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The Budget Report March 2012

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  1. 1. plummerparsonsPlummer Parsons18 Hyde GardensEastbourne East Sussex BN21 4PT brmar2012Phone. 01323 431 200Email. plummerparsons fcYour guideto the Budget Report 2012
  2. 2. Budget 2012This Report, written immediately after the Economic and fiscal update 03Chancellor of the Exchequer delivered hisBudget Speech, provides an overview of theannouncements most likely to affect you and your FOR BUSINESSbusiness. Introduction and highlights 04This Budget was heralded as a Budget for economicstability, tax simplification and growth, but was Business taxes 05-06set against a relatively benign economy that isendeavouring to break out of the constraints of Other announcements 07reductions in public expenditure coupled withlower household disposable income and growingjob insecurity. With little room for manoeuvre For your financesthe Chancellor’s aim was to balance the bookswhile making strategic advance toward promoting Introduction and highlights 08business growth and the ongoing reduction of thepublic purse. Personal taxes 09-11The last year has provided yet further evidence of Pensions and investments 12our interdependence on the global economy andthe impact of events beyond our shores continue to Other announcements 13provide a challenge to business confidence.The politics of the coalition Government continueto influence policy decisions and the need to satisfy VAT and indirect taxes 13-15the constituents in the two political parties areevident in some of today’s announcements. Vehicle taxation 16-17The Budget announces the Government’s budgetaryplans and this serves as a reminder to us allthat we should ensure that our personal and HOW TO MAKE THE MOSTbusiness budgets and plans reflect the reality of OF OUR SERVICESour available income and necessary expenditure.Debt remains embedded in our economy and the * Please read the Report as soon as possibleobligation to repay must be balanced with the needto save and invest. * Contact us to discuss any action you may be considering, and to review yourWe can help you review your plans; adapting them longer term plans. We always welcome theas necessary to take into account the ongoing opportunity to advise.challenging economic environment and your ownpersonal circumstances, plans and objectives.The Report is generally based on Press Releases and Reports issued immediately after the Budget on 21 March 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 orrefrained from in consequence of the contents of this Report.02
  3. 3. Economic and fiscal update Government spending 2012/13 Government receipts 2012/13 Other £43 billion Other £84 billion Debit interest £46 billion Income tax Public order and Social protection £155 billion safety £32 billion £207 billion Council tax £26 billionHousing and environment £21 billion Business ratesIndustry, agriculture and £26 billion employment £19 billion £683 £592 billion billion Defence £39 billion VAT £102 billion Personal social services £33 billion National Education £91 billion Insurance £106 billion Transport £22 billion Health £130 billion Corporation tax £45 billion Excise duties £48 billion 5.2% 5.0% 4.8% 4.5% 4.5% 4.4% 4.5% 4.0% 4.2% 4.2% 3.6% 3.4% % September 2011 November 2011 December 2011 February 2012 January 2012 October 2011 August 2011 March 2011 April 2011 June 2011 May 2011 July 2011 Annual inflation over a year The economic backdrop to this year’s Nevertheless, the Chancellor Budget proves that the Chancellor is Budget is more important than ever. highlighted the ‘major risks’ posed to sticking to his austerity plans; all of It serves as a reminder to us all of the the UK’s economy by the sovereign which leads to the conclusion that importance of prudent planning and debt crisis in the European economy, the UK economy still has a long and strategy, particularly when it comes to and volatile oil prices. But on a arduous recovery ahead. tax and business issues. positive note the OBR reported that net borrowing is falling in line with This Budget report is designed to The UK economy is far from out of the the Government’s targets, and is set highlight the issues that you may woods; in fact, GDP was at -0.2 in the to come in at £126 billion this year, wish to consider. Please contact us last quarter of 2011, and two quarters £1 billion less than forecast in the if you think that we can help you to of negative growth will make the Autumn Statement. prepare and plan as the economy rumours of a double dip recession a continues its recovery. harsh reality. But the latest economic Another key economic indicator, and fiscal update from the Office for inflation, continued its downward Budget Responsibility (OBR) suggests trend in February falling to 3.4%, that the UK has managed to pull back but remains 1.4% above the Bank of from this negative growth, as the England’s target of 2%, while the UK’s GDP forecast for 2012 was increased AAA rating from Fitch is on negative to 0.8%. watch. This year’s fiscally neutral 03
  4. 4. FOR BUSINESSIntroduction and highlightsINTRODUCTION HighlightsBudget 2012 was designed to provethat the UK ‘unashamedly backs ✓ Main rate of corporation tax to reduce tobusinesses’ according to Chancellor 24% from 1 April 2012George Osborne. Business confidencewas the order of the day, as the ✓ Tax simplification for small businessesChancellor revealed his intentions forBritish businesses to have the self- ✓ Enterprise zones to claim 100% capitalconfidence to: invest, expand, hire,innovate and be the best. allowancesWe will earn our way out of the ✓ Greater flexibility for EIS investmentsdeficit the Chancellor said, byproviding businesses with moderninfrastructure, growth-friendlyplanning rules, and employment laws.We are here to make sure that yourbusiness can grow and prosper andmake the most of all measures thatare available to you – please contactus for our advice.Business taxesCorporation tax rates Financial year to 31 March 2013 31 March 2012The Chancellor announced that Taxable profitsthe main rate of corporation tax First £300,000 20% £300,000 20%will be reduced to 24% from April Next £1,200,000 25% £1,200,000 27.50%2012, rather than 25% as had beenannounced at Budget 2011. The rate On profit over £1,500,000 24% £1,500,000 26%will then be reduced by a further 1% Tax credit on dividends 10% 10%in each of the following two years, Marginal relief fraction 1/100 3/200and as a result will be 22% fromApril 2014. This will give the UKone of the lowest corporate tax ratesin comparison to other major G20economies. There are no changesto the small profits rate which willremain at 20%. The small profits rate remains at 20% - could your tax bill be minimised?04
  5. 5. Business taxesSmall business tax cash Enhanced capital Enhanced capitalbasis and simplification allowances: energy- allowances (ECAs) inof allowable expenses saving and water- Enterprise Zones efficient technologiesFollowing the Office of Tax 100% capital allowances will beSimplification review of small The list of designated energy-saving available on plant and machinerybusiness tax, the Chancellor has and water-efficient technologies investment made in designated areasannounced the introduction of a qualifying for enhanced capital of the London Royal Docks Enterprisenew cash basis for calculating tax allowances will be updated during Zone, three Scottish Enterprise Zonesfor small unincorporated businesses. summer 2012, subject to State aid in Irvine, Nigg and Dundee, andA consultation will be held on the approval. The scheme allows a 100% Deeside in North Wales. This followsdetails of the scheme, including deduction of the qualifying assets announcements regarding ECA’s ineligibility of businesses with turnover against taxable profits. English Enterprise Zones in 2011,up to the VAT registration threshold and the additional zone in Humberof £77,000. The new basis will be Capital allowances: announced in February 2012. Theseintroduced in April 2013. business cars first-year allowances will be available from allowances (FYAs) 1 April 2012.A further consultation will be heldon standardising business expenses, From April 2013 the 100% FYA for Capital allowancesallowing a fixed amount to be businesses purchasing low emissions on gas refuellingclaimed rather than recording actual cars will be extended for a further equipmentamounts. two years to 31 March 2015. The carbon dioxide emissions threshold The 100% first-year capital allowanceIntellectual property: below which cars are eligible for the for gas refuelling equipment will‘patent box’ FYA will also be reduced from be extended from April 2013 for two 110 g/km to 95 g/km. further years to 31 March 2015.As previously announced inNovember 2010, the Government Capital allowances: Research andwill introduce a reduced 10% rate of business cars main rate development (R&D) taxcorporation tax for profits attributed creditsto patents and certain other similar From April 2013, the carbon dioxidetypes of intellectual property. This emissions threshold for the main The Chancellor has announced anwill be introduced over the five years rate of capital allowances of 18% for ‘above the line’ credit for R&D, withfrom 1 April 2013 and forms part of the business cars will reduce from a minimum rate of 9.1% before tax.Government’s ‘growth agenda’. In the 160 g/km to 130 g/km. This will also Loss-making companies will be ablefirst year this proportion will be 60% be the new threshold above which the to claim a cash refund. A consultationand increase annually to 100% from lease rental restriction applies. on the detailed design of the creditApril 2017. will take place shortly and final details will be decided following consultation. The credit will be introduced from April 2013.Could you benefit from the changes in tax credits for R&D? 05
  6. 6. Business taxesCorporation tax reliefs Company distributions Enterprise Incentivefor the creative sector Schemes As announced on 6 December 2011The Chancellor drew on the success certain transactions involving The following changes wereof the film sector and following transfers of assets or liabilities confirmed today:industry consultations will introduce between UK resident companies arecorporation tax reliefs for the video not excluded from being treated as The limits which currently apply togames, animation and high-end distributions for the purposes of Enterprise Investment Schemes (EIS)television industries from April 2013, corporation tax. It will also clarify the and Venture Capital Trusts (VCTs) willsubject to State aid approval. interface between two overlapping be increased as follows: provisions in the distributions rules.Grouping rules: change These measures will be included in • The employee limit will riseto equity rules the 2012 Finance Act. from 50 to 250Legislation will be introduced in Bank levy • The gross assets limit of £7mFinance Bill 2012 to ensure that before investment and £8m afterthe group status of a company will As previously announced the full will increase to £15m before andbe unaffected where it issues loan rate of the bank levy will be set at £16m afternotes carrying a right to conversion 0.088% from 1 January 2012. Butinto shares or securities of quoted the Chancellor has now announced • The maximum annual amountunconnected companies. This follows that from 1 January 2013 the full that can be invested in botha number of clearance applications rate of the bank levy will be set at schemes will increase from £2mreceived by HMRC where companies 0.105%. The bank levy legislation to £5m.sought confirmation that they would will also be amended to ensure that The rules for EIS and VCTs will benot lose eligibility for group relief as the liabilities of joint ventures are simplified so that:a result of issuing loan notes with correctly aggregated into a foreignconversion rights. This measure will banking group or a relevant non- • There will be a relaxation in thehave effect for transactions entered banking group’s chargeable equity rules defining when a person isinto on or after 21 March 2012. and liabilities. connected to a companyControlled foreign Enterprise Management • The definition of qualifyingcompany (CFC) rules Incentive Scheme shares will be widenedAs announced in November 2010 new The current £120,000 limit for • The £500 minimum investmentCFC rules are to be introduced which options held by an employee under threshold will be removedreflect the global nature of business an Enterprise Management Incentiveactivities. The new rules include a Scheme will be increased to £250,000. • The £1 million investment limitfinance company partial exemption The measure is subject to State aid by a VCT in a single companythat in broad terms will result in an approval but will be introduced as will be removedeffective UK tax rate of one quarter soon as possible. The aim is to helpof the main rate on profits derived small and medium sized businesses The changes to EIS will be effectivefrom overseas group financing retain and recruit high calibre on or after 6 April 2012 and the VCTarrangements. The rules will be employees. changes on or after 1 April 2012.effective for CFCs with accountingperiods beginning on or after 1 January 2013.06 Do you need access to business finance? Contact us to discuss
  7. 7. Other announcementsRepeal of relief for Gift Aid - Community Anti-avoidanceblack beer Amateur Sports Clubs (CASCs) and Gift Aid In common with all recent BudgetsThe Government announced that it registration the 2012 Budget saw its fair shareis the intention to repeal legislation of anti-avoidance provisions whichthat is no longer deemed relevant. Legislation is to be introduced to included the announcement ofIt seems that one such instance ensure CASCs do not need to amend General Anti-avoidance Rules but alsoconcerns the production of black their constitutions to retain their anti avoidance measures to counteractbeer which is produced by only one status, to reflect new management the following abuses:producer in Yorkshire. Black beer has and location conditions and to allowan original gravity of 1200 degrees or CASCs to make claims for repayment • Plant and machinery leasingmore and is a concentrated beverage of tax under Gift Aid. arrangements where businessesmade from malt and used as a mixer are seeking to artificially reducewith lemonade, milk or in cooking. This is amending legislation to ensure the disposal value for capitalIn its concentrated form, it has an that the CASC and Gift Aid legislation allowance computationsalcoholic strength of 8.5% by volume. works as originally intended.This product has previously enjoyed • Purchases of plant and machineryexemption from excise duty and that Gift Aid – Charitable from 1 April 2012 for companiesexemption is now withdrawn from Companies and CASCs and 6 April 2012 for unincorporated1 April 2013. businesses for which there is a tax Again, amending legislation is to be avoidance purposeCarbon price floor introduced to put onto a statutory basis an extra statutory concession • Sales of lessor companies whereA raft of changes covering five operated by HMRC to make provision a legitimate short term taxpages was announced that affect for charitable companies and timing benefit is converted intoUK generators, including combined CASCs to make in-year claims for a permanent benefit. A new ruleheat and power and auto-generators, repayments of Gift Aid. effective for transactions on orof fossil-fuel based electricity; and after 21 March 2012 will createthose supplying such generators. The a new ‘trigger’ event which willmeasures are all introduced from bring deferred tax profits into1 April 2013. Budget 2011 announced charge immediately before a lessorthat a carbon price floor would be company comes within the chargeintroduced from 1 April 2013 and to tonnage’s announcements introducefurther changes and announcements Field allowancesof rates and indicative rates through Changes have been announcedto 2016/17. that impact oil and gas companies regarding the new category qualifying oil field for a field allowance. Please consult with us if you are in this industry.Could you benefit from increased funding and changes in tax reliefs on capital expenditure? 07
  8. 8. FOR YOURFINANCESIntroduction and highlightsINTRODUCTION HighlightsIn a fiscally neutral Budget, lowerincome earners were some of ✓ 50% additional rate to reduce to 45%the primary beneficiaries, as theChancellor sought to increase the ✓ Personal allowance increasing to £9,205 inamount that they retain from their April 2013earnings.On the other end of the spectrum, ✓ Age related personal allowance to be frozenthose earning the highest rate oftax will also see a reduction in tax ✓ Changes that will benefit higher ratefrom 2013, while an adjustment to the taxpayersremoval of Child Benefit for higherearners has been made. ✓ Capital taxes – no significant changesWhatever your circumstances, we arehere to ensure that you make the most ✓ Minimal changes to savings regimeof your money, please contact us tofind out how we can help. Could you minimise your income tax as the basic rate band is continuing to fall?08
  9. 9. Personal taxesIncome tax personal Income tax rates and allowances 2012/13 2011/12allowances Savings rate band £2,710 £2,560The Government has announced a long term Savings tax rate 10% 10%commitment to increase the basic personal Basic rate band £34,370 £35,000allowance for individuals aged under 65 to Basic tax rate 20% 20%£10,000. It is being increased from £7,475to £8,105 with effect from 6 April 2012, and Dividend ordinary tax rate 10% 10%being further increased to £9,205 from Higher rate band £34,371 - £35,001 -6 April 2013. £150,000 £150,000 Higher tax rate 40% 40%The enabling legislation will be contained Dividend higher tax rate 32.50% 32.50%in Finance Bill 2012 and the basic rate limitwill be reduced from £35,000 to £34,370. For Additional rate band Over £150,000 Over £150,0002013/14, the basic rate limit will be further Additional tax rate 50% 50%reduced by £2,125 to £32,245. This means Dividend additional tax rate 42.50% 42.50%that overall most higher rate taxpayerswill receive one quarter of the benefit thataccrues to basic rate taxpayers.Age related personal Allowances that reduce taxable income 2012/13 2011/12allowance Personal allowances Under 65 £8,105 £7,475From 2013/14 the availability of the age 65-74 £10,500 £9,940related personal allowance will be restricted 75 and over £10,660 £10,090– the allowance of £10,500 for 2012/13, Blind persons allowance £2,100 £1,980available for those aged 65 to 74 will be Age related allowances are reduced by £1 for every £2 of income aboverestricted to individuals born after 5 April £25,400 (2011/12 £24,000) until the personal allowance of £8,105 (2011/121938 but before 6 April 1948. £7,475) is reached. The personal allowance is reduced by £1 for each £2 of income fromThe age related personal allowance of £100,000 (2011/12 £100,000) to £116,210 (2011/12 £114,950).£10,660 for 2012/13, available to people aged75 and over will be restricted to those bornbefore 6 April 1938. The allowance of £10,660will not be increased in 2013/14. Allowances that reduce tax 2012/13 2011/12Income tax rates Married couple’s allowance (MCA) 78 and over £7,705 £7,295The 50% additional rate of tax will be Tax reduction at 10% £770.50 £729.50reduced to 45% from 6 April 2013. Thedividend additional rate will be set at 37.5%, The age for MCA is of the elder spouse or civil partner.the trust rate will be 45% and the dividend The loss of tax reduction is 10p for each £2 of income above £25,400trust rate will be 37.5%. The Government (2011/12 £24,000) until the minimum of £296 (2011/12 £280) is reached.believes that the existing high top rate of All the above ages are as at 5 April risks damaging the UK’s economy in thelonger-term. 09
  10. 10. Personal taxesCap on unlimited reliefs Taxation of non-resident sports peopleFrom April 2013, a new limit on all The tax treatment of worldwide endorsement income for non-residentuncapped income tax reliefs will be sports people will be revised to take training days into account whenintroduced in order to ensure that those calculating the proportion liable to UK income tax.with the highest incomes pay their ‘fairshare’. Relief will be restricted to the Capital taxes: Capital Gains Tax (CGT) annualgreater of £50,000 or 25% of income. exemptionsChild benefit – income tax The Government announced in 2011 that the CGT annual exemptioncharge for those on higher would increase in line with rises in the CPI rather than in the RPI.incomes Parliament is entitled to override automatic indexation and set a different figure.A new income tax charge is beingintroduced from 7 January 2013 on However, the Budget Day press releases confirm that the CGT annualtaxpayers who are both in receipt of exemption will remain at £10,600 with effect from 6 April 2012. Thechild benefit and whose annual income CGT annual exemption for trustees and personal representativesexceeds £50,000. This charge also applies remains at £5,300.if it is the partner of the taxpayer earning£50,000 in a tax year who is in receipt of The entrepreneurs’ relief lifetime limit of gains remains at £10 million.the child benefit. In a case where both Qualifying gains are taxed at a 10% rate of capital gains tax ratherpartners earn over £50,000 in a tax year, than at 18% or 28%. Entrepreneurs’ relief was introduced in Aprilthe income tax charge will only apply to 2008. It is available for an individual or a trustee who disposes ofthe partner with the higher income. either the whole or part of a trading business or shares in a trading company.For taxpayers with income in a tax yearof above £60,000, the tax charge willequate to the amount of the child benefit. Capital gains tax 2012/13 2011/12For those taxpayers with an income of Capital gains Lower rate 18% 18%between £50,000 and £60,000, the income tax rate Higher rate 28% 28%tax charge will be 1% of the amount ofchild benefit for every £100 of income Entrepreneurs Applicable rate 10% 10%above £50,000. relief Lifetime limit £10m. £10m. Annual Individual £10,600 £10,600Child benefit is a tax free receipt and exemptionthe amount that may be claimed is not Settlement(s) £5,300 £5,300amended by the income tax charge.Reform of ordinaryresidence CGT regime and non-residentsThe Government will abolish ordinary The CGT regime will be extended to gains on disposals by non-residence for tax purposes from 6 April resident non-natural persons of UK residential property and shares or2013, although it will retain overseas interests in such property, commencing from April 2013.workday relief and put it on a statutoryfooting.10 Will you be making a capital gain? Contact us to discuss how you could reduce your liability to capital taxes
  11. 11. Inheritance tax Inheritance tax 2012/13 2011/12 Nil rate band £325,000 £325,000The nil rate band remains at£325,000 for the year ended 5 April Chargeable rate on lifetime transfers 20% 20%2013 and the inheritance tax rate Rate on transfers on or within seven years of death 40% 40%remains at 40% Reduced rate 36% N/AThe Government announced in 2011that a reduced rate of inheritancetax would apply where 10% or more National insurance contribution ratesof a deceased person’s net estate(after deducting IHT exemptions, The Chancellor has announced that he is considering the integration of thereliefs and the nil rate band) is left income tax and national insurance systems in order to make the systemto charity. The tax rate of 40% will more user friendly – a consultation document was published in July 2011. Thebe reduced to 36% where death Government has previously announced that:occurs on or after 6 April 2012. • the contributory principle will be maintainedInheritance tax: • national insurance contributions will not be extended to pensioners or toavoidance using pensions income, savings income or dividends.offshore trustsThe inheritance tax legislation is Tax avoidance: corporate settlor interested trustsbeing amended from 21 March 2012 A number of avoidance schemes have been promoted to enable an individual toto curtail a number of avoidance gain a tax advantage by a diversion of income to another person who is liableschemes that have attempted to at a lower rate of tax. The schemes generally involve the use of an ‘interest incircumvent the excluded property possession’ settlement and a corporate settlor in order to divert the income taxand settled property rules. The liability away from the beneficial owners of the income.schemes worked by permitting aUK-domiciled individual to acquire The schemes have been curtailed with effect from 21 March 2012 by amendingan interest in settled property in the settlements legislation so that any income which arises under a settlement,an offshore trust thereby reducing and originates from any settlor who is not an individual, is not treated as thatthe value of the individual’s estate of the settlor. The effect of the changes will be that the settlements legislationthat was subject to inheritance will not apply where the settlor is not an individual. Where the settlementstax. Assets which would have legislation no longer applies, the income arising under the settlement will bebeen subject to inheritance taxed on the beneficiaries of the interest in possession trust as it would be in atax were converted by a series non-settlor interested case.of transactions into excludedproperty, which is outside thescope of inheritance tax.Do you wish to reduce your estate liability to IHT? Gifts to charity can reduce what is due to HMRC 11
  12. 12. Pensions and investmentsLife insurance policies Pension contributions Maximum annual tax-efficient 74This change affects those who own life assurance gross contributions to agepolicies, capital redemption policies and life annuitycontracts. The rules for calculating the amount of Individuals £3,600 or 100% of net relevant earnings togains from the relevant policies and contracts are £50,000amended. The changes apply where there have been Employers £50,000 less employeegains earlier in the life of the policy or contract contributionsbut the gains were not chargeable to tax under theincome tax rules. The changes clarify the rules for Minimum age for taking benefits 55calculating the amount of gains liable to income tax. Lifetime allowance charge Lump sum paid 55%ISA annual allowance Monies retained 25%The cash value of the ISA limit has increased from On cumulative benefits exceeding £1,500,000*£10,680 in 2011/12 to £11,280 in 2012/13. Up to half of Maximum tax-free lump sum 25%the allowance may be saved in cash. *Subject to transitional protection for excess amount.Enterprise Incentive SchemesThe following changes for Enterprise Investment ISAsSchemes (EIS) and Venture Capital Trusts (VCTs)were confirmed today: Overall investment limit £11,280 Including cash maximum £5,640• The employee limit will rise from 50 to 250 Junior ISA overall annual limit from 1.11.2011 £3,600• The gross assets limit of £7m before investment and £8m after will increase to £15m before and £16m after• The maximum annual amount that can be State pension invested in both schemes will increase from £2m to £5m. The state pension will be reformed into a single tier pension. This will not take effect until after 2015.The rules for EIS and VCTs will be simplified so that:• There will be a relaxation in the rules defining State pension age when a person is connected to a company Consideration will be given to introducing a new mechanism• The definition of qualifying shares will be for increasing the pension age in line with growing longevity. widened• The £500 minimum investment threshold will be Seed Enterprise Investment Scheme removed The Seed Enterprise Investment Scheme (SEIS) is introduced• The £1m investment limit by a VCT in a single from April 2012, as previously announced. This provides 50% company will be removed. tax relief and a capital gains tax holiday for investments in qualifying new companies.The changes to EIS will be effective on or after 6 April 2012 and the VCT changes on or after 1 April 2012.12 Will you have adequate income in retirement? Contact us for a review
  13. 13. Other announcementsClaims Equalisation Reserves (CERs) And finally…and general insurance companies Resettlement payments made to MPsThis measure, first announced in the Budget 2011, relatesto corporate and partnership members of Lloyd’s and Unusual as it is for HMRC to include announcementsgeneral insurance companies who maintain equivalent regarding MPs, from 1 April 2012 the MP’s Expensesreserves. This measure will introduce a rule to tax Scheme administered by the Independent Parliamentarybuilt up CERs in equal amounts over a six year period Standards Authority will include a provision for acommencing from the date of the Solvency 11 Directive resettlement payment to any MP who involuntarily leavessolvency requirements come into force. Alternatively, in office on or after that date. The measure introduces anany year during the transitional period, an election may income tax exemption for such payments, subject to abe made to tax the remaining balance of the built-up £30,000 limit.reserve that has not yet been subject to tax.VAT and indirect taxes VAT from from VAT ONLINE REGISTRATION 01/04/2012 01/04/2011 The online VAT registration system will be introduced Standard rate 20% 20% with effect from 31 October 2012. Consequently, certain VAT fraction 1/6 1/6 VAT forms will be removed from VAT law on the same Reduced rate 5% 5% date. From 1 December 2012, the VAT threshold for Taxable turnover limits businesses not established in the UK will be removed. Registration - last 12 months or £77,000 £73,000 VAT RELIEF FOR EUROPEAN RESEARCH next 30 days over INFRASTRUCTURE CONSORTIA (ERICs)Deregistration - next 12 months £75,000 £71,000under VAT relief will become available for European Research Infrastructure Consortia through Secondary legislation to be introduced in the autumn of 2012.CHANGES TO REGISTRATION ANDDEREGISTRATION THRESHOLDS INSTALLATION OF ENERGY-SAVING MATERIALS IN CHARITABLE BUILDINGSFrom 1 April 2012, the taxable turnover threshold, whichrequires a person to register for VAT, will be increased Legislation will be introduced in Finance Bill 2013from £73,000 to £77,000 per annum; the threshold below to reduce the scope of the reduced rate applicable towhich a VAT-registered person may apply to deregister the installation of energy-saving materials. It will nowill be increased from £71,000 to £75,000 per annum, and longer apply to installations in buildings for a relevantthe relevant registration and deregistration threshold for charitable purpose, but remain for residential buildings,Intra-Community acquisitions will also be increased from including those operated by charities.£73,000 to £77,000 per annum.The simplified reporting requirement for the income taxSelf Assessment return will continue to be aligned withthe VAT registration threshold. 13
  14. 14. VAT and indirect taxesZERO RATE FOR ADAPTED MOTOR VEHICLES Tobacco dutyAND BOATS FOR WHEELCHAIR USERS With effect from 6pm on 21 March 2012 the rate ofThe Government has announced it plans to introduce a duty increases on all tobacco products imported into,voluntary disclosure scheme in order to gather information or manufactured in, the UK by 5% above retail priceabout the use of this relief, which is often abused because of inflation. This will have the effect of increasing costsdifferent interpretations and its difficulty to administer. at the point of sale as follows:INVOICING RULES • 37p to a packet of cigarettes and a 25g of hand- rolling tobaccoAs a result of the EU Invoicing Directive, the UKGovernment will introduce secondary legislation effective • 20p to a 25g packet of pipe tobacco, andfrom 1 January 2013, simplifying the rules for VAT invoices. • 12p to a packet of 5 small cigarsUNIVERSAL CREDIT CONSEQUENTIALCHANGES Machine games duty (MGD)Changes will be introduced by statutory instrument from The taxation of gaming machines is to be reformed1 April 2013 to ensure that all universal credit claimants can in order to put tax revenues from gaming machinesobtain the same reliefs as were available to claimants of the on a more sustainable footing. MGD will be chargedbenefits it replaces. The changes will apply to certain zero on the net takings from playing dutiable machineand reduced rate provisions. games. These are games played on a machine where customers hope to win a cash prize greaterCONSULTATION ON EXEMPTION FOR SUPPLIES than their stake. The changes are introduced on OF EDUCATION 1 February 2013.The Government is planning a consultation on the VAT These changes are introduced after the issue of twoexemption for providers of education with a view to consultation documents in 2009 and 2011. Whereensuring commercial universities are treated fairly. MGD is payable, it will replace both Amusement Machine Licence Duty and VAT. There will beFREIGHT TRANSPORT SERVICES two rates of MGD. The lower 5% rate will apply to machines with maximum stakes of 10p andThere are currently temporary provisions in place to ensure maximum cash prizes of £8, and the standard 20%transport and related services performed wholly outside rate will apply to all other dutiable machine games.the EU are not liable to UK VAT where the recipient is a UKbusiness or charity. In the autumn of 2012, the Government Aggregates levywill introduce secondary legislation to formalise thesearrangements. The planned increase in the aggregates levy rate from £2.00 to £2.10 per tonne has been delayed untilTREATMENT OF SMALL CABLE-BASED 1 April 2013.TRANSPORT Landfill taxSuch services are currently subject to the standard rate ofVAT, but will become subject to the reduced rate in 2013. The The standard rate from 1 April 2012 is £64 per tonnechange will apply to vehicles that carry fewer than 10 people and from 1 April 2013 this increases to £72 per tonne.and will be evaluated after three years. A consultation will The lower rate remains at £2.50 per tonne.precede the changes, in the summer of 2012.14
  15. 15. Stamp duty land tax (SDLT): SDLT Stamp duty land taxavoidance On the transfer of residential rate payable propertyThe SDLT legislation is to be amended fortransactions on or after 21 March 2012 to ensure that £0 - £125,000* nilan SDLT avoidance scheme, involving the sub-sales £125,001 - £250,000 1%rules and an option to purchase land is ineffective. £250,001 - £500,000 3%The grant or assignment of an option will not be able £500,001 - £1,000,000 4%to satisfy the requirements of the sub-sale rules. £1,000,001 - £2,000,000 5%SDLT rate in respect of residential £2,000,001 and over 7%property of over £2 million * £150,000 in disadvantaged areas until 5 April 2013The rate of SDLT charged on the purchase of aresidential property for more than £1 million iscurrently 5%. For properties where the purchaseprice exceeds £2 million, a new SDLT rate of 7% willbe charged where the effective date of the transaction This Report, written immediately after the Chancellor ofis on or after 22 March 2012. Transitional provisions the Exchequer delivered his Budget Speech, provides anwill ensure that the old 5% rate applies for contracts overview of the announcements.entered into before 22 March 2012 but completed onor after that date.SDLT rate: taxation of high valueresidential propertiesA number of high value properties have beenpurchased in the UK using complicated ownershipstructures involving companies and/or trusts.In cases where a UK residential property is purchasedfor more than £2 million on or after 21 March 2012and the purchaser is a ‘non-natural person’, the rate ofSDLT will be 15%. A ‘non-natural person’ is defined asincluding companies, collective investment schemes(including unit trusts) and partnerships in which a‘non-natural person’ is a partner.The intention is to stop or reduce the number of highvalue property transactions that are undertakenusing such structures. In addition, it is proposedto introduce an annual charge in 2013 on such aproperty that is owned by a ‘non-natural person’. 15
  16. 16. Vehicle taxationCOMPANY CARSAn employee is liable to pay income tax on the benefit-in-kind of being provided with a car forpersonal use. The value of the benefit is determined by multiplying the list price by a percentage. Thelist price includes the cost of most accessories. The percentage is taken from the table below accordingto the car’s carbon dioxide emissions. The same benefit figure is used to determine the employer’sclass 1A national insurance liability. 2012/13 company car taxable benefits table CO2 emissions (g/km)* Petrol Diesel CO2 emissions (g/km)* Petrol Diesel 1 to 75 5% 8% 160 to 164 23% 26% 76 to 99 10% 13% 165 to 169 24% 27% 100 to 104 11% 14% 170 to 174 25% 28% 105 to 109 12% 15% 175 to 179 26% 29% 110 to 114 13% 16% 180 to 184 27% 30% 115 to 119 14% 17% 185 to 189 28% 31% 120 to 124 15% 18% 190 to 194 29% 32% 125 to 129 16% 19% 195 to 199 30% 33% 130 to 134 17% 20% 200 to 204 31% 34% 135 to 139 18% 21% 205 to 209 32% 35% 140 to 144 19% 22% 210 to 214 33% 35% 145 to 149 20% 23% 215 to 219 34% 35% 150 to 154 21% 24% 220 and over 35% 35% 155 to 159 22% 25% *The exact CO2 figure is rounded down to the nearest 5g/km. Cars that cannot emit CO2 by being driven have a benefit of 0%.COMPANY CAR BENEFITLegislation will be introduced in Finance Bill 2012 to increase by one percentage point the level of therelevant percentage of the list price for company cars that is subject to tax. The tax charge applies tocars emitting more than 75 g/km up to a maximum of 35% in 2014/15.In both 2015/16 and 2016/17, the appropriate percentages of the list price subject to tax will increase by2% to a maximum of 37%.There is currently a diesel supplement but this will be removed in April 2016, as diesel cars will berequired to have the same air emissions quality as petrol cars from September 2015.16
  17. 17. COMPANY CAR FUEL BENEFITIf an employer provides fuel for any private travel, the taxable benefit is calculated by multiplying£20,200 (2011/12 £18,800) by the percentage used to calculate the benefit on the car. The employer paysclass 1A NICs on the same amount at 13.8 per cent. Current advisory fuel only mileage rates (for a company car) Rates per mile Rates per mile Rates per mile Engine capacity Petrol Diesel LPG Up to 1400cc* 15p 13p 10p 1401cc** - 2000cc 18p 15p 12p 2001cc and over 26p 19p 18p *1600cc for diesel cars **1601cc for diesel carsThese rates are normally reviewed quarterly depending on changes in the price of fuel, and changes(if any) take effect on 1 March, 1 June, 1 September and 1 December each year, so the next change inrates will be due on 1 June 2012.If the employee uses a privately owned car for business journeys, the employer may reimburse thecosts at the following standard rates without the employee incurring a tax or NIC charge. Vehicle First 10,000 miles Thereafter Car/van 45p 25p Motorcycle 24p 24p Bicycle 20p 20pIf the employer reimburses at a lower rate per mile, the employee is permitted to claim tax relief onthe shortfall. 17
  18. 18. plummerparsons bc guideto theBudgetReport 2012