The Chancellor of the Exchequer presented his Budget to Parliament today, 20 March 2013.
The below is a summary of some of the key points delivered.
CORPORATE AND BUSINESS TAXES
Corporation Tax Rate Reduction
Legislation will be introduced in Finance Bill 2013 to reduce the main rate of corporation tax on profits to:
- 21 per cent for the financial year commencing 1 April 2014; and,
- 20 per cent for the financial year commencing 1 April 2015.
Finance Bill 2013 also sets the small profit rate at 20 per cent for the financial year commencing 1 April 2013. Finance Bill 2013 will also set the marginal rate.
National Insurance: £2,000 employment allowance
The Government will introduce an allowance of £2,000 per year for all businesses and charities to be offset against their employer Class 1 secondary NICs liability from April 2014. The Government is seeking to introduce legislation later this year.
Annual tax on enveloped dwellings
As announced in Budget 2012, legislation will be introduced in Finance Bill 2013 for an annual tax to be payable by certain non-natural persons that own interests in dwellings valued at more than £2 million. Following consultation on draft legislation, changes have been made to introduce additional reliefs, modify conditions for some of the reliefs, and the requirements to make returns if companies cease to be eligible for relief or become liable to an increased charge
Capital Gains Tax: extension to certain non-natural persons disposing of UK residential property valued at over £2 million
Legislation will be in the Finance Bill 2013 to introduce a capital gains tax (CGT) charge payable by certain non-natural persons when they dispose of interests in high value residential property in the UK on or after 6 April 2013. Broadly, the new tax charge will be payable by these non-natural persons, wherever they are resident, if they were liable to the new annual tax on enveloped dwellings on the property in question. CGT will normally be payable only on gains attributable to periods of ownership after 5 April 2013.
Seed enterprise investment scheme (SEIS): reinvestment relief
Legislation will be introduced in Finance Bill 2013 to extend the capital gains tax relief for reinvesting gains in SEIS shares to gains accruing in 2013-14 when those gains are reinvested during 2013-14 or 2014-15. The relief will apply to half the qualifying re-invested amount.
Legislation will also be introduced to prevent a company from being disqualified from SEIS where it was established by a corporate formation agent before sale to its ultimate owners. This will apply in respect of shares issued on or after 6 April 2013.
Review of Partnerships
The Office of Tax Simplification will carry out a review of ways to simplify the taxation of partnerships. The OTS will carry out an initial scoping exercise to identify which areas are most complex for taxpayers and will provide more details in due course.
Capital allowances: low emission vehicles
Legislation will be introduced in Finance Bill 2015 to extend the 100 per cent allowance for expenditure incurred on cars with low carbon dioxide emissions and electrically propelled cars for an additional three years to 31 March 2018.
INDIVIDUALS - PERSONAL TAXES, TAX CREDITS AND PERSONAL ALLOWANCES
Income tax personal allowances for 2014-15
The personal allowance for people born after 5 April 1948 will be increased to £10,000 in 2014-15. As set out in Budget 2011, once the personal allowance has reached £10,000, it will then increase in line with inflation (based on CPI) in future years, starting from 2015-16. As announced in Autumn Statement 2012, the higher rate threshold, which equals the sum of the personal allowance and the basic rate limit, will be increased by 1 per cent to £41,865 in 2014-15. Therefore the basic rate limit will be set at £31,865 in 2014-15.
New Childcare Scheme from Autumn 2015
For childcare costs of up to £6,000 per year per child, support of 20% will be available worth up to £1,200. From the first year of operation, all children under 5 will be eligible and the scheme will build up over time to include children under 12. The scheme will provide support for families where all parents are in work and not receiving support through the Childcare Element of Working Tax Credits/Universal Credit, or where one has an income over £150,000. Support will be provided through a childcare account redeemable at any registered childcare provider. The new scheme offer will be phased in from Autumn 2015 as the current system of Employer Supported Childcare is phased out. The Government will shortly consult on the detail of delivery.
PENSIONS Pensions Tax Relief As announced in the Autumn Statement 2012, legislation will be introduced in Finance Bill 2013 to reduce the annual allowance to £40,000 and to reduce the standard lifetime allowance to £1.25 million for the 2014-15 tax year onwards. Following consultation, draft legislation for the restriction to the lifetime allowance has been revised to include various minor adjustments.
TAX EVASION AND AVOIDANCE GAAR
Legislation will be introduced in the Finance Bill 2013 for a General Anti-Abuse Rule (GAAR) to counteract tax advantages arising from abusive tax avoidance schemes. The GAAR will apply to income tax, corporation tax (and amounts treated as corporation tax), CGT, inheritance tax, SDLT, the annual tax on enveloped dwellings and petroleum revenue tax. Legislation will be introduced in Finance Bill 2013 to clarify the rules that determine the availability of corporation tax deductions in connection with share options or awards granted to employees. This legislation will have effect from 20 March 2013 in relation to company accounting periods ending on or after that date.
Corporation tax deductions for employee share acquisitions
Legislation will be introduced in Finance Bill 2013 to clarify the rules that determine the availability of corporation tax deductions in connection with share options or awards granted to employees. This legislation will have effect from 20 March 2013 in relation to company accounting periods ending on or after that date.
Trade and property business deductions
As announced on 21 December 2012, the Government will introduce targeted anti-avoidance rules (TAARs) to the income tax and corporation tax provisions governing the relationship between the rules prohibiting and allowing deductions, with effect from that date. Legislation will be in Finance Bill 2013.
Tax Agreements with Isle of Man, Jersey and Guernsey The UK has agreed a comprehensive package of measures with the Isle of Man, Guernsey and Jersey governments to clamp down on those who choose to hide their money offshore. This demonstrates the commitment of all parties to tackle tax evasion. The package consists of:
- agreement to automatically exchange a wide range of financial information on UK taxpayers with accounts in the Isle of Man, Guernsey and Jersey which will significantly enhance HMRC's ability to crack down on those who do not declare their offshore affairs;
- a disclosure facility to allow people to come forward to disclose their previous tax affairs in advance of the information being automatically exchanged.
HMRC has signed Memoranda of Understanding with each of these Crown Dependencies.
Partnerships The misuse of the partnership rules has been a feature of many avoidance schemes closed down in recent years. The Government announced in Autumn Statement 2012 that it would consider whether partnerships should be reviewed, as part of the rolling examination of high risk areas of the tax code. The Government has now announced that it will consult on measures to: -remove the presumption of self-employment for limited liability partnership (LLP) partners, to tackle the disguising of employment relationships through LLPs; and, -counter the manipulation of profit/loss allocations (by both LLPs and other partnerships) to secure tax advantages.
Loss buying: targeted loss buying rules Legislation will be introduced in Finance Bill 2013 to prevent 'loss buying', where companies pass the potential to gain access to corporation tax relief to unconnected third parties. The legislation will:
- extend the current 'loss buying' rules, in Part 14 of Corporation Tax Act 2010 (CTA 2010), to apply to a transfer of ownership of company that is not a trading company nor one with a property or investment business, which holds non trading loan relationship deficits and non-trading intangible fixed asset debits and credits;
- amend the rules in Part 14 of CTA 2010 to additionally apply to the trade of a company that has undergone a change of ownership, if that trade or part trade is subsequently transferred to a fellow group company; and,
- amend the rules at Part 5 of CTA 2010 to include controlled foreign company apportionments in the calculation of certain amounts to be surrendered as group relief.
These changes have effect from 20 March 2013
Loss buying: 'loss loophole closure' rules Legislation will also be introduced to address arrangements which seek to circumvent the longstanding loss buying rules in Part 14 of CTA 2010. In particular the rules will cover reliefs, deductions, allowances and expenses for which it is possible to dictate or predict in advance the timing of their 'crystallisation' since, where timing can be dictated or predicted, ownership or part ownership changes can take place in advance of the crystallisation of the loss enabling the current anti-'loss buying' rules in Part 14 of CTA 2010 to be bypassed.
The Government therefore proposes, in certain circumstances, to bring the tax treatment of unrealised loss, involved in a transfer between unconnected parties, more closely into line with the longstanding treatment of realised losses. The proposed changes will introduce three separate rules to combat 'loss buying' which, when triggered, will not remove the ability to relieve relevant losses but merely stop their set-off against other profits (including by way of group relief). This will also have effect from 20 March 2013.
Close company loans to participators Legislation will be introduced in Finance Bill 2013 to close three loopholes used to attempt to avoid the tax charge on close company loans to their participators. The changes will:
- charge close companies on loans they make via intermediaries to their participators;
- charge close companies on other payments they make via intermediaries to their participators; and,
- update the repayment rules with an anti-avoidance provision.
These changes will have effect for loans, payments, repayments and repayment arrangements made on or after 20 March 2013.
High-risk promoters The Government will consult this summer on a package of information powers, penalties and other measures for tackling the behaviour of high-risk promoters of tax avoidance schemes, with a view to bringing forward legislation in Finance Bill 2014.
SDRT AND STAMP DUTY Abolition for AIM shares The government will bring forward legislation in Finance Bill 2014 taking effect from April 2014, that abolishes stamp duty and Stamp Duty Reserve Tax on share transactions in UK companies quoted on Small Company Growth Markets including AIM. Legislation will also be introduced in the Finance Bill 2014 to abolish the stamp duty reserve tax charge on unit trusts and open-ended investment companies in Schedule 19 to the Finance Act 1999.
INDIRECT TAXES INCLUDING VAT
VAT: registration and deregistration thresholds The VAT registration and deregistration thresholds will be increased in line with inflation so that with effect from 1 April 2013:
- the taxable turnover threshold which determines whether a person must be registered for VAT, will be increase from £77,000 to £79,000;
- the taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £75,000 to £77,000; and
- the registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased from £77,000 to £79,000.
The simplified reporting requirement (three line accounts) for the income assessment return will continue to be aligned with the VAT registration threshold. For the 2013-14 tax year and onwards, small businesses will be able to use the new simpler income tax cash basis intended to simplify the way in which small businesses can calculate their trade profits. The eligibility conditions for the cash basis will be linked to the VAT registration threshold in place at the end of the tax year.
VAT: changes to the place of supply rules
Legislation will be introduced in Finance Bill 2014 to tax intra-EU business to consumer supplies of telecommunications, broadcasting and e-services in the Member State in which the consumer is located. These services are currently taxed in the Member State in which the business is established. The changes will take effect from 1 January 2015 and implement already agreed EU legislation into UK legislation, ensuring that these services are taxed fairly in the Member State of consumption. To save the need for businesses affected by these changes to register for VAT in other Member States, a Mini One Stop Shop will also be introduced from 1 January 2015. This is an IT system that will give businesses the option of registering in just the UK and accounting for VAT due in other Member States using a single return.
The duty rates for spirits, wine and made-wine, cider and perry will increase by two per cent above the rate of inflation (based on RPI) with effect from 25 March 2013. This will add 2 pence to the price of a litre of cider, 10 pence to the price of a bottle of wine and 38 pence to the price of a bottle of spirits. The duty rates on beer will decrease by 6 per cent for low strength beer (less than 2.8 per cent abv), 2 per cent for the standard rate of beer duty (between 2.8 per cent and 7.5 per cent abv) with effect from 25 March 2013. This will reduce the price of an average strength pint of beer by 1 penny.