Experts react to Osborne's speech
Thu 05 Dec 2013
By Lucy Warwick-Ching
" Residential property and PPR cut
" Pension measures
" Tax avoidance measures
" Isa allowances
" Personal tax allowances/ married couples' allowance
Reaction on residential property and PPR cut
Richard Mannion, national tax director at Smith & Williamson, the accountancy and investment management
group, said: "Currently, the last three years of ownership of a private residence are ignored so as to give time for
the owner to sell after moving out without losing the tax exemption. This is to be reduced to 18 months from April
2014. The 36-month exemption was generally regarded as generous, so this tightening is not a surprise."
Paul Emery, real estate tax director at PwC, said: "This is a big issue for foreign investors into the UK. It sends a
sign that the UK is not open for business. It adds weight to notion that the UK has an unstable tax regime
because it keeps being tinkered with. Last year, the government introduced capital gains tax (CGT) on companies
that own residential property to encourage foreign owners to de-envelope. Now having de-enveloped as they
were told to, they will now be hit with the CGT they were told they would not be subject to. Not a great message
for foreign investors into the UK, who will feel double-crossed."
Lucy Brennan, partner in the private wealth group at Saffery Champness, said: "The change to the CGT Principal
Private Residence (PPR) Relief final period will come as a shock for many, as this rule has long been relied on by
those moving out of their PPR but who may not be in a position to sell immediately. While some see their
residence as an investment and it could be considered a buy-to-let property, others may just be planning the right
time to sell, or have had personal circumstances overtake the selling process. For those moving out because of a
divorce, this is likely to be a valuable relief, given that the sale of the home is not necessarily under their control.
In times when property prices are predicted to increase sharply, paying tax on an extra 18 months of gain could
Peter Rollings, chief executive of estate agent Marsh & Parsons, said: "The enhanced CGT for overseas property
owners smacks of political point-scoring but is unlikely to generate much for the government in terms of revenue.
However, it poses a real risk of cutting inward investment to the UK. Buyers in this country already pay the
highest property taxes in the developed world, and this policy will create further uncertainty by adding to the
ever-increasing tax burden that overseas buyers experience in London.
"However, if the introduction of this tax quells demands for a more draconian mansion tax, it could actually boost
the market. And with the change only being introduced in April 2015, we may find a short-term rush for tax-free
sales before the policy comes into effect, helping to boost supply and fluidity at the highest level. London is still a
much more attractive and easier place to buy property than many other cities around the world, and demand for
the best properties will remain fierce."
Richard Sexton, director of e.surv chartered surveyors, said: "Housebuilding needs to be radically ramped up if
we are to address the critical shortage in supply in the housing market. The chancellor has now offered a partial
answer to this problem - a further 1bn to unblock housing development. It has taken a long time but finally the
message seems to have sunk in that housebuilding is the only real way to keep a lid on rising prices, and ensure
that first-time buyers can afford to get on to the first rung of the ladder, without the need to take out excessively
"But by failing to reduce stamp duty, as was speculated may occur, the chancellor may have missed a second
trick. Cutting the duty could have helped alleviate the monumental task of saving for a deposit, and encouraged
more movement within the market. It would have helped first-time buyers get a hold on the housing ladder,
particularly in the capital, where high house prices mean they often have to add stamp duty to the buying-a-home
bill. Together, these two large changes could have considerably impacted the fortunes of first-time buyers, but Mr
Osborne only chose to go halfway."
Damian Bloom a partner at international law firm Berwin Leighton Paisner said: "The changes to the capital gains
tax regime imposes CGT on residential property held by non-UK resident individuals, but only from April 2015
and only on future growth. This will be perceived as an appropriate levelling of the playing field compared to UK
residents, and is not out of step with other major economies.
"However, these reforms ought to have been considered as part of last year's extensive consultation on the
taxation of UK property held by non-resident entities. To prevent any further undermining of the stability of the UK
tax regime for international individuals, it would be helpful if the government could confirm whether there will be
any further changes to the taxation of residential property for the remainder of the current parliament."
Reaction to pension measures
Emma Burns, head of employment and HR at Hugh James, said: "Raising the state pension age to 70 is likely to
lead to big jumps in age discrimination claims, which are already a big headache for businesses. It means
employees today will believe they are allowed to retire later in life, causing problems for businesses that are
trying to manage their workforce.
"There has been a huge rise in age discrimination cases since the removal of the default retirement age about
whether employers can force older employees to retire. This will trigger a further rise in claims.
"The removal of the default retirement age means that it is much harder for businesses to force older employees
to retire. This change means fewer employees will want to retire voluntarily before they are 70, creating a
headache for their employer.
"Older employees tend to expect to be able to take advantage of flexible working as they near their planned
retirement, for example just working one or two days a week. This is going to be a big problem for employers if a
large swath of their workforce expect to retire later while benefiting from an abnormally short working week."
Anthony Carty, group financial director at Clifton Wealth on pensions, said: "The chancellor's recognition of the
need to bring forward the later state pension age, clearly indicates that the state alone cannot fund an
increasingly ageing population. Despite a 2.95/week rise in the state pension and the introduction of
auto-enrolment as a positive stimulus for people to contribute to a work-based pension, it is now clear that
everyone of working age must consider setting up their own pension plans."
"The additional measures announced in the statement to assist young people in joining the workforce, such as the
abolition of NI contributions for people under 21, offers them and their employers the opportunity to start the
savings process earlier. While young workers will have other priorities - such as housing and day-to-day living - I
cannot emphasise enough the need to begin making contributions into a pension plan as early as possible to
ensure a comfortable retirement."
Gina Miller, co-founder of The True & Fair Campaign, said: "Government steps to balance the UK's books and
raise the state pension age to give workers more time to save for a comfortable and longer retirement are a
necessary step, but it is critical the pensions and savings industry gets its house in order and ends the rip-off of
excessive and hidden fund fees and charges.
"Currently as much as 50 per cent of the value of pension funds can be eroded through costs and fees and
ending this opaque system has to be at the heart of any debate on pension reform.
"We need to see greater transparency, more pension product innovation, fewer layers of intermediation and
greater competition and choice in the market to match the needs of a significantly ageing population.
"Increasing the state retirement age does nothing to address these fundamental issues. As the UK works longer
and saves harder for retirement the pensions industry should not profit from people's hard work. It is time that the
industry stopped talking and acted to give pension savers a better deal."
Reaction to tax avoidance measures
Ronnie Ludwig, partner in the Private Wealth Group at Saffery Champness, said: "Until we see the details of how
these new measures to tackle tax avoidance and evasion will work in practice, it is difficult to believe that the
government will recover 9bn. The reality is that there is a limited amount that one country can do, without an
internationally co-ordinated effort."
"The reality is that it is extremely time-consuming and expensive for HMRC to investigate offshore structures.
When the taxman gets a sniff, assets can be switched from one jurisdiction to another at almost a moment's
notice. However, it is somewhat encouraging that the chancellor has announced that HM Revenue & Customs'
budget will be ringfenced in the next round of departmental spending cuts. He is putting his money where his
mouth is, to a small extent."
Neal Todd, a partner in the tax team at international law firm Berwin Leighton Paisner, said: "Ensuring individuals
and multinational corporations pay the right amount of tax is a laudable objective, but the latest announcements
beg the question of why additional reform is needed. We already have the general anti-abuse rule (GAAR) in
place which was intended precisely to act as a catch-all framework to ensure the spirit as well as the letter of UK
tax legislation is obeyed.
"Imposing the most wide-ranging anti-avoidance package in this parliament on top of the GAAR and so soon after
the GAAR was implemented will lead to unnecessary uncertainty about the interplay between various sets of
anti-avoidance provisions. It can only further lengthen the UK tax code."
Reaction on individual savings account (Isa) allowances
Karen Barrett, chief executive of unbiased.co.uk, said: "The Autumn Statement confirms that the government will
increase the Isa, Junior Isa and Child Trust Fund allowances in line with CPI. The 2014-15 Isa limit will increase
to 11,880 (half of which can be saved in a cash Isa). This is positive news for savers and we would urge people
to make the most of the allowances available to them.
"While savings rates may not be at their peak there are still huge tax benefits in placing cash or investments
inside an Isa. Firstly, interest generated from these savings isn't taxed, and secondly, profits made from share
price increases are not subject to capital gains tax, meaning that savers could give their pot an extra boost
without having to do very much."
Stuart Welch, CEO, TD Direct Investing, said: "With interest rates remaining low, we expect savers and investors
will continue to explore different ways to make their money go further. Using Isas, one of the nation's most
popular tax wrappers, is one way to do this. By announcing that investors will be able to save 11,880 in a
stocks-and-shares Isa for the year 2014-15, (an increase from the previous threshold of 11,520) the government
has extended an olive branch to savers, encouraging them to continue using an Isa as an effective tax-sheltered
Reaction to personal tax allowances/married couples' allowance
Richard Mannion, national tax director at accountancy firm Smith & Williamson, said: "Mr Osborne confirmed the
married couples' transferable tax allowance will be introduced in April 2015. However it appears that only
one-third of married couples will benefit from this proposal and so this is more of a sound bite than a meaningful
Karen Barrett, chief executive of unbiased.co.uk, said: ""While there was no boost in the personal tax allowance
from the chancellor, which is still set for 10,000 next April, his announcement of a married couples' allowance, of
which 1,000 can be transferred to the other spouse from April 2015 will be a welcome addition for basic rate
taxpayers, a saving of 200 a couple.
Stuart Welch, CEO, TD Direct Investing, said: "It is encouraging to see that the chancellor has raised the
personal tax allowance. Raising the threshold from 9,440 to 10,000 will provide UK households with a bit of
welcome relief and we are in full support of this move. This comes when we are beginning to emerge from
extreme austere times and steps like these allow consumers to focus more on preparing for their financial future
and not just trying to make ends meet."