There was little in this year’s Budget which had not already been leaked in the press it would seem. However, the devil as always is in the detail.
Our initial view and the headlines from a tax perspective are largely as follows:
Tax Free Personal Allowance
- The tax free personal allowance will be £9,440 from 6 April 2013; it will increase to £10,000 from 6 April 2014.
Exemption threshold for employer provided beneficial loans
- The threshold for employment-related “cheap” loans to be treated as earnings =will increase from the current threshold of £5,000 to £10,000 for 2014-15 and subsequent tax years.
As long as the total outstanding balances on all such loans do not exceed the threshold at any time in a tax year, there is no tax charge.
Seed enterprise investment scheme (SEIS): reinvestment relief
- The Capital Gains Tax ("CGT") applies in certain cases when an asset is sold for more than it was originally purchased. The taxable gain (profit) may be triggered following the transfer of an asset, although commonly this would follow a sale. A number of tax reliefs are available to exempt or reduce the tax that may apply. Basic tax planning may... More (Capital Gains Tax ("CGT") applies in certain cases when an asset is sold for more than it was originally purchased. The taxable gain (profit) may be triggered following the transfer of an asset, although commonly this would follow a sale. A number of tax reliefs are available to exempt or reduce the tax that may apply. Basic tax planning may... More) ‘holiday’ for reinvesting gains in SEIS shares has been extended to gains accruing in 2013-14 and reinvested in 2013-14 or 2014-15.
As a result, for taxpayers with the right circumstances, an SEIS investment can continue to be made without any financial risk after potential tax reliefs are taken into account.
Employee Shareholders Status
- Employees who take part in the new employee shareholder arrangements will benefit from a £50,000 capital gains tax exemption on gains made on their shares. The exemption will apply to shares received from September 2013.
- Owners of limited companies will continue to benefit from the gradual reduction to corporation tax rates, the Main Rate will be 23% from 1 April 2013 (as anticipated), with the rate reducing down to 21% from 1 April 2014 and 20% from 1 April 2015.
As a result, from 1 April 2015 the UK will therefore have just one rate of corporation tax.
- An ‘Employment Allowance’ has been announced which will reduce the employer’s national insurance costs by £2,000 annually, from April 2014.
Several measure have been introduced to counter tax avoidance, these include:
General anti-abuse rule (GAAR)
As anticipated, legislation will be introduced in Finance Bill 2013 for a GAAR to counteract tax advantages arising from abusive tax avoidance schemes.
The GAAR will apply to income tax, corporation tax, CGT, inheritance tax, SDLT, the annual tax on enveloped dwellings and petroleum revenue tax.
The GAAR will come into force following Royal Assent of the Finance Bill 2013 this summer.
- The Government will consult on the use of LLPs and other partnerships to secure tax advantages, with a particular focus on the manipulation of profit/loss allocations.
- A consultation document will be published with proposals, and legislation will be introduced in Finance Bill 2014.
These proposals will no doubt lead to a period of uncertainty for many businesses trading as LLPs.
Isle of Man, Guernsey, Jersey: Tax Information Agreements and Disclosure Facilities
- Tax agreements have been made between Isle of Man, Jersey and Guernsey with the UK tax authorities. As a result, a range of financial information on UK taxpayers with accounts in these perceived ‘tax havens’ will be passed through to Her Majesty's Revenue and Customs (HM Revenue and Customs or HMRC) is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support and the administration of other regulatory regimes including the national minimum wage.... More.
- A disclosure facility will allow people to come forward to disclose their previous tax affairs in advance of the information being automatically exchanged (as previously reported here).
Taxpayers who have some exposure as a result of these tax agreements should consider using the disclosure facility before they receive an approach from HMRC.
Stamp Duty Land Tax (SDLT)
- Retrospective legislation has been introduced which closes SDLT subsale schemes, effective from 21 March 2012.
Inheritance Tax (IHT)
- Legislation will be introduced to limit the relief available on debts; in particular this focuses on arrangements where the debt is never repaid after death, or where the borrowed funds have been used to invest in property which would not attract an inheritance tax charge.
If you would like to discuss any of these issues and how they might affect your circumstances please contact us.