Autumn Statement 2012


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Autumn Statement 2012

  1. 1. Plummer Parsons 18 Hyde Gardens Eastbourne BN21 4PT 01323 431 200 information only. Always seek professional advice before acting.
  2. 2. contents02 introduction03 THE ECONOMY04 personal05 Business06 pensions and savings07 benefits07 travel08 Other announcements 01
  3. 3. introduction As expected, the Office for Budget The planned January 2013 three pence rise in Responsibility (OBR) downgraded its forecast fuel duty has been scrapped and the annual for growth for the year 2012. The OBR believes pension contribution allowance will decrease that the UK economy will shrink by 0.1 per from £50,000 to £40,000 in 2014. cent in 2012, compared with its Budget 2012 Whitehall budgets will be cut by one per cent forecast of 0.8 per cent growth. in 2013 and two per cent in 2014, generating Against this challenging backdrop, the an intended £5.5 billion for investment in Chancellor’s 2012 Autumn Statement outlined infrastructure. However, HM Revenue & a range of measures aimed at making the Customs will be given an extra £77 million savings needed to protect the economy and to tackle tax avoidance and evasion by invest in programmes for growth. companies and wealthy individuals. Significant announcements included the details This report provides a concise summary of of a new £1 billion state-backed Business the announcements made in the Autumn Bank to improve access to finance for small Statement. businesses. There will be an increase in the personal income tax allowance to £9,440 from Please contact us to discuss measures that April 2013 and the main rate of corporation may be relevant to you or your business. tax will be cut to 21 per cent from April 2014.IMPORTANT INFORMATIONThis report is generally based on documents and reports issued immediately after the Autumn Statement on 5 December 2012. These proposals may be amended.Professional advice should be obtained before acting on any information contained herein.No responsibility can be accepted as a result of action taken or refrained from in consequence of the contents of this Report.The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual circumstances and may be subject to change in the future.This document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investmentdecisions based upon its content. The value of investments can fall as well as rise and you may not get back the full amount you originally invested.Whilst considerable care has been taken to ensure that the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracyor completeness of any information. E & OE. 02
  4. 4. THE ECONOMY It is a hard road, but Britain is on the right track the Chancellor George OsborneKey points cent in 2016 and 2.8 per cent in 2017. These starts to fall has been delayed by another year growth rates are much lower than previously to 2016/17.• GDP growth forecasts downgraded to -0.1% forecast, which the OBR claims is due to in 2012 and 1.2% in 2013 the economy performing less strongly than According to the OBR, public sector net debt• Deficit continues to fall expected back in March; largely down to the will be at 74.7 per cent of GDP this year and• Debt will not reduce until 2016/17 weakness of net exports. will continue to increase until 2016, when it will• Unemployment is expected to peak at 8.3% fall to 79.2 per cent from its peak of 79.9 per in 2013 instead of 8.7%. In response to this, and the challenges posed cent in 2015/16. by the growth of emerging economies such as China, India and Brazil, this year’s Autumn Statement sets out measures intended to strengthen the economy and promote growth The good newsBackdrop through investment in infrastructure, the tax system, and business. The good news is that employment is onChancellor George Osborne began his speechwith the words ‘the British economy is healing’, the up. Since early 2010, the private sectorbefore describing the 2008/09 financial crisis has created 1.2 million new jobs – 600,000as the ‘biggest economic crash of our life more than predicted. Businesses received antimes’. Deficit reduction unexpected boost in the Autumn Statement, with a cut in the main corporation tax rate to 21He observed that deep-rooted problems Perhaps the most unexpected and positive per cent from 2014 and a ten-fold increase incontinue to affect us all, both at home and news for the UK economy is that the deficit the Annual Investment Allowance (AIA).overseas; but indicated that the Coalition continues to fall, with or without the impact ofGovernment remains committed to its deficit the newly announced Asset Purchase Facilityreduction plan. (APF). What does this mean for you? In 2010 the deficit stood at 11.2 per cent – the highest in our peace-time history. Last year, As an individual or business owner, the current the deficit had reduced to 7.9 per cent and is state of the UK economy means that you mayGrowth forecast to fall to 6.9 per cent this year if the wish to proceed carefully. The onus is on care APF is included – 7.7 per cent if not. and consideration when it comes to everythingIt came as no surprise that the GDP forecastfor this year was downgraded from 0.8 per from investing, to borrowing funds. There arecent at the March Budget to -0.1 per cent; also opportunities to be seized, but not withoutparticularly after official Office for National risk, it is vital to seek professional advice.Statistics data revealed that the UK fell back What about debt? Please contact us to ind out how we caninto recession in the second quarter of 2012. In George Osborne’s words, ‘the tougher economic conditions mean that while our help you and your business during this slow economic recovery.The Office for Budget Responsibility (OBR) nowexpects GDP to grow 1.2 per cent in 2013, deficit is forecast to go on falling, instead of2 per cent in 2014, 2.3 per cent in 2015, 2.7 per taking three years to get our debt falling, it’s going to take four.’ The point at which debt 03
  5. 5. personalIncome tax Pension tax reliefFrom 6 April 2013, the basic personal Government changes to pension tax reliefallowance will increase to £9,440, which is will be implemented from the 2014/15 tax£235 more than previously announced in year. The lifetime allowance for pensionthe 2012 Budget. The total increase in the contributions will reduce from £1.5 millionpersonal allowance is £1,335. This will benefit to £1.25 million and the annual allowancean estimated 24.4 million individuals and the will also reduce from £50,000 to £40,000.rise of £1,335 is the largest ever cash increase. Reports indicate that 98 per cent of individualsIt is projected that since 2011 the cumulative approaching retirement age have a pension potincreases in the personal allowance will have worth less than £1.25 million and 99 per cent oftaken 2.2 million out of paying any income tax individuals making pension savings contributewhatsoever. less than £40,000 annually.The income limit for age-related allowances willincrease by £700 from £25,400 to £26,100 in2013/14. The married couples allowance will Individual Savings Accountsincrease to a maximum of £7,915 from 6 April and Child Trust Fund2013 (£7,705 in 2012/13) and a minimum of£3,040 (£2,960 in 2012/13). In 2013/14, Individual Savings Account (ISA) subscription limits will be increased fromHigher rate taxpayers will see increases in £11,280 to £11,520. Of this amount, the cashthe higher rate threshold of one per cent for subscription limit is restricted to a maximum of2014/15 and 2015/16 to £41,865 and £42,285 £5,760. At the same time the Junior ISA andrespectively. This will be the first cash increase Child Trust Fund subscription limits will bothin the higher rate threshold this Parliament. increase from £3,600 to £3,720.Capital gains tax Patent royalty income tax reliefOver the same period, the capital gains tax It was announced that income tax relief forexemption will benefit from a one per cent the payment of patent royalties by individualsincrease each year. Therefore the exempt and other persons will be abolished. Smallamount will be £11,000 in 2014/15 and £11,100 firms are unlikely to be affected as patentin 2015/16. royalties paid as part of a trade are deductible in computing profits of that trade. However, a small number of individuals and households who pay patent royalties, other than as part ofInheritance tax a trade, will be affected.The inheritance tax nil-rate band will increaseby one per cent from 6 April 2015 to £329,000.This will be the first increase since thethreshold was frozen until 5 April 2015. 04
  6. 6. businessCorporation tax Cash basis of accounting Business BankThe Government announced that the main rate The Autumn Statement confirmed that the In September 2012, it was announced that theof corporation tax will be reduced to 21 per new cash basis for small, unincorporated Government would create a Business Bank.cent from April 2014. This is an addition to the businesses with receipts of up to £77,000 This bank will have £1 billion of additionalone per cent reduction already announced. to calculate their tax will be introduced as capital to stimulate the private sector marketAs previously announced, the main rate of planned from April 2013. The use of flat for long-term capital and address structuralcorporation tax will reduce to 23 per cent from rates to calculate some expenses will also be gaps in the supply of finance to small- and24 per cent on 1 April 2013, with the Small introduced. medium-sized companies. It is reported thatProfit rate remaining at 20 per cent. the Business Bank will be operational from spring 2013, with the institution becoming Employee share ownership fully operational in autumn 2014. FurtherCapital allowances announcements are expected before the end of Following a recent consultation on providing December 2012.From 1 January 2013, the Annual Investment shares to employees in return for giving upAllowance (AIA) will increase ten-fold from employment rights, the Government will go£25,000 to £250,000 for two years, in a ahead with the proposals, as planned from Business Growth Fund Investmentmeasure principally designed to encourage and 6 April 2013. Amendments to the originalsupport investment by small- and medium- plans are being considered, which include the It has long been considered that banks aresized businesses in plant and machinery. first £2,000 of shares received under the new not doing enough to help small- and medium- status being free of income tax and national sized enterprises. The £2.5 billion Business insurance. Growth Fund (introduced by Barclays, HSBC,Taxation of controlling persons Royal Bank of Scotland and Lloyds TSB to invest in small business equity) is budgeting toThe Government has decided not to pursue Company cars and vans substantially increase its level of investment tothe proposal to tax, at source, those who £200 million in the definition of a ‘controlling person’. From 2013/14, there will be further taxIt is believed that the new approach adopted increases for some company car drivers asby HM Revenue & Customs and the existing the car fuel benefit charge multiplier will see Start-up loansmeasures for tackling IR35 are sufficient another increase from £20,200 to £21, avoid the loss of tax revenue through The van fuel benefit charge will also increase The Government will provide £72 million ofdisguised employment. The legislation will be from £550 to £564. follow-on funding for start-up loans.strengthened to ensure there is no doubt thatthe rules apply to office holders. Funding for business Other business measuresSmall Business Rate Relief The Government has announced further From next year, the Bank Levy will be increasedand property rates support for UK businesses by seeking to to 0.130 per cent. improve access to finance. Several schemesThe temporary doubling of the Small Business will be established to promote trade andRate Relief scheme has been extended until investment, which include a scheme providingApril 2014. It is estimated that over 500,000 up to £1.5 billion of loans for the purchase ofbusinesses will benefit from this extension. UK exports when there is no other suitable finance available. The scheme is intended toSubject to state aid approval, an exemption provide UK firms with greater confidence to bidfrom empty property rates will be available for export contracts knowing that finance willfor 18 months on all newly-built commercial be that are completed between1 October 2013 and 30 September 2016. 05
  7. 7. pensionsIndividual Savings Accounts and savings The carry forward rules Fixed protection 2014and Child Trust Fund If your total pension contributions for the tax Those individuals who apply for fixedThe investment subscription limits have been year are more than the annual allowance you protection 2014 will have a lifetime allowanceincreased, as previously announced, in line may still be able to claim tax relief as you can of the greater of £1.5 million and the lifetimewith inflation. carry forward any unused allowance from the allowance (£1.25 million from April 2014). There previous three years to the current tax year. are certain conditions that have to be met –The investment limits for Individual Savings You will only have to pay tax on any amount of please contact us for further information.Accounts (ISAs) and Child Trust Fund accounts pension contributions in excess of the total ofare as follows: the annual allowance for the tax year plus any It is proposed that individuals with fixed unused annual allowance you carry forward. protection 2014 will be able to take a tax-free lump sum at the time they take a pension. The Investment limits 2013/14 2012/13 Thus, these carry forward rules are not being maximum lump sum that can be taken is up to changed. The effect of this is that for 2014/15 25 per cent of their pension rights, subject to Overall investment limit £11,520 £11,280 you will be able to carry forward up to £50,000 an overall limit of 25 per cent of £1.5 million. Including cash limit £5,760 £5,640 in unused allowances from each of the tax However, some scheme rules may only allow a Junior ISA limit £3,720 £3,600 years 2011/12 through to 2013/14. smaller tax-free lump sum to be taken. Child Trust Fund limit £3,720 £3,600 Individuals will be able to apply for fixed protection 2014 after the legislation comes Lifetime allowance into force, which is expected to be in summer 2013. A signed form must be lodged with HMPension tax relief The lifetime allowance is to be reduced from Revenue & Customs by 5 April 2014.With effect from the tax year 2014/15 there are £1.5 million to £1.25 million with effect from the 2014/15 tax year onwards. It is also planned that where an individualchanges to the annual allowance for pensions dies before 6 April 2014, and any lump sumand the standard lifetime allowance. The lifetime allowance is the maximum amount death benefits are not paid until on or after of pension benefit you can build up over your 6 April 2014, then the lump sum will be tested life that is available for tax relief. If, when you against the lifetime allowance at the time of theThe annual allowance individual’s death rather than at the point the take your pension benefits, these are worth more than the lifetime allowance there is a tax lump sum is paid.The annual allowance will be reduced from charge (the lifetime allowance charge) on the£50,000 to £40,000 for the tax year 2014/15. excess.The annual allowance is the maximum amountof an individual’s annual pension contributionsthat attract tax relief. The lifetime allowance charge is a tax charge Pensions drawdown policy paid on any excess in the value of your pension benefits over the lifetime allowance limit. The The income drawdown limit which is currentlyYou will be affected by the change if your total rate depends on how this excess is paid to capped at 100 per cent of the value of anpension contributions made in ‘pension input you. If the amount over the lifetime allowance equivalent annuity is to increase to 120 perperiods’ that end in a tax year are greater is paid as: cent.than the annual allowance plus any availableunused annual allowance that you can carry • a lump sum – the rate is 55 per cent The income drawdown provisions allowforward from the three previous tax years. The pensioners to take an income from theirapproach to your contributions being tested • a taxable pension – the rate is 25 per cent. pension fund while the fund remains invested,against the annual allowance depends on the and thus without taking an annuity.type of your pension scheme. Your pensionscheme administrator should advise you if yourpension contributions in their scheme are morethan the annual allowance. 06
  8. 8. Benefits benefits State pensionThe cost of welfare has grown year on year It was announced that most working age From April 2013 the basic state pension willand it is the Government’s objective to rein in benefits will be uprated by one per cent increase by £2.70 to £110.15 per week.the cost to the Exchequer while also remaining from April 2013. These include Job Seekersfair. In the decade to 2007/08 welfare spending Allowance, Employment Support Allowanceincreased by around 20 per cent in real terms, and Income Support. This also applies todespite the growth of the economy and Child Tax Credit (CTC) and Working Tax Credit Universal creditrising employment. Measures have already (WTC), except elements that are already frozenbeen announced that will save £18 billion in in 2013/14 and the family element. As previously announced, Universal Credit2014/15, but nevertheless welfare still costs will be introduced in October 2013. This willover £200 billion a year. The Autumn Statement Child benefit will be uprated by one per cent in replace CTC and WTC.announces further savings of £3.7 billion. both 2014/15 and 2015/16.Fuel duty travel Rail fares Company cars and vansThe proposed fuel duty increase, which was Those who travel by train are accustomed From 2013/14 there will be further taxset to add over three pence to a litre of fuel, to the above-inflation increases that are increases for some company car drivers ashas been permanently abandoned. This introduced in January each year. It has been the car fuel benefit charge multiplier increasesincrease was originally due to come into effect announced that the increase in rail fares will be from £20,200 to £21,100. The van fuel benefiton 1 January 2013. The next fuel duty increase limited to the Retail Price Index (3.2 per cent charge will also increase from £550 to £564.has been deferred from 1 April 2013 to in October) plus one per cent for two years. It1 September 2013. This means that the fuel is reported that this will benefit over 250,000duty will not have increased for nearly two and annual rail season ticket holders.a half years. Thereafter any increase will applyon 1 September each year rather than 1 April. 07
  9. 9. Other announcementsTax evasion A £14 billion loss to the Exchequer?Recent publicity regarding the non or minimal HM Revenue & Customs believes that 93 perpayment of corporation tax has shone the cent of tax due is paid. The latest estimatesspotlight on the importance of HM Revenue & suggest that those operating in the ‘hiddenCustoms being more effective in maximising economy’ and those who undertake organisedthe collection of tax. There are probably few criminal attacks on the tax system, deprive thewho regard us as having a soft tax regime, but public purse of around £14 billion – 46 per centit is evident there are those that escape paying of all unpaid taxes.what some regard as their moral obligation.While time will tell what changes there may be As a result of the focus of resources in 2011/12in the taxation of profits of companies such as HM Revenue & Customs reported that they hadAmazon, Google, Starbucks and others, the increased compliance revenue by £2 billion andannouncements in today’s Autumn Statement they expect their compliance activities will raisedemonstrate there still remains tax that HM £22 billion a year by 2014/15.Revenue & Customs should be collecting.The fact is that the overwhelming majorityof people pay the right tax. HM Revenue & Actions HM Revenue & CustomsCustoms makes it clear that ‘closing in on tax has already taken:evasion’ is not about these people. It seeksto assure all honest taxpayers that they are • Signed an agreement with Switzerlanddetermined to tackle those who break the law to recover billions of pounds in previouslyby not paying the tax they owe or who try to uncollected taxmislead and attempt to evade their taxes. It • Created an Offshore Coordination Unit,is hoped that the publicity at the beginning of dedicating an additional 100 investigators tothis month will focus their attention on the tax tackle tax evasionpayments of some of those global companies • Established a team dealing with the taxwho are doing business here in the UK. In affairs of about 5,000 of the wealthiestorder to provide the tax authorities with the individuals that has, since 2009, raised annecessary funds the Government is investing a additional £500 million in tax.further £77 million into avoidance and evasionwork. HM Revenue & Customs has announced that during the coming four months they will launch a series of more than ten different initiatives – many trust they will also ensure that foreign owned companies contribute corporation tax to the Exchequer. 08