Autumn Statement 2012: Tax summary

Autumn Statement 2012: Tax summary

Published:

Author: Tom Wilde

The Chancellor delivered the Autumn Statement 2012 on 5 December. This is a summary of the main tax points of interest, with draft legislation enacting the proposed changes scheduled to be published on 11 December:

BUSINESS TAXES

Corporation Tax - rates: from April 2014, the main rate of corporation tax will be reduced by an additional 1%. Therefore the rate will be reduced from 24% to 23% in April 2013, and then to 21% in April 2014. The small companies rate will remain at 20%.

Corporation Tax - reliefs: from April 2013, the Government plans to introduce corporation tax reliefs for the video games, animation and high-end television industries (subject to state aid approval). The reliefs will offer either an additional deduction of 100% of relevant expenditure or a payable tax credit of 25% of qualifying losses surrendered.

Corporation Tax and foreign bank levies - the Government will legislate to ensure that, from 1 January 2013, foreign bank levies paid by a foreign banking group trading in the UK cannot be claimed as a deduction against UK corporation tax or income tax.

Annual Investment Allowance - for expenditure incurred on or after 1 January 2013, there will be a temporary increase in the Annual Investment Allowance, from £25,000 to £250,000 for a period of two years.

Capital Allowances - Wales: enhanced capital allowances will be available at designated sites in the Ebbw Vale and Haven Waterway Enterprise Zones in Wales.

Research and development - as announced in the Autumn Statement 2011, the Government plans to introduce an 'above the line' credit for research and development in 2013. Further details are due to follow.

Bank Levy - the rate of the Bank Levy will increase to 0.130% from 1 January 2013.

PERSONAL TAXES

Income tax - personal allowance: from April 2013, the personal allowance will increase by a further £235 to £9,440.

Income Tax - higher rate threshold: the Government will increase the higher rate threshold for income tax by 1% (rather than inflation) in 2014-15 and 2015-16. This means that the higher rate threshold will be £41,865 for 2014-15, and £42,285 for 2015-16.

Income Tax - capping unlimited reliefs: as announced in Budget 2012, the Government will cap all previously unlimited income tax reliefs (excluding charitable reliefs) at the greater of £50,000 or 25% of the individual's income.

National Insurance - the upper earnings limit and upper profits limit will increase in line with the income tax thresholds referred to above.

Operational integration of income tax and NICs - formal consultation will only follow once further progress has been made on planned operational changes to the tax system.

Capital Gains - annual exemption: this will be increased by 1% in 2014-15 and 2015-16. This means that the annual exemption will be £11,000 for 2014-15 and £11,100 for 2015-16.

Inheritance Tax - nil rate band: the inheritance tax nil rate band (currently £325,000) will increase by 1% in 2015-16 to £329,000.

Pensions - lifetime allowance: from 2014-15, the lifetime allowance will be reduced from £1.5 million to £1.25 million.

Pensions - annual allowance: from 2014-15, the annual allowance will be reduced from £50,000 to £40,000.

EMPLOYMENT

New 'employee shareholder status' - the Government will introduce a new employee shareholder status giving individual employees a stake in their employer's business. Employee shareholders will have different employment rights and the shares in the employer's business will be worth a minimum of £2,000. From 6 April 2013, gains of up to £50,000 on shares acquired by employee shareholders will be exempt from capital gains tax. The Government is also considering ways to reduce income tax and NICs liabilities on the shares received by employee shareholders. One possibility is for the first £2,000 of shares received to be free of income tax and NI.

Employee ownership - following the Nuttall Review's recommendations to support an expansion of employee-owned businesses, the Government is considering incentives to support this objective and will report in the Budget 2013.

Company car tax - the Government will consider the case for providing time-limited incentives through company car tax to encourage the purchase of low emission vehicles.

Government response to Office of Tax Simplification employee share schemes review - the Government will implement a number of simplifications to employee share schemes. Most of these changes will take effect in 2013.

IR35 - the Government is strengthening the existing intermediaries legislation (IR35) to put beyond doubt whether it applies to office holders for tax purposes.

PROPERTY

Commercial Property - new build: all newly built commercial property completed between 1 October 2013 and 30 September 2016 will be exempt from empty property rates for the first 18 months.

Small Business Rate Relief - the temporary doubling of the Small Business Rate Relief Scheme will be extended by a further 12 months from 1 April 2013.

VAT

Static holiday caravans - from 6 April 2013, a 5% reduced rate of VAT will apply to static holiday caravans and large touring caravans.

Hot takeaway food - food remains zero-rated if it is cooling down naturally, provided that it is not heated to order, kept hot, provided in packaging which retains heat or is specifically designed for hot food, or marketed as hot.

HMRC AND TAX ADMINISTRATION

Tackling offshore tax evasion - the Government plans to tackle offshore tax evasion by creating a dedicated HMRC unit and publishing a strategy in Spring 2013. The Autumn Statement also provides details of the benefits expected from the Government's agreement with Switzerland to recover unpaid UK tax. The agreement is due to come into force in January 2013 and is forecast to bring in £5 billion over the next six years. The Government has also signed an agreement with the US to increase the amount of information on potentially taxable income exchanged between the two countries. The Government will look to conclude similar agreements with other jurisdictions.

Tackling tax evasion - the Government plans to tackle tax evasion in a number of ways:

  • introducing the UK's first General Anti-Abuse Rule 
  • developing new information disclosure and penalty powers targeted at aggressive tax avoidance schemes 
  • closing down loopholes

Offshore employment intermediaries - the Government will undertake an internal review of offshore intermediaries being used to avoid tax and NICs. An update will follow in the Budget 2013.

Online services - HMRC's online services will be significantly expanded over the next three years.

Cost of tax administration - the Government will introduce a target to reduce the annual cost to business of tax administration by £250m by the end of the spending review period.

Voluntary cash basis for calculating tax - the new voluntary cash basis for calculating tax will be applied to self-employed businesses with receipts of up to £77,000. These businesses will be able to continue to use the cash basis until receipts reach £154,000.

Simplified expenses - unincorporated businesses will be able to use flat rates to calculate some types of expenses rather than having to calculate actual amounts.

FATCA - the Government will legislate to implement the UK-US Agreement regarding FATCA (Foreign Account Tax Compliance Act).

HMRC powers - the Government will amend HMRC's bulk data-gathering powers to allow it to issue notices to merchant acquirers to identify businesses who are not declaring their full tax liability.

Withdrawal of relief for payments of patent royalties - the Government will withdraw the relief for payments of patent royalties by individuals to combat the abuse of the existing rules.

OTHER

Fuel duty - the Government has cancelled the 3.02 pence per litre fuel duty increase that was planned for 1 January 2013. The 2013-14 increase will be deferred until 1 September 2013.

UK natural gas - the Government will consult on the tax regime for shale gas.

Gift Aid Small Donations Scheme - as announced in Budget 2011, from April 2013, the Government will introduce a Gift Aid Small Donations Scheme. Following consultation and drafting of legislation, policy adjustments have been made to increase the limit per donation to £20, allow some charities (meeting certain criteria) to access the scheme on more than £5,000 of donations and concerning other elements of Gift Aid.