The Summer Budget 2015 document provides an overview and analysis of the key announcements from the UK Summer Budget 2015. It discusses changes to personal taxes including increases to the personal tax allowance and higher rate tax threshold. It also covers reforms to inheritance tax, including a new main residence nil rate band. Business tax measures are analyzed such as reductions to the corporation tax rate and changes to dividend taxation and annual investment allowance limits.

2. The Summer Budget 2015
Murray Graham
Partner

3. The Summer Budget 2015
• George Osborne “Britain deserves a pay
rise”
• Eliminating the deficit and boosting
productivity
• Continuing spending cuts

4. The Summer Budget 2015
The economy and
public finances
• Growth forecasts on track (?)
• Extra jobs
• Deficit and debt reductions

5. The Summer Budget 2015
• Impact upon local businesses
• Good news or bad news?

6. The Summer Budget 2015
Colin Fish
Tax Partner

7. Personal tax changes

8. Personal allowances
2015/16 £10,600
2016/17
£11,000
£10,800
2017/18
£11,200
£11,000

9. Personal allowance indexation
• Personal allowance to increase in line with
equivalent of 30 hours per week at the
national minimum wage
• Takes effect once personal allowance has
reached £12,500
• Government has objective to achieve this
by the end of this Parliament

10. Higher rate threshold
2015/16 £42,385
2016/17
£43,000
£42,700
2017/18
£43,600
£43,300

11. Domicile tax changes

12. UK born individuals
• From April 2017 can no longer claim
non-dom status if they are resident and
are born in the UK to UK domiciled
parents

13. Abolishing non-UK domicile
status for long domicile residents
• From April 2017 anyone resident in the UK
for more than 15 of the past 20 years will
be deemed to be domiciled in the UK
• Will be deemed to be UK resident for
income and capital gains tax purposes
• Also will apply for inheritance tax (was 17
out of 20 years)

14. UK property owned by non-
UK domiciled individuals
• Inheritance tax falls on UK assets for those
not domiciled in the UK
• This could be avoided through holding the
property in a non-resident company
• Inheritance tax will now fall on all UK property
regardless of the structure in which it is held
• Other IHT changes also (offshore trusts etc)

15. Savings and investments

16. Reminders of previous
announcements
• Personal Savings Allowance of £1,000 of
savings income for basic rate taxpayers (less
for higher rate taxpayers) – comes in April
2016
• ISA eligibility for P2P lending from April 2016
• ISAs more flexible so funds can be
withdrawn and replaced – from April 2016

17. Pensions

18. Reminders
• Taxation of pensions on death – the 45% rate
of tax applying to lump sums paid from the
pension of someone who dies over age 75
will reduce to the marginal rate of the
recipient – from April 2016
• The Lifetime Allowance is to fall to £1m from
the current £1.25m from April 2016

19. Pensions – reduced
allowance for top earners
• Applies to those earning more than £150,000
• Will apply from April 2016
• Limit is currently £40,000 per year
• Will fall on a tapered basis to a minimum of
£10,000 per year
• £1 restriction for every £2 over £150,000
income

20. Pensions – reduced
allowance for top earners
• £10,000 limit at £210,000 income
• Pension input periods/salary exchange
avoidance
• Income level is calculated after adding back
pension contributions (employee and employer)
• Anti-avoidance looking at three years’ income
• Annual allowance charge on employer
contributions (can be paid by pension fund)

21. Consultation on pension
tax relief
• Looks at questions such as:
–Whether there should be different
treatments for different types of scheme
–Whether a simpler system would be
better
–Views on automatic-enrolment

22. Liz Hill
VAT consultant

23. Agenda
• VAT Budget announcements
• Vehicle excise duty
• Energy saving materials
• Multi One Stop Shop (MOSS)
• Pre-registration input tax
• New build dwellings

24. VAT Budget announcements
• VAT rates locked at 5% and 20%
• Law to prevent items being removed from
0% and 5% list
• IPT to rise 1/11/15 to 9.5% but with
transitional rules
• Tobacco and fuel duty levy to stay the
same

25. Vehicle excise duty
• From 1/4/17 newly registered vehicles pay
based on emissions for first year
• 1st year
– Between £10 (50 g/CO2/km) - £2,000
(over 255 g/CO2/km)
• 2nd year
– £140 flat rate
• £0 applying to nil emissions

26. Energy saving materials
• Relates to:
– Solar and PV panels
– Wind and water turbines
– Draught insulation for doors, windows walls etc
– Ground and air source heat pumps
– Micro combined heat and power units
– Wood fuelled boilers
• Supply and installation (together) charged at 5%

27. Energy saving materials
• CJEU case using 5% reduced rate
incorrect
• 20% due on all but social housing cases
• May try to ‘re-label’ under different area of
reduced rate 5% law
• HMRC to make announcement

28. Energy saving materials
• Suppliers may need to adjust profit margin
• Buyers may want to buy sooner rather
than later
• HMRC may invoke anti-forestalling
regulations
• Public letters sent to HMRC by industry

29. MOSS
• From 1 Jan 2015
–Suppliers selling B2C
–E-services
–To customers based in other EU
member states
• Must register for VAT in country where
customer located irrespective of turnover

30. MOSS
• E-services include:
– Broadcasting and telecomms
– Sale of apps
– Sale of e-books
– Videos on demand
– Online gaming
– Anti-virus software
– Online auctions
– Online automated training

31. MOSS
• Turnover of €1 creates liability to register
• Must obtain and retain evidence of customer
location for 10 years
• MOSS allows VAT registration in one member state
and submission of a return to cover all member
states
• Payment made to local tax authority, which
distributes as per your info on return
• No VAT can be reclaimed on purchases
• Different to UK VAT registration

32. Pre-Reg input tax
• VAT on expenses incurred prior to
registration
• Goods: four years
• Services: six months
• New guidance issued by HMRC restricting
claims

33. New build dwellings
• Recent case: Roy Shields
• New dwelling close to livery yard
• Planning restriction meant ‘new dwelling’
criteria not met
• Contractor charge = 20% VAT
• Builder/clients – check you have right
planning in place

34. The Summer Budget 2015
Colin Fish
Tax Partner

35. Taxation of landlords
Colin Fish
Partner

36. Rent a room relief
• Current limit - £4,250
• Limit is being increased to £7,500 from
April 2016
• Applies where a room is rented out at an
individual’s residence

37. Wear and tear allowance
• Wear and tear allowance is being
abolished from April 2016
• Wear and tear allowance gives tax relief of
10% of the rent received
• Only applies to fully furnished properties
• Renewals basis withdrawn two years ago
– issue for landlords with unfurnished
properties replacing white goods etc

38. Wear and tear allowance
• Proposal is to replace wear and tear
allowance with a relief for all landlords
whereby tax relief is available for the
actual cost of the furnishing
• Furnished holiday lets will continue to be
eligible for capital allowances

39. Tax relief for interest
• Currently interest can be deducted from
rental income in full
• Includes mortgage fees etc
• From April 2017 this will be restricted
• Special rules where there are rental losses
• Full relief will continue for those with
furnished holiday lettings

40. Tax relief for interest
Tax year Proportion of interest
on which full tax relief
available
2017/18 75%
2018/19 50%
2019/20 25%
2020/21 0%

41. Tax relief for interest
£100k house with
£80k loan at 5%
Current rules Post 2020
Rent £5,000 £5,000
Interest £4,000 £4,000
Tax £400 £1,200
Net position £600 (£200)

42. Inheritance tax

43. Inheritance tax
• Current nil rate band is £325,000
• Will continue to be frozen at this level until
2021
• Rules relating to pilot trust/multiple trusts
are being changed
• Simplifications to the calculation of the ten
year charge

44. Inheritance tax – main
residence nil rate band
• Gives an additional nil rate band
• Applies where a property is passed on
death to a direct descendant (children,
grandchildren including step children and
adopted children)
• Any unused nil rate band can be passed to
a spouse or civil partner

45. Inheritance tax – main
residence nil rate band
• Also available where someone downsizes or
ceases to own a home after 8 July 2015
• Tapered withdrawal of the additional nil rate
band for estates with a value of over £2m
• Value of the additional nil rate band is the
lower of the net value of the interest in the
residential property or the maximum amount
of the band

46. Inheritance tax – main
residence nil rate band
Tax year Maximum additional
nil rate band
2017/18 £100,000
2018/19 £125,000
2019/20 £150,000
2020/21 £175,000

47. Business tax

48. Dividends
• Dividend tax credit abolished from April 2016
• A new Dividend Tax Allowance of £5,000 per
year being introduced
• New rates of tax will be:
– Basic rate taxpayers – 7.5% (0% currently)
– Higher rate taxpayers – 32.5% (25%
currently)
– Additional rate taxpayers – 38.1% (30.55%
currently)

49. Dividends
Effective rate of tax on higher rate salary is c.49%
Level of income Effective rate of tax
ignoring £5k
exemption
Basic rate 26%
Higher rate 46% (40%)
Additional rate 50%

50. Corporation tax
Tax year
commencing
Corporation tax rate
1 April 2016 20%
1 April 2017 19%
1 April 2018 19%
1 April 2019 19%
1 April 2020 18%

51. Tax relief for write off
of goodwill by companies
• Currently if the trade and assets of a
business are purchased by a company,
the company can claim tax relief for the
write off of the goodwill
• This will no longer be allowed for
acquisitions made on or after 8 July 2015
• Not much detail on changes at this stage

52. Annual Investment Allowance
• Currently £500,000 (since April 2014)
• Was planned to dropped to £25,000 on
1 January 2016
• Rate will now instead move to £200,000 on
a permanent basis from 1 January 2016

53. Quick round up of other points
• Modernising the taxation of corporate debt
• Simplifying the ‘link company’
arrangements for consortium relief
• CFC loss restriction
• Disposal of stock between connected
parties
• VCT/SEIS/EIS changes to meet State Aid
rules