Despite the pre-Budget "leaks" and there were plenty of surprises in George Osborne's 2012 Budget.
Key highlights are:
- A rate 15% on properties worth £2million + sold via a corporate envelope
- A 7% rate on properties worth £2million
- Block on sub-sale relief
From April 2012
- Corporation tax main rate 24% (was set to be 25%)
- Increase in Bank Levy
- Capital allowances: new Enterprise Zones inc in Scotland, Wales and N.Ireland
- Capital Gains Tax - review relief where residential property is held by offshore companies.
- A limit on all uncapped income tax reliefs.
- Enterprise Management Initiatives (EMI) increase option limit to £250,000.
- Increase in car fuel benefit multiplier to £20,200.
From April 2013
- Personal allowance increase to £9,205
- Higher rate of income tax decreases to 45%
- Freeze on age related allowance
- NEW TAX: Child Benefit Income tax charge
- Corporation tax main rate 23%
- Small firms allowed to cash account
- Introduction of a General Anti-abuse Rule
Note for paid Subscribers: you also have acces to our Finance Bill 2012: tax planner this provides a rolling tracker of all key measures including secondary legislation and disappearing tax reliefs
Where something was announced in Budget 2012 we say "NEW"
Personal Allowances
From April 2012
- £8,105 for a single person, £10,500 if you are over 65, and £10,660 if you are over 75
- The 40% tax band starts at £34,370 (was £35,001)
- No changes to the 50% band
NEW from April 2013
- £9,205 for a single person
- Age allowance frozen for new pensioners
- top income tax rate falls to 45%
Child Benefit Tax Charge
NEW: from 7 January 2013
- Where net income in 2012/13 (and in subsequent years) exceeds £50,000, a tax charge will apply at 1% on each £100 of income between £50,000 and £60,000.
- For taxpayers with income of £60,000 the charge will not exceed child benefit paid.
- See How to work out the Child Benefit Tax charge
Cap on unlimited tax reliefs
NEW: from 6 April 2013
- Anyone seeking to claim more than £50,000 in tax relief will be capped at the greater of 25% of income or £50,000
Comment: considerable concern already expressed about how this will affect loss reliefs and Gift Aid but this is hopefully subject to consultation.
Small business tax reporting
NEW: from April 2013
- Cash accounting optional if turnover < £77,000
- Simplified expenses system for business use of cares, motorcycles and home
Corporation tax
NEW from April 2012
- Main rate 24%
NEW: from April 2013
- Main rate 23%
- Tax breaks for the creative sector (video games, animation & and "high-end" TV)
- Above the line R & D credits for big companies
- Disincorporation relief for small companies
Seed Enterprise Investment Scheme (SEIS)
From April 2012:
A modified version of the EIS scheme aims to raise money for new start-ups.
Key features:
- 50% tax relief on investments of up to £100,000 per investor, to a maximum of £150,000 per investee company
- Available to directors - although unable to hold more than 30% of the company
- A Capital Gains holiday for assets disposed of in 2012/13 where gains are reinvested in the SEIS in the same year.
- See Seed Enterprise Scheme (SEIS)
Enterprise Investment Scheme (EIS)
From April 2012:
- NEW: the amount that a qualifying company may receive is increased to £5 million
- The amount that an individual may invest under EIS is increased to £1 million.
- Loan capital will not be included when considering the 30% control test.
- Non-qualifying trades to include those in receipt of the feed in tariff and acquire shares.
See Enterprise Investment Scheme (EIS)
Statutory residency test
From April 2013
- A statutory residence test and legislating split year treatment
The remittance basis
From April 2012
- The Remittance basis charge increases from £30,000 to £50,000 for long term non-residents.
- Certain property can now be brought into the UK and is not treated as remitted
- See Remittance basis (overseas income)
IHT: 4% rate reduction where 10% or more left to charity
From April 2012
- Where 10% or more of an estate is left to charity the estate will attract a 10% discount on the rate of IHT paid. This means it will attract IHT of 36% instead of 40%.
- This relief will be given by splitting an individual's estate into three components in order to allocate reliefs, see IHT relief in 2012: 10% discount
NEW: from April 2013
- Increase in the IHT exempt amount for a non-dom spouse or civil partner (subject to consultation)
- Periodic charges on trusts simplication (subject to consultation)
- A rate 15% on properties worth £2million + sold via a corporate envelope
- Block on sub-sale relief
NEW from 22 March 2012
- A 7% rate on properties worth £2million
Capital Gains Tax (CGT)
Foreign currency bank accounts
From 6 April 2012
- Gains made on foreign currency bank accounts will be exempted from CGT
- Affects individuals, trustees and personal representatives
CGT: residential property held by an offshore non-natural person
NEW from April 2013
- A CGT charge, subject to consultation in 2012.
CGT roll-over relief and Single Farm payments
- S155 TCGA amended to ensure that the single farm payment qualifies for roll-over relief back dates so this affects disposals on or after 1 January 2009.
- See CGT reliefs
CGT annual exempt amounts
From 2013
- Future increases will be index linked
- See CGT Tax Data
Employees and benefits
Share schemes
- A review is ongoing in order to see what might be done to promote wider employee share ownership.
Enterprise Management Initiatives (EMI)
NEW from April 2012
- The limit on the value of shares over which options may be held by an employee under EMI will be increased from £120,000 to £250,000.
NEW Finance Bill 2013
- Gains shares aquired through exercising EMI options to qualify for CGT Entrepreneurs' Relief
- See Enterprise Management Incentives (EMIs)
Car and van benefits
From April 2012
- NEW: Car fuel benefit multiplier increased to £20,200.
- NEW: Van fuel benefit frozen at £550
- Security enhanced features: are not to be regarded as accessories provided tha the nature of the employment creates a threat to personal security.
- See Company cars
Luncheon Vouchers for employees
Withdrawn from April 2013 - 15p per day no longer qualies for tax relief
Cycle to work schemes - breakfast
From 6 April 2013
- Employer can no longer provide tax-free meals to encourage cycling to work (no changes to Workplace canteens, Subsistence though).
Pensions
From April 2013
- NEW: the rules will be amended to prevent employers paying pension contributions to employees' family members as part of a remuneration package.
MPs: tax free resettlement pay
New: from April 2012
- Any MP involuntarily re-unseated will not be taxed on the first £30,000 of resettlement payment paid by the Parliamentary Standards Committee.
UK Switzerland Agreement
- IT, CGT, IHT: a one-off levy on financial assets in Switzerland and withholding tax deducted from income and gains arising in Switzerland from 1/1/2013
Exemption from UK taxation for foreign sports stars
Football Championship League Final 2013
- An employee or contestant of an overseas team that completes in the final will be exempt from income tax if non-UK resident at the time of the final (a similar exemption applied to the 2011 League).
Glasgow Commonwealth Games 2014
- Foreign atheletes will be exempt from income tax if non-UK resident at the time of the final.
Capital allowances - cars
From April 2013
- Extend First Year Allowances low emissions cars for a further two years
- Emissions main car rate drops to 130g/km (previously 160)
Enterprise Zones - plant and machinery
From 1 April 2012
100% allowances on investment of up to €125 million in plant and machinery by UK resident trading companies for five years from 1/4/2012
- Certain sectors excluded
- Unincorporated businesses, partnerships of companies not eligible
Energy Saving Plant and Machinery
- From 1/4/2012 no Enhanced Capital Allowance (ECA) for expenditure on plant and machinery that generates or produces electricity or heat under the feed-in tariff or renewable heat incentive scheme.
- No ESC from 1/4/2014 for combined heat and power equipment installations
- From April 2012 expenditure on solar panels is treated at the special rate (as for long life assets)
- From April 2013 scheme extended a further five years
See Enhanced Capital Allowances (ECA)
Fixtures
- Changes are being made to current rules to ensure a tax write off is given only once during an asset's life
- For expenditure treated as being incurred after April 2012 capital allowances on fixtures will be available to a purchaser provided that:
- The seller pools expenditure prior to transfer to the purchaser
- Seller and buyer have 2 years to fix the transfer value
- The seller confirms the tax disposal value
- See Fixtures: overview
Flat Conversion Allowance
- 100% allowance on the costs of conversion of empty or underused space above shops and other commercial premises to residential use.
- Withdrawn from April 2013
- See Flat Conversion Allowance (FCA)
Business Premises Renovation Allowance (BPRA)
- This 100% allowance is given on expenditure incurred on bringing redundant commercial property situated in designated disadvantaged areas back into use.
- Extended until 2017
- See Business Premises Renovation Allowance
Gas refuelling equipment
- 100 FYA for plant and machinery used in gas, biogas and hydrogen refuelling stations extends to 31 March 2015.
See: Finance Bill rolling planner for details of key changes in capital allowances as already enacted and combined with these changes.
Patent Box
From April 2013
- Corporation Tax relief: reduced rate on income deriving from the exploitation of patents
See Patent Box
R & D
- Enhanced deduction 100% to 125%
- Increased relief for pre-trading expenditures to be claimed as a deemed trading loss.
- Reduces payable credit to 11% of surrendered loss
- £10,000 pa minimum expenditure condition removed
GAAP
With big changes expected to GAAP, new measures are designed to ensure that income will only be taxed once when there is a change in accounting practices.
VAT
NEW: changes to iron out some anomalies on:
- Aligining approved alterations to listed buildings with repairs and maintenance to existing buildings
- Standard rating of hot food ('pasty tax') and sports drinks
- Standard rating of hairdressers' chairs
- Standard rating purchase of holiday caravans
- VAT treatment of self-storage
Business without an establishment in a member state is prohibited from benefiting from that State’s registration threshold.
- Cost sharing exemption, see VAT: costs sharing exemption
Anti-avoidance
NEW: latest tax schemes are targeted involving
- Settlement legislation: corporate settlors
- IHT settled property
- Stamp Duty Land Tax: sub-sale relief
- Capital allowances: long funded leases
- Sale of lessor companies
- Waste disposal site restoration relief
See Anti-avoidance measures: Budget 2012
Disclosure of Tax Avoidance Schemes – DOTAS
- Broadened to extend to more SDTL schemes, and may require some schemes to be disclosed one more time
Sch 36 Information Powers
New power to require a 3rd party to provide details about a taxpayer.
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Tax Agents: civil penalties for dishonest conduct
NEW from 1 April 2013
- Penalties for dishonest conduct to range from £5,000 to £50,000
- Legislation broadly drafted
General anti-abuse rule (GAAR)
NEW: to be introduced in an attempt to crack down on tax schemes which are contrary to Parliament's intentions, following further consultation from April 2013
Charities
- Gifts to the nation: individuals and companies, reduction in IT, CGT or CT when a pre-eminent object is gifted to the nation.
- IHT relief on charitable bequests: reduced rate of 10% from 6/2/12
- See IHT relief in 2012: 10% discount
Gift Aid
-
SA donate scheme dropped from April 2012 – too expensive to administer
-
No further news on Gift Aid and cash collections.
-
From 6 April 2013 the proposal to place a cap on unlimited tax reliefs will ensure that anyone seeking to claim more than £25,000 in tax relief will be capped at the greater of 25% of income or £50,000 - potential to block donations under Gift Aid by major donors.
Bank Levy
- From 1 January 2012 0.088%
- NEW: From 1 January 2013 0.105%.