Download a PDF version here
Rates
The main rate of corporation tax (CT) for companies with profits above the upper limit of £1.5m will be reduced to 24% from 1 April 2012, 23% from 1 April 2013 and 22% from 1 April 2014.
The main rate for companies with profits arising from oil extraction and oil rights in the UK and the UK Continental Shelf (ring-fence profits) will remain at 30%.
The small profits rate of CT remains at 20% from 1 April 2012. The small profits rate for ring-fence profits remains at 19%.
CFC reform
The current Controlled Foreign Company (CFC) rules are to be repealed and replaced with a new CFC regime which will apply for CFC accounting periods beginning from 1 January 2013.
R&D relief
Legislation will be introduced in Finance Bill (FB) 2012 to amend the current research and development (R&D) rules as follows for expenditure incurred/claims made on or after 1 April 2012:
The following reliefs/rules are to be abolished:
CT reliefs for the creative sector
Corporation tax reliefs for the production of culturally British video games, television animation programmes and high-end television productions are to be legislated for in FB
Patent Box
Qualifying IP will include patents granted by the UK Intellectual Property Office and the European Patent Office, as well as supplementary protection certificates, regulatory data protection and plant variety rights.
The provisions will apply to existing IP, new IP and to acquired IP provided that the group has further developed the IP or the product which incorporates it.
Tax transparent investment funds
Legislation will be introduced in FB 2012 giving
Tax simplification for small businesses
The government is to consult on introducing a voluntary cash accounting basis for unincorporated businesses with receipts up to the amount of the VAT registration threshold, with a view to introducing legislation in FB 2013. It will also consult on a simplified expenses system for business use of cars, motorcycles and the home and on proposals to introduce a tax relief for disincorporation of businesses carried on by companies.
Personal service companies and IR35
The government intends to bring forward a package of measures to further counter avoidance through the use of personal service companies, and to make the existing IR35 legislation easier to understand. This will include HMRC strengthening specialist compliance teams, simplifying the way IR35 is administered, and consulting on proposals which would require office holders and controlling persons, who are integral to the running of an organisation, to have PAYE and NICs deducted at source.
Enterprise zones FYAs
FB 2012 will introduce legislation to provide 100% first-year allowances (FYAs) for expenditure incurred by trading companies on qualifying plant or machinery for use primarily in certain designated assisted areas within enterprise zones. The qualifying expenditure must be incurred between 1 April 2012 and 31 March 2017, the area in which the plant or machinery is to be used must be an assisted area at the time when the expenditure is incurred, and the plant or machinery must not be held for use in an area outside of the designated assisted area for a period of five years.
The usual general exclusions will apply including the exclusion of expenditure on assets for leasing.
Fixtures
Legislation will be introduced to make the availability of capital allowances to a purchaser of fixtures on or after 1 April 2012 for corporation tax purposes or 6 April 2012 for income tax purposes conditional on:
Business premises renovation allowances scheme
The government has confirmed that it will extend the Business Premises Renovation Allowances scheme for a further five years until 31 March 2017 for businesses within the charge to corporation tax and 5 April 2017 for businesses within the charge to income tax. The scheme’s purpose is to enable businesses that own or lease vacant property in designated disadvantaged areas to claim 100% tax relief on their capital spending on renovating or converting the property to restore it to business use. Certain restrictions will be introduced to comply with EU State aid requirements.
Solar panels, feed-in tariffs & renewable heat incentive
FB 2012 will provide that expenditure on solar panels from April 2012 will be designated as special rate expenditure for capital allowances purposes. The annual investment allowance will, however, continue to be available on such expenditure.
From April 2012 (or April 2014 for combined heat and power equipment installations) enhanced capital allowances will not be available in respect of expenditure on plant or machinery when it generates electricity or heat, or produces biogas or biofuels, that attract tariff payments under either of the feed-in tariffs or renewable heat incentive schemes introduced by the Department of Energy and Climate Change. Any such allowances given in respect of expenditure incurred from these dates will be withdrawn if the tariffs are paid subsequently.
The 100% first-year capital allowance for businesses purchasing low emission cars will be extended for two years beyond the current expiry date of 31 March 2013, except for leased cars. Also, from the same
Emissions threshold for main rate cars
The threshold for
The 100% first-year capital allowances for plant and machinery used in gas, biogas and hydrogen refuelling stations will be extended for two more years to 31 March 2015.
Company car tax rates
For 2014/15 the appropriate percentage of
Company car fuel benefit charge
For 2012/13, the multiplier (the figure to which the appropriate percentage is applied) for calculating the car fuel benefit charge is increased from £18,800 to £20,200. The multiplier will be increased by 2% above the rate of inflation (RPI) for the tax year 2013/14.
Company car benefits: security enhanced cars
With backdated effect for 2011/12 onwards, for individuals who can demonstrate that the nature of their employment creates a threat to their personal security, certain security enhancements (eg, armour, bullet-resistant glass) will be excluded from being accessories and will thus not count towards the price of a company car for the purpose of calculating a taxable benefit.
Income tax rates 2013/14
The rates of income tax for 2013/14 will be: basic rate 20%; higher rate 40%; additional rate 45%; dividend additional rate 37.5%; trust rate 45%; and dividend trust rate 37.5%. The charge on benefits paid to non-individuals under an employer-financed retirement benefits scheme will reduce from 50% to 45%. Where capital sums are deemed to be income of a settlor, the rate of tax taken as paid by the trustees will also reduce from 50% to 45%.
Limits and allowances
For 2013/14 the personal allowance for those aged under 65 will be increased to £9,205. The basic rate limit will be reduced to £32,245.
The NICs upper earnings limit and upper profits limit will continue to be aligned with the level of the higher rate threshold (the total of the personal allowance and the basic rate limit).
For 2013/14 the higher personal allowance available to people aged 65−74 will be restricted to those born after 5 April 1938 but before 6 April 1948. The higher personal allowance for those aged 75 and over will be restricted to those born before 6 April 1938. The amounts of these allowances will not be increased from their 2013/14 levels.
Child benefit: income tax charge
From 7 January 2013, an income tax charge is being introduced as a means of clawing back child benefit from those on higher incomes. Entitlement to the child benefit itself and the amount of the benefit will both remain unchanged. The charge will apply to recipients of child benefit whose income exceeds £50k in a tax year and to individuals whose partner is in receipt of child benefit and whose own income exceeds £50k. In the event that both partners have income over £50k, the charge will apply only to the partner with the highest income. Partners for this purpose include married couples, civil partners, unmarried couples and same-sex couples not in a civil partnership. Income will be measured by reference to adjusted net income, which is broadly taxable income before deducting the personal or blind person’s allowance, adjusted for any pension contributions paid net of tax and Gift Aid donations.
For those with income between £50k and £60k, the amount of the charge will be 1% of the amount of benefit for every £100 of income above £50k. For example, if total child benefit is £1,752 and adjusted net income is £54k, the tax charge will be £700.80 (£17.52 x 40). For those with income above £60k, the amount of the charge will equal the amount of child benefit received, so that the benefit will be fully clawed back.
The tax will be collected via PAYE and self-assessment. Child benefit claimants will be able to elect not to receive the child benefit to which they are entitled if they or their partner do not wish to pay the tax charge. The claimant can subsequently withdraw that election if they or their partner are no longer liable to pay the charge.
Legislation will be introduced in FB 2013 to apply a cap on income tax reliefs claimed by individuals for 2013/14 onwards. The cap will apply only to reliefs which are currently unlimited. For anyone seeking to claim more than £50,000 of these reliefs, they will be capped at 25% of income or £50,000, whichever is the greater.
Residence
The government had already announced its intention to introduce a statutory residence test. This was to be introduced with effect from 6 April 2012 but has been deferred to 6 April 2013. The legislation will be included in FB 2013.
Ordinary residence will be abolished for tax purposes from 6 April 2013. At the same time, overseas workday relief will be placed on a statutory footing; this is currently a non-statutory means of apportioning earnings between duties performed in the UK and duties performed elsewhere.
Non-domiciled individuals
With effect from 6 April 2012, three changes are made to the taxation of UK resident non-domiciled individuals who claim the remittance basis of taxation:
EIS and VCTs
A number of changes will be made to these venture capital schemes, including the following.
Some of these changes are subject to EU State aid approval being granted.
Seed Enterprise Investment Scheme
Legislation to be included in FB 2012 will introduce the Seed Enterprise Investment Scheme (SEIS), a new tax-advantaged venture capital scheme with effect for investments made by individuals on or after 6 April 2012. The scheme will be similar to the Enterprise Investment Scheme (EIS) but focused on smaller,
Enterprise Management Incentives
The limit on the value of shares over which an employee may hold options under the Enterprise Management Incentives scheme will be increased from £120k to £250k from a date to be announced. The government intends to implement the measure as soon as possible, subject to EU State aid approval.
Qualifying time deposits
Life insurance: qualifying policies
There will be a limit on the premiums that can be paid into qualifying life insurance policies each year with effect from 6 April 2013 (subject to transitional provisions). Policies issued on or after this date will only be qualifying policies where the premiums payable for an individual do not exceed £3,600 each year.
Armed forces
A new income tax exemption is to be introduced for the Continuity of Education Allowance paid to members of the armed forces to provide a continuity of education for their children.
Foreign currency bank accounts
Legislation will be introduced in FB 2012 to exempt individuals, trustees and personal representatives from capital gains tax on gains made on withdrawals on or after 6 April 2012 of money from bank accounts denominated in a foreign currency. Consequently, capital losses will not be allowable.
Non-resident, non-natural persons
The government will consult on the introduction of a capital gains tax charge on residential property owned by non-resident, non-natural persons, and the consultation will be made in conjunction with the stamp duty land tax enveloping annual charge for high-value residential properties. The charge will be introduced in FB 2013 with the measure coming into effect in April 2013.
Rollover relief
Legislative changes will be made in FB 2012 to ensure that the availability of capital gains tax rollover relief in respect of entitlements to the EU Single Payment Scheme is preserved.
Pensions tax relief
Legislation will be introduced in FB 2013 to amend the rules which currently allow employers to pay pension contributions into their employees’ family members’ pensions as part of their employees’ remuneration package to remove the tax and NICs advantages from these arrangements.
Estates leaving 10% or more to charity
For deaths on or after 6 April 2012, the normal 40% rate of IHT is reduced to 36% if at least 10% of the deceased’s net estate is left to charity.
Where the estate consists only of the deceased’s free estate, the value on which the 10% threshold is based
If the estate includes two or more components, the 10% test is applied to each component as if it were a separate estate. The free estate, any settled property and any jointly-owned property all count as components for this purpose. If the 10% test for a component is passed, IHT will be charged on that particular component at the 36% rate. An election can also then be made to treat two or more components as one and reapply the 10% test accordingly.
The reduced rate will apply to charitable legacies made by Instrument of Variation as well as to those made by the will, but the charity must be notified that the devolution of the estate has been varied in its favour.
An election can be made to disapply these rules for one or more components. This might be worthwhile if, for example, the benefit of the reduced rate would be eaten up by additional valuation costs.
Spouses & civil partners domiciled outside the UK
The government will consult on legislation to increase the IHT-exempt amount that a UK domiciled individual can transfer to their non-UK domiciled spouse or civil partner. The government similarly proposes to allow individuals who are domiciled outside the UK and who have a UK domiciled spouse or civil partner to elect to be treated as domiciled in the UK for the purposes of IHT. Legislation will be included in FB 2013.
Gifts of pre-eminent objects to the nation
Under a new scheme to take effect on a day to be appointed after Royal Assent to FB 2012, individuals and companies will be able to donate pre-eminent objects, or collections of objects, to the nation in return for a reduction in their UK tax liabilities. A potential donor will make his own valuation of the object(s) in question. A panel of experts will consider the offer and, if it considers the object is pre-eminent and should be accepted, the panel will
Rates for residential properties
A new 7% rate of SDLT is to be introduced for purchases of residential property where the consideration exceeds £2m. The new rate applies where the effective date of the transaction (usually the date of completion) is after 21 March 2012, subject to a transitional rule to ensure that the new rate does not apply to contracts entered into before 22 March 2012 but completed on or after that date.
Enveloping of
Where
SDLT sub-sale relief anti-avoidance
An anti-avoidance measure is to be included in FB 2012 to counteract a disclosed avoidance scheme with effect for transactions on or after 21 March 2012. The measure will put beyond doubt that the grant or assignment of an option cannot satisfy the requirements of sub-sale relief. The relief applies where a person contracts to purchase an interest in land but, before completion, transfers their rights under the contract to a third party.
SDLT DOTAS changes
Two changes are being made to the Disclosure of Tax Avoidance Schemes (DOTAS) regime for SDLT. The first will remove the DOTAS ‘grandfathering’ rules for certain avoidance schemes. This will include requiring certain grandfathered schemes, still in use but disclosed before April 2010, to be disclosed one additional time by promoters so that new users of those schemes must be identified to HMRC. The second change will remove the property valuation thresholds for disclosure.
Registration issues
With effect from October 2012, businesses will be able to register and deregister for VAT, and amend their VAT registration details, electronically. In addition, with effect from 1
This measure removes, with effect from 1 April 2012,
Cost-sharing exemption
The cost-sharing exemption provided for in EU Directive 2006/112/EC, art 132(1)(f) is to be implemented in the UK with effect from Royal Assent to FB 2012. The measure will exempt from VAT the supply of services by a group which consists of persons engaged in exempt or non-taxable activities so long as the services are supplied to group members at cost and for the purposes of those activities. Conditions may be imposed in connection with the exemption.
Car fuel scale charges
The scale used to charge VAT on fuel used for private motoring in business cars will be amended from the start of the first VAT period beginning on or after 1 May 2012.
The government intends to consult on legislation to be included in FB 2013 to give effect to certain extra-statutory concessions relating to the scale charges and a proposal to amend the scale by annual public notice having the force of law instead of by statutory instrument.
Invoicing rules
Following changes made by the EU Invoicing Directive, secondary legislation will be introduced to simplify the VAT invoicing rules, with effect from 1 January 2013.
Energy-saving materials in charitable buildings
Legislation will be introduced in FB 2013 which will mean that buildings used for a relevant charitable purpose will no longer benefit from the reduced rate of VAT in respect of the supply and installation of energy-saving materials. The reduced rate will continue to apply to the supply and installation of energy-saving materials in residential accommodation, including accommodation operated by charities.
VAT evasion on road vehicles brought into
With effect from 2013 (the precise date is yet to be announced), any person bringing a road vehicle into the UK for permanent use on UK roads will have to notify HMRC within 14 days. It will not be possible to register or license such a vehicle until notification is made and any VAT due has been paid or secured.
This requirement will not apply to certain categories, eg, UK residents returning from holiday, private importers and vehicles imported under secure schemes approved by the DVLA.
VAT grouping extra-statutory concession
Legislation will be introduced in FB 2012 to replace a concession that allows a reverse charge to be based on the cost of services purchased by the group members established overseas, rather than on the actual charge made to the UK member. The legislation will take effect from Royal Assent; the current concession will continue to apply in the meantime.
Public bodies
Listed buildings
Zero-rating for approved alterations to listed buildings is to be removed with effect from 1 October 2012. In addition, the ‘60% test’ for the first sale or long lease of a substantially reconstructed listed building is to be removed, so that zero-rating will apply only if the reconstructed building incorporates no more of the original building than the external walls, together with other external features of architectural or historic interest. Transitional arrangements will provide for the retention of zero-rating where a contract for reconstruction was entered into prior to 21 March 2012, and at least 10% of the work (by cost) was completed before that date. Anti-forestalling measures will be introduced in FB 2012.
Small cable-based transport
The rate of VAT applicable to the carriage of passengers on small cable-based transport will be reduced from 20% to 5% with effect from 2013. This will apply where vehicles carry fewer than 10 people each, as transport in larger vehicles is zero-rated. This reduction will be evaluated after three years.
Hairdressers’ chair rental
Holiday caravans
From 1 October 2012, the zero-rating of caravans will apply only to those caravans which are designed and constructed for continuous
Hot food and premises
From 1 October 2012, the meanings of ‘hot food’ and ‘premises’ for the purposes of VAT zero-rating will be clarified. From that date:
Self-storage
Sports nutrition drinks
General anti-abuse rule
The government has accepted the recommendation of the Aaronson Report that there should be a general anti-abuse rule (GAAR) targeted at artificial and abusive tax avoidance schemes. The government will consult on draft legislation in the summer of 2012, with a view to introducing legislation in FB 2013. The GAAR will be extended to SDLT.
Post-cessation trade relief
Legislation will be introduced in FB 2012 to deny post-cessation trade relief and capital gains relief for payments or events which are made or occur directly or indirectly in consequence of, or in connection with, tax avoidance arrangements the main purpose of which is the obtaining of a reduction in tax liability as a result of post-cessation trade relief. The amendments will apply to payments made, or events occurring, on or after 12 January 2012 except where a payment is made pursuant to an unconditional obligation in a contract made before that date.
Property loss relief against general income and post-cessation property relief
FB 2012 will amend legislation to deny agricultural property loss relief and post-cessation property relief for expenses arising, or a payment or an event which is made or occurs, directly or indirectly in consequence of, or in connection with, tax avoidance arrangements, the main purpose of which is the obtaining of a reduction in tax liability as a result of the reliefs. The amendments will apply to expenses arising and payments made, or events occurring, on or after 13 March 2012 except where expenses arise or a payment is made pursuant to an unconditional obligation in a contract made before that date.
Plant and machinery leasing
For disposal events for long funding leases occurring on or after 21 March
Life insurance policies: income tax avoidance
Changes are being made to provisions applying to life insurance policies, capital redemption policies and life annuity contracts. The changes apply where there have been gains earlier in the life of the policy or contract but the gains were not chargeable to tax under the income tax rules for these products (because, for example, the earlier gains were attributable to a person who was not UK resident). The new measure amends the rules for calculating the
IHT: avoidance using offshore trusts
The inheritance tax provisions relating to excluded property and settled property will be amended to counter avoidance schemes involving the acquisition of interests in settled property in offshore trusts by ensuring that any reduction in the value of a person’s estate as a result of the arrangements is charged to IHT. The changes will largely replicate the tax treatment that a UK domiciled individual using such a scheme would incur if the assets within the offshore trust had instead been transferred to a UK trust. The change has
Angostura Bitters and Black Beer: The relief from excise duty for Angostura Bitters and Black Beer is to be withdrawn from 1 April 2013.
Pool betting duty: Various reliefs, designed to ensure that the benefit of reductions in pool betting duty could be passed on to trusts supported by pool betting companies without further tax liabilities arising, are to be repealed as obsolete with effect from 1 April 2013 (for corporation tax purposes) and 6 April 2013 (for income tax and inheritance tax purposes).
Deeply discounted securities: Relief is currently available for certain incidental expenses incurred on the acquisition and disposal of deeply discounted securities, but only where the securities have been held since before 27 March 2003. Incidental costs of disposal will no longer be allowable, either to increase a loss on disposal or to reduce a profit, if they are incurred on or after 6 April 2015.
Disadvantaged area relief: The relief from SDLT for purchases of residential property in areas designated as ‘disadvantaged’ where the purchase price does not exceed £150,000 is to be abolished. This measure will have effect for transactions with an effective date on or after 6 April 2013. All claims for relief for purchases prior to this date must be made on or before 5 May 2014.
Capital allowances: flat conversion allowances: This relief will be withdrawn for expenditure incurred on or after 6 April 2013 for businesses within the charge to income tax and 1 April 2013 for businesses within the charge to corporation tax. The entitlement to writing-down allowances on unrelieved expenditure brought forward will also cease with effect from the same dates.
Agricultural land relief: Legislation will be introduced to repeal TCGA 1992 s 249, which provided
Harbour reorganisation schemes: Three existing tax reliefs relating to the transfer of the trade or assets of a company to a harbour authority under a certified harbour reorganisation scheme are to be repealed with effect for transactions on or after 1 April 2013.
Life assurance premium relief: Currently, income tax relief of 12.5% is still available on regular premiums paid into qualifying life insurance policies issued on or before 13 March 1984. This relief will be repealed with effect for premiums paid, or due and payable, on or after 6 April 2015. Changes made to policies as a direct consequence of the repeal will not affect their status as qualifying policies.
Life assurance premiums paid by employers under EFRBS: Where, in connection with an employer-financed retirement
Luncheon vouchers: Relief from income tax and NICs on the first 15p per working day of a meal voucher provided by an employer is to be withdrawn with effect from 6 April 2013.
Mineral royalties relief: The reliefs relating to mineral royalties are to be repealed with effect from 1 April 2013 (for corporation tax) and 6 April 2013 (for income tax). Reliefs in respect of capital losses on mineral leases or agreements will no longer be available for leases or agreements entered into on or after these dates. However, the ability to crystallise losses and the entitlement to carry back losses for up to 15 years will be preserved for mineral leases or agreements entered into before these dates.
Payments for the benefit of family members: The relief for individuals who are required to make payments to secure an annuity for their surviving spouse, civil partner or children is to be withdrawn with effect from 6 April 2013.
Pensions for 1947 redundancies: Legislation providing pensions for those made redundant following the closure (in 1947) of the offices for land tax and income tax assessors is to be repealed with effect from 6 April 2013.
Stamp duty: certain transactions in
The reliefs will cease to be available for instruments executed on or after 6 April 2013. Any outstanding claims must be made before 6 April 2013. The transitional provisions that were introduced when disadvantaged areas relief for non-residential properties was abolished in 2005 will be retained.
Stamp duty: certain transactions in shares: Stamp duty reliefs relating to transfers to the Crown in connection with nationalisation schemes; partial relief for transfers made in connection with certain company acquisitions; and an exemption for certain transfers that prior to 2008 would otherwise have been chargeable with fixed stamp duty of £5, are repealed for instruments executed on or after 6 April 2013.
Tax reserve certificates issued by HM Treasury: The exemption from tax in respect of interest on tax reserve certificates issued by HM Treasury between 1941 and 1975 is to be repealed with effect from 1 April 2013 (for corporation tax purposes) and 6 April 2013 (for income tax purposes).
Tax agents: dishonest conduct
Currently, HMRC may call for the papers of a tax accountant only where the accountant has either been convicted of a tax offence in a UK court or has been penalised for assisting in the preparation of an incorrect return.
These provisions will be replaced by a new power. Where HMRC has determined that an agent has engaged in dishonest conduct, they will be able to issue a notice to that agent requiring
There will be a civil penalty for dishonest conduct of an amount up to £50,000. In cases where full disclosure was not made, HMRC will be able to publish details of the penalised tax agent. It is intended that the legislation will be effective from 1 April 2013.
Download a PDF version here
Rates
The main rate of corporation tax (CT) for companies with profits above the upper limit of £1.5m will be reduced to 24% from 1 April 2012, 23% from 1 April 2013 and 22% from 1 April 2014.
The main rate for companies with profits arising from oil extraction and oil rights in the UK and the UK Continental Shelf (ring-fence profits) will remain at 30%.
The small profits rate of CT remains at 20% from 1 April 2012. The small profits rate for ring-fence profits remains at 19%.
CFC reform
The current Controlled Foreign Company (CFC) rules are to be repealed and replaced with a new CFC regime which will apply for CFC accounting periods beginning from 1 January 2013.
R&D relief
Legislation will be introduced in Finance Bill (FB) 2012 to amend the current research and development (R&D) rules as follows for expenditure incurred/claims made on or after 1 April 2012:
The following reliefs/rules are to be abolished:
CT reliefs for the creative sector
Corporation tax reliefs for the production of culturally British video games, television animation programmes and high-end television productions are to be legislated for in FB
Patent Box
Qualifying IP will include patents granted by the UK Intellectual Property Office and the European Patent Office, as well as supplementary protection certificates, regulatory data protection and plant variety rights.
The provisions will apply to existing IP, new IP and to acquired IP provided that the group has further developed the IP or the product which incorporates it.
Tax transparent investment funds
Legislation will be introduced in FB 2012 giving
Tax simplification for small businesses
The government is to consult on introducing a voluntary cash accounting basis for unincorporated businesses with receipts up to the amount of the VAT registration threshold, with a view to introducing legislation in FB 2013. It will also consult on a simplified expenses system for business use of cars, motorcycles and the home and on proposals to introduce a tax relief for disincorporation of businesses carried on by companies.
Personal service companies and IR35
The government intends to bring forward a package of measures to further counter avoidance through the use of personal service companies, and to make the existing IR35 legislation easier to understand. This will include HMRC strengthening specialist compliance teams, simplifying the way IR35 is administered, and consulting on proposals which would require office holders and controlling persons, who are integral to the running of an organisation, to have PAYE and NICs deducted at source.
Enterprise zones FYAs
FB 2012 will introduce legislation to provide 100% first-year allowances (FYAs) for expenditure incurred by trading companies on qualifying plant or machinery for use primarily in certain designated assisted areas within enterprise zones. The qualifying expenditure must be incurred between 1 April 2012 and 31 March 2017, the area in which the plant or machinery is to be used must be an assisted area at the time when the expenditure is incurred, and the plant or machinery must not be held for use in an area outside of the designated assisted area for a period of five years.
The usual general exclusions will apply including the exclusion of expenditure on assets for leasing.
Fixtures
Legislation will be introduced to make the availability of capital allowances to a purchaser of fixtures on or after 1 April 2012 for corporation tax purposes or 6 April 2012 for income tax purposes conditional on:
Business premises renovation allowances scheme
The government has confirmed that it will extend the Business Premises Renovation Allowances scheme for a further five years until 31 March 2017 for businesses within the charge to corporation tax and 5 April 2017 for businesses within the charge to income tax. The scheme’s purpose is to enable businesses that own or lease vacant property in designated disadvantaged areas to claim 100% tax relief on their capital spending on renovating or converting the property to restore it to business use. Certain restrictions will be introduced to comply with EU State aid requirements.
Solar panels, feed-in tariffs & renewable heat incentive
FB 2012 will provide that expenditure on solar panels from April 2012 will be designated as special rate expenditure for capital allowances purposes. The annual investment allowance will, however, continue to be available on such expenditure.
From April 2012 (or April 2014 for combined heat and power equipment installations) enhanced capital allowances will not be available in respect of expenditure on plant or machinery when it generates electricity or heat, or produces biogas or biofuels, that attract tariff payments under either of the feed-in tariffs or renewable heat incentive schemes introduced by the Department of Energy and Climate Change. Any such allowances given in respect of expenditure incurred from these dates will be withdrawn if the tariffs are paid subsequently.
The 100% first-year capital allowance for businesses purchasing low emission cars will be extended for two years beyond the current expiry date of 31 March 2013, except for leased cars. Also, from the same
Emissions threshold for main rate cars
The threshold for
The 100% first-year capital allowances for plant and machinery used in gas, biogas and hydrogen refuelling stations will be extended for two more years to 31 March 2015.
Company car tax rates
For 2014/15 the appropriate percentage of
Company car fuel benefit charge
For 2012/13, the multiplier (the figure to which the appropriate percentage is applied) for calculating the car fuel benefit charge is increased from £18,800 to £20,200. The multiplier will be increased by 2% above the rate of inflation (RPI) for the tax year 2013/14.
Company car benefits: security enhanced cars
With backdated effect for 2011/12 onwards, for individuals who can demonstrate that the nature of their employment creates a threat to their personal security, certain security enhancements (eg, armour, bullet-resistant glass) will be excluded from being accessories and will thus not count towards the price of a company car for the purpose of calculating a taxable benefit.
Income tax rates 2013/14
The rates of income tax for 2013/14 will be: basic rate 20%; higher rate 40%; additional rate 45%; dividend additional rate 37.5%; trust rate 45%; and dividend trust rate 37.5%. The charge on benefits paid to non-individuals under an employer-financed retirement benefits scheme will reduce from 50% to 45%. Where capital sums are deemed to be income of a settlor, the rate of tax taken as paid by the trustees will also reduce from 50% to 45%.
Limits and allowances
For 2013/14 the personal allowance for those aged under 65 will be increased to £9,205. The basic rate limit will be reduced to £32,245.
The NICs upper earnings limit and upper profits limit will continue to be aligned with the level of the higher rate threshold (the total of the personal allowance and the basic rate limit).
For 2013/14 the higher personal allowance available to people aged 65−74 will be restricted to those born after 5 April 1938 but before 6 April 1948. The higher personal allowance for those aged 75 and over will be restricted to those born before 6 April 1938. The amounts of these allowances will not be increased from their 2013/14 levels.
Child benefit: income tax charge
From 7 January 2013, an income tax charge is being introduced as a means of clawing back child benefit from those on higher incomes. Entitlement to the child benefit itself and the amount of the benefit will both remain unchanged. The charge will apply to recipients of child benefit whose income exceeds £50k in a tax year and to individuals whose partner is in receipt of child benefit and whose own income exceeds £50k. In the event that both partners have income over £50k, the charge will apply only to the partner with the highest income. Partners for this purpose include married couples, civil partners, unmarried couples and same-sex couples not in a civil partnership. Income will be measured by reference to adjusted net income, which is broadly taxable income before deducting the personal or blind person’s allowance, adjusted for any pension contributions paid net of tax and Gift Aid donations.
For those with income between £50k and £60k, the amount of the charge will be 1% of the amount of benefit for every £100 of income above £50k. For example, if total child benefit is £1,752 and adjusted net income is £54k, the tax charge will be £700.80 (£17.52 x 40). For those with income above £60k, the amount of the charge will equal the amount of child benefit received, so that the benefit will be fully clawed back.
The tax will be collected via PAYE and self-assessment. Child benefit claimants will be able to elect not to receive the child benefit to which they are entitled if they or their partner do not wish to pay the tax charge. The claimant can subsequently withdraw that election if they or their partner are no longer liable to pay the charge.
Legislation will be introduced in FB 2013 to apply a cap on income tax reliefs claimed by individuals for 2013/14 onwards. The cap will apply only to reliefs which are currently unlimited. For anyone seeking to claim more than £50,000 of these reliefs, they will be capped at 25% of income or £50,000, whichever is the greater.
Residence
The government had already announced its intention to introduce a statutory residence test. This was to be introduced with effect from 6 April 2012 but has been deferred to 6 April 2013. The legislation will be included in FB 2013.
Ordinary residence will be abolished for tax purposes from 6 April 2013. At the same time, overseas workday relief will be placed on a statutory footing; this is currently a non-statutory means of apportioning earnings between duties performed in the UK and duties performed elsewhere.
Non-domiciled individuals
With effect from 6 April 2012, three changes are made to the taxation of UK resident non-domiciled individuals who claim the remittance basis of taxation:
EIS and VCTs
A number of changes will be made to these venture capital schemes, including the following.
Some of these changes are subject to EU State aid approval being granted.
Seed Enterprise Investment Scheme
Legislation to be included in FB 2012 will introduce the Seed Enterprise Investment Scheme (SEIS), a new tax-advantaged venture capital scheme with effect for investments made by individuals on or after 6 April 2012. The scheme will be similar to the Enterprise Investment Scheme (EIS) but focused on smaller,
Enterprise Management Incentives
The limit on the value of shares over which an employee may hold options under the Enterprise Management Incentives scheme will be increased from £120k to £250k from a date to be announced. The government intends to implement the measure as soon as possible, subject to EU State aid approval.
Qualifying time deposits
Life insurance: qualifying policies
There will be a limit on the premiums that can be paid into qualifying life insurance policies each year with effect from 6 April 2013 (subject to transitional provisions). Policies issued on or after this date will only be qualifying policies where the premiums payable for an individual do not exceed £3,600 each year.
Armed forces
A new income tax exemption is to be introduced for the Continuity of Education Allowance paid to members of the armed forces to provide a continuity of education for their children.
Foreign currency bank accounts
Legislation will be introduced in FB 2012 to exempt individuals, trustees and personal representatives from capital gains tax on gains made on withdrawals on or after 6 April 2012 of money from bank accounts denominated in a foreign currency. Consequently, capital losses will not be allowable.
Non-resident, non-natural persons
The government will consult on the introduction of a capital gains tax charge on residential property owned by non-resident, non-natural persons, and the consultation will be made in conjunction with the stamp duty land tax enveloping annual charge for high-value residential properties. The charge will be introduced in FB 2013 with the measure coming into effect in April 2013.
Rollover relief
Legislative changes will be made in FB 2012 to ensure that the availability of capital gains tax rollover relief in respect of entitlements to the EU Single Payment Scheme is preserved.
Pensions tax relief
Legislation will be introduced in FB 2013 to amend the rules which currently allow employers to pay pension contributions into their employees’ family members’ pensions as part of their employees’ remuneration package to remove the tax and NICs advantages from these arrangements.
Estates leaving 10% or more to charity
For deaths on or after 6 April 2012, the normal 40% rate of IHT is reduced to 36% if at least 10% of the deceased’s net estate is left to charity.
Where the estate consists only of the deceased’s free estate, the value on which the 10% threshold is based
If the estate includes two or more components, the 10% test is applied to each component as if it were a separate estate. The free estate, any settled property and any jointly-owned property all count as components for this purpose. If the 10% test for a component is passed, IHT will be charged on that particular component at the 36% rate. An election can also then be made to treat two or more components as one and reapply the 10% test accordingly.
The reduced rate will apply to charitable legacies made by Instrument of Variation as well as to those made by the will, but the charity must be notified that the devolution of the estate has been varied in its favour.
An election can be made to disapply these rules for one or more components. This might be worthwhile if, for example, the benefit of the reduced rate would be eaten up by additional valuation costs.
Spouses & civil partners domiciled outside the UK
The government will consult on legislation to increase the IHT-exempt amount that a UK domiciled individual can transfer to their non-UK domiciled spouse or civil partner. The government similarly proposes to allow individuals who are domiciled outside the UK and who have a UK domiciled spouse or civil partner to elect to be treated as domiciled in the UK for the purposes of IHT. Legislation will be included in FB 2013.
Gifts of pre-eminent objects to the nation
Under a new scheme to take effect on a day to be appointed after Royal Assent to FB 2012, individuals and companies will be able to donate pre-eminent objects, or collections of objects, to the nation in return for a reduction in their UK tax liabilities. A potential donor will make his own valuation of the object(s) in question. A panel of experts will consider the offer and, if it considers the object is pre-eminent and should be accepted, the panel will
Rates for residential properties
A new 7% rate of SDLT is to be introduced for purchases of residential property where the consideration exceeds £2m. The new rate applies where the effective date of the transaction (usually the date of completion) is after 21 March 2012, subject to a transitional rule to ensure that the new rate does not apply to contracts entered into before 22 March 2012 but completed on or after that date.
Enveloping of
Where
SDLT sub-sale relief anti-avoidance
An anti-avoidance measure is to be included in FB 2012 to counteract a disclosed avoidance scheme with effect for transactions on or after 21 March 2012. The measure will put beyond doubt that the grant or assignment of an option cannot satisfy the requirements of sub-sale relief. The relief applies where a person contracts to purchase an interest in land but, before completion, transfers their rights under the contract to a third party.
SDLT DOTAS changes
Two changes are being made to the Disclosure of Tax Avoidance Schemes (DOTAS) regime for SDLT. The first will remove the DOTAS ‘grandfathering’ rules for certain avoidance schemes. This will include requiring certain grandfathered schemes, still in use but disclosed before April 2010, to be disclosed one additional time by promoters so that new users of those schemes must be identified to HMRC. The second change will remove the property valuation thresholds for disclosure.
Registration issues
With effect from October 2012, businesses will be able to register and deregister for VAT, and amend their VAT registration details, electronically. In addition, with effect from 1
This measure removes, with effect from 1 April 2012,
Cost-sharing exemption
The cost-sharing exemption provided for in EU Directive 2006/112/EC, art 132(1)(f) is to be implemented in the UK with effect from Royal Assent to FB 2012. The measure will exempt from VAT the supply of services by a group which consists of persons engaged in exempt or non-taxable activities so long as the services are supplied to group members at cost and for the purposes of those activities. Conditions may be imposed in connection with the exemption.
Car fuel scale charges
The scale used to charge VAT on fuel used for private motoring in business cars will be amended from the start of the first VAT period beginning on or after 1 May 2012.
The government intends to consult on legislation to be included in FB 2013 to give effect to certain extra-statutory concessions relating to the scale charges and a proposal to amend the scale by annual public notice having the force of law instead of by statutory instrument.
Invoicing rules
Following changes made by the EU Invoicing Directive, secondary legislation will be introduced to simplify the VAT invoicing rules, with effect from 1 January 2013.
Energy-saving materials in charitable buildings
Legislation will be introduced in FB 2013 which will mean that buildings used for a relevant charitable purpose will no longer benefit from the reduced rate of VAT in respect of the supply and installation of energy-saving materials. The reduced rate will continue to apply to the supply and installation of energy-saving materials in residential accommodation, including accommodation operated by charities.
VAT evasion on road vehicles brought into
With effect from 2013 (the precise date is yet to be announced), any person bringing a road vehicle into the UK for permanent use on UK roads will have to notify HMRC within 14 days. It will not be possible to register or license such a vehicle until notification is made and any VAT due has been paid or secured.
This requirement will not apply to certain categories, eg, UK residents returning from holiday, private importers and vehicles imported under secure schemes approved by the DVLA.
VAT grouping extra-statutory concession
Legislation will be introduced in FB 2012 to replace a concession that allows a reverse charge to be based on the cost of services purchased by the group members established overseas, rather than on the actual charge made to the UK member. The legislation will take effect from Royal Assent; the current concession will continue to apply in the meantime.
Public bodies
Listed buildings
Zero-rating for approved alterations to listed buildings is to be removed with effect from 1 October 2012. In addition, the ‘60% test’ for the first sale or long lease of a substantially reconstructed listed building is to be removed, so that zero-rating will apply only if the reconstructed building incorporates no more of the original building than the external walls, together with other external features of architectural or historic interest. Transitional arrangements will provide for the retention of zero-rating where a contract for reconstruction was entered into prior to 21 March 2012, and at least 10% of the work (by cost) was completed before that date. Anti-forestalling measures will be introduced in FB 2012.
Small cable-based transport
The rate of VAT applicable to the carriage of passengers on small cable-based transport will be reduced from 20% to 5% with effect from 2013. This will apply where vehicles carry fewer than 10 people each, as transport in larger vehicles is zero-rated. This reduction will be evaluated after three years.
Hairdressers’ chair rental
Holiday caravans
From 1 October 2012, the zero-rating of caravans will apply only to those caravans which are designed and constructed for continuous
Hot food and premises
From 1 October 2012, the meanings of ‘hot food’ and ‘premises’ for the purposes of VAT zero-rating will be clarified. From that date:
Self-storage
Sports nutrition drinks
General anti-abuse rule
The government has accepted the recommendation of the Aaronson Report that there should be a general anti-abuse rule (GAAR) targeted at artificial and abusive tax avoidance schemes. The government will consult on draft legislation in the summer of 2012, with a view to introducing legislation in FB 2013. The GAAR will be extended to SDLT.
Post-cessation trade relief
Legislation will be introduced in FB 2012 to deny post-cessation trade relief and capital gains relief for payments or events which are made or occur directly or indirectly in consequence of, or in connection with, tax avoidance arrangements the main purpose of which is the obtaining of a reduction in tax liability as a result of post-cessation trade relief. The amendments will apply to payments made, or events occurring, on or after 12 January 2012 except where a payment is made pursuant to an unconditional obligation in a contract made before that date.
Property loss relief against general income and post-cessation property relief
FB 2012 will amend legislation to deny agricultural property loss relief and post-cessation property relief for expenses arising, or a payment or an event which is made or occurs, directly or indirectly in consequence of, or in connection with, tax avoidance arrangements, the main purpose of which is the obtaining of a reduction in tax liability as a result of the reliefs. The amendments will apply to expenses arising and payments made, or events occurring, on or after 13 March 2012 except where expenses arise or a payment is made pursuant to an unconditional obligation in a contract made before that date.
Plant and machinery leasing
For disposal events for long funding leases occurring on or after 21 March
Life insurance policies: income tax avoidance
Changes are being made to provisions applying to life insurance policies, capital redemption policies and life annuity contracts. The changes apply where there have been gains earlier in the life of the policy or contract but the gains were not chargeable to tax under the income tax rules for these products (because, for example, the earlier gains were attributable to a person who was not UK resident). The new measure amends the rules for calculating the
IHT: avoidance using offshore trusts
The inheritance tax provisions relating to excluded property and settled property will be amended to counter avoidance schemes involving the acquisition of interests in settled property in offshore trusts by ensuring that any reduction in the value of a person’s estate as a result of the arrangements is charged to IHT. The changes will largely replicate the tax treatment that a UK domiciled individual using such a scheme would incur if the assets within the offshore trust had instead been transferred to a UK trust. The change has
Angostura Bitters and Black Beer: The relief from excise duty for Angostura Bitters and Black Beer is to be withdrawn from 1 April 2013.
Pool betting duty: Various reliefs, designed to ensure that the benefit of reductions in pool betting duty could be passed on to trusts supported by pool betting companies without further tax liabilities arising, are to be repealed as obsolete with effect from 1 April 2013 (for corporation tax purposes) and 6 April 2013 (for income tax and inheritance tax purposes).
Deeply discounted securities: Relief is currently available for certain incidental expenses incurred on the acquisition and disposal of deeply discounted securities, but only where the securities have been held since before 27 March 2003. Incidental costs of disposal will no longer be allowable, either to increase a loss on disposal or to reduce a profit, if they are incurred on or after 6 April 2015.
Disadvantaged area relief: The relief from SDLT for purchases of residential property in areas designated as ‘disadvantaged’ where the purchase price does not exceed £150,000 is to be abolished. This measure will have effect for transactions with an effective date on or after 6 April 2013. All claims for relief for purchases prior to this date must be made on or before 5 May 2014.
Capital allowances: flat conversion allowances: This relief will be withdrawn for expenditure incurred on or after 6 April 2013 for businesses within the charge to income tax and 1 April 2013 for businesses within the charge to corporation tax. The entitlement to writing-down allowances on unrelieved expenditure brought forward will also cease with effect from the same dates.
Agricultural land relief: Legislation will be introduced to repeal TCGA 1992 s 249, which provided
Harbour reorganisation schemes: Three existing tax reliefs relating to the transfer of the trade or assets of a company to a harbour authority under a certified harbour reorganisation scheme are to be repealed with effect for transactions on or after 1 April 2013.
Life assurance premium relief: Currently, income tax relief of 12.5% is still available on regular premiums paid into qualifying life insurance policies issued on or before 13 March 1984. This relief will be repealed with effect for premiums paid, or due and payable, on or after 6 April 2015. Changes made to policies as a direct consequence of the repeal will not affect their status as qualifying policies.
Life assurance premiums paid by employers under EFRBS: Where, in connection with an employer-financed retirement
Luncheon vouchers: Relief from income tax and NICs on the first 15p per working day of a meal voucher provided by an employer is to be withdrawn with effect from 6 April 2013.
Mineral royalties relief: The reliefs relating to mineral royalties are to be repealed with effect from 1 April 2013 (for corporation tax) and 6 April 2013 (for income tax). Reliefs in respect of capital losses on mineral leases or agreements will no longer be available for leases or agreements entered into on or after these dates. However, the ability to crystallise losses and the entitlement to carry back losses for up to 15 years will be preserved for mineral leases or agreements entered into before these dates.
Payments for the benefit of family members: The relief for individuals who are required to make payments to secure an annuity for their surviving spouse, civil partner or children is to be withdrawn with effect from 6 April 2013.
Pensions for 1947 redundancies: Legislation providing pensions for those made redundant following the closure (in 1947) of the offices for land tax and income tax assessors is to be repealed with effect from 6 April 2013.
Stamp duty: certain transactions in
The reliefs will cease to be available for instruments executed on or after 6 April 2013. Any outstanding claims must be made before 6 April 2013. The transitional provisions that were introduced when disadvantaged areas relief for non-residential properties was abolished in 2005 will be retained.
Stamp duty: certain transactions in shares: Stamp duty reliefs relating to transfers to the Crown in connection with nationalisation schemes; partial relief for transfers made in connection with certain company acquisitions; and an exemption for certain transfers that prior to 2008 would otherwise have been chargeable with fixed stamp duty of £5, are repealed for instruments executed on or after 6 April 2013.
Tax reserve certificates issued by HM Treasury: The exemption from tax in respect of interest on tax reserve certificates issued by HM Treasury between 1941 and 1975 is to be repealed with effect from 1 April 2013 (for corporation tax purposes) and 6 April 2013 (for income tax purposes).
Tax agents: dishonest conduct
Currently, HMRC may call for the papers of a tax accountant only where the accountant has either been convicted of a tax offence in a UK court or has been penalised for assisting in the preparation of an incorrect return.
These provisions will be replaced by a new power. Where HMRC has determined that an agent has engaged in dishonest conduct, they will be able to issue a notice to that agent requiring
There will be a civil penalty for dishonest conduct of an amount up to £50,000. In cases where full disclosure was not made, HMRC will be able to publish details of the penalised tax agent. It is intended that the legislation will be effective from 1 April 2013.
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