‘Budget 2013’

Budget 2013 – Measures unchanged following consultation

Tuesday, March 26th, 2013

This section lists those measures where draft legislation has been published for consultation and no changes were made as a result or small, technical amendments have been made to the final legislation to be introduced in Finance Bill 2013.

Personal tax

  • Income tax basic rate limit and personal allowance 2013-14
  • Tax status of Universal Credit
  • Cap on unlimited tax reliefs
  • Personal services companies and IR35
  • Glasgow 2014 Commonwealth Games tax exemption
  • Expenses of members of devolved administrations
  • Pensions tax relief: family pension plans
  • Bridging pensions
  • Pensions tax relief: lifetime allowance – technical changes
  • Qualifying Recognised Overseas Pensions Schemes
  • Life insurance: qualifying policies
  • Life insurance policies: time apportioned reductions
  • Inheritance tax: spouses and civil partners domiciled outside the UK
  • Heritage maintenance funds
  •  Inheritance tax: investments in open ended investment companies and authorised unit trusts
  • Non-domicile taxation

Corporate tax

  • Corporation tax reliefs for the creative sector
  • Annual investment allowance
  • First year capital allowances for gas refuelling equipment
  • Capital allowances: emissions threshold for a main rate car
  • Disincorporation relief
  • Corporation tax: NHS bodies
  • Banks’ regulatory capital
  • Debt cap
  • Removing inadvertent restriction on corporate tax group loss relief
  • Community Investment Tax Relief

Property tax

  • Real Estate Investment Trusts
  • Lease premium relief

Indirect tax

  •  Combined bingo
  • Herbal smoking products
  • Vehicle excise duty administration
  • Air passenger duty: annual accounting schem
  • VAT: reduced rate for energy-saving materials in charitable buildings
  • VAT: refunds for NHS bodies

Anti-avoidance

  • Manufactured payments
  • Review of the taxation of unauthorised unit trusts
  • Disclosure of Tax Avoidance Schemes
  • Abolition of income tax relief for payments of patent royalties
  • Bank levies
  • Avoidance schemes involving loan relationships and derivatives

Tax administration

  • Withdrawing a notice to file a self assessment tax return
  • UK-Switzerland agreement: remittance basis
  • Overpayment relief: limiting the effect of prevailing practice and timing of loss mistakes
  • Criminal investigations
  • Customs and excise modernisation

Cross cutting measures

  • Personal Independence Payment and Armed Forces Independence Payment

Secondary legislation

  • Building society capital instruments

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Budget 2013 – Analysis of key issues

Tuesday, March 26th, 2013

Budget 2013 – A more in-depth analysis of the key points

Following our summary on Budget Day of some of the Budget highlights, we’ve taken a closer look at some of the issues most relevant to our clients and contacts. It’s also been interesting to let the dust settle in the last few days and gauge the reactions of a range of sectors.

Here are the announcements we fell are of most relevance from the ‘aspiration nation’ Budget :

Personal Taxation

It was with much delight that Chancellor Osborne announced he would be raising the tax-free personal allowance for those born after 5 April 1948 to £10,000 from 6 April 2014. Increasing the allowance to this level was a key aim of the Coalition on taking office and the Chancellor was under pressure to deliver on this measure in this Budget.

The higher allowance will not be increased for those born before 6 April 1948 and this enhanced allowance will be removed in the longer term.

Then came the not so good news for middle-income earners, which partially explains how the £10,000 allowance will be ‘paid for’…..the basic rate limit (after the personal allowance has been accounted for and above which people start to pay tax at 40%) will reduce to £32,010 from 6 April 2013 and then fall again to 31,865 from 6 April 2014.

It had been announced previously that the additional rate of tax on incomes above £150,000 would fall from 50% to 45% which is seen as a boost to the UK’s higher earners and entrepreneurs.

Tax-free Childcare Support

Details of a new scheme to encourage parents back to work by helping  cover childcare costs had already been announced the day before the Budget. However, it warranted another mention in the Chancellor’s speech in a move which will be welcomed by working families, especially those who have suffered the loss of their Child Benefit.

From autumn 2015, the government will provide up to 20% of the cost of childcare for each child below 5, up to a maximum of £1,200. The exception is disabled children with this financial provision available until the disabled child turn 16. The measure is designed to cover the vast majority of working families and is available to working parents each earning less than £150,000 per annum. We will provide further details once more information is available.

Corporation Tax Rates

Another key aim of the coalition has been to make the UK one of the most competitive tax regimes in the G20 through lowering the main rate of tax.

This Budget achieved that aim with the main rate of corporation tax reduced to 20% from 1 April 2015. From this date, the main and small companies rates will be aligned which removes the extra complications around marginal rates and associated companies (where a company’s chargeable profits fall between £300,000 and £1.5m in the year). A welcome piece of news for accountants when preparing the corporation tax computations!

Chancellor Osborne was keen to point out that this decrease in corporation tax will be paid for by an increase in the bank levy (which will increase to 0.142%).

 

Employment Allowance’ (EA) and Employment-Related Loans

The Chancellor asked businesses what would help them recruit more staff and his solution to their requests for NIC breaks was an ‘Employment Allowance’.

Available to all businesses and charities from April 2014, the EA will reduce an employer’s NIC bill by up to a maximum of £2,000. Over 90% of the benefit is expected to go to smaller businesses with 450,000 of the UK’s small businesses no longer subject to employer NICs.

Every business will be able to take one worker on a salary of £22,400 or four employees working full time on the adult National Minimum Wage, without suffering any employer NIC costs.

Administration of the EA is designed to be straight forward, with employers confirming eligibility through standard software and HMRC’s Real Time Information system and up to £2,000 in employer NIC liability deducted over the course of the year’s PAYE payments.

Employment-Related Loans

There will now be no tax charge where the total outstanding balance on a small loan from the employer does not exceed £10,000 throughout the tax year. Such loans include those where the rate of interest charged is less than the official rate of interest. It also covers notional loans, such as season tickets for rail travel.

This means that employers will no longer be required to report the loan on the P11D form, provided it stays below £10,000 for the year.

 

Statutory Residence Test (SRT)

From 6 April 2013, a new statutory residence test is to be introduced via the Finance Bill 2013 with a new definition for the tax status of individuals This follows an intense consultation which has been a grey area for advisors and HMRC alike, replacing all existing legislation, case law and guidance.

The SRT will apply to income tax, capital gains, inheritance tax for an individual but not national insurance. The SRT consists of:

  • automatic tests for non-residence
  • automatic tests for residence and a series of connection factors for those caught in between to determine status.

The new legislation will bring clarity over the treatment of income and gains earned by those who spend frequent periods abroad during the year. This is a welcome move given the increase in the ‘mobile workforce’

 

Help to Buy Scheme

In an attempt to help more people onto the housing market and boost the property sector Chancellor Osborne announced the launch of the ‘Help to Buy’ scheme, with the government providing an equity loan of up to 20% of the new property’s value.

The loan will be available to all, rather than just first time buyers and a 5% personal deposit is required. The property value must not exceed £600,000 and there is no cap on the amount of income earned by the loan applicants.

This sounds like good news for those struggling to raise the required finance for a property, either getting started on the housing market or moving up the ladder but with little equity accrued so far. Additional benefits to buyers of taking out a Help to Buy loan are that the loan is only repayable once the home is sold and is interest free for the first 5 years.

Critics of the scheme argue that it will benefit sellers more than buyers as it will push up house prices. The risk appears to lie with the government and there are concerns that it doesn’t create another property bubble.

The scheme is designed to be in place for three years and takes effect from 1 April 2013..

Budget 2013 – Help to Buy Scheme

Tuesday, March 26th, 2013

In an attempt to help more people onto the housing market and boost the property sector Chancellor Osborne announced the launch of the ‘Help to Buy’ scheme, with the government providing an equity loan of up to 20% of the new property’s value. ‘Help to Buy’ consists also of a mortgage guarantee scheme with lenders incentivised to make more mortgages available for people with smaller deposits.

The Help to Buy equity loan scheme is available from 1 April 2013 for purchases of new homes. For those looking to purchase either new builds or existing properties, the Help to Buy mortgage guarantee scheme is available from 1 January 2014.

The loan will be available to all, rather than just first time buyers and a 5% personal deposit is required. The property value must not exceed £600,000 and there is no cap on the amount of income earned by the loan applicants.

This sounds like good news for those struggling to raise the required finance for a property, either getting started on the housing market or moving up the ladder but with little equity accrued so far. Additional benefits to buyers of taking out a Help to Buy loan are that the loan is only repayable once the home is sold and is interest free for the first 5 years.

Critics of the scheme argue that it will benefit sellers more than buyers as it will push up house prices. The risk appears to lie with the government and there are concerns that it doesn’t create another property bubble.

The scheme is designed to be in place for three years and takes effect from 1 April 2013..

Budget 2013 – Statutory Residence Test (SRT)

Tuesday, March 26th, 2013

From 6 April 2013, a new statutory residence test is to be introduced via the Finance Bill 2013 with a new definition for the tax status of individuals This follows an intense consultation which has been a grey area for advisors and HMRC alike, replacing all existing legislation, case law and guidance.

The SRT will apply to income tax, capital gains, inheritance tax for an individual but not national insurance. The SRT consists of:

  • automatic tests for non-residence
  • automatic tests for residence and a series of connection factors for those caught in between to determine status.

The new legislation will bring clarity over the treatment of income and gains earned by those who spend frequent periods abroad during the year. This is a welcome move given the increase in the ‘mobile workforce’.

Budget 2013 – Employment Allowance’ (EA) and Employment-Related Loans

Tuesday, March 26th, 2013

Employment Allowance (EA)

The Chancellor asked businesses what would help them recruit more staff and his solution to their requests for NIC breaks was an ‘Employment Allowance’.

Available to all businesses and charities from April 2014, the EA will reduce an employer’s NIC bill by up to a maximum of £2,000. Over 90% of the benefit is expected to go to smaller businesses with 450,000 of the UK’s small businesses no longer subject to employer NICs.

Every business will be able to take one worker on a salary of £22,400 or four employees working full time on the adult National Minimum Wage, without suffering any employer NIC costs.

Administration of the EA is designed to be straight forward, with employers confirming eligibility through standard software and HMRC’s Real Time Information system and up to £2,000 in employer NIC liability deducted over the course of the year’s PAYE payments.

Employment-Related Loans

There will now be no tax charge where the total outstanding balance on a small loan from the employer does not exceed £10,000 throughout the tax year. Such loans include those where the rate of interest charged is less than the official rate of interest. It also covers notional loans, such as season tickets for rail travel.

This means that employers will no longer be required to report the loan on the P11D form, provided it stays below £10,000 for the year..

Budget 2013 – Corporation Tax Rates

Tuesday, March 26th, 2013

Another key aim of the coalition has been to make the UK one of the most competitive tax regimes in the G20 through lowering the main rate of tax.

This Budget achieved that aim with the main rate of corporation tax reduced to 20% from 1 April 2015. From this date, the main and small companies rates will be aligned which removes the extra complications around marginal rates and associated companies (where a company’s chargeable profits fall between £300,000 and £1.5m in the year). A welcome piece of news for accountants when preparing the corporation tax computations!

Chancellor Osborne was keen to point out that this decrease in corporation tax will be paid for by an increase in the bank levy (which will increase to 0.142%)..

Budget 2013 – Tax-Free Childcare Support

Tuesday, March 26th, 2013

Details of a new scheme to encourage parents back to work by helping  cover childcare costs had already been announced the day before the Budget. However, it warranted another mention in the Chancellor’s speech in a move which will be welcomed by working families, especially those who have suffered the loss of their Child Benefit.

From autumn 2015, the government will provide up to 20% of the cost of childcare for each child below 5, up to a maximum of £1,200. The exception is disabled children with this financial provision available until the disabled child turn 16. The measure is designed to cover the vast majority of working families and is available to working parents each earning less than £150,000 per annum. We will provide further details once more information is available..

Curo Complete Budget Highlights 2013

Wednesday, March 20th, 2013

Budget 2013 Highlights

Budget 2013 – A Budget for the ‘Aspiration Nation’

Chancellor Osborne hailed the UK an ‘aspiration nation’ and his Budget was designed to help those who wanted to work hard and encourage employment in the UK.

The economics in brief:

  • Chancellor confirmed the debt targets had been missed and he would be borrowing more than planned, although public sector net borrowing is forecast to fall by one third over the three years from 2009/10 to 2012/13.
  • Growth forecast was revised down for 2013 from 1.2% to 0.6% and 2% to 1.8% for 2014.
  • More subdued and uneven recovery than expected.
  • Budget designed to help those who want to aspire and work hard.

Personal taxation

In one of the most hotly anticipated announcements, Chancellor Osborne confirmed that the personal tax-free allowance would increase to £10,000 from April 2014, up from the 2013/14 allowance of £9,440.

However, some of this has been clawed back by the reduction of the basic rate personal tax threshold from £32,010 in 2013/14 to £31,865 from April 2014. The higher rate threshold will increase slightly from £41,450 for 2013/14 to £41,865 for 2014/15.

Statutory Residency Test

A statutory residence test is to be introduced via the Finance Bill 2013 to introduce a new statutory definition of the tax residence status for individuals. Previously this has been a difficult area to advise, the new rules will bring clarity which with a more mobile workforce and employment in various countries during a tax year will bring certainty on income and gains for individuals.

Childcare

The Chancellor reminded us of the measure announced yesterday providing 20% tax relief of up to £1,200 per child towards the costs of childcare. Conditions are that both parents must work, not receive support through tax credits and neither parent earns over £150,000 pa. It is expected that this scheme will be open to around 2.5 million working families in the UK.

Pensions

From 2014/15 the annual allowance will reduce to £40,000 pa with the lifetime allowance reducing to £1.25m. This is a better than expected result given the rumours that the annual allowance would fall to £30,000! The measure is designed to rebalance the amount of tax relief benefiting higher earners.

Seed Enterprise Investment Scheme

The scheme is to be extended for capital gain tax on gains accruing in 2013-14 which are reinvested during 2013-14 or 2014-15. The relief will apply to half the qualifying amount re-invested.

Business Taxes

Corporation tax

It is a long-held commitment of the Chancellor (and Chancellors before him) to make the UK one of the most competitive tax regimes in the G20 and today he announced a reduction in the main rate of corporation tax to 20% from 2015. The measures are designed to attract overseas investment and will align with the small companies’ rate, simplifying the tax calculation process and save administration time. However, as large companies pay their tax on account, (as opposed to small companies who pay after the year-end), the detail on how this anomaly will be ironed out has yet to come to light. Watch this space.

Employers National Insurance Savings

In a welcome and headline-grabbing measure, the Chancellor introduced an ‘Employment Allowance’ of £2,000 pa for all businesses and charities to be offset against their employer’s NIC bill from April 2014. It was hailed as a ‘tax off jobs’ designed to encourage further employment and remove further burden for small businesses.

The measure is expected to benefit up to 2.5m employers with 450k of the country’s smaller businesses no longer paying contributions.

Employment-Related Loans

From April 2014 employers who provide their employees with loans either low-cost or interest free will see the threshold increase from £5,000 to £10,000 before they are treated as earnings and taxable on the employee. To ensure there is no tax charge, the total outstanding loan balance must not exceed the new £10,000 threshold at any point during the tax year.

Research & Development ‘Above the line (‘ATL’) R&D credit’

The coalition has continued its commitment to encouraging R&D investment in the UK and today announced a 10% tax credit ‘above the (profit) line’ for large companies. The measure is designed to help larger businesses realise a cash benefit immediately and is mandatory from April 2016. This initiative was announced in the 2011 Autumn Statement followed by consultation to June 2012 and will provide a huge boost to large companies, specifically those making losses.

Businesses need to prepare for the ATL credit before it is introduced in order to obtain it as quickly as possible and can do this by seeking robust advise from an R&D tax specialist.

General Anti-Abuse Rules – ‘GAAR’

Never before has tax avoidance made the headlines so much as in the last few months and as expected, today’s Budget delivered measures to counteract tax advantages arising from abusive tax avoidance arrangements. The GAAR will apply to income tax, NIC, corporation tax, capital gains tax, stamp duty land tax and petroleum revenue tax.

The rules are effective for arrangements entered into or after Royal Assent by the Finance Bill 2013 and provide additional means for HMRC to tackle tax avoidance schemes. In line with HMRC’s recent stance, Chancellor Osborne announced that tax avoiders would be ‘named and shamed’.

 

Property

Help to Buy Scheme

The Chancellor referred to the UK as an  ‘aspiration nation’ and in a nod to the UK’s aspiring home owners,  launched the ‘Help to Buy’ scheme, providing a government backed equity loan of up to 20% of the new property’s value. The scheme will be in place for three years and the loan is repayable once the home is sold. Loans will be interest free for the first 5 years and the other conditions at the moment include:

  • Available to all, not just first time buyers
  • Property value  must be less than £600,000
  • 5% personal deposit required
  • No income cap constraint

Social Care Funding Reform

Recognising the high costs of residential care for the elderly, more people will get access to financial support towards reasonable residential care costs. This is to be capped at £72,000 and aims to prevent many from seeing their life savings wiped out by this cost or the sale of homes.

Beer & Fuel – the highlights!

Beer Tax

Duty rates on beer will decrease from Sunday as follows:

  • 6% for low strength beer
  • 2% for standard strength beer
  • 0.75% for high strength beer

As previously advised, duty rates are increasing for spirits, wine and cider by 2% above the rate of inflation, being:

  • 10p increase to a bottle of wine
  • 38p increase to a bottle of spirits
  • 2p increase to a litre of cider

Fuel tax

  • September’s rise in fuel duty has been cancelled
  • Petrol now 13p a litre cheaper than if the Government had not acted in the last two years
  • Saving is equivalent to £7 off every time you fill up for the average Vauxhall Astra or Ford Focus

And what’s missing……

Here are some of the things not included in the Budget:

  • There was no call for the reduction of 62% rate of tax from earners between £100,000 and £116,210 to remove such a high rate of tax for individuals in this range.
  • No freezing of business rates to help buisnesses with increasing cost pressures.
  • Conservatives requests for marriage tax allowances to allow stay at home parents haven’t materialised – this would have helped compensate for the reduction in the Child Benefit for many couples and has been the focus of political pressure recently. This falls in with the ‘work’ focus of the Budget rather then helping parents stay at home.

We will follow up with a more detailed look at some of the key issues and hope to publish this early next week in our Spring Newsletter.

Please contact Curo’s Head of Tax, Julia Whelan on [email protected] or call Julia on 01527 558539 if you would like to discuss today’s Budget in more detail..

Budget Highlights 2013 – Property, Booze and Fuel

Wednesday, March 20th, 2013

Further anouncements made by the Chancellor included:

 Property

Help to Buy Scheme

The Chancellor referred to the UK as an  ‘aspiration nation’ and in a nod to the UK’s aspiring home owners,  launched the ‘Help to Buy’ scheme, providing a government backed equity loan of up to 20% of the new property’s value. The scheme will be in place for three years and the loan is repayable once the home is sold. Loans will be interest free for the first 5 years and the other conditions at the moment include:

  • Available to all, not just first time buyers
  • Property value  must be less than £600,000
  • 5% personal deposit required
  • No income cap constraint

Social Care Funding Reform

Recognising the high costs of residential care for the elderly, more people will get access to financial support towards reasonable residential care costs. This is to be capped at £72,000 and aims to prevent many from seeing their life savings wiped out by this cost or the sale of homes.

Beer & Fuel – the highlights!

Beer Tax

Duty rates on beer will decrease from Sunday as follows:

  • 6% for low strength beer
  • 2% for standard strength beer
  • 0.75% for high strength beer

As previously advised, duty rates are increasing for spirits, wine and cider by 2% above the rate of inflation, being:

  • 10p increase to a bottle of wine
  • 38p increase to a bottle of spirits
  • 2p increase to a litre of cider

Fuel tax

  • September’s rise in fuel duty has been cancelled
  • Petrol now 13p a litre cheaper than if the Government had not acted in the last two years
  • Saving is equivalent to £7 off every time you fill up for the average Vauxhall Astra or Ford Focus

.

Budget 2013 – What’s missing?

Wednesday, March 20th, 2013

And what’s missing from today’s Budget……

Here are some of the things not included in the Budget:

  • There was no call for the reduction of 62% rate of tax from earners between £100,000 and £116,210 to remove such a high rate of tax for individuals in this range.
  • No freezing of business rates to help businesses with increasing cost pressures.
  • Conservatives requests for marriage tax allowances to allow stay at home parents haven’t materialised – this would have helped compensate for the reduction in the Child Benefit for many couples and has been the focus of political pressure recently. This falls in with the ‘work’ focus of the Budget rather than helping parents stay at home.

We will follow up with a more detailed look at some of the key issues and hope to publish this early next week in our Spring Newsletter.

Please contact Curo’s Head of Tax, Julia Whelan on [email protected] or call Julia on 01527 558539 if you would like to discuss today’s Budget in more detail..