Following George Osborne’s Budget announcement, Group Tax Director GILL MOLLOY gives an overview of the key points…
Personal
Income tax personal allowance:
For 2012/13 the personal allowance for those aged under 65 will be increased to £8,105 (£7,475 for 2011/12);
The basic rate limit will be £34,370 (£35,000 for 2011/12).
Enterprise Investment Scheme & Venture Capital Trusts:
Subject to State Aid approval, legislation will be introduced that will help smaller, riskier UK Companies to compete for finance by increasing the incentive for people to invest in smaller companies & help the EIS & VCT schemes focus better on higher risk businesses;
With effect from 6 April 2011 the income tax relief rate will increase from 20% to 30% of the amount subscribed for shares;
With effect from 6 April 2012 there will be increases to;
• the thresholds for the maximum size of qualifying company for both EIS & VCT’s;
• the maximum annual amount that can be invested in an individual company;
• the annual amount that an individual can invest under the EIS
Approved Mileage Allowance Payments:
From 6 April 2011, for employees who use their own cars or vans for business mileage, the tax free approved mileage allowance payment will be increased from 40p per mile to 45p per mile for the first 10,000 miles of business travel in a tax year.
For mileage beyond 10,000 miles, the rate remains at 25p per mile.
Annual ISA Subscription Limit:
The annual ISA subscription limit will be increased on an annual basis by reference to the Consumer Prices Index (“CPI”) rather than the Retail Prices Index (“RPI”) from 2012/13 onwards.
ISA limits for 2011/12 are set at £10,680.
Junior ISAs:
A new Junior ISA product is being introduced, from Autumn 2011, for which all UK resident children under the age of 18, who do not have a Child Trust Fund, will be eligible to subscribe. These ISAs will be available as cash or stocks and shares investments and will be tax-relieved with many of the features of existing ISA products.
SA Donate:
Under SA Donate, self-assessment taxpayers who were due a repayment of tax from HMRC could direct that the repayment should instead be made to a charity of the taxpayer’s choice
SA Donate will be withdrawn in relation to repayments of tax in respect of:
Tax returns for the tax year 2011/12 onwards; and
Tax returns up to and including 2010/11 where the repayment is made on our after 6 April 2012.
Reduced Childcare Relief for Higher Earners:
Affects employees who join employer supported childcare schemes on or after 6 April 2011
By restricting the level of relief available to higher rate and additional rate taxpayers by introducing new income tax exempt limits of £28 per week for higher rate and £22 per week for additional rate taxpayers
Aligns the monetary equivalent of the tax relief entitlement for all taxpayers at £11 per week.
National Insurance Contributions:
From 2012/13 the basis for indexation of some national insurance contribution rates, limits and thresholds will be in line with the CPI instead of the RPI.
Capital Gains Tax
Entrepreneurs’ Relief:
The lifetime limit on gains qualifying for Entrepreneurs’ Relief will increase from £5m to £10m for qualifying gains made on or after 6 April 2011.
Annual Exemption:
With effect from 2012/13, the capital gains tax annual exempt amount will rise in line with the CPI rather than the RPI.
The automatic indexation of the annual exempt amount, using the CPI, will still be subject to override if Parliament determines that an alternative amount should apply.
Business / Corporate
Rates of Corporation Tax:
Main rate of CT is now reduced by 2%, to 26% from 1 April 2011.
The main rate will then reduce by 1% each year until it reaches 23% by the financial year beginning April 2014.
R & D Tax Credits for SMEs:
For small and medium sized enterprises incurring qualifying R & D expenditure on or after 1 April 2011, the additional deduction in computing their business profits/losses for corporation tax purposes will be increased from 75% to 100%
This additional deduction will be increased by a further 25% to 125% for qualifying R & D expenditure incurred on or after 1 April 2012.
Capital Allowances; Short Life Assets:
From April 2011 if a business elects for plant and machinery to be treated as a short life asset the ‘cut off’ period will be increased from 4 years to 8 years from the end of the chargeable period in which the expenditure was incurred.
Bank Levy:
It affects in principal UK banks, banking groups & Building Societies & foreign banks that have permanent presence in the UK
The levy is effective for accounting periods after 1 January 2011 and it’s based on the total chargeable equity & liabilities as reported on the relevant balance sheet
The purpose of the levy is to ensure that the banking sector makes a fair contribution bearing in mind the risks that they pose to the financial system & wider economy
Taxation of Foreign Branches:
Legislation is being introduced to exempt the profits, of foreign branches of UK resident companies, from UK corporation tax. Currently, a UK resident company is chargeable to UK corporation tax on all its profits wherever arising in the world and relief is given, against the UK corporation tax liability, for the foreign tax paid on the foreign branch profits. (The relief given against the company’s UK corporation tax liability, for the foreign tax paid, cannot exceed the UK tax payable on those foreign branch profits.)
The new legislation which will have effect for accounting periods commencing on or after the 2011 Finance Bill receives Royal Assent, will allow a company to make an irrevocable election for all its foreign branches, located anywhere in the world, to be exempt from UK corporation tax on their profits. The company will not be able to claim UK corporation tax relief on its foreign branch losses.
VAT
The Low Value Consignment Relief (LVCR) threshold, below which goods imported from outside the EU are VAT-free, will be lowered from £18 to £15 with effect from 1 November 2011
Stamp Duty Land Tax
Bulk Purchases of Residential Property:
A relief is being introduced for purchasers of residential property who acquire more than one dwelling in a particular transaction from the same vendor. This relief will enable the rate of SDLT payable on the purchase to be determined by the mean consideration, i.e. the aggregate consideration divided by the number of dwellings, rather than by the total aggregate consideration paid for the portfolio of properties
The relief will apply for transactions with an effective date on or after the 2011 Finance Bill receives Royal Assent.
All Taxes / Other
Disguised remuneration:
From 6 April 2011, where trusts and other intermediate vehicles are used in arrangements aimed at providing value to an individual for what is in substance a reward or recognition in connection with the individual’s employment, or a loan in connection with the employee’s employment, a new employment income charge will apply
An anti-forestalling charge will arise on 6 April 2012 if sums paid out between 9 December 2010 and 5 April 2011 have not been repaid
If you have any queries or require further clarification on any of these areas, please contact Group Tax Director GILL MOLLOY on 0161 7032500 or e-mail gill.molloy@championgroup.co.uk
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