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NEWS

A brief summary of the Chancellor's Autumn Statement on Thursday 5th December 2013:


  • The Chancellor restated his commitment to a 20% corporation tax.
  • Measures will be taken to encourage employee share ownership.
  • For small businesses, he announced a capped increase in business rates, as well as the £1,000 business rates rebate for small high street retailers.
  • The cost of business travel will be reduced, with the scrapping of the fuel duty increase in April 2014.
  • The Government is to examine and take action where necessary on partnerships, which include a corporate partner that takes a share of profit, which the others are able to benefit at a later date.
  • The individual personal allowance will increase to £10,000 in 2014/15.
  • The higher rate 40% tax threshold will increase by £415 to £41,865 (including £10,000 PA).
  • A new but limited transferable tax allowance of £1,000 will be introduced for married couples and civil partners from April 2015. However, this will not benefit higher rate taxpayers.
  • From 6 April 2015, employers will no longer pay Class 1 national insurance contributions on earnings paid up to the upper earnings limit to any employee under the age of 21.
  • From October 2015, a new class of voluntary NICs, 3A, will be introduced to allow pensioners who reach state pension age before 6 April 2016 to top up their Additional Pension entitlement.
  • The overall annual individual savings account (ISA) subscription limit for 2014/15 will rise to £11,880, but of which only £5,940 can be invested in cash.
  • The final exemption period for private residence relief will be halved from 36 to 18 months from April 2014.
  • From April 2015, capital gains tax will apply to future gains on residential property owned by non-resident individuals.
  • New legislation to block venture capital trust (VCT) enhanced buyback schemes will take effect from April 2014.
  • New simplified IHT rules for trusts will be introduced from April 2015, but following on from further consultation.


A Summary of the main Income Tax Rates and Allowances
:

Main income tax allowances                                                                        2013/14                 2014/15

Personal allowance - basic                                                                                 £   9,440                £  10,000

Personal allowance reduced by 50% if total income exceeds                        £100,000               £100,000

Personal allowance if born between 6/4/38 and 5/4/48                                  £  10,500               £  10,500

Personal allowance if born before 6/4/38                                                        £  10,660               £  10,660

Personal allowance if born pre 6/4/48 reduced by 50% if income exceeds  £  26,100   £  27,000

Minimum where income exceeds limit  £    9,440 £  10,000

Married couples and civil partners (minimum) at 10% (but see note  #)        £    3,040               £    3,140

Married couples and civil partners (maximum) at 10% (but see note #)        £    7,915               £    8,165


Blind person’s allowance                                                                                 £    2,160               
£    2,230


Note # = where at least one spouse or civil partner was born before 6 April 1935.

Income tax rates                                                                                            2013/14                 2014/15

Starting rate of 10% on savings income up to                                  £    2,790               £   2,880

(But. not available if taxable non-savings income exceeds the starting rate band)

Basic rate of 20% on income up to                                                                 £  32,010               £  31,865

Maximum tax at basic rate                                                                               £    6,402               £    6,373

Higher rate of 40% on income                                                                         £  32,011 to          £  31,866 to

£ 150,000              £150,000

Tax payable on the first £150,000                                                                    £   53,598              £  53,627

Additional rate applied on income over £150,000                                                         45%                      45%

Rates applicable on dividends for:

- basic rate (20%) taxpayers                                                                                        10%                       10%

- higher rate (40%) taxpayers                                                                                  32.5%                    32.5%

- additional rate (45%) taxpayers                                                                            37.5%                    37.5%


Please note that the above report is only our brief interpretation and understanding of the Government's Autumn Statement for 2013, delivered to Parliament by George Osborne on Thursday 5th December 2013. These provisions are normally confirmed upon the receipt of Royal Assent later in the following year. Accountants And Bookkeepers Ltd. can not be held responsible for any errors, omissions or changes to the above.


A brief summary of the Chancellor's Spring Statement on Wednesday 20th March 2013:

2013 Budget Highlights

  • Main rate of corporation tax reduced to 21% from 1st April 2014 and 20% from 1 April 2015.
  • New simplified income tax schemes for small unincorporated businesses. 
  • Introduction of general anti-abusive rule (GAAR) to counteract tax advantages arising from "abusive" tax avoidance schemes. 
  • New annual tax on "enveloped dwellings" - residential properties valued at more than £2 million and owned by certain "non-natural persons" - with stamp duty land tax and capital gains tax implications.
  • NICs allowance of £2,000 per year for all businesses and charities to be offset against their employer Class 1 NICs bill from April 2014.
  • New statutory definition of tax residence for individuals and the general abolition of ordinary residence.
  • New employee shareholder status with exemption from CGT, and reduction in income tax and NICs.

In addition, you can find information relating to HMRC by clicking on this link:

http://www.hmrc.gov.uk/budget2013/

Finally, you may also be interested in a recent change in HMRC's approach to Real Time PAYE reporting for Small Businesses, details of which can be found on the following link:

http://www.hmrc.gov.uk/news/rti-small-businesses.htm



Employers
Employment Allowance
The big news for employers is a new Employment Allowance of £2,000 per year for all businesses and charities to offset against the cost of employer's class 1 NI contributions. This should provide a real reduction in the cost of employing workers by all types of businesses - not just new employees taken on by new businesses. The new employment allowance will reduce employer's NICs paid after 5 April 2014. 

NI rates 2013/14
For 2013/14 the main rates and thresholds for NI contributions are:

Lower Earnings Limit (LEL) for Class 1 NICs - £109/week
Employer's class 1 above £148/week not contracted out - 13.8%
Employee's class 1 not contracted out from £149 to £797/week - 12%
Employee's additional class 1 above £797/week - 2%
Self-employed small earnings exemption - £5,725 per annum
Self-employed class 4 from £7,755 to £41,450 per annum - 9%
Self-employed class 4 additional rate above £41,450 per annum - 2%
Self-employed class 2 - £2.70 per week
Voluntary contributions class 3 - £13.55 per week

Contracting Out
Contracted out rates for NI are 10.6% for employees and 10.4% for employers, but those reduced rates only apply for members of salary-related pension schemes. All contracted out rates will cease in April 2016, when the new flat rate state pension comes into effect.

Employee Shares
Employee share schemes can be incredibly complex to set up and administer. However, the Government believes employee involvement in the companies they work for is a good thing, and employees owning shares in their employing company is the way to achieve this.

Employee shareholder status. A new type of share scheme will permit employees to take up shares offered by their employer, in return for giving up certain employment rights such as the right to statutory redundancy pay. Normally an employee is taxed on shares received, like salary, but the first £2,000 of shares awarded to the employee under this scheme will be tax and NI free. The employer will be able to give up to £50,000 of shares to each employee, but any value of shares above £2,000 will be immediately taxable and subject to NICs.

When the employee sells those shares any gains they make will be tax free, even if the employee has taken up the full quota of £50,000 of shares initially. The company will be able to claim tax relief on the value of shares given to employees. This new scheme is due to apply for shares provided on and after 1 September 2013.

EMI shares. The Enterprise Management Incentive scheme (EMI) is an existing share scheme that allows smaller companies to award up to £250,000 of share options to key employees. The shares are not tax free on disposal, but employees can now qualify for entrepreneurs' relief which applies a tax rate of 10% on any taxable gains made on the EMI shares. The employee must still work for the company at the time he sells the EMI shares and must have held those shares for at least one year.

That last condition can cause a problem, as the employee usually holds the EMI share options and sells the actual EMI shares as soon as they are acquired. The law will now be changed to allow the period of holding EMI share options to count as a period of holding the EMI shares. Also, if the company is taken over or re-organises its shares, any shares acquired in exchange for EMI shares count as if they were EMI shares.

Other share schemes. Other tax advantaged share schemes normally have to be individually approved by HMRC, but the Government has proposed that employers will be able to self-certify share schemes from 2014. This will make it easier for companies to set up a share scheme for their employees.

Loans to Employees
Employees who take an interest-free or low-interest loan from their employer are treated as receiving a taxable benefit if the loan exceeds £5,000 at any point in the tax year. This threshold will rise to £10,000 from 6 April 2014. This increase is designed to allow employees take loans to buy annual rail tickets, which now exceed £5,000 in many areas, although applies to loans for any purpose.

The rules for loans made to company owners have been tightened up - see loans to participators below.
 
Cars, Vans & Fuel
Company Car Benefit 
The taxable benefit of having the private use of a company car is based on a percentage of the original list price for the vehicle. For 2013/14 the percentage varies from 5% for vehicles with CO2 emissions up to 75g/km, 10% from 75 to 95g/km, and increases by 1% for every 5g/km of CO2 emissions, up to a maximum of 35%. This scale of percentages increases every year such that a higher amount of the list price of the same vehicle is taxed each year.

From 6 April 2015 cars with CO2 emissions in the band 0-50g/km will be taxed at 5% of list price, and those in the band 51-75g/km with be taxed at 9% of list price. Cars with CO2 emissions of 76g- 94g/km will be taxed at 13% of list price, with the percentage increasing in 1% steps for each additional 5g/km, up to a new maximum of 37%. Further increases in the percentages of list price have been published for the years 2016/17 to 2019/20.

Fuel Benefit
Where a company car driver receives free fuel, the taxable benefit is calculated as the percentage of the list price for the car applied to the fuel charge multiplier set at £21,100 for 2013/14 (£20,200 for 2012/13). The maximum taxable benefit of receiving free road fuel for private use will increase from to £7,070 (2012/13) to £7,385 for 2013/14.

The taxable benefit when fuel is provided for private use in a company van will rise from £550 for 2012/13 to £564 for 2013/14. In future years the fuel benefit multiplier for cars and the van fuel benefit will increase in line with the rate of inflation as measured by the RPI.
 
Business Taxes
Cash Basis
Unincorporated businesses will be permitted to calculated profits and losses for tax purposes using the cash accounting basis, rather than the standard accruals accounting basis. The cash basis ignores all creditors, debtors, prepayments and accruals, and includes flat rate amounts for certain expenses such as a motoring or use of home for business purposes. 

This cash basis will be compulsory for anyone who claims Universal Credit, but it can only be used by businesses whose turnover, when they start to use the cash basis, is under the VAT registration threshold. The business will be required to continue using the cash basis until it is no longer suitable for them, perhaps when the turnover exceeds a certain threshold. This will prevent businesses from opting in and out of the cash basis to gain a tax advantage. The cash basis can be applied from 6 April 2013.

Partnerships 
The taxation of partnerships can be very complex, so the Government has asked the Office for Tax Simplification to make suggestions to simplify tax for partners and partnerships.

Alongside this review the Government is considering changes to the self-employed status of the members of LLPs, and restrictions on the variation of profit allocations within the LLP. These changes may make the taxation of LLP members more like employees of companies for some members. Any changes to the taxation of partnerships or LLPs will not take effect until at least 2014. However, if your business operates as an LLP please talk to us about how the structure could be changed if the tax changes prove to be hostile to LLPs.

Corporation Tax Rates
The corporation tax rates for small and large companies will be aligned at 20% from April 2015. This will remove the need for the associated companies rule and the marginal rate of corporation tax will disappear.

The small companies rate is already at 20% and the main rate will be 23% for the year beginning 1 April 2013, 21% for the year beginning 1 April 2014 and then 20% for the year beginning 1 April 2015.

Loans to Participators
Where a company that is controlled by its directors or five or fewer shareholders, makes a loan to a participator (typically a shareholder/director), there are tax consequences. The company must pay 25% of the loaned amount to HMRC if the loan is not repaid within nine months of the end of company's accounting year. This rule is widely taken advantage of by company shareholder/directors who repay the loan just before the nine month deadline and immediately take out a replacement loan from the company. New tax avoidance rules will apply from 20 March 2013 such that:

- loans channelled through third parties to shareholders will be included in these rules;
- transfers of assets from the company will be treated as loans; and
- the immediate replacement of a repaid loan will not count as a repayment of the first loan.

If you have taken a loan from your own company we need to discuss whether you will be caught be these new tax avoidance rules. 

Capital Allowances
The rates and thresholds of the main capital allowances will apply as follows for 2013/14:

Main pool: writing down allowance: 18%
Special rate pool: writing down allowance: 8%
Annual Investment Allowance (AIA) cap: £250,000

Expenditure within the AIA cap qualifies for 100% allowance in the year the asset is bought. The AIA cap was changed in April 2012 and January 2013, so great care is needed to calculate the available AIA for accounting periods which straddle the change. The AIA cap is due to revert to £25,000 on 1 January 2015.
 
Individuals
Personal Allowances
The standard personal allowance will rise to £10,000 from 6 April 2014, a year earlier than expected. The age related allowances are frozen until 2015. The allowances as they have been announced for 2013/14 are:

Personal allowance (born after 5 April 1948): £9,440
Personal allowance (born between 6 April 1938 and 5 April 1948): £10,500
Personal allowance (born before 6 April 1938): £10,660
Minimum married couples allowance*: £3,040
Maximum married couples allowance*: £7,915
Blind person's allowance: £2,160
Income limit for allowances for age related allowances: £26,100
Income limit for standard allowances: £100,000

* given where one partner was born before 6/4/1935, as 10% reduction in tax due.

Income Tax Bands and Rates
The income tax bands for 2013/14 are:

Savings rate* (10%) - 0 to £2,790
Basic rate (20%) - 0 to £32,010
Higher rate (40%) - £32,011 to £150,000
Additional rate (45%) - over £150,000

*The savings rate of 10% only applies if the individual's net non-savings income does not exceed the savings rate limit.

The additional rate was reduced from 50% in 2012/13.

The higher rate and basic rate thresholds can be increased by paying personal pension contributions or gift aid donations.

Pension Allowances
The annual allowance and lifetime allowance will both reduce in 2014/15 as shown below. The annual allowance can be expanded by unused amounts of allowance brought forward from the previous three tax years.

The lifetime allowance limits the amount of tax advantaged funds a person can draw on at retirement. If the pension fund is greater than the lifetime allowance when the scheme member starts to take his benefits, the excess is taxed at 55%. Individuals with funds that already exceed the lifetime allowance can apply for fixed protection of the existing value of their fund. 

Annual allowance: 2012/13: £50,000, 2013/14: £50,000, 2014/15: £40,000
Lifetime Allowance: 2012/13: £1,500,000, 2013/14: £1,500,000, 2014/15: £1,250,000

Pension Drawdown
Some individuals can choose to drawdown amounts from their pension fund instead of buying an annuity with the funds on retirement. The maximum amount of the permitted drawdown is increased from 100% of the equivalent annuity value of the fund, to 120% of that same annuity value. This change comes into effect from 26 March 2013.
 
Capital Taxes
Capital Gains Tax
The thresholds for capital gains tax (CGT) have increased slightly for 2013/14:

Annual exemption: £10,900 (2012/13: £10,600)
Annual exemption for most trustees and personal representatives: £5,450 (2012/13: £5,300)
Rate for gains within the basic rate band: 18% (no change)
Rate for gains above the basic rate band: 28% (no change)
Rate for gains subject to entrepreneurs' relief: 10% (no change)
Lifetime limit for gains subject to entrepreneurs' relief: £10 million (no change)

Selling to Employees
When a business owner sells his business, they can qualify for entrepreneurs' relief if they sell the whole business, or a significant part which can be operated as a separate business. This relief reduces the tax payable on the sale to 10%.

The Government is proposing a new capital gains relief to encourage business owners to sell a controlling interest in a business to the employees who have worked in the business. This new tax relief will not apply until April 2014.

Seed Enterprise Investment Scheme (SEIS)
The SEIS was introduced for investments made in small new trading companies from 6 April 2012, with a limit on investments under the scheme of £150,000 per company. Each investor can subscribe for up to £100,000 of SEIS shares per tax year and get 50% income tax relief. 

If that investment is funded using a capital gain made in 2012/13, 100% of the reinvested gain is exempt from CGT. The CGT exemption was to be limited to investments made only in 2012/13, but it has been extended for two further years at the rate of 50% of the gain, not 100% of the gain. This is still a significant tax saving.

The original SEIS rules contained a serious trap for investors. A company acquired from a formation agent could not qualify; it had to be incorporated with individuals rather than another company as the original subscribers. This administrative niggle has been removed for shares issued from 6 April 2013, but not for companies formed earlier.

Inheritance Tax 
The inheritance tax (IHT) nil rate band will remain frozen at £325,000 until 2017/18. This is the amount of a deceased person's estate that is free of inheritance tax.

The estate value is arrived at after deducting any debts owed by the deceased, and the value of any assets that qualify as business property, agricultural property or woodlands. A number of tax schemes exist to make use of these deductions for debts to reduce the value of the deceased's estate on death, and hence reduce the IHT payable. To block such tax avoidance schemes the deduction of debts from the value of an estate will be prevented where:

- the debt is not repaid to the creditor; or
- the loan was used to acquire property which is exempt from IHT.

These changes will apply from the date Finance Act 2013 is passed.
 
VAT
Rates
The VAT rates remain unchanged at...
 

Lower rate: 0%
Reduced rate: 5%
Standard rate: 20%

The registration and deregistration from 1 April 2013 are....

Registration turnover: £79,000 (1 April 2012 - £77,000)
Deregistration turnover: £77,000 (1 April 2012 - £75,000)


Please note that the above report is only our brief interpretation and understanding of the Government's budget proposals for the 2013 Budget, delivered to Parliament by George Osborne on Wednesday 20th March 2013. These provisions are normally confirmed upon the receipt of Royal Assent later in the year. Accountants And Bookkeepers Ltd. can not be held responsible for any errors, omissions or changes to the above.

A brief summary of the Chancellor's Autumn Statement on Wednesday 5th December 2012:


The Office of Budget Responsibility predicted that there will be negative growth (-0.1%) for 2013, 1.2% growth for 2013 and rises of between 2% and 3% for the next four years. Economic growth has been weaker than expected, but the labour market has been stronger than anticipated with employment rising from a March forecast of 29.1 million to 29.6 million and a fall in the unemployment rate to 7.8%. The target for debt reduction in 2015/16 will be missed. There will be cuts in the budgets of government departments and unemployment is expected to reach 8.3% in 2012 reducing to 6.9% by the end of 2017. Government spending as a share of gross domestic product is predicted to fall from 48% in 2009/10 to 39.5% in 2017/18.

The Autumn Statement document can be found on the HM Treasury website.

PERSONAL TAXATION

Personal allowances

For 2013/14 the personal allowance will increase to £9,440 and the basic rate limit will be set at £32,010. The current allowance (2012/13) is £8,105 and it had been announced that the 2013/14 allowance would be £9,205. The increase of an additional £235 means that the allowance is now “within touching distance” of the much vaunted £10,000 target proposed by the Liberal Democrats.

Higher rate

The higher rate tax remains at 40% (with an additional rate of 50% currently and 45%for 32013/14) but the increase in the higher rate threshold for 2014/15 and 2015/16 will be capped at 1%. Potentially an example of ‘fiscal drag’ this means that more taxpayers become liable to the higher rate – the Treasury estimates that this will affect approximately 400,000 taxpayers.

The 2013/14 basic rate band will be £32,010 meaning that the 40% tax will apply where income exceeds £41,450. Following the 1% increases, the 2014/15 income threshold at which higher rate tax will become payable will be £41,865 and £42,285 for 2015/16.

The Chancellor revealed that in the first year of the 50% top rate of tax (2010/11) tax revenues from the wealthy fell by £7 billion and the number of people declaring income in excess of £1 million fell by half.

Pensions

As expected, there are more changes to the tax regime for pension contributions. For tax year 2014/15 and following years:

The annual allowance for pensions tax relieved savings will be reduced from £50,000 to £40,000 (note that the unused annual allowance can be carried forward for three years); the standard lifetime allowance for pensions tax relieved savings will be reduced from £1.5 million to £1.25 million; a transitional “fixed protection” regime will be introduced for those who believe they may be affected by the reduction in the lifetime allowance; and there will be discussions with interested parties on whether a personalised protection regime should be offered in addition to a fixed protection regime.

It was noted that 99% of pension savers contribute less than £40,000 per annum (the average is £6,000) and that the median pension “pot” at retirement is currently £55,000. Furthermore, 98% of those approaching retirement have a pension fund of less than £1.25 million.

Draft legislation will be introduced in Finance Bill 2013 and will be published on 11 December 2012.

For more information see HMRC’s overview note: Pensions: Restriction of pensions tax relief.

CAPITAL GAINS TAX

The capital gains tax annual exempt amount will be increased by 1% over the 2014/15 and 2015/16 years, reaching £11,100.

INHERITANCE TAX

The inheritance tax nil-rate band was frozen at Budget 2010 at its current level of £325,000 until April 2015. For 2015/16 the band will be increased by 1% rounded up to £329,000.

ISAs

From April 2013, the overall ISA limit will increase from £11,280 to £11,520. The maximum cash element increases from £5,640 to £5,760.

In addition, there will be consultation on allowing investment in SME equity markets such as AIM to be held directly in stocks and shares ISAs. As explained by HMRC in their ISA Bulletin 19 (March 2010), to qualify for the ISA stocks and shares component a share must be officially listed on a recognised stock exchange. AIM is not a recognised stock exchange so shares traded on AIM will on qualify if they are also officially listed on another stock exchange that is recognised.

BUSINESS TAX

Corporation tax

The main corporation tax (CT) rate for financial year 2014 will be reduced by a further 1% to 21%. The main rate is currently 24% and, as previously announced, this will reduce to 23% for financial year 2013 and then to 21% (rather than the previously planned 22%) for 2014. These rates will not apply to banks, the rate of the bank levy will increase to 0.130% from 1 January 2013. The small profit corporation tax rate remains at 20%.

Subject to state aids approval by the EU, Budget 2012 announced corporation tax reliefs from April 2013 for the video games, animation and high-end television industries. A payable tax credit for these reliefs will be offered which will be worth 25% of qualifying expenditure.

Capital allowances

Capital allowances have seen many changes in recent years. The annual investment allowance for plant and machinery where a 100% allowance can be obtained was reduced from £100,000 between April 2010 and April 2012 to £25,000. The annual investment allowance will now be temporarily increased from £25,000 to £250,000 per annum for a two-year period commencing from 1 January 2013. The Chancellor stated that this allowance should cover total annual investments by 99% of UK businesses.

Cash basis

Already the subject of consultation, a simpler income tax scheme for small unincorporated businesses will be introduced for the tax year 2013/14. The main aspects of this will be as follows. Eligible self-employed individuals and partnerships (with receipts up to £77,000) will be able to calculate their profits on the basis of the cash that passes through their business. They will generally not have to distinguish between revenue and capital expenditure. All unincorporated businesses will be able choose to deduct certain expenses on a flat-rate basis.

Personal companies

The Government appears to have abandoned the idea of new legislation on “controlling persons” to tackle individuals who use a personal service company to avoid being taxed as an employee. Existing legislation, etc. will be strengthened and should be sufficient to deal with this issue.

Company cars

The Government will consult on the use of time-limited incentives through the company car tax regime to encourage the purchase and development of ultra-low emission vehicles.

OTHER TAXES

Fuel duty

The 3.02 pence per litre fuel duty increase that was due to take effect on 1 January 2013 will be cancelled and the increase that was planned for 1 April 2013 will be deferred until 1 September 2013.



Air passenger duty (APD)

APD rates will rise by amount of the retail price index (RPI) increase for September 2012 from 1 April 2013.

Shale gas

The Autumn Statement says that “the government will also establish an Office for Unconventional Gas. This will join up responsibilities across government, provide a single point of contact for investors and ensure a simplified and streamlined regulatory process. The Government will also consult on the tax regime for shale gas.”

Carbon reductions

The Carbon Reduction Commitment energy efficiency scheme is to be simplified from 2013.

ANTI-AVOIDANCE AND EVASION

Schemes closed

HMRC's approach to tax evasion was launched on Monday 3 December. Details can be found at Tackling Tax Avoidance and Evasion including a summary of information on the Treasury website and the HMRC document Closing in on tax evasion. Five further measures have been announced in a Written Ministerial Statement. The measures have effect from 5 December 2012 as follows.

Foreign bank levies. These will not be allowable deductions for income tax or corporation tax purposes.

Tax mismatch scheme. It will no longer be possible to reduce corporation tax liability through the asymmetric tax treatment of loans or derivatives. Property return swaps. Legislation will prevent capital losses being converted into income losses.

Manufactured payments. Schemes involving stock lending arrangements are to be closed. Payments of patent royalties. Relief for non-trade payments is to be abolished.

General anti-abuse rule

A general anti-abuse rule (GAAR) will be introduced as a deterrent to abusive avoidance schemes and to strengthen HMRC’s methods of tackling them. Guidance and draft legislation on the GAAR will be published in December 2012.

Other measures

There will be consultation on the introduction of significant new information, disclosure, and penalty powers to target the promoters of aggressive tax avoidance schemes. There is to be a review of offshore employment intermediaries used to avoid tax and NICs. More information will be included in Budget 2013. It is estimated that the agreement between the UK and Switzerland on undisclosed bank accounts will raise £5 billion over the next six years. The number of tax inspectors is to be increased by 2,500 and prosecutions for tax evasion have increased by 80%. £77 million more will be spent on combating tax avoidance and there will be more resources to ensure that multi-national companies pay their “proper share” of tax.

The following documents which include the Tax Information and Impact Notes (TIINs), draft legislation and explanatory notes have been published.

Bank levy amendments

Corporation tax: mismatch schemes, property return swaps and manufactured payments

Abolition of income tax relief for patent royalties

STATE BENEFITS

General

On the basis that salaries are not rising substantially, rises in benefits (eg jobseekers allowance, employment and support allowance and income support, child tax credit and working tax credits) will, with some exceptions, be limited to 1% rather than increasing by the rate of inflation.

Child benefit rates are frozen in 2013/14 and will increase by 1% in 2014/15 and 2015/16 and housing benefit will be capped at 1% for two years from 2014.

Carer benefits and the disability elements of tax credits are to be increased in line with the consumer price index (CPI). Other elements are either frozen or will increase by 1% in 2013/14 and all rates are increased by 1% in 2014/15 and 2015/16. The guardian's allowance will be increased in 2013/14 in line with CPI.

Support for mortgage interest is to be extended for two more years. A Welfare Uprating Bill is to be introduced.

Universal credit

Universal credit will be introduced from October 2013 to simplify the benefit system with the aim of increasing the incentive to work. By 2017/18, universal credit will comprise about two-thirds of working age welfare expenditure. The earnings disregards for each household type will be increased by 1% for two years from April 2014, rather than by CPI, in line with the restricted level of increase in most other benefits.

State pension

The basic state pension will rise by 2.5%, meaning that the full basic state pension will be £110.15 a week in 2013/14 (rising from £107.45 in 2012/13).

NATIONAL INSURANCE CONTRIBUTIONS

For 2013/14 there are no changes to the percentage rate of contribution for Class 1 and Class 4 National Insurance contributions, but there are changes to all of the thresholds and limits.

The HM Treasury website has Tables confirming tax and tax credit rates and thresholds for 2013-14.

PENSIONS

The capped drawdown limit will be raised from 100% to 120% allowing pensioners with such arrangements to increase their income if they wish. The volatility in measures of pension scheme deficits can make it hard for companies to manage their investment plans and attract external funding. It has been announced that the Department for Work and Pensions will consult on whether companies undergoing valuation in 2013 or later should be allowed to smooth asset and liability values.

BUSINESS RATES/COUNCIL TAX

Business rates

Subject to consultation, all newly built commercial property completed between 1 October 2013 and 30 September 2016 will be exempted from empty property rates for the first 18 months, up to the state aids limit. The temporary doubling of the small business rate relief scheme will be extended for a further 12 months from 1 April 2013. It is estimated that over half a million small businesses will benefit from this extension, with 350,000 not paying any business rates until April 2014.

Council tax

As for the two previous years, a grant will be provided to English local authorities that freeze or reduce their council tax in 2013/14.

EMPLOYMENT LAW

Following consultation, legislation will be introduced on a new employee shareholder status. In return for accepting changed employee rights these workers will be given shares worth a minimum of £2,000 in their employer firm. It has already been announced that capital gains of up to £50,000 on such shares will be exempt. Options to reduce income tax and National Insurance liabilities on the receipt of such shares will also be considered. This would mean that the first £2,000 of shares received under the new status would be free from income tax and NICs.

There is to be consultation on reducing unnecessary burdens from the transfer of undertakings (protections on employment) (TUPE) regulations.

OTHER ANNOUNCEMENTS

Reducing tax credit error fraud and debt

Measures are to be introduced aimed at reducing the levels of tax credit error and fraud and recovering tax credit debt.

Claimants will have to provide more evidence to support tax credit claims for children and childcare.

The use of debt collection agencies to collect tax credit debt will be trialed.

Changed rules will enable the collection of existing tax credit debt from a new tax credit award.

Recovering debt

New initiatives are proposed with the aim of recovering debt owed to central government. include:

The use of debt collection agencies will be trialed by the Department of Work & Pensions.

HMRCs debt management resources will be increased for the rest of 2012/13 and for 2013/14.

Digital Services

HMRC will significantly expand the range of digital services over the coming three-year period to include:

Personal tax statements for an estimated 20 million taxpayers showing how their tax is calculated and spent by government. A more “joined-up digital experience” will be provided to business customers. This will give an overview of their HMRC “account”, links to online transactions, and the ability to access tailored assistance.

OTHER BUSINESS NEWS

From April 2015, a greater proportion of growth-related public spending will be devolved to local areas. Details will be in the Spending Review. A Business Bank will be created. A package of reforms is planned to promote exports and inward investment. There will be capital investments in various infrastructure projects including spending on super-fast broadband, new homes, motorway improvements, science and schools and academies.

LINKS

Links to the HM Treasury 2012 Autumn Statement and accompanying documents are on the Treasury website.

The report by the Office for Budget Responsibility, The Economic and fiscal outlook – December 2012 and supporting documents are on the OBR website.


Please note that the above report is only our brief interpretation and understanding of the Government's budget proposals for the 2012 Budget, delivered to Parliament by George Osborne on Wednesday 5th December 2012. These provisions are normally confirmed upon the receipt of Royal Assent later in the year. Accountants And Bookkeepers Ltd. can not be held responsible for any errors, omissions or changes to the above.



Changes to the Audit threshold

For financial years ending on or after the 1st October 2012, there have been changes to the audit thresholds for both limited companies and LLPs. Under the new rules, a company that qualifies as a small company in accordance with Companies Act 2006, sections 382(1) to (6) will qualify for audit exemption.

Once a company qualifies as small it will remain small, unless it fails to meet the qualifying conditions in both the current and preceding year. This will also apply to a company that previously qualified as either medium or large, that wishes to be now treated as small and thus exempt from audit.

The qualifying conditions are deemed to be met in a financial year, in which a company satisfies at least two or more of the three basic requirements:

 > Turnover not exceeding £6.5 million
 > Balance sheet total (fixed and current assets) not exceeding £3.26 million
 > Staff not exceeding 50 employees 

However, certain entities cannot qualify, such as PLCs, nor those groups containing one. A parent company must be the parent of a small group. A subsidiary must be both a small company and part of a small group in order to qualify, unless it takes advantages of the new rules relating to subsidiary undertakings.

Changes relating to subsidiary undertakings:
 
Exemption applies even if part of a non-qualifying group, but only if the following conditions are met and it files the necessary documents with Companies House before filing accounts - 

 > its' parent undertaking is established under the law of an EEA State
 > all the members of the company agree by filing written notice to the exemption for the financial year
 > the parent company guarantees, by filing a statement, the subsidiary's commitments
 > the company is included in the consolidated accounts for that financial year or an earlier date
    (both these and an audit report must be filed)
 > the parent company must disclose in the notes to the consolidated accounts the subsidiary's exemption

Again, certain entities such as quoted companies and banks cannot partake in this exemption.

Please note that a qualifying company is not obliged to forgo an audit, and indeed might even be required to have one conducted by its' parent's auditors.


A brief summary of the Chancellor's Spring Statement on Wednesday 21st March 2012:

Budget 2012 Highlights

Key points covered in the budget

Personal tax
• Basic personal allowance will increase to £8,105 for 2012–13 and to £9,205 for 2013–14.
• Age-related personal allowances will be restricted and phased out from 2013–14.
• Additional rate of income tax will be reduced from 50% to 45% for 2013–14.
• EIS annual investment limit for individuals will be increased to £1 million from 6 April 2012.

Business tax
• Main corporation tax rate will be cut by 2%, to 24% from 1 April 2012; the small profits rate will remain at 20%.
• Main corporation tax rate will be 23% from 1 April 2013, falling to 22% from 1 April 2014.
• Bank levy will be increased from 0.088% to 0.105% from 1 January 2013 to off-set the reduction in the main rate of corporation tax.
• New reliefs will be introduced from 1 April 2013 for the production of culturally British video
games, television animation programmes and some other television productions.

Stamp duty land tax
• New 7% rate of stamp duty land tax will apply for residential properties of over £2 million.

VAT
• VAT registration threshold will increase to £77,000 and deregistration threshold to £75,000 from 1 April 2012.

Anti-avoidance
• A range of anti-avoidance measures have been announced.
• Government will consult on a “general anti-abuse rule” with a view to introducing legislation in 2013.

Please note that the above report is only our brief interpretation and understanding of the Government's budget proposals for the 2012 Budget, delivered to Parliament by George Osborne on Wednesday 21st March 2012. These provisions are normally confirmed upon the receipt of Royal Assent later in the year. Accountants And Bookkeepers Ltd. can not be held responsible for any errors, omissions or changes to the above.

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A brief summary of the Chancellor's Autumn Statement on Tuesday 29th November 2011:

OBR forecasts show growth dropping to 0.9% in 2011 and 0.7% in 2012, but  recovering to between 2.7%and 3% between 2012 to 2016

OBR forecasts show growth dropping to 0.9% in 2011 and 0.7% in 2012, but  recovering to between 2.7%and 3% between 2012 to 2016

Under the National Infrastructure Plan £30 billion of new capital investment to be made in energy, transport, telecommunications, waste and water.

Tax rates and thresholds for 2012/2013-

 

  • the starting rate for savings will be £ 2,710
  • the basic rate 20% limit will be £ 34,370
  • the higher rate 40% starts at £ 34,371 rising to £ 150,000
  • the additional rate of 50% starts at £ 150,001
  • rates for dividends: ordinary stays 10%; upper 32.5%; additional 42.5%

   

  • Capital Gains Tax - annual allowance stays at £ 10,600

  •  Corporation Tax down to 25% from 1st April 2012

  • ISA limit up to £ 11,280 (£ 5,640 as Cash ISA; £ 3,600 Junior)

  • Pensions - State pension age rises to 67 in 2026. Basic state pension £107.45 in April 2012

  • Seed Enterprise Investment Scheme (SEIS) starts April 2012, tax relief at 50% available to individuals who invest in shares of qualifying companies, with an annual limit of £ 100,000 (cummulative £ 150,000 per company). The scheme will offer CGT exemption on gains realised in 2012/2013 and then invested in a SEIS in that same year

  • Capital Allowances - Enterprise Zones in six assisted areas qualify for enhance capital allowances. 100% for plant & machinery between April 2012 and march 2017. (Black Country, Humber, Liverpool, North Eastern, Sheffield and Tees Valley)

  • Bank Levy - increased from 0.078% to 0.088% from 1st January 2012

  • Employment Law - qualifying period for unfair dismissal claims increases to two years from April 2012

  • Small Business Rate Relief Holiday -  extended by six months from 1st October 2012 to April 2013. Businesses able to defer 60% of increase in 2012/2013 business rate bills (based upon RPI) uprating, to be repaid equally over following two years

  •  *******************************************************************************

  • Please note that the above report is only our brief interpretation and understanding of the Government's budget proposals for the Autumn Statement, delivered to Parliament by George Osborne on Tuesday 29th November 2011. These provisions, and other Budget proposals, are normally confirmed upon the receipt of Royal Assent later in the year. Accountants And Bookkeepers Ltd. can not be held responsible for any errors, omissions or changes to the above.

    ___________________________________________________________________________
     

  • A brief summary of highlights from George Osborne's 2011 Budget speech delivered to Parliament, on Wednesday 23rd March 2011: 

    The key changes that come into effect from 1 April 2011, or 6 April for income tax and capital gains tax, are:

    ·         Main rate of corporation tax cut from 28% to 26%.

    ·         Small profits rate of corporation tax cut from 21% to 20%.

    ·         Personal allowance increased by £1,000 to £7,475.

    ·         All National Insurance rates increase by 1%.

    ·         R&D tax relief for small and medium sized companies increased from 175% to 200%.

    ·         VAT compulsory registration turnover threshold raised from £70,000 to £73,000.

    ·         Capital gains tax annual exempt amount raised from £10,100 to £10,600.

    ·         Entrepreneurs’ relief lifetime cap raised from £2 million to £10 million.

    ·         Income tax relief on investments in EIS shares increased from 20% to 30%.

     

     

    Small business tax

     

     

    IR35

    The Office of Tax Simplification (OTS) was tasked at reviewing how the tax system could be simplified for small businesses. Top of the list was the complex legislation known as IR35. The OTS interim report recommended that this burdensome tax rule should either be suspended or the way in which the legislation is administered by HMRC should be improved. 

     

    The Government has chosen to follow the second recommendation. IR35 is here to stay, but HMRC have been instructed to improve their guidance to businesses that are trying to operate IR35. Also in future investigations of companies potentially caught by IR35 will be carried out by a specialist teams within HMRC.

     

    Tax reliefs to go

    The OTS has suggested a list of more than 40 tax reliefs that could be abolished because they are rarely used, or are obsolete. Tax reliefs on this list of interest to small businesses include:  

    ·         Tax free meals for employees who cycle to work.

    ·         Tax free late night taxis for employees.

    ·         Enhanced tax relief for the costs of cleaning up contaminated land (land remediation relief).

     

    Capital allowances

    The main rates of capital allowances will change from April 2012 rather than April 2011. The annual investment allowance (AIA) will reduce from £100,000 per year to £25,000 per year, and the rates of writing down allowances for asset purchases not covered by the AIA will be cut from 20% to 18%, and from 10% to 8%.

     

    Assets that are expected to have a short useful life can be treated separately for capital allowance purposes, maximising the allowances that can be claimed. From April 2011 a short life asset will be one with an estimated useful life of up to 8 years, increase from 4 years. This will benefit larger businesses that incurred expenditure on assets in excess of their AIA cap for the year. However, the record keeping required to claim short life asset treatment for many assts may be prohibitive.

     

    Enterprise zones

    The Government will create 21 Enterprise Zones around the country. The tax incentives for businesses locating to these zones may include enhanced capital allowances for manufacturing businesses, or a discount on business rates up to a cap of £275,000 over 5 years. There may also be relaxed planning consent and the provision of superfast broadband.

     

     

     

     

    Employment and benefits

     

     

    Merger of NI and income tax

    When employers are asked what single action could simplify the tax system, most suggest merging income tax and national insurance contributions (NICs). This message has finally been heard by the Government, who will consult on how the operation of the national insurance and income tax could be combined.

     

    This does not mean these two taxes will be merged. The Government has stated that NICs will not be charged on savings, dividends or pensions, and certain state benefits will continue to be paid based on the NICs paid by the claimant (the contributory principle). Any changes to NICs and tax will involve aligning the rules and mechanics for collection of the two taxes. However, don’t expect big changes any time soon.

     

    Company Cars

    The company car driver is hit in the pocket as usual by this Budget. The discounts in car benefit for alternatively fuelled cars (such as LPG or duel fuels) are all removed from 6 April 2011. The £80,000 cap on list price is also abolished, so the taxable benefit for very expensive models will jump significantly. In future years the taxable benefit of most cars will increase by 1 percentage point of the list price. Although electric cars and vans still have zero taxable benefit until at least 2015.

     

    The taxable benefit for receiving free fuel for a company car is calculated as the percentage of the list price applied to a fixed value of £18,000. This value is set at £18,800 from 6 April 2011. The maximum taxable benefit of receiving fuel for private use will increase from £6,300 (for 2010/11) to £6,580 (for 2011/12).

     

    Mileage allowance

    If an employee uses their own car for business journeys they can claim a tax free and NIC free mileage allowance (AMAP) from their employer. This AMAP rate has been stuck at 40p mile since about 2002, but will be increased to 45p per mile from 6 April 2011. This rate applies for the first 10,000 business miles per year, any additional miles can be reimbursed at 25p per mile.

     

     

     

     

    Investing in companies

     

     

    Enterprise investment scheme (EIS)

    Individuals who subscribe for shares in private trading companies under the EIS, can claim 20% income tax relief on the amount subscribed up to £500,000 per tax year. The rate of income tax relief will increase to 30% from 6 April 2011, and the cap on investment qualifying for income tax relief will rise to £1 million from 6 April 2012. Investment in EIS shares can also be used to defer tax on unlimited amounts of capital gains. This capital gains tax relief has not been changed.

     

    Venture capital trusts (VCT)

    The range of companies that can accept investments through the EIS or VCT schemes is to be increased from April 2012 to include those with gross asset values of up to £15 million, and with up to 249 employees. At present, only companies with gross asset values of no more than £7 million and with fewer than 50 employees can qualify for these tax-favoured investments. The cap on the amount a company can raise through these schemes in any year will also be increased from £2 million to £10

     

      

    Savings and pensions

     

     

    ISAs

    The investment limit for ISAs is increased to £10,680 for 2011/12 with half that amount available to be invested in cash. A junior ISA is will be launched later in 2011. This tax exempt savings account will be available to all children resident in the UK who do not have a child trust fund account. The investment limits and other conditions for the junior ISA have not been announced.

     

    Pensions

    The level of total pension contributions from employers and the employee, that may be made with full tax relief is reduced to £50,000 per pension input period (PIP) ending in the tax year, from 6 April 2011. However, this cap can be expanded by bringing forward unused relief of up to £50,000 from each of the previous three tax years. If the annual allowance is exceeded the taxpayer must pay an annual allowance charge on the excess contributions at their marginal rate of income tax, but the pension fund may be able to pay this charge in certain circumstances.

     

    The lifetime allowance for registered pension schemes will be cut from £1.8 million to £1.5 million from 6 April 2012. 

     

    Non-residents and non-domicile

    There is currently no clear measure by which an individual can determine whether they should be treated as resident for tax purposes in the UK. The Government intends to introduce a legal test of tax residence with effect from April 2012.

     

    Individuals who are domiciled outside of the UK (non-doms), and who have been resident in the UK for at least 7 out of the previous 9 tax years, must pay a remittance basis charge (RBC) if they want to exclude their off-shore income and gains from UK taxation. The Government is considering raising RBC from £30,000 to £50,000 per year for non-doms who have been UK resident for at least 12 years, from 6 April 2012. However, if the non-dom brings significant funds into the UK to invest in businesses, the annual RBC may be waived.

     

     

     

    Please note that the above report is only our brief interpretation and understanding of the Government's budget proposals for the 2011 Budget, delivered to Parliament by George Osborne on Wednesday 23rd March 2011. These provisions are normally confirmed upon the receipt of Royal Assent later in the year. Accountants And Bookkeepers Ltd. can not be held responsible for any errors, omissions or changes to the above.

     



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