The Chancellor presented the 2013 Budget to Parliament yesterday (20 March). The following is a summary of the main tax points of interest with the draft Finance Bill to be published on 28 March:
Corporation Tax - rates: as announced in Autumn Statement 2012, the main rate of corporation tax will be reduced from 23% in April 2013 to 21% in April 2014. However this will now be reduced further to 20% from April 2015, so that from that date there will be a unified main rate of 20% for all companies.
Corporation Tax - exit charges: companies moving their operations to another EU or EEA state will have the ability to defer payment of any exit charges, although the amounts deferred will be subject to interest. The measures will apply retrospectively to allow companies to opt for deferred payment in respect of charges arising on or after 11 March 2012.
Corporation Tax - loss relief anti-avoidance: in certain circumstances trading losses where there is a transfer of a trade within a new group following the change of ownership of a company will be disallowed. Also the availability of non-trading debits, non-trading loan relationships and non-trading losses on intangible fixed assets after the change of ownership of a shell or dormant company will be restricted.
Corporation Tax - reliefs: as announced in Autumn Statement 2012, from April 2013 corporation tax reliefs for the video games, animation and high-end television industries will be introduced.
National Insurance - employment allowance: from April 2014, an annual allowance of £2,000 will be introduced, after consultation, which all businesses and charities will be able to offset against their employer Class 1 secondary NI liability.
Capital Allowances - railway assets and ships: from 1 April 2013 expenditure on railway assets and ships will no longer be excluded from access to 100% first-year allowances.
Capital Allowances - energy-saving and water efficient technologies: the list of technologies and products which attract 100% capital allowances under the energy-saving and water efficient enhanced capital allowances scheme will be updated.
Capital Allowances - Northern Ireland: measures are to be introduced to ensure that expenditure on plant and machinery in Northern Ireland qualifying to receive feed in tariffs or renewable heat incentive payments will not also qualify for the enhanced capital allowances for energy-saving technologies, bringing the treatment in line with the rest of the UK.
Capital Allowances - low emission vehicles: legislation will be included in Finance Bill 2015 to extend the 100% capital allowance for expenditure on low emission vehicles for an extra 3 years, up to 31 March 2018.
Taxable Profits - small businesses: as announced at Budget 2012, from 2013-14 eligible small unincorporated businesses (generally those whose receipts do not exceed the VAT registration threshold) will be able to work out their taxable profits using the simpler 'cash basis', rather than the accruals basis.
Close Companies - loans to participators: with immediate effect, avoidance of the s.455 tax charge on loans from close companies will be tackled by clarifying that loans to various intermediaries are subject to the charge, by bringing other transfers of value within the scope of the charge, and by ensuring that relief is only given for genuine repayments.
Disincorporation relief: as announced in December 2012, a relief from corporation tax on chargeable gains when a small company transfers its business to its shareholders will be introduced for disincorporations on or after 1 April 2013 to 31 March 2018, provided that certain conditions are met and a valid claim is made.
Research and Development: as announced in Autumn Statement 2011, companies will be able to claim a 10% above the line credit for qualifying R&D expenditure incurred on or after 1 April 2013. Companies will be able to elect whether to opt in to the ATL credit scheme until 31 March 2016, after which it will become mandatory.
Bank Levy: the rate of the Bank Levy will increase further from 0.130% from 1 January 2013 to 0.142% from 1 January 2014.
Code of Practice on Taxation for Banks: the Government will consult on a proposal for HMRC to publish annual reports, from 2015 onwards, on the operation of the Code of Practice on Taxation for Banks.
Review of loan relationships and derivative contracts: the Government will consult on measures to clarify and simplify the legislation governing the taxation of loan relationships and derivative contracts. Legislation will be in Finance Bill 2014 and Finance Bill 2015.
Trade and property business deductions - anti-avoidance: the Government will introduce targeted anti-avoidance rules in relation to the rules prohibiting and allowing deductions for income and corporation tax purposes in Finance Bill 2013, to take effect from 21 December 2012.
Income Tax - personal allowance: for 2014-15, the personal allowance limit will be increased further to £10,000, from £9,440 for 2013-14. As announced at Budget 2011, once the personal allowance has reached £10,000, it will then increase by Consumer Prices Index starting from 2015-16.
Income Tax - basic rate threshold: for 2014-15, the basic rate threshold will be reduced further to £31,865, from £32,010 for 2013-14.
Income Tax - rules on interest: as announced in October 2012, legislation will be introduced in Finance Bill 2013 on disguised interest and on the deduction of income tax from interest on compensation payments, specialty debt and interest in kind.
Income Tax - capping unlimited reliefs: as announced at Budget 2012, a cap on all previously unlimited income tax reliefs (excluding charitable reliefs) will be introduced at the greater of £50,000 or 25% of the individual's income.
National Insurance - administrative simplification: the Government will consult on measures to simplify the administrative process for self-employed persons in respect of Class 2 NI.
Capital Gains Tax - annual exempt amount: as announced at Autumn Statement 2012, the AEA will increase by 1% in 2014-15, to £11,000, and by the same percentage in 2015-16, to £11,100.
Capital Gains Tax - SEIS CGT re-investment relief: the CGT relief for re-investing gains in Seed Enterprise Investment Scheme shares will extend to gains made in 2013-14, providing the gains are re-invested in 2013-14 or 2014-15. The extension is for half of the qualifying re-invested amount.
Capital Gains Tax - SEIS eligible companies: the SEIS conditions will be changed to ensure that companies established by company formation agents are not inadvertently disqualified from the regime.
Inheritance Tax - nil rate band: as announced in February, the IHT nil-rate band will remain frozen at £325,000 until April 2018.
Inheritance Tax - spouses and civil partners domiciled overseas: as announced in Budget 2012, the cap on transfers between UK-domiciled and non-UK domiciled spouses or civil partners will be increased to £325,000, and a non-UK domiciled spouse or civil partner will be able to elect to be treated as UK-domiciled for IHT purposes.
Inheritance Tax - limiting the deduction for liabilities: legislation will be introduced in Finance Bill 2013 to close an avoidance scheme exploiting the current rules on allowable deductions from the value of the estate for liabilities owed by the deceased on death.
Pensions - lifetime allowance: as announced at Autumn Statement 2012, the lifetime allowance will be reduced from £1.5 million to £1.25 million for 2014-15.
Pensions - annual allowance: as announced at Autumn Statement 2012, the annual allowance will be reduced from £50,000 to £40,000 for 2014-15.
Statutory and Ordinary Residence: as announced at Budget 2011, legislation will be introduced in Finance Bill 2013 to eliminate the concept of ordinary residence and introduce a statutory definition of tax residence for individuals. In addition, Overseas Workday Relief will be placed on a statutory footing.
Employee shareholder status: as announced at Autumn Statement 2012, the Government will introduce a new employee shareholder status giving individual employees a stake in their employer's business. Legislation will be introduced in Finance Bill 2013 exempting from CGT any capital gains on the disposal of employee shareholder shares up to a maximum of £50,000. Provisions will also be included to reduce the income tax and NI due on the acquisition of employee shareholder shares (by introducing a deemed payment of £2,000 for the shares). Businesses will also benefit from being able to claim relief against the acquisition of the shares by the employee shareholders where appropriate.
Enterprise Management Incentives: as announced at Budget 2012, legislation will be introduced in Finance Bill 2013 to remove the minimum 5% holding requirement to qualify for entrepreneurs' relief in relation to shares acquired on the exercise of EMI options; to include the period during which the option is held in determining whether the minimum 12 month holding period requirement is met; and relief will be extended to the disposal of certain shares that replace EMI shares on a reorganisation or exchange.
Review of tax advantages employee share schemes: as announced in December 2012, legislation will be introduced in Finance Bill 2013 implementing a number of the recommendations made by the Office of Tax Simplification ("OTS") in its review of tax advantaged employee share schemes. Legislation will be introduced in Finance Bill 2014 replacing the current system of HMRC approval of tax advantaged share schemes with self-certification by businesses.
Review of unapproved employee share schemes: the Government will consult on the recommendations in the OTS review of unapproved share schemes, and legislation will be introduced in future finance bills.
Employee ownership - relief: legislation will be introduced in Finance Bill 2014 creating a CGT relief where a controlling business interest is sold into an employee ownership structure.
Employment-related loans: the statutory threshold for taxable cheap loans which can be made to employees without giving rise to a tax charge will be increased from £5,000 to £10,000.
Partnerships - anti-avoidance: the Government will consult on measures to tackle the disguising of employment relationships through LLPs and the manipulation of profit / loss allocations by partnerships to secure tax advantages. Legislation will be in Finance Bill 2014.
Company car tax rates: legislation will be introduced in Finance Bill 2013 to increase the percentages linked to CO2 emissions used to calculate the cash equivalent of the benefit of company cars for 2015-16, and again for 2016-17, up to a new maximum of 37%. New bands for low emission cars will be introduced in 2015-16 and from 2016-17 the 3% diesel supplement will be removed.
Car and van fuel benefit charge: the rate of fuel benefit charge for company cars and fuel benefit charge and benefit charge for company vans will increase in line with inflation for 2014-15 (based on the September 2013 RPI figure).
IR35 - as previously announced, the Government will strengthen the existing intermediaries legislation (IR35) to put beyond doubt whether it applies to office holders for tax purposes.
Tax Reliefs - expenditure on health-related interventions: legislation will be introduced in Finance Bill 2014 so that amounts up to £500 paid by employers on health-related interventions recommended to support employees to return to work are not treated as taxable benefits in kind.
Offshore employment intermediaries - anti-avoidance: as announced at Autumn Statement 2012, the Government will consult on measures to ensure that offshore employment intermediaries pay the correct income tax and NI. Legislation will be in Finance Bill 2014.
High-value UK residential property held by non-natural persons (NNPs): as announced at Budget 2012, a package of taxes is to be introduced in relation to residential properties valued at over £2m and held by certain companies, partnerships with company members and managers of collective investment schemes, other than genuine commercial businesses and other limited categories as follows:
- further reliefs will be introduced in Finance Act 2013 removing certain types of property from the 15% SDLT rate on acquisition;
- an annual tax on enveloped dwellings will be introduced from 1 April 2013 and will be chargeable at flat rates within certain property value bands, which will be increased by CPI inflation each year; and
- CGT will be chargeable at 28% on disposals of such properties by NNPs from 6 April 2013 (although only on any gain accrued from 6 April 2013 where a property was acquired before that date).
SDLT avoidance schemes: with immediate effective legislation will be introduced to close SDLT avoidance schemes involving a sub-sale which is not completed for a number of years.
Registration and deregistration thresholds: the taxable turnover threshold over which VAT registration is required will increase from £77,000 to £79,000; the taxable turnover threshold under which VAT deregistration is possible will increase from £75,000 to £77,000; and the registration and deregistration thresholds for acquisitions from other EU Member States will increase from £77,000 to £79,000.
Changes to zero-rating of exports from UK: the Government will consult on making certain sales of goods to businesses registered for VAT in the UK but with no business establishment here zero-rated, where they arrange for the goods to be exported outside the EU.
Place of supply rules: legislation will be included in Finance Bill 2014 to tax business to consumer supplies of telecoms, broadcasting and e-services within the EU in the Member State in which the consumer, rather than the business, is located although to alleviate this a Mini One Stop Shop will be introduced from 1 January 2015.
Charitable buildings: as announced at Budget 2012, charitable buildings will be withdrawn from the scope of the VAT reduced rate for the supply and installation of energy-saving materials, from 1 August 2013.
HMRC and Tax Administration
General anti-abuse rule: as announced at Budget 2012, a general anti-abuse rule will be introduced in Finance Bill 2013 providing for the counteraction of tax advantages arising from abusive tax arrangements in relation to income tax, NICs, corporation tax, CGT, IHT, petroleum revenue tax, SDLT and the new annual tax on enveloped dwellings.
Anti-avoidance - HMRC offshore evasion strategy: HMRC has published its latest strategy for tackling offshore evasion, entitled 'No safe havens'. In addition it has agreed packages of measures with the governments of the Isle of Man, Guernsey and Jersey, comprising of automatically exchanging financial information on UK taxpayers with offshore accounts and creating a disclosure facility so that people can disclose this information before it is automatically exchanged.
Anti-avoidance - high-risk promoters: the Government will consult on measures to tackle the actions of high-risk promoters of tax-avoidance schemes, including the proposal to use 'naming and shaming' penalties. Legislation will be in Finance Bill 2014.
PAYE - real time information penalties: as announced at Budget 2012, new late filing penalties and amendments to the late payment penalties will be made in respect of RTI returns. Penalties will vary according to the number of employees in the scheme and will apply from 6 April 2014.
Avoidance schemes - notification requirement: the Government will consult on proposals to introduce notification requirements for taxpayers using avoidance schemes defeated in litigation by HMRC. Legislation will be in Finance Bill 2014.
Data gathering from card payment processors: HMRC will be given new powers to require card payment processors to provide bulk data about business taxpayers, so that they can identify those who do not declare their full sales.
Customs penalties: the Government will consult on proposals to modernise customs civil penalties by bringing them in line with other HMRC penalties. Legislation will be in Finance Bill 2014.
Procurement: as announced at Autumn Statement 2012, suppliers to central Government will have to certify tax compliance when bidding for Government contracts from 1 April 2013.
Stamp Duty - junior shares: the Government will consult on abolishing stamp duty on shares quoted on growth markets such as AIM and the ISDX Growth Market. Legislation will be in Finance Bill 2014.
Gift Aid: the Government will consult on measures to improve the take-up of Gift Aid on donations made digitally.
Air passenger duty: air passenger duty rates will be increased in line with inflation (based on RPI) from 1 April 2013.
Landfill tax: the standard rate of landfill tax will increase by £8 per tonne to £80 per tonne for disposals of waste to landfill from 1 April 2014, whilst the lower rate will remain frozen at £2.50 per tonne for 2014-15.
Social investment tax relief: legislation may be introduced in Finance Bill 2014 following consultation on the introduction of a new tax relief to encourage investment in social enterprises.