The Chancellor delivered the 2014 Budget yesterday. The main announcements to be noted in the TMC sector are:

  • Seed Enterprise Investment Scheme (“SEIS”) -  SEIS and the associated CGT relief for re-investing chargeable gains in SEIS shares have been made permanent. SEIS was introduced to help small, early-stage companies raise equity finance by offering a range of tax reliefs to individual investors who subscribed for no more than a 30 per cent stake in these companies for an initial period of a year. 
  • R&D tax credit - The rate of R&D payable tax credit for loss making SMEs will be increased from 11 per cent to 14.5 per cent for “qualifying expenditure” incurred on or after 1 April 2014.  This will increase the rate of the cash credit payable to SMEs that conduct qualifying R&D activity but do not have corporation tax liabilities.
  • Annual Investment Allowance - The maximum amount of Annual Investment Allowance that could be claimed on “qualifying expenditure” was temporarily increased from £25,000 to £250,000 for the period 1 January 2013 to 31 December 2014 in Budget 2013.  It was announced in the Budget yesterday that the maximum amount will be increased to £500,000 and the period extended to 31 December 2015.
  • ECA sites and capital allowances - The designated enhanced capital allowances sites in Enterprise Zones (“ECA Sites”) were introduced in 2012 for a five year period to 31 March 2017.  Businesses investing in new plant and machinery in ECA Sites can qualify for 100 per cent capital allowances.  It was announced in Budget 2014 that this period has been extended to 31 March 2020.  The qualifying expenditure must be incurred between 1 April 2012 and 31 March 2017, and the area in which the plant and machinery is to be used must be an “Assisted Area” at the time that the expenditure is incurred.
  • VAT prompt payment discounts - From 1 May 2014, businesses in the telecoms and broadcasting sector, where there is no obligation to issue a VAT invoice for supplies will be required to account for VAT on the amounts that they actually receive, rather than always accounting for VAT on the discounted sum when a prompt payment discount is offered. Other businesses that offer prompt payment discounts will also have to pay VAT on the amounts they receive, from 1 April 2015 (unless HMRC brings forward the implementation date for revenue protection reasons).
  • Space satellites – Secondary legislation will be introduced to provide an IPT exemption for premiums received under insurance contracts covering certain risks relating to space satellites. The exemption will be effective by the end of 2014.

General interest

  • The ISA will be reformed into a New ISA (NISA), which will be a simpler product with a single limit for cash and stocks and shares. The annual investment limit for the NISA will be £15,000 per year.
  • The government intends to introduce a new requirement for taxpayers to pay upfront any disputed tax associated with schemes covered by the Disclosure of Tax Avoidance Scheme (DOTAS) rules or counteracted under the General Anti-Abuse Rule.
  • A number of pensions related changes were introduced to allow people greater freedom and choice over how to access their defined contribution pensions.
  • Tax avoidance remained a focus of the Budget and consultations were announced on improving the DOTAS rules and VAT Avoidance Disclosure Regime.
  • Venture Capital Trusts will be prohibited from returning share capital to investors within three years of the end of the accounting period in which the shares were issued.
  • Businesses will no longer be able to account for VAT on a prompt payment discount when the discount is not taken up.
  • The VAT registration threshold will increase to £81,000.