BUDGET 2012

 

DETAILED NOTES

 

Individual Taxes

 

A. Income Tax

 

    1. Changes effective from April 2012

 

There will be an income tax charge to recover child benefit from couples where at least one spouse has an income in excess of £50,000. The recovery will be gradual at income levels between £50,000 and £60,000, with all relief withdrawn where a taxpayer has income in excess of £60,000.

 

There will be a cap on currently uncapped income tax reliefs. If anyone seeks to claim more than £50,000 of reliefs, they will be capped at 25% of income. This will not apply to capped reliefs, such as pension contributions.

 

As previously revealed, the enterprise investment scheme annual investment limit for an individual will rise to £1 million, the company annual investment limit will rise to £5 million and companies with up to 250 employees and up to £15 million of gross assets will be eligible for the EIS. These changes are subject to State Aid approval.

 

The seed enterprise investment scheme is introduced as scheduled, with 50% income tax relief available on qualifying investments. In addition there will be an exemption from capital gains tax for 2012-13 gains reinvested into the SEIS.

 

The enterprise management incentive scheme individual limit will rise from £120,000 to £250,000, subject to State Aid approval.

 

The non-domicile remittance basis charge for those resident in the UK for more than 11 years will rise to £50,000 from £30,000.

 

Deduction of tax at source will apply to interest on qualifying time deposits.

 

The car fuel benefit multiplier increases from £18,800 to £20,200.

 

    1. Changes effective from later dates

 

April 2013

 

Removal of 15p per day tax relief for employee luncheon vouchers.

 

The personal allowance will rise to £9,205.

 

Age related allowances will be frozen from April 2013, and only available to those born before 6 April 1948 (1938 for higher age related allowance). The intention is that the personal allowance will ultimately ‘catch up’ with these allowances.

 

The basic rate band upper limit will fall from £34,370 to £32,245, thus restricting the value of the personal allowance increase for higher rate taxpayers.

 

Small unincorporated businesses (turnover < £77,000) will be able to account for tax purposes on a cash basis.

 

The additional rate of income tax will fall from 50% to 45% (as will the trust rate). The dividend additional rate will fall from 42.5% to 37.5%.

 

There will be a statutory residence test.

 

Ordinary residence will be abolished.

 

April 2014

 

Company car tax rates for vehicles emitting more than 75g/km of CO2 will increase by 1%

 

April 2015

 

Company car tax rates for vehicles emitting more than 75g/km of CO2 will increase by 2%, with the maximum percentage becoming 37%.

 

Zero-carbon and ultra-low carbon emission vehicles will attract a benefit percentage of 13%.

 

April 2016

 

Company car tax rates for vehicles emitting more than 75g/km of CO2 will increase by 2%.

 

Zero-carbon and ultra-low carbon emission vehicles will attract a benefit percentage

of 15%.

 

The 3% benefit addition for diesel cars will be abolished.

 

Consultations

 

There will be consultations on the integration of income tax and national insurance, the income tax loss regime and the possible introduction of standardised tax expenses for small, unincorporated businesses.


 

B Capital Gains Tax

 

  1. Changes effective from April 2012

 

As noted above, there will be an exemption from capital gains tax for 2012-13 gains reinvested into the Seed Enterprise Investment Scheme.

 

  1. Changes effective from later dates

 

There will be consultation on the application of CGT to the disposal of UK residential property by non-resident non-natural persons (i.e. companies).

 

C. Inheritance Tax

 

  1. Changes effective from April 2012

 

The introduction of a 36% IHT rate where at least 10% of an estate is left to charity.

 

Anti-avoidance legislation will be introduced to combat avoidance of IHT by the acquisition of interests in offshore excluded property trusts (effective immediately).

 

  1. Consultations

 

On an increase in the £55,000 non-domiciled spouse exemption limit and on a simplification of the IHT rules relating to trusts (anniversary and exit charges).

 

D. Stamp Duty Land Tax

 

  1. Changes effective immediately

 

A 7% SDLT rate for residential properties valued at £2 million+.

 

A 15% SDLT rate for £2 million+ residential properties ‘enveloped’ in a corporate vehicle.

 

The grant or assignment of an option can no longer satisfy the requirements of the SDLT sub-sales exemption.

 

  1. Changes effective from October 2012

 

Removal of SDLT relief for zero-carbon homes.

 

  1. Changes effective from April 2013

 

Removal of SDLT disadvantaged areas relief

 

  1. Consultations

 

On an annual charge on residential properties owned by non-natural persons (i.e. companies).

 

Business Taxes

 

E. Corporation tax

 

  1. Changes effective from April 2012

 

Main rate of corporation tax falls to 24%.

 

Research and development tax relief enhancement for small & medium companies to increase from 200% to 225%, the PAYE & NI restriction on tax credit relief is removed, as is the £10,000 minimum expenditure requirement.

 

Business Premises Renovation

 

Tax avoidance between connected companies by way of debt buyback has been blocked.

 

A package of measures has been introduced to tackle avoidance using personal service companies, to include:

  1. strengthening of special compliance teams to tackle avoidance of employment income;
  2. simplification of IR35 administration; and
  3. consultation on requiring office holders and controlling persons integral to the running of an organisation to have PAYE & NICs deducted at source by the organisation by which they are engaged.

 

  1. Changes effective from April 2013

 

Main corporation tax rate falls to 23%.

 

Consultations

 

On an above the line R & D tax credit (minimum rate 9.1% pre-tax).

 

On a special CT relief regime for games companies, animation companies and ‘high-end’ TV companies (similar to films tax relief)

 

On disincorporation relief


 

F. Capital Allowances

 

1. Changes effective from April 2012

 

No enhanced capital allowances for plant & machinery eligible for feed-in tariff payments.

 

10% pool status for solar panels

 

100% first year allowances on low-emission cars extended to April 2015, with the threshold reduced from 110g/km to 95g/km.

 

Business Premises Renovation Allowance is extended until April 2017.

 

2. Changes effective from April 2013

 

The lease rental restriction and the 10% pool will apply to cars emitting above 130g/km (currently 160g/km).

 

Removal of flat conversion allowances

 

G. VAT

 

    1. Changes effective from April 2012

 

Registration threshold £77,000 (£73,000) and de-registration threshold £75,000 (£71,000).

 

Revalorisation of road fuel scale charges

 

No low value consignment relief for Channel Island imports

 

    1. Changes effective from October 2012

 

Confirmation of the application of 20% VAT to:

 

Rental of hairdressers’ chairs

 

Static holiday caravans

 

Hot food

 

Cold food consumed on the premises where supplied

 

Sports drinks

 

Extension of 20% VAT rate to cover:

Self-storage

 

Alterations to listed buildings

 

On-line registration & deregistration regime introduced (31st)

 

3.Changes effective from April 2013

 

Charitable buildings no longer eligible for reduced rate VAT on energy-saving materials

 

Other Tax Measures

 

1. Changes effective from April 2012

 

The Gift Aid small donation scheme will apply to a maximum of £5,000 total donations per year and £20 per single donation (was to be £10).

 

2.Changes effective from April 2014

 

Personal Tax Statements to be sent to taxpayers, confirming tax paid, average tax rate and breaking down what tax has been spent on.

 

3.Consultation

 

On a General Anti-Abuse Rule (“GAAR”) to counter artificial and abusive tax avoidance schemes.

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