Budget 2012. Other matters Capital taxes Employment tax 2 Business tax Investment relief Personal...

Budget 2012Budget 2012

Other mattersOther matters

Capital taxesCapital taxes

Employment taxEmployment tax

2

Business taxBusiness tax

Investment reliefInvestment relief

Personal TaxPersonal Tax

Personal taxPersonal tax

3

2011/12

Personal allowance under 65 yrs £7,475*

Personal allowance 65 – 74 yrs £9,940**

Personal allowance over 75 yrs £10,090**

*Reduced by £1 for every £2 adjusted net income exceeds £100,000** Reduced by £1 for every £2 adjusted net income exceeds £24,000

ALLOWANCES

2011/12 2012/13

Personal allowance under 65 yrs £7,475* £8,105*

Personal allowance 65 – 74 yrs £9,940** £10,500***

Personal allowance over 75 yrs £10,090** £10,660***

*Reduced by £1 for every £2 adjusted net income exceeds £100,000** Reduced by £1 for every £2 adjusted net income exceeds £24,000*** Reduced by £1 for every £2 adjusted net income exceeds £25,400

ALLOWANCES

Higher rate threshold

£126£126

£42,475 £42,475

2011/12 2012/13

Basic rate 20% 35,000 20% 34,370

Higher rate 40% 115,000 40% 115,630

Additional rate 50% Over 150,000

50% Over £150,000

TAX RATES

Tax as % Income

8

2013/14

Personal allowance born after 5 April 1948 £9,205*

Personal allowance born between 6 April 1938 and 5 April 1948

£10,500

Personal allowance born before 6 April 1938 £10,660

*Reduced by £1 for every £2 adjusted net income exceeds £100,000

ALLOWANCES 2013/14

Age related allowances

• To be frozen at 2012/13 levels• Entitlement

– 65+ only for those born before 6 April 1948– 75+ only for those born before 6 April 1938

• Income limits increased to £100,000• Once basic PA reaches same level

– Extra allowance will disappear

10

2012/13 2013/14

Basic rate 20% £34,370 20% £32,245

Higher rate 40% £115,630 40% £117,755

Additional rate 50% Over 150,000

45% Over £150,000

TAX RATES 2013/14

Tax as % Income

12

Other issues

• Dividend rate for additional income– 37.5%– Effective rate 30.6% on net dividend

• Trust rate– 45%

13

Child benefit charge

• Tax charge from 7 Jan 2013• Adjusted net income > £50,000

– Recipient of child benefit – Partner of child benefit recipient

• Charge– 1% of benefit per £100 of ANI over £50,000– At £60,000 ANI full benefit charged

14

Example

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Partnership

• Married couple living together• Civil partners living together• Man and woman living together not married• Couple living together as if civil partners

16

Cap on reliefs

• Will apply to reliefs which have no cap– Loss relief– Charitable giving

• Relief above £50,000• Limited to greater of

– 25% of income– £50,000

• Consultation on impact on charitable giving

17

ISAs

2011/12 2012/13

Maximum investment

£10,680 £11,280

Cash maximum £5,340 £5,640

18

Statutory Residence Test

• Clear tests• Harder to break away from UK• Applies for individuals• Covers direct taxes

– Not NIC

• Will supersede all existing law and guidance• Applies from April 2013

Ordinary Residence

• Relevant for – Employment income– Remittance basis– CGT

• To be abolished from 2013

20

Remittance basis charge

• 7 out of 9 years resident– £30,000

• 12 out of 14 years resident– £50,000

• Individuals born in UK– Will hit £50,000 charge at 18

Remittances – qualifying investment

• Exempt remittance for investment• Formal claim required• Investment in a company

– Shares direct – eligible trading company– Loan direct– Shares in stakeholder company

• No limits

Eligible trading company

• Unquoted• Carrying on commercial trade

– Preparing to trade within 2 yrs

• Trade– Includes commercial property– Some residential property situations

• Substantial requirement– 80%+

Benefit restriction

• Widely drawn• Anything not provided in course of trade• Anything provided on favourable terms• Can have a commercial salary, dividend etc

Reinstatement of remittance

• Potentially chargeable event• Without appropriate mitigation steps• Treat original investment as remittance• At end of period of grace

Business taxBusiness tax

26

FY Main rate Small Company

1 April 2011 26% 20%

1 April 2012 25% 20%

1 April 2013 24% 20%

1 April 2014 23% 20%

CT rates Plan A

FY Main rate Small Company

1 April 2011 26% 20%

1 April 2012 24% 20%

1 April 2013 23% 20%

1 April 2014 22% 20%

CT rates Plan B

29

Investment Investment

ReliefRelief

EIS changes

• Relief increased from 6 April 2012– £1m investment

• Connection with company– Removal of loans as a factor

• Inclusion of some preference shares– Rights must not be determined by company or

investor

• Minimum investment level removed

EIS and VCT changes

• Some tightening of avoidance rules– Acquisition of existing business– Not acquisition of shares as a trade

• Subsidised generation of electricity not qualifying

• Increase in size of company that qualifies– £15m gross assets

• Increase in investment into company– £5m

SEED ENTERPRISE INVESTMENT

SCHEME

SEIS headlines

• Income tax relief at 50%– Max investment £100,000

• CGT exemption– Gains made in 2012/13– Reinvested in SEIS

• Company assets < £200,000• Max investment in company £150,000• Mass of anti-avoidance!!

Income tax relief

• Given as a reduction of tax liability• Cannot create a repayment

– Max relief = actual tax liability

• Unused relief– Carry back to PY– BUT not 2012/13 to 2011/12

CGT relief

• 2012/13 only• Assets sold

– Reinvested in SEIS

• Reduce gain by SEIS investment• If SEIS withdrawn

– CGT charge reinstated

Capital allowances from April 2012

• Annual Investment Allowance– Down to £25,000– Time apportion– Watch the period post April

• Writing down allowances– 20% down to 18%– 10% down to 8%– Hybrid rates

Cars

• 100% FYA on low emission cars• To be extended to 31 March 2015• Qualifying emissions to be reduced in 2013

– 95gm/km

37

Cars – writing down allowance

• Current 20% wda– Emissions 111 – 160 gm/km

• From April 2013– Emissions 96 – 130 gm/km

• All other vehicles– 10% (8%) wda

38

First Year Allowance ‘designated assisted areas’ in Enterprise Zones

• 100%• Plant• From 1 April 2012

– For 5 years

• Meets 5 conditions• Watch exclusions

5 conditions

1. Company within CT2. For purpose of trade3. New activity4. New 5. Not replacement

Fixtures

• Asset installed in a building which becomes part of building

• CAs go to person incurring expenditure• Building transferred

– Fixture transferred– CAs for purchaser must not exceed disposal value

of vendor

New rules

• Current owner acquires fixtures from another person

• Other person treated as owner– Incurred historic expenditure

• Past owner entitled to claim CAs• Requirements for purchaser to get CAs

R&D changes

• April 2011– Credit rises to 100% (200% total)

• April 2012– Credit rises to 125% (225% in total)– £10,000 min spend removed– PAYE limit removed

Patent Box

• Intellectual Property – 10% tax rate– 10% rate of corporation tax

44

Creative sector

• New reliefs to be introduced– No details yet

• Aimed at– Video games– Animation– High end TV programmes

• ‘Wallace and Gromit’ relief!

45

Issues for small businesses

• Unincorporated businesses• Turnover up to VAT threshold

– Continue up to £150,000• From 2013• Use cash basis rather than full accounting

– Reduce record keeping• Some standard expenses

– Motoring– Use of home

46

Other issues

• Make disincorporation easier• Integration of tax and NIC• Improving HMRC service• Introducing online Business Dashboard

47

48

49

Employment taxEmployment tax

Car benefits

• Cars– Changes announced for future years– Increased percentages– Diesel supplement of 3%

• will not apply from April 2016

50

Car benefits 2012/13

Car benefits 2013/14

Car benefits 2014/15

Car benefits 2015/16

Fuel benefits

• Cars– 2012/13 multiplier increased to £20,200– 2013/14 increase by RPI + 2%

• Vans– 2012/13 unchanged at £550– 2013/14 increased by RPI

55

Time

Real

Information

RR

TT

II

What is RTI?

• Information about payroll and deductions passed to HMRC when payroll run

• Part of Bacs transmission• Ultimate aim is Centralised Deductions

– HMRC do the work!

Timetable

• April 2012– Volunteer employers start RTI

• April 2013– All employers start

• Oct 2013– All employers will be using RTI

Core process

• Payday– Details of net pay to employee– Background details to HMRC

• Monthly– Pay tax to HMRC– Provide other relevant information

• Employee leaves– Notify HMRC via RTI

Core process

• Employer issues– Monthly payslips – P60– Details to leavers

• Year end– No P35– No P14– No P38A

Personal Service Companies

• Tighten up IR 35 procedures– Package of legal changes– Strengthen compliance teams in HMRC

• Consultation on use of service companies by office holders and controlling individuals– Integral to running of organisation– PAYE and NIC deducted

61

Enterprise Management Incentive

• Tax advantaged shares scheme– Target employees

• Limit of shares– Current £120,000– Increase to £250,000

• Consult on– Make gains subject to 10% CGT only– Extend access for academics

62

Capital taxesCapital taxes

63

CGT

• Annual exemption frozen for 2012/13– £10,600

• Rates unchanged– 18% if any basic rate band available– 28% otherwise unless– 10% for Entrepreneurs’ Relief gains up to £10m

Foreign currency bank accounts

• Present position– No problem if for private expenditure abroad– CGT issues if purchasing overseas assets

• From 6 April 2012– All exempt from CGT

IHT

• Nil rate band frozen until April 2015– £325,000

• Consulting on– Periodic charge in trusts– Spouse exemption for domiciled spouse

transferring to non-dom spouse

66

IHT and charitable bequests

• Basic principle– Liability on estate at 36%

• Provided minimum level of charitable bequests– 10% of baseline amount

Other mattersOther matters

68

VAT

• Registration threshold increased to £77,000• Removal of loopholes and anomalies to bring

in standard rate liability– Approved alterations to listed buildings– Self-storage arrangements– Hot food and sports drinks– Rental of hairdressers’ chairs– Holiday caravans

69

SDLT

• Zero band to £250,000 for first time buyers– Ends 24 March 2012

• Residential property over £2m– Currently 5%– Increased to 7% from 22 March– Unless contract entered into before that date

70

71

Dealing with avoidance

• Non-natural person is purchaser– Company

• SDLT 15% if price over £2m– Effective from Budget Day

• Further consultation– Annual charge– CGT charge if non resident

72

GAAR

• General Anti Abuse Rule• Detailed report prepared in 2011• Consulting on detail• Primarily aimed at abusive schemes

73

Budget 2012Budget 2012

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