budget 2012. other matters capital taxes employment tax 2 business tax investment relief personal...
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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Budget 2012Budget 2012
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