aligning profits with value creation or economic activities – Delineating transactions by addressing contractual terms of intercompany arrangements vis a vis the actual conduct of the parties – Outlining a new framework for pricing intangibles with a focus on the development, enhancement, maintenance, protection and exploitation of the intangible where legal ownership plays secondary role – New guidance on pricing commodity transactions – Simplifying transfer pricing for low-value added services by applying a mark up of 5% on the relevant cost base – Revising guidance on the cost contribution arrangements This is another example of the Government’s commitment to adopting the OECD’s BEPS recommendations at the earliest possible opportunity. UK companies should review their current transfer policies for compliance with the new guidelines. Repeal of Renewals Allowance ● The “renewals allowance”, which predates the capital allowances legislation and was intended to allow the costs of replacing implements, utensils and articles used in a business, will be repealed from 1 April 2016 for corporation tax purposes. Tax relief for this type of expenditure is now afforded under the existing capital allowances regime or the new relief for residential landlords. Some businesses had sought to obtain relief under the renewals allowance provisions for expenditure on very large and expensive items of equipment. The renewals allowance was never intended to apply to expenditure of that nature and the repeal of this allowance levels the playing field.

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Securitisation Companies and Annual Payments ● Following consultation legislation will be introduced such that residual payments made by securitisation companies to their investors will not be classified as annual payments and therefore can be paid without withholding tax. Currently, many securitisation companies seek clearance from HMRC on this matter. This should clarify a specific area of uncertainty about the withholding tax treatment of certain payments made by securitisation companies to their investors and remove the requirement to seek clearance from HMRC in each case.

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REAL ESTATE Ta x a n d

Stamp Duty Land Tax (SDLT) on Commercial Property ● SDLT on commercial property is changing to a slice system, similar to that already introduced for residential property. The first £150,000 of purchase price will be exempt, the next £100,000 will be taxed at 2% and anything in excess of £250,000 will be taxed at 5%. This represents an increase for all transactions over £1.05 million. In addition the rate of SDLT on rents on leases of commercial property will increase to 2% where the NPV of the rents exceeds £5 million. This is a doubling of the existing 1% rate. The new rates apply from 17 March 2016 with transitional relief where a binding contract already exists. This represents a significant increase in the cost of investment for most institutional and larger scale property investors, and will potentially reduce property values as well as the viability of some investments. The increase in lease duty will also be a blow for larger occupiers and may accelerate the trend towards shorter leases. Additional 3% Rate ● The Government has announced some minor changes to the new 3% additional SDLT rate for purchasers of buy-to-let properties and second homes. In particular it will be possible to avoid the additional tax where a primary residence is purchased and the existing primary residence is sold within three years. However the mooted exemption for larger scale investors purchasing 15 or more units has been dropped and all buyers of residential investments will therefore be caught. The new rules apply from 1 April 2016. This will be a disappointment to the property investment community who had hoped for special treatment to encourage larger scale investments in the private rented sector. In practice where six or more units are being purchased, it is possible to apply the commercial rate of SDLT and, even at 5%, this will often be lower than the residential rates in future. The effect may be to make some investments unviable, and it remains to be seen whether the volume of institutional investment into this sector will be affected.

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REAL ESTATE Ta x a n d

Offshore Property Developers ● Certain offshore property developers who do not currently pay tax on the profits from developing and selling land will do so after Report Stage to the 2016 Finance Bill (probably late June). Currently it is possible for property developers in certain jurisdictions to avoid having a permanent establishment (PE) in the UK and therefore avoid tax on any trading profits arising from the development. A new rule will bring them into charge to tax even if there is no PE, and the treaties with Jersey, Guernsey and the Isle of Man are being amended by Protocol to allow this to happen. In addition there will be anti-avoidance provisions with immediate effect to prevent developers rebasing their property, or using fragmentation or enveloping arrangements to avoid the new charge. HMRC have become aware that this practice is common as a result of discussions around the Diverted Profits Tax and it is perhaps not surprising that they are taking steps to prevent it. The anti-avoidance provisions are quite detailed and could potentially catch people who might not otherwise expect to be within the rules. Business Rates ● In major reforms to business rates, all properties with ratable values up to £12,000 will be exempt, a doubling of the existing limit, with taper relief up to £15,000. Ratable values up to £51,000 will not suffer the higher rate of tax. In addition the Government is proposing to introduce revaluations of all property at least three yearly, to link rates to CPI rather than RPI from 2020, and to reform and simplify the billing and payment regime. The Government has also confirmed that local councils will in due course be able to keep business rates and have the ability to reduce them to attract more investment. The lack of reform of business rates has been a major complaint of business for some years, and there will be a widespread welcome for this substantial reform programme. The prime beneficiaries are smaller businesses, but large business will also potentially benefit from the changes to revaluation, to indexation and to the compliance regime. A particular concern has been the lack of regular revaluations which means that the tax has become out of kilter with real values. Revaluations every three years will remedy this.

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BANKING AND FINANCIAL SERVICES Ta x a n d

Bank Losses ● At Autumn Statement 2014 it was announced that the amount of taxable profit that could be offset by banks’ pre-April 2015 carried-forward losses (trading losses, non-trading loan relationship deficits and management expenses) would be restricted to 50% from 1 April 2015. It was today announced that the restriction would be changed to 25% from 1 April 2016. Any profits of a banking company with an accounting period straddling 1 April 2016 will be allocated into notional periods falling before and after that date, on either a time apportioned or just and reasonable basis. Although measures were announced today restricting the use of tax losses of all companies the financial services industry has once again been singled out for special treatment. The Treasury estimates that the deferral of relief will generate an additional £2bn of corporate tax revenues over the next five years. One of the key components of a competitive tax regime is stability and this kind of selective targeting undermines that. Insurance Premium Tax ● Flood defence and resilience funding will be increased by more than £700 million by 2020-21, funded by a 0.5% increase in the standard rate of Insurance Premium Tax.

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OIL AND GAS Ta x a n d

Petroleum Revenue Tax (PRT) and Supplementary Tax Charge ● There were two significant tax reductions for the industry - a reduction in the rate of PRT from 35% to 0%, effectively abolishing PRT, and a reduction in the rate of the supplementary tax charge from 20% to 10%. The PRT reduction will apply for all chargeable periods ending after 31 December 2015 while the reduction in the supplementary tax charge will apply to accounting periods commencing on or after 1 January 2016. The oil & gas sector is struggling not just in the UK but globally. We are in the midst of the lowest oil prices seen for over a decade. In the industry companies are struggling to survive, there are numerous job losses and significantly reduced investment particularly for new projects. The UK industry has been lobbying hard for tax cuts and it seems the Chancellor has answered. These tax cuts are expected to cost the Exchequer just over £1bn over the next five years. The measures are intended to boost much needed investment in the sector and maximise economic recovery of reserves, especially in the UK North Sea. The PRT reduction should provide better post tax returns for investors and create equal treatment for additional investment between older (pre 16 March 1993) PRT paying fields and non-PRT paying fields.

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ANTI-AVOIDANCE Ta x a n d

Loans to Participators ● Effective from 6 April 2016, loans by close companies to their participators, or other arrangements through which participators extract value, will be subject to tax at a rate of 32.5% (an increase from the current 25%). This will maintain the anti-avoidance purpose of this provision and align the rate of tax on loans to participators with that on dividend income announced in 2015 so that individuals will not gain an unfair advantage by extracting value from their companies by way of loans (or other arrangements) instead of remuneration or dividends. Tackling Disguised Remuneration Avoidance Schemes ● HMRC has announced a package of proposals to tackle historic and continued use of disguised remuneration avoidance schemes, to ensure that those who have used or continue to use such schemes will pay tax and NICs. A new antiavoidance rule will be introduced with effect from 16 March 2016 to put beyond doubt that certain schemes intended to be covered by existing legislation do not work, and existing transitional relief on investment returns accruing on disguised remuneration will be withdrawn from 30 November 2016. ● Further consultation will be undertaken and legislation will be introduced in Finance Bill 2017 and in subsequent years to ensure the anti-avoidance legislation is targeted and effective. This will put beyond doubt that schemes which result in a loan or other debt being owed by an employee to a third party, whatever the intervening steps, should be subject to income tax and NICs as remuneration. This will also include the ability for HMRC to transfer the PAYE liability for income tax and NICs from the employer to the individual if it cannot reasonably be collected from the employer (for example where schemes involve an offshore ‘employer’). The legislation announced for Finance Bill 2016 is intended to clarify that a particular type of disguised remuneration scheme is not effective and encourage users of disguised remuneration schemes prior to 2011 who have accrued investment returns on their disguised remuneration to settle their liability with HMRC before 30 November 2016. It has also been made clear that HMRC will take further action in the future if it becomes aware of other disguised remuneration avoidance schemes and this could include retrospective action.

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RATES AND ALLOWANCES Ta x a n d

Income Tax Thresholds ● The personal allowance for individuals earning less than £100,000 will increase to £11,500 from 6 April 2017 (from £11,000 for the tax year 6 April 2016 to 5 April 2017). ● The higher rate threshold will increase to £33,500 from 6 April 2017 (from £32,000 for the tax year 6 April 2016 to 5 April 2017) giving an effective threshold of £45,000 for those who are entitled to a full personal allowance. ● The National Insurance contributions Upper Earnings/Profits Limit will also rise in line with these increases. These increases are part of the Government’s commitment to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this parliament. Capital Gains Tax Rates (CGT) ● The CGT rate will reduce from 18% to 10% for basic rate taxpayers. ● The CGT rate will reduce from 28% to 20% for higher rate taxpayers. ● These changes do not apply to capital gains on residential properties, that do not qualify for private residence relief, and carried interest, which will continue to be taxed at 18% or 28%. Cutting the rates of CGT is intended to ensure companies have access to capital they need to expand and create jobs and to foster an investment culture for the next generation. Retaining the 28% and 18% rates for residential property is intended to provide an incentive for individuals to invest in companies over property.

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SAVING AND INVESTMENTS Ta x a n d

Extension to Entrepreneurs Relief (ER) ● ER will be extended to apply to external investors in unlisted trading companies, reducing their capital gains tax rate on disposal to 10%. Currently, ER applies only to individuals who are employees of a company and hold at least 5% of the share capital. The new relief, “investors’ relief”, will only be available after a three year holding period compared with ER which requires a one year holding period. It will also have a separate £10m lifetime cap. This is a further part of the Chancellor’s aim of ensuring smaller companies have access to capital in order to grow. ER has proved to be popular and this new relief should encourage further investment. Employee Shareholder Status (ESS) ● A lifetime limit of £100,000 will be introduced on gains eligible for capital gains tax exemption under the ESS regime. The limit will apply to all arrangements entered into on or after 17 March 2016 but will not impact on arrangements which are already in place. This measure does not come as a surprise given the generosity of the existing ESS rules. Since its introduction in September 2013, ESS schemes have been widely implemented but perhaps not always to achieve the original aim of encouraging genuine employee participation. The lifetime limit restricts the potential tax benefit for future Employee Shareholders but the fact that the changes will not have retroactive effect is good news for existing participants. ISA ● The annual ISA allowance will rise from £15,240 to £20,000 in April 2017. The Government is committed to encouraging people to save and this is a further generous increase in the amount which can be saved into the tax free ISA regime on top of increases already introduced.

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SAVING AND INVESTMENTS Ta x a n d

Lifetime ISA (LISA) ● There will be a new LISA introduced in 2017 for savers under 40. They can put up to £4,000 into the LISA in each year and the Government will top it up with £1 for each £4 put in. Contributions can continue to be made up to age 50, and will count towards the overall £20,000 ISA limit. Funds can be withdrawn either for a house purchase or at any time after age 60. It will be possible to withdraw funds before 60 for other purposes but the Government top up will be lost. The existing house purchase ISA will sit alongside this regime and it will be possible to contribute to both, but it will only be possible to access the Government contribution in one of them for home purchase. This is another generous scheme designed to encourage the next generation to save either for house purchase or retirement. Given that the Government contribution rate is effectively the same as the basic rate of income tax, it may be that this will eventually turn into the main pension vehicle for the under 40s in place of current pension tax relief. Providers will need to consider whether and how to provide packaged products to investors which could incorporate the Help to Buy ISA, the new LISA and a traditional ISA.

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INDIRECT TAX Ta x a n d

Joint and Several Liability for VAT Representatives and Online Marketplaces ● In response to growing concern about the amount of VAT revenue lost when overseas businesses fail to declare VAT due on sales of goods in the UK via online marketplaces, the Government will legislate in the Finance Bill 2016 for greater HMRC powers to direct an overseas business to appoint a UK VAT representative with joint and several liability for the VAT debts of the overseas business. HMRC will also be able to hold online marketplaces jointly and severally liable for VAT that has not been declared on sales made by overseas businesses via the marketplace. Both measures will be applied at HMRC’s discretion and will not apply to any business automatically. The Government estimates it is losing over £1bn in annual VAT receipts from the failure of some overseas businesses to VAT register in the UK and declare VAT accurately. This should be a welcome measure to tackle the problem, provided HMRC recognises where overseas businesses are making genuine efforts to meet all their UK VAT obligations. Operators of online marketplaces open to UK consumers will need to think carefully about whether they may be exposed to joint and several liability for the VAT debts of sellers operating in their marketplaces and what steps they may be able to take to mitigate the risk. Increased VAT Registration and Deregistration Thresholds ● As is now customary with Spring Budgets, the Government has announced a rise of £1,000 in the UK VAT registration and deregistration thresholds. From 1 April 2016, the VAT registration threshold will be £83,000 while the deregistration threshold will be £81,000. Sugar Tax ● The Government will introduce a new soft drinks industry levy. It will be paid by producers and importers of soft drinks that contain added sugar. The levy will be based on the total sugar content of the drinks. There will be two bands, one for sugar content above 5g/100ml and a second higher band for sugar content above 8g/100ml. There will be an exclusion for small operators and the Government will consult on the details over the summer, for legislation in Finance Bill 2017 and implementation from April 2018 onwards. Whilst the Government has included costings for these proposals it is not clear from the Budget documentation exactly what the rates of the levy will be. Clearly this will be important for the soft drinks industry given its potential to affect consumption and ultimate profitability.

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EMPLOYMENT TAX Ta x a n d

National Insurance on Termination Payments ● From April 2018 employers will need to pay National Insurance Contributions (NICs) at the rate of 13.8% on pay-offs (for example, termination payments) above £30,000 where income tax is also due. For people who receive compensation for losing their job and receive payments up to £30,000, the current rules will continue to apply. This measure will more closely align the NICs treatment with the income tax treatment of termination payments. Class 2 NICs ● Class 2 NICs for self-employed people will be scrapped from April 2018. After April 2018, Class 4 NICs will also be reformed so that self-employed people can continue to build benefit entitlement. This is a welcome administrative simplification for self-employed taxpayers.

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CONTACT US Ta x a n d

To discuss how A&M might provide assistance please contact any of the following:

David Pert Managing Director, Head of Tax Tel: +44 (0) 20 7715 5208 Mobile : +44 (0) 7946 442809 [email protected]

Charles Beer Managing Director, Real Estate Tax Tel: +44 (0) 20 7863 4721 Mobile: +44 (0) 780 261 5194 [email protected]

Ian Fleming Managing Director, Transaction Tax Tel: +44 (0) 20 7663 0425 Mobile: +44 (0) 7947 938907 [email protected]

Kevin Hindley Managing Director, Corporate and International Tax Tel: +44 (0) 20 7715 5235 Mobile: +44 (0) 7939 468157 [email protected]

Claire Lambert Senior Director, Corporate and International Tax Tel: +44 (0) 20 7072 3285 Mobile: +44 (0) 7583 553 544 [email protected]

Dafydd Williams Managing Director, Transaction Tax Tel: +44 (0) 207 072 3215 Mobile: +44 (0) 750 617 6416 [email protected]

Richard Syratt Managing Director, International Tax and Transfer Pricing Tel: +44 (0) 20 7863 4722 Mobile: +44 (0) 7796 336101 [email protected]

Tom McFarlane Managing Director, Transfer Pricing and Business Restructuring Tel: +44 (0) 20 7072 3201 Mobile: +44 (0) 7876 790163 [email protected]

Jonathan Hornby Managing Director, Corporate and International Tax Tel: +44 (0) 20 7715 5255 Mobile: +44 (0) 7808 054052 [email protected]

Lisette Lach-Reichle Senior Director, Transfer Pricing Tel: +44 (0) 20 7863 4727 Mobile: +44 (0) 7772 643 060 [email protected]

Marcus Nicolaou Senior Director, Corporate and International Tax Tel: +44 (0) 20 7715 5222 Mobile: +44 (0) 7946 185770 [email protected]

Jagdip Bharij Senior Director, Transaction Tax Tel: +44 (0) 207 663 0793 Mobile: +44 (0) 753 418 9233 [email protected] Leigh Clark Senior Director, VAT Tel: +44 (0) 20 7715 5258 Mobile: +44 (0) 7720 009 7567 [email protected] Andrea Clarkson Senior Director, VAT Tel: +44 (0) 20 7863 4796 Mobile: +44 (0) 7583 104549 [email protected]

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ABOUT TAXAND Ta x a n d

Disclaimer

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