At the end of November 2016, new Chancellor of the Exchequer Philip Hammond gave his first Autumn Statement. There was, understandably, a strong focus on growth, debt, infrastructure and post-Brexit uncertainty. Hammond (with strong reference to Office of Budget Responsibility (OBR) input) was effectively preparing us for potentially tough times ahead while leaving uncertainty over just how tough they would be. Surprisingly, not every Brexiteer agreed with that basis but that’s what the Chancellor is working with.

There was also a reaffirmation of this Government’s commitment to being a “Government for all and not the few”. So, these fundamental assumptions – increasing debt, economic uncertainty and lower growth – together with a commitment to help so called ‘JAMs’ (people who are just about managing) influenced the Chancellor’s monetary policy. Already more than a few are questioning the extent to which this last commitment has been evidenced by the Autumn Statement proposals. 

However, this article will focus on some of the measures announced (and confirmed in the ensuing Finance Bill and accompanying documents) that I believe are of greatest relevance to financial planners. The Autumn Statement had two key themes: pensions and investments.

Before considering these though, perhaps the most interesting news from the Chancellor’s first statement was the announcement that this was to be his last. In future, Budgets will take place in the autumn, allowing changes to be announced well in advance of the start of the tax year. So there will be two Budgets in 2017: the Spring Budget and the first Autumn one. From 2018 onwards there will be a shorter Spring Statement, responding to the OBR forecast, and an Autumn Budget.
Pension changes
Given the enormous cost of pensions tax relief, the chance of some fundamental change to relief (perhaps moving to a flat rate) was not ruled out. Most, myself included, believe that these changes will be a case of ‘when’, not ‘if’. However, in line with the Chancellor’s intention for the Autumn Statement not to be the place for large scale tax changes, pensions were only given marginal treatment. On the other hand, the changes could be quite important to those affected. I am grateful to Sam Kaye and Claire Trott, who lead the Technical Connection pensions team, for the following thoughts on the key aspects of the proposed changes.
Money Purchase Annual Allowance
The headline change is the reduction of the Money Purchase Annual Allowance (MPAA) from £10,000 to £4,000 with effect from 6 April 2017. As a reminder, the MPAA is triggered by one of a list of events, for example drawing income from flexi-access drawdown, taking an uncrystallised funds pension lump sum (UFPLS), establishing a scheme pension from a small self-administered scheme (SASS) or by purchasing a flexible annuity.

Why the reduction? If you cast your mind back to when the MPAA was introduced in 2015, the Government said that if it felt that the MPAA system was being abused it would be amended. The abuse comes in the form of an individual investing £10,000, receiving tax relief on the full amount and then withdrawing the £10,000 and only paying income tax on 75% of that amount. Whether or not there has been evidence of the abuse is speculative but there is obviously enough of a concern at the Treasury to introduce the reduction. Consultation on the detail will take place.

Currently, the alternative Annual Allowance is £30,000 (the Annual Allowance less the MPAA of £10,000). It should follow that a reduction in the MPAA means that the alternative Annual Allowance reduces to £36,000. We will have to wait for clarification as there is no mention of this in the consultation document.
Foreign pensions
Somewhat quietly, changes were also announced to the tax treatment of foreign pensions. The fact that the Government is starting to make changes to the tax treatment of monies that have benefited from UK tax relief and been transferred overseas, usually in the form of a transfer to a Qualifying Recognised Overseas Pension Scheme (QROPS), shows that it is taking overseas transfers more seriously. Indeed, HMRC will shortly be holding meetings with the pensions industry to look at QROPS changes with a view to dealing with any unanswered questions that providers and advisers alike have. It sounds potentially ominous so watch this space.
Somewhat quietly, changes were announced to the tax treatment of foreign pensions
The Autumn Statement confirms that the tax treatment of foreign pensions will be more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents in the same way that UK pensions are taxed.
For those individuals that have emigrated and transferred their UK pension funds, which would have benefited from UK tax relief to a QROPS, there will be an extension from five to ten years of the taxing rights of any foreign lump sum payments.

Amends to the Recognised Overseas Pension Schemes list, published by HMRC on 15 November 2016, show a significant cull in the number of overseas schemes meeting HMRC’s criteria. It therefore comes as no surprise that there is to be an update to the eligibility criteria for foreign schemes to qualify as overseas pension schemes for tax purposes.
Investments
So how about changes proposed in relation to investments? Well, first a couple of relatively targeted and technical changes to offshore funds and dividend distributions to corporate investors and then a few words on venture capital trusts, offshore structures, dividends and savings income and life policy taxation.
Offshore funds
UK taxpayers invested in offshore reporting funds pay income tax on their share of a fund’s reportable income, and capital gains tax (CGT) on any gain when shares or units in their fund are sold or otherwise disposed of. 

The Government has announced that it intends to bring in legislation to ensure that performance fees incurred by such funds, and which are calculated by reference to any increase in the fund’s value, are not deductible against reportable income but instead reduce any tax payable on disposable gains. This new treatment, which applies from 6 April 2017, will equalise the tax treatment between onshore and offshore funds.
Tax-advantaged Venture Capital Schemes (EIS, SEIS and VCT)
There will be provisions in the Finance Bill 2017 to amend the requirements for the tax-advantaged venture capital schemes – the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs) to:

• Clarify the EIS and SEIS rules for share conversion rights, for shares issued on or after 5 December 2016.

• Provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures to align with EIS provisions, for investment made on or after 6 April 2017.

• Introduce a power to enable VCT regulations to be made in relation to certain shares, for share exchanges to provide greater certainty to VCTs.

In addition, a consultation will be carried out into options to streamline and prioritise the advance assurance service.

The Government has confirmed that it will not be introducing flexibility for replacement capital within the tax-advantaged venture capital schemes at this time.
Offshore structures
The Government intends to consult on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and the related client lists. It is not certain at this stage what is meant by a ‘complex structure’. It is unlikely that this would extend to an offshore bond or fund.
Dividends/savings income
A new system of dividend and savings income taxation was introduced on 6 April 2016. No changes were announced in relation to these tax rules in the Autumn Statement. All individuals now receive a tax-free annual dividend allowance of £5,000. Above that dividends are taxed according to the marginal rate(s) of income tax that an individual pays – 7.5% (basic rate taxpayer), 32.5% (higher rate taxpayer) and 38.1% (additional rate taxpayer and trustees).

All dividend income (including that falling within the £5,000 allowance) will count for the purposes of other tax thresholds; for example, higher rate tax, high income child benefit tax, personal allowance and annual allowance pension taper.

Savers with savings income will be entitled to a personal savings allowance (PSA) of £1,000 (basic rate taxpayers) or £500 (higher rate taxpayers). People who are additional rate taxpayers do not qualify for a PSA. Income within the PSA is taxed at a zero rate – but still counts as income for other tax purposes.
Life policy taxation
Following consultation it has been decided that any policyholder who suffers a chargeable event gain on a part surrender (above the available 5% allowances) that is disproportionately high (taking account of the economic gain in the policy) can apply to HMRC to have the gain reassessed on a “just and reasonable” basis.
Conclusion
So, on the face of it, there was very little in the Autumn Statement to cause ‘shockwaves’ for financial planners and their clients. However, the cumulative impact of the changes described above is not insignificant. 

Keeping up with these relatively small developments as they emerge and, where appropriate, factoring them into financial planning decision-making is what enables financial planners to be professional and deliver tangible value to their clients.

• Tony Wickenden is managing director of Technical Connection, a business providing tax, legal and proposition development support and consultancy to financial planners and financial institutions through an online management platform, Techlink Professional. Request a free trial at www.techlink.co.uk. Be sure to indicate that you are a CISI member when prompted to secure a discounted rate if you decide to sign up.

• This article is provided strictly for general consideration only. No action should be taken or refrained from based on its content alone. Each case must be considered on its own facts. Neither the author, Technical Connection nor any of its officers or employees can accept any responsibility for any loss arising as a result of any such action or inaction.

This article was originally published in the January print edition of The Review. The print edition is available to all members who opt in to receive it, except student members. All eligible members who would like to receive future editions in the post should log in to MyCISI, click on My Account/Communications and set their preference to 'Yes'.