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My PFS Technical news 27/11/2018

Publication date:

27 November 2018

Last updated:

27 November 2018


Technical Connection

Personal Finance Society news update from the 8th November to 21st November 2018.

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Taxation and trusts

Investments planning



Taxation of trusts consultation paper published

(AF1, JO2, RO3)

On 7 November HMRC published a consultation paper entitled The Taxation of Trusts: A Review.   The consultation has been published following the Government’s commitment in the 2017 Budget to look at how to make the taxation of trusts ‘simpler, fairer and more transparent’.

The consultation looks at the implementation of transparency, fairness and simplicity within various aspects of trusts, including transparency in relation to non-resident trusts, and the government’s interest in simplifying the approach to taxation for vulnerable beneficiary trusts, as well as other aspects of trust taxation that might warrant simplification.

The closing date for comments on the consultation is 30th January 2019.

Source: ‘The Taxation of trusts: a review’ published by HMRC on 7 November 2018

Rent-a-room proposals dropped

(AF1, RO3)

In July the Government proposed to amend how rent-a-room relief works, by introducing a shared occupancy test – broadly that the landlord or a member of their household would have to be resident in the property and physically present for at least some part of the letting period.

However, in the 29 October Budget the Government announced that this change will not now go ahead as planned. It said this was:

“to maintain the simplicity of the system”.

Instead, the Government will:

“retain the existing qualifying test of letting in a main or only residence, and will work with stakeholders to ensure that the rules around the relief are clearly understood.”

Income from renting out a furnished room in a main residence to a lodger can qualify for an automatic rent-a-room relief tax exemption if the annual income, before the deduction of any expenses, is no more than £7,500.

If gross rental income exceeds £7,500, the automatic exemption will not apply. However, in that situation, it’s possible to elect instead for the taxable amount to be the gross rent received, plus any payments received for meals and services, less £7,500.

Whilst this relief is aimed at providing a tax break to those renting a room in their home to a long-term lodger, the Government has always acknowledged that it has also effectively been available to those letting their home for short-term or holiday lets.

Source:  Budget -29/10/2018

Changes to entrepreneurs’ relief

(AF2, JO3)

In the 2018 Budget the Chancellor announced two key changes to entrepreneurs’ relief which are likely to have a significant impact on the number of individuals/shareholders benefiting from the relief.

The two key changes are broadly:

  • An extension to the qualifying holding period from one year to two years; and
  • A tightening of the rules governing the definition of a personal company whereby the share rights an individual must benefit from before they qualify for the relief - introduced with immediate effect. This change requires the claimant to have a 5% interest in both the distributable profits and the net assets of the company.

Looking at these two changes in more detail:


Qualifying period

The extension of the qualifying holding period from one year to two years will mean that individuals/shareholders need to consider their position at least two years in advance of any potential transaction to ensure their position is protected.

This measure will have effect for disposals on or after 6 April 2019, except where the business ceased before 29 October 2018. In cases where the claimant’s business ceased, or their personal company ceased to be a trading company (or the holding company of a trading group), before 29 October 2018, the existing one-year qualifying period will continue to apply.

Please see HMRC’s policy paper for more information.


Personal company

The tightening of the rules regarding the definition of a personal company, which essentially governs the share rights to which an individual must be entitled, will have wide-ranging implications.

Previously, in order to qualify for entrepreneurs’ relief, an individual must:

  • Be an employee or officer of the company;
  • Hold at least 5% of the “ordinary share capital”; and
  • Have at least 5% of the voting rights by virtue of that holding of ordinary share capital.

However, in tightening up these rules, from 29 October 2018, the shares must also entitle the holder to 5% of the company’s distributable profits and 5% of the assets available to equity holders on a winding up.

This means that, going forward, in order to qualify for entrepreneurs’ relief, the individual must:

  • Be an employee or officer of the company;
  • Hold at least 5% of the “ordinary share capital”;
  • Have at least 5% of the voting rights by virtue of holding that ordinary share capital;
  • Be entitled to at least 5% of the company’s distributable profits; and
  • Have a right to at least 5% of the net assets of the company available to equity holders on a winding-up.

The Government has said that this change ensures a shareholder must benefit from a genuine economic entitlement to 5% of a company in order to qualify for entrepreneurs’ relief. This means that shareholders will be required to continually monitor their position to ensure they qualify for relief.

Please see HMRC’s policy paper for more information.

For disposals before 6 April 2019, these additional requirements will apply for one year to the date of disposal. For disposals on or after 5 April 2019, these additional requirements will apply for two years to the date of disposal, except where the company ceased trading before 29 October 2018.


Dilution protection

The draft legislation also confirms that proposals will be introduced from 6 April 2019 to protect an individual’s entrepreneurs’ relief entitlement up to the point they are diluted below the 5% qualifying requirement.

The definition of “ordinary share capital” covers all the shares of a company except fixed dividend shares. So, in practice, before 29 October 2018, pretty much any class of shares, however they are described, could have qualified for entrepreneurs’ relief. Provided the shareholder also had sufficient voting rights, the other rights they held to dividends could be negligible.

While these changes are likely to affect many shareholders, those who have built up their own company and, as such, hold ordinary shares with full voting rights as well as rights to the company’s assets on a winding-up should not be affected. However, those who may, for example, have taken part in a management buyout, may find that they have less rights to the company’s assets on a winding-up so could be affected.

As always, advice will be essential to determine whether relief will be available in the future.

Source:  Budget 2018 – 29 & 30 October 2018

HMRC loses business property relief appeal in the Vigne case

(AF2, JO3)

HMRC’s appeal against an earlier First-tier Tax Tribunal (FTT) decision in the inheritance tax (IHT) business (property) relief case of the Estate of Maureen W Vigne v HMRC [2017] UKFTT 632 (Vigne v HMRC) has been dismissed by the Upper Tribunal.

Business property relief is hugely valuable to taxpayers, particularly on death. However, IHTA 1984, s105(3) denies relief for businesses which ‘consist wholly or mainly of… dealing in securities, stocks or shares, land or buildings or making or holding investments’.

In Vigne v HMRC the FTT had to consider whether relief should be given in respect of 30 acres of land used in a livery stable business run by the deceased Mrs Vigne.

In broad terms, HMRC’s position was that although the deceased undisputedly carried on an active business, this did not detract from the fact that the business was mainly of an investment nature consisting of nothing more than the letting or licensing of land for the use of others (in this case horses).

However, the FTT found that the deceased’s business amounted to significantly more than this as she also provided valuable additional services that were not routinely provided in the course of the lower levels of livery. Veering slightly away from the ‘Pawson’ test, the FTT judge granted relief on the basis that:

“any objective observer who had visited the site… would have concluded that a business was being run from …the land …. and that no properly informed observer could or would have said that the deceased was in the business of “holding investments””.

Appealing against the decision, HMRC argued that the services offered as part of the business in conjunction with the right to occupy land were less extensive than those in a number of decided cases in relation to holiday accommodation, where the property owners were found to be “wholly or mainly the making or holding of investments” despite additional activity.

It said that if similar accommodation and services were provided to humans rather than horses, relief would have been denied and that it was anomalous that the result should be different simply because the accommodation and services were provided for horses; and that the FTT had applied the wrong legal test in reaching their conclusion.

However, the Upper Tribunal said that it was satisfied that the FTT had applied the correct legal test and its conclusion was one that it was entitled to reach on the basis of evidence given.

The outcome of this appeal has important implications, not just for livery businesses, but also for furnished holiday let businesses where similar considerations arise, and it will be interesting to see whether the approach suggested by the Tribunal in the Vigne case will be followed in future ‘grey area’ cases.

It is, however, important to note that the decision in Vigne does not necessarily mean that satisfying the test for business relief has become easier – particularly as the tone of the Upper Tribunal’s decision suggests that had it been responsible for the initial ruling then, based on the facts presented, it may well have found in favour of HMRC!

Source: Upper tribunal tax and chancery chamber: The Commissioners for HMRC and the personal representatives of the estate of Maureen M Vigne (deceased) - 31 October 2018.

Tax avoidance involving profit fragmentation

(AF1, RO3)

In the Summer, HMRC published draft legislation and responses to its consultation around proposals to tackle tax avoidance schemes designed to deliberately move UK profits outside the charge to UK tax, often using offshore trusts and companies.

HMRC’s latest policy paper sets out how the new rules will work.

From April 2019, this targeted legislation aims to prevent UK traders and professionals from avoiding UK tax by arranging for their UK-taxable business profits to accrue to entities resident in territories where significantly lower tax is paid than in the UK. HMRC will counter this avoidance by adding such profits to the profits of the UK trade.


Targeted legislation

Unlike action taken by the Government to tackle anti-avoidance by larger enterprises, in this instance the avoidance arrangements described are seen by HMRC as generally being undertaken by individuals and smaller entities or groups.

The new legislation will consider whether certain characteristics are present and, where they are, the arrangement is to be counteracted by bringing the profits back into UK tax by attributing the correct amount of profits to the UK-taxable source. These are as follows:

  • there must be a transfer of value from the UK trader to an offshore entity – this could be a diversion of income to the offshore entity, or payment of expenses to the offshore entity;
  • the effect of the arrangement must be that a significantly lower level of tax is paid on the profits than would be the case if they were correctly taxed in the UK in accordance with the current law – a ‘tax mismatch’;
  • the proprietor of the business, whether a sole trader or partner in an unincorporated business, or a director and/or shareholder of a company must be able to enjoy the profits that have been diverted;
  • the UK person must have arranged for the profits to be diverted to the offshore entity;
  • the diversion or payments mentioned in the first condition are not commensurate with the work undertaken by the offshore entity.

A ‘tax mismatch’, as referred to above, is where tax of the resident party is lower because of either:

  • an increase in the expenses of the resident party; or
  • a reduction in the income of the resident party;

and it is reasonable to conclude that:

  • the resulting reduction in the amount of the relevant tax which is payable by the resident party exceeds the resulting increase in relevant taxes payable by the overseas party for the period corresponding to the tax period; and
  • the overseas party does not meet the ‘80% payment test’.

The ‘80% payment test’ is met by the overseas party if the resulting increase in relevant taxes paid by that party is at least 80% of the amount of the resulting reduction in the amount of the relevant tax payable by the resident party.

There is an exemption if the above mismatch results solely by reason of:

  • contributions paid by an employer under a registered pension scheme, or overseas pension scheme, in respect of any individual;
  • a payment to a charity;
  • a payment to a person who, on the ground of sovereign immunity, cannot be liable for any relevant tax; or
  • a payment to an offshore fund or authorised investment fund:
  • which meets the genuine diversity of ownership condition (whether or not a clearance has been given to that effect); or
  • at least 75% of the investors in which are, throughout the accounting period, registered pension schemes, overseas pension schemes, charities or persons who cannot be liable for any relevant tax on the ground of sovereign immunity.

Previously, concerns had been raised that the proposed notification rules - where a taxpayer who enters into arrangements of this sort would have to notify HMRC and make payment of any tax shown on a relevant charging notice - were drawn too widely and would draw many compliant businesses into the requirement to notify and cause many more to at least consider whether they should notify.

Following consultation on the draft legislation, the Government has decided to remove the duty to notify HMRC of relevant arrangements.

The new legislation also attempts to clarify the adjustments required to be made under this legislation.

Next steps

The above changes, which are in Clause 4 of the Finance Bill, will come into effect from 1 April 2019 (corporation tax) / 6 April 2019 (income tax and National Insurance).  The Government has promised detailed guidance in advance of its introduction in April.

The Government will monitor compliance with these rules and will keep the requirement for an early payment rule under review.

Source: HMRC Policy paper: Profit fragmentation – dated 7 November 2018.

Tax abuse and insolvency - consultation responses

(AF1, RO3)

In April 2018, HMRC published a discussion paper on how to prevent taxpayers abusing the insolvency regime to avoid or evade their tax liabilities, through the use of companies or similar structures, including through the use of phoenixism.

Phoenixism, or phoenixing, in this context is where the insolvent company is effectively replaced by a new company.

Repeated non-payment of tax can be achieved by running up tax liabilities in a limited liability entity, then avoiding paying those liabilities by making the company insolvent and setting up a new company to carry out the same practice. Each time, the insolvent company’s business, but not its debts, is transferred to a new ‘phoenix’ company. This practice can also be used to avoid payment to the company’s other creditors.

Comments were invited by HMRC on two potential approaches to solve this problem:

  1. Transferring liability from corporates to directors and other officers in certain circumstances; or
  1. Joint and several liability for those linked to the avoidance or evasion. 

The Government received 28 responses. Although there was no clear preference for one proposed model over the other, in general most felt that joint and several liability would offer both flexibility and clarity to the taxpayer - the company would still have a liability, rather than have it removed in full and placed upon the transferees. And this is the approach that the Government will take forward.

Legislation will apply from 2019/20 to allow HMRC to make directors and other persons involved in company tax avoidance, evasion or phoenixism jointly and severally liable for tax liabilities that arise from those activities where the company becomes insolvent.

HMRC will only be able to collect a charge when there is an established liability and it is clear that the liability has arisen through avoidance, evasion or phoenixism.

The Government has promised clear definitions to determine when and to whom the measure will apply, with General Anti-Abuse Rule (GAAR) and Disclosure of Tax Avoidance Schemes (DOTAS) provisions being included as definitions of tax avoidance. And it is intended that there will be a right of appeal to prevent disproportionate outcomes.

It is also intended that this measure will address:

  • those who, as a result of seeking to enable or facilitate others to avoid or evade tax, have incurred certain HMRC penalties and then move into insolvency as a way of avoiding paying those penalties; and
  • those who facilitate tax avoidance and evasion, through a company, and when HMRC applies a penalty to that behaviour, side-step this sanction by liquidating the company on which the penalty is raised.

The Government therefore proposes that penalties raised on facilitators of avoidance under DOTAS, Disclosure of Avoidance Schemes VAT and Other Indirect Taxes (DASVOIT), Promoters of Tax Avoidance Schemes (POTAS) and Avoidance Enablers, and penalties on facilitators of evasion should be brought within scope.

Source: HMRC consultation responses: ‘Tax Abuse and Insolvency: A Discussion Document’’ dated 7 November 2018.


New penalty regime deferred again

(AF1, AF2, JO3, RO3)

The Government has announced that a new penalty regime for late payments of tax and late submissions of tax returns has been deferred. No date has been given – the October Budget note merely stating:

‘The government remains committed to the reform and intends to legislate in a future Finance Bill, to allow for more time to consider further the communications needed for successful implementation. The government will provide notice before these measures are implemented.’

These new penalties were originally expected to be introduced alongside Making Tax Digital (MTD) for Income Tax from April 2018, so this isn’t the first time that they have been deferred.

The details around these changes, which included a new penalty point system for late submission, were included in this Summer’s Draft Finance Bill. At that time, the Government was planning a staged implementation: applying to VAT from 1 April 2020. For income tax and corporation tax, the new penalty regime would not apply to any tax or accounting periods starting before 1 April 2020.

However, these changes have now been dropped from the Finance Bill published on 7 November. This means that the new penalty regime will not be in place until April 2021 at the earliest.

MTD for Income Tax and Corporation Tax

MTD for Income Tax and Corporation Tax is a requirement to keep digital records and make regular quarterly reports of income and expenditure to HMRC, the intention being that transactions will be recorded, using accounting software, as near as possible to the time when those transactions occurred.

At the end of the accounting period taxpayers will need to send a final digital report to confirm their income and expenses for the year, and to claim allowances and reliefs.


From 1 April 2019, most VAT-registered businesses with a taxable turnover above the £85,000 VAT threshold will be required to keep their VAT-business records digitally and send their VAT returns using MTD-compatible software.

MTD won’t be applied to businesses that have voluntarily registered for VAT. It will, however, be available on a voluntary basis for businesses with income below the VAT threshold.

MTD for VAT has recently been deferred by six months for certain businesses, trusts, charitable trusts and ‘not for profit’ organisations that are not set up as a company.

The timetable for MTD is now:

  • Consultation on MTD for corporation tax expected later in 2018;
  • Digital records required for VAT purposes from 1 April 2019 (except those customers that have been deferred for six months, see above);
  • Digital records required for VAT purposes from 1 October 2019 for those customers that have been deferred;
  • Digital records and quarterly reporting required for other taxes - income tax and corporation tax - from April 2020 at the earliest;
  • New penalty regime - from April 2021 at the earliest.

This latest deferral means that the new penalty regime will now not be in place until at least two years after MTD becomes mandatory for VAT for most taxpayers; and potentially at least a year after MTD for Income Tax is expected to be introduced.

Given that the new penalty regime was designed to complement MTD better than the current system, it seems likely that this further delay will only add to the complexity and administrative burdens for business.

Source: Budget 2018 – 29/10/2018


Trust taxation consultation

(AF1, JO2, RO3)

On 7 November, after a long wait since its coming was announced in the Autumn Budget of 2017, the consultation paper, ‘The Taxation of Trusts: A review’, was published. The consultation has the overriding objective of seeking to make the taxation of trusts simpler, fairer and more transparent. Suffice to say that the initial impression is that there is probably little for financial planners to overly worry about.

So, let’s have a look at what the consultation says against each of the stated broad objectives.

Against the Simplicity test HMRC focuses very much on simplifying the approach to taxation for Vulnerable Beneficiary Trusts and touches on some other aspects of trust taxation that might warrant simplification. The “possible issues” are set out below.

In the case of trusts known collectively as “Vulnerable Beneficiary Trusts” (trusts for beneficiaries with a disability or for bereaved minors), the Government is aware that stakeholders have previously expressed concerns that the complexity of income tax and capital gains tax rules limits the use of the available tax reliefs by those who should benefit. There are also concerns about the effectiveness of the income tax relief, given that the tax pool mechanism can lead to a secondary charge.

The Government is committed to taking action to simplify the treatment of these trusts and to ensure the effectiveness of reliefs. At this stage, the Government says it would welcome views on the tax treatments that these trusts receive, ‘alongside their interaction with ‘age 18 to 25 trusts’ (a continuation of bereaved minor trusts used in some circumstances)’.

In parallel, the Government is interested in views and evidence on other drivers of excessive complexity in the trust taxation system.

For example, it recognises that one key determinant of the complexity of the present trust taxation system is the need for trustees to liaise with the settlor or beneficiaries (as the case may be) to ensure that all parties pay the correct amount of tax, rather than there being a stand-alone or simplified regime, either for all trusts or for those trusts whose settlors or trustees would welcome a reduction in administrative burdens.

That said, the Government recognises that taking a different approach would constitute a fundamental change to trust taxation policy, and would only be warranted if it constituted a significant improvement in comparison to the current rules.

Finally, the Government is interested in views and evidence on all other complex administrative aspects of the trust taxation system. For example:

  • The Government is aware that, for many small trusts, income tax administrative requirements can seem unduly onerous, especially where the tax due is low.
  • Recent Ipsos MORI research demonstrates that the cost of employing an agent to calculate the inheritance tax (IHT) periodic charges for a trust can outweigh the cost of the tax itself.

In relation to Transparency the main reference is to the actions already resulting from the OECD Common Reporting Standard (CRS) and the implementation of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations. The new (and, it seems, to be expanded) trust registration provisions will be known to all with more than a passing interest in trusts.

Also, in relation to Transparency, strong focus is given to the use of offshore trusts by UK residents.

On Fairness and Neutrality, the spotlight falls predominantly on the trust IHT charges - in particular, the combined impact of entry, periodic and exit charges and whether they operate fairly and efficiently compared with the IHT outcome of an ordinary gift to an individual or individuals.

Among the additional topics picked upon for consideration are the application of the private residence exemption for residential property held in trust, trust management expenses and the impact of determining whether a receipt is an income receipt or a capital receipt.

The consultation is being conducted in line with the Tax Consultation Framework.

There are five stages to tax policy development:

Stage 1 Setting out objectives and identifying options.

Stage 2 Determining the best option and developing a framework for implementation including detailed policy design.

Stage 3 Drafting legislation to effect the proposed change.

Stage 4 Implementing and monitoring the change.

Stage 5 Reviewing and evaluating the change.

This consultation is taking place during stage 1 of the process. The purpose of the consultation is to seek views on the policy design and any suitable possible alternatives, before consulting later on a specific proposal for reform.

Responses are required by 30 January 2019:

  • in writing to: Trusts Tax Reforms Consultation Assets and Residence Team, 100 Parliament Street, London SW1A 2BQ.

Following the consultation period, the Government will publish a response document which will indicate whether it is minded to propose any specific changes based on the suggestions received. If so, there will be further consultations on detailed proposals at that point.

Source: HMRC consultation: ‘The taxation of trusts: a review’ – dated 7 November 2018.

Online platforms’ role in ensuring tax compliance by their users

(AF1, RO3)

The Government has set out how it will take forward the initial results of its review of the role platforms could play in ensuring tax compliance by their users. This follows on from the publication of a ‘call for evidence’ in March – not a formal consultation, but more of an information gathering exercise - and an Office of Tax Simplification (OTS) document in July, exploring ideas for taxing gig economy platform workers, such as self-employed workers who work for companies like UBER.

In addition to meetings with a number of platforms and others to explore the issues facing users of online platforms in dealing with their tax affairs, 41 written responses were received to the call for evidence, from platforms, representative bodies, other businesses and individuals.

Based on these responses and July’s OTS report, the Government’s next steps are:

  • Improving help and guidance; and
  • Gathering more data about users’ activities.

Interestingly, it hasn’t ruled out the OTS’s idea of a PAYE-like experience.

Improving help and guidance

Acknowledging that for many people who use online platforms tax can feel complicated, and the actions they need to take seem neither clear nor straightforward, the Government will improve the help and support that is available to them and will work with platforms and software providers to exploit opportunities to make that experience simpler.

It says it will build on existing work to improve the help and support that is available on, exploiting advances in technology to give customers guidance in a place and format that is accessible to them, including the use of ‘decision-based guidance’ and virtual assistant technologies to provide a more personalised experience. It believes this will allow people to find the information they need, with the right level of detail for them to understand.  

The Government will continue to explore with platforms the opportunities that exist for them to signpost users to this new HMRC guidance when it is available, alongside other help and support they provide to users.

Reference is made to an array of innovative software and apps currently being developed that can support people in meeting their obligations, providing them with an experience of paying tax that is as simple as possible. The Government says it will continue to look for opportunities to make use of these as it works towards creating “an effortless tax experience (wherever possible) for customers”.

Also, in line with the recommendations from October’s OTS report on guidance, the Government will work with a variety of stakeholders, including platforms and users, to ensure the guidance meets their needs.  

Gathering more data about users’ activities

HMRC wants to ensure that all platforms who operate in the UK face the same obligations relating to providing data.

Many online platforms already work collaboratively with HMRC to provide data about the activities of their users, helping HMRC to identify non-compliance and undertake targeted compliance interventions.  

HMRC’s bulk data-gathering powers mean it can acquire data, including by issuing notices to ‘business intermediaries’ such as online platforms. However, where online platforms are not based in the UK, this can create an uneven playing field between platforms, depending on where they are based. So, the Government will explore how it can most effectively access data about users whatever the online platform’s business model.

HMRC is co-sponsoring with the Italian Revenue Agency (Agenzia delle entrate) an OECD Forum of Tax Administration (FTA) project looking at the effective taxation of participants in the sharing and gig economy.

The stated aim of this project is to shape a more coherent compliance response across tax administrations to these economies, and work is focusing on voluntary compliance of platforms, including targeted education of users as to potential tax obligations, data acquisition from the platforms and subsequent sharing between countries.

The project sponsors with the OECD FTA are currently in the process of developing recommendations and are aiming to publish a report early next year.

The Government says it will continue to explore opportunities for technological solutions for users to share their own data directly with HMRC. It will work with platforms, software providers and others to ensure that HMRC’s API (Application Programming Interface) programme continues and develops.

Consideration of a PAYE-like experience

Referring to OTS suggestions in July to provide a PAYE-like experience for some users of online platforms, HMRC says it will continue to consider the arguments for change made by the OTS as part of its wider work to ensure that, where people have tax obligations because of these new opportunities, it is as easy as possible for them to comply.

The OTS had suggested enabling platforms, such as taxi or delivery firms, to operate a system equivalent to PAYE for self-employed platform workers (without affecting their employment status). The OTS’s initial idea for this was that platforms could compute taxable profits, deduct tax and pay that tax on account to HMRC and then correct it all for the worker at the end of the year.

Source: HMRC/HMT Consultation outcome: Online platforms’ role in ensuring tax compliance by their users – dated 7 November 2018.


October inflation numbers

(AF4, FA7, LP2, RO2)

The CPI for October showed an annual rate of 2.4%, unchanged from the previous month. Across October prices rose 0.1%, the same rate as between September 2017 and October 2017. The market consensus had been for a rise to a 2.5% annual rate. The CPI/RPI gap remained at 0.9%, with the RPI annual rate unchanged at 3.3%. Over the month, the RPI was up 0.1%.

The Office for National Statistics (ONS)’s favoured CPIH index was flat for the month at 2.2%. The ONS notes the following significant factors across the month, which cancelled each other out:



Housing and household services: This category produced the largest upward contribution as prices for gas rose between September and October 2018 by more than a year ago. Electricity prices also rose between September and October 2018, but they had no contribution to the change in the CPIH 12-month rate, as prices rose by a similar rate a year ago

Miscellaneous goods and services: Overall prices fell in this category by less than a year ago. The upward contributions came from surveyors’ fees, where prices were unchanged this year but some providers offered price reductions last year, and increases to initial charges for unit trust investments and to home delivery costs.

Recreation and culture: There were upward contributions from a range of items including cultural services, PC peripherals, DVDs, shop-bought computer games and eBooks. These were partially offset by a large downward contribution from other major durables for recreation and culture where prices rose, between September and October 2018, by less than a year ago.

Communications: The final small upward contribution came from this sector where the price of bundled telecommunication services and telephone charges rose this year but were unchanged a year ago. This was offset by a small downward contribution from mobile phone apps where prices fell between September and October this year by more than a year ago.



Food and non-alcoholic beverages: The largest downward contribution came from this category. The ONS says that food prices have remained little changed since the start of 2018 and fell by 0.1% between September and October 2018 compared with a rise of 0.5% between the same two months a year ago. The main effects came from yoghurts and from cheese where prices fell between September and October this year but rose a year ago. Prices for non-alcoholic beverages had a small downward effect as prices fell by more than a year ago.

Clothing and footwear: Prices in this category fell between September and October 2018 but rose between the same two months a year ago. There were small downward contributions from menswear, footwear and other articles of clothing, partially offset by a small upward effect from children’s clothes, which rose in price between September and October 2018 but were little changed a year ago.

Transport: The purchase price of vehicles overall was unchanged this year compared with rising prices between September and October 2017. Transport services also showed larger price falls between September and October 2018 than between the same two months a year ago. There were also small downward effects from bicycles and international rail and coach fares. Within transport, there was an offsetting small upward effect from motor fuels.

In six of the twelve broad CPI categories, annual inflation increased, while five categories posted a decline. Transport remains the highest category with an annual inflation rate now of 5.4%, the next highest being alcoholic beverage and tobacco at 4.0%.

Core CPI inflation (CPI excluding energy, food, alcohol and tobacco) was flat at 1.9%. Goods inflation, at 2.3%, showed a 0.2% decline, while services inflation, at 2.5%, was up 0.2%.

Producer Price Inflation was 3.3% on an annual basis, up 0.2% on the output (factory gate) measure. Input prices rises slowed to 10.0%, down 0.5% on September. The main driver here was once again oil prices.

These figures pose some interesting issues for the Bank of England. The rise in services inflation, which is primarily domestically driven, comes after the 13 November ONS announcement that wage inflation (ex-bonuses) had reached 3.2%. That might indicate the economy is starting to overheat.  

Source: ONS 14/11/18



DWP publish consultation - delivering collective defined contribution pension schemes

(AF3, FA2, JO5, RO4, RO8)

Work and Pensions Select Committed published it findings “Collective defined

contribution pensions” the Committee’s 16th Report of Session 2018–19, on which we produced a bulletin. Following on from this the Department of Work and Pensions have now produced a consultation document - delivering collective defined contribution pension schemes.

The DWP state that the benefits of CDC are as follows for members:

  • provide a savings and income in retirement option within one package that is potentially attractive to those people uncomfortable making complex financial decisions at the point of retirement
  • enable the sharing of longevity risk between members, thus providing each individual member with an element of longevity protection without the cost of accessing the insurance market
  • may achieve greater scale than some non-pooled schemes and be able to invest at lower cost as a result – the recent emergence of master trusts in the individual defined contribution (DC) space has already shown some of the benefits of scale
  • may allow the trustees to adopt an investment allocation which is tilted towards a higher proportion of higher return assets over the member’s lifetime than may be usual in an individual DC scheme, although the emergence of the draw-down market may see trends in the individual DC space follow a similar path over time.

The consultation discusses the issues that have brought them to this point and reports that new primary and secondary legislation will be needed to provide an appropriate legislative and regulatory framework for CDC schemes.

The proposals are such that:

  • CDC benefits will be a type of money purchase benefit so that employers have clarity about their liabilities to the scheme.
  • ‘CDC schemes’ will be defined in legislation so that the Government can attach an appropriate regulatory and assurance regime to them.

The consultation goes on to discuss this in depth, with particular focus on the appropriate regulatory regime.

How to respond to this consultation

Online at

In writing to:

CDC Team 
Private Pensions and Arm’s Length Bodies 
1st Floor, Caxton House 
6-12 Tothill Street 

By Email:

Pension freedoms statistics: £21.69bn from April 2015

(AF3, FA2, JO5, RO4, RO8)

HMRC have released figures that show pension savers have cashed in £21.69 billion from their pension pots since pension freedoms were introduced in April 2015.

Over 4.86 million taxable payments have been made using pension freedoms, with 258,000 people accessing nearly £2 billion flexibly from their pension pots over the last 3 months, according to published HMRC figures

Year and quarter

Number of payments (1)

Number of individuals (1)

Total value of payments (2,3)







2015 Q2






£1,560 m


2015 Q3



£1,170 m


2015 Q4



£800 m


2016 Q1



£820 m


2016 Q2



£1,770 m


2016 Q3



£1,540 m


2016 Q4



£1,560 m


2017 Q1



£1,590 m


2017 Q2



£1,860 m


2017 Q3



£1,590 m


2017 Q4



£1,504 m


2018 Q1



£1,697 m


2018 Q2



£2,270 m


2018 Q3



£1,960 m












Total: 2015 Q2 - 2016 Q1 (4,5)



£4,350 m


Total: 2016 Q2 - 2017 Q1 (4,5)



£6,450 m


Total: 2017 Q2 - 2018 Q1 (4,5)



£6,650 m


Total: 2018 Q2 - 2018 Q3 (4,5)



£4,230 m


Notes to the table

  1. i) The numbers published for 2015-16 are not comprehensive as to manage the burden on industry reporting was optional for 2015-16 but compulsory from April 2016. The increase in reported payments seen in 2016 Q2 is expected to partly result from this.
  2. ii) The data underpinning these figures comes from Real Time Information (RTI) reports submitted to HMRC.


  1. Figures are rounded to the nearest 1,000.
  2. Figures are rounded to the nearest £10 million.
  3. Includes taxable payments only.
  4. The number of individuals for the year totals are less than the sum of the number of individuals from each quarter as some have taken payments in multiple quarters.
  5. Quarterly figures may not sum to total due to rounding.

Chart 1, shows the increase in the number of payments between quarter 2 of 2015 and quarter 3 of 2018. Over this period, the number of payments increased from 121,000 to 585,000.

The value of payments in each year follows a consistent trend, of increased withdrawals towards the start of the year and lower withdrawals in the remaining three quarters of the year.

The numbers published for 2015-16 are not comprehensive, as to manage the burden on industry, reporting was optional for 2015-16 but compulsory from April 2016. The increase in reported payments seen in 2016 Q2 is expected to partly result from this.


This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.