AAT Budget Update13 April 2011

Speakers

Phil Cook FCA CTA - Head of Tax

Steve Simmonds AIIT - Director of VAT Services

Budget Update

Value Added Tax

Budget Update

Registration & Deregistration limits

– Registration limit increased from £70,000 to £73,000

– De-registration limit increased from £68,000 to £71,000

Effective from 1 April 2011

Budget Update

Fuel Scale charges new rates from 1 May 2011

• See Tax Data Card

• Approved Mileage Allowance (from 6 April)

– Increased to 45p per mile for first 10,000 miles but remains at 25p mile thereafter

– Fuel Element of the 45p/25p is from 1 March 2011

Petrol Diesel LPG• up to 1400cc 14p 13p 10p • 1401 – 2000cc 16p 13p 12p• Over 2000cc 23p 16p 17p

All including VAT

Budget Update

Online VAT Returns• 1 April 2012 all businesses must be filing

online VAT returns• Must also pay electronically (BACS,

CHAPS, DD)• Can pay by Internet Banking, BillPay and

Credit Card (Fee applies)• Note – BACS, BillPay & Credit Card take 3

working days to process

Budget Update

Reporting EC Trade from 1 Jan 2011• New rules mean that most B2B supplies

of services now subject to reverse charge

• Still need evidence that client is receiving supply by way of business

• Need to put reference on invoice referring to supply as Intra Community supply of services subject to reverse charge

Budget Update

Penalty update• Under the old rules no penalty was imposed when an

error was or was due to be corrected on the next VAT return

• When new penalties introduced in 2007 this was rule was dropped

• HMRC have reinstated rule backdating it to introduction of the new penalties (see R&C Brief 15/11 - copy attached). Scope for appealing any penalty where error would have been discovered and corrected

Budget Update

• Business Records Checks (BRC)– HMRC claim that “poor business record keeping is responsible

for a loss of tax in up to 2 million SME cases annually”– HMRC intends to undertake some 50,000 checks per year into

the adequacy of the business records starting this Autumn– An unannounced pilot has started with over 1,500 businesses

already being contacted - HMRC say this is a trial & learn exercise

– Where HMRC consider records are inadequate then a penalty of up to £3,000 could be levied even if no tax has been lost

– No guidance as to what HMRC will consider adequate or inadequate just vague comments although HMRC say guidance will be published in the next 2 weeks

Budget Update

Direct Taxation

Budget Update

• Personal Taxes

– Personal allowance £7,475; £8,105 in 2012/13• Lower basic rate limit to restrict PA increase to basic rate• £100,000 income limit• £150,000 Additional limit rate – 50%/42.5%

– NIC’s increase• Class 1; Primary 12% + 2%, Secondary 13.8%• Class 4; 9% + 2%

– Lower upper threshold @ £42,475

Budget Update

• Personal Tax

– Car Fuel Benefit £18,800– List Price cap of £80,000 removed– Approved mileage rate 45p for first 10,000 miles– Child care vouchers higher rate restriction (new entries only)

– Non-dom charge £50,000pa >12 years residence to claim remittance basis

• Remains at £30,000pa >7yrs residence but <12yrs

– Statutory residence test planned for 2012/13

Budget Update

• Personal Tax

– Furnished Holiday Lets• UK & EEA eligible as qualifying FHL on statutory basis• Day count increase by 50% for availability and actual letting• 2 year average arrangement on actual letting requirement • Losses no longer available for sideways offset

• CGT rate @ 10% still available

Budget Update

• Capital Allowances

– AIA reduced to £25,000 from April 2012• Transitional hybrid rate for periods spanning 1 April/6April.

– WDA’s down• Main Pool 18% from 20%• Special Pool 8% from 10% • Periods ending after April 2012 with hybrid rate spanning that time

– Short Life Assets• 4year period extended to 8 years• From April 2011

– ECA extended• Changes from summer 2011

Budget Update

• Corporation Tax

– Main rate down to 26% from 1.4.11– Small Company rate down to 20% from 1.4.11– Marginal rate down to 27.5%

– R&D enhancement for SME’s up to 100% from 1.4.11– Subject to EU state aid approval up to 125% from 1.4.12

Budget Update

• Capital Taxes– Inheritance Tax

• Nil Rate Band frozen at £325,000 until 5 April 2015• Death rate reduced to 36% on Estates where 10% or more is given to

charity.

– Capital Gains Tax• Annual Exemption up to £10,600• 18%/28% rates remain for basic rate/higher rate/trustees• Entrepreneurs relief Lifetime limit increased to £10million

– Applies only to gains after 6April 2011. Gains in excess of previous limit remain

unrelieved

Budget Update

• Savings & Investments

– EIS Income Tax relief up to 30% for shares acquired post

5 April 2011.– EIS limits and restrictions improved from 2012– 21 New Enterprise Zones announced with city partnerships to

decide exact details in Summer 2011– Junior ISA’s planned

Budget Update

• Pension Changes

– Annual Allowance reduced to £50,000– 3 year carry forward of unused Annual Allowance

• c/fwd calculated from 2008/09 for 2011/12

– Lifetime Allowance reduced to £1.5million– Compulsory annuity purchase at age 75 abolished– Tax Rate on death benefits if pension in payment or aged

greater than 75 fixed at 55%– Minimum Income Requirement £20,000 for fund application

Budget Update

• Consultations– Enterprise Zone designation– CA’s on Generating Equipment– IR35 Review

• Pre-transaction certainty• Example guidance• High risk areas only• Forum for discussion

– Income Tax & NIC Reform

• Office of Tax Simplification– Review of 1,042 reliefs

Budget Update

Any Questions?