Rocky Road – The Chancellor’s Autumn Statement 2012

December 6th, 2012

The Chancellor said that the British economy was on a┬árocky road┬átowards health. No one is ever going to complain about having rocky road in their lunchbox. It’s excellent for a quick, snatched burst of energy at any time. I’m pretty sure that’s not exactly how George might have intended us to interpret his statement but what I do think is that much of this Autumn statement was intended as┬ádistraction therapy to give at least certain sectors a quick, snatched burst of positivity.

Whilst it’s not really my role to comment on the economic information presented so carefully yesterday, it’s clear that George may have adopted the old accountants definition, “what number do you want it to be?” when dealing with the many variables such as the timing of 4G licence sales income, Royal Mail pension scheme treatments and the old “whose money is that?” game from the Asset Purchase Facility. Luckily for him, it is so┬áfiendishly┬ácomplicated that many commentators still can’t properly agree what growth, borrowing, deficit and other key numbers might actually be. I’m therefore not even going to try, I’ll only make an Ed Ball’s of it!

Mini-Budget not Autumn Statement?

This was really a mini-Budget which produced some good news and surprises for business and some expected bad news for personal taxation.

Personal tax

  • From 6 April 2014, the annual allowance for pension contributions will reduce from ┬ú50,000 to ┬ú40,000. This is an excellent reason for individuals to maximise pension contributions before 5 April 2013 where income tax relief at 50% is available.
  • Also from 6 April 2014, the lifetime allowance for pension savings will be reduced from ┬ú1.5million to ┬ú1.25 million.Individuals with pension savings near ┬ú1.25m will face a difficult choice about how to manage excesses (which could be taxed at 55%) and which of the new forms of protection to elect for. Another form of fixed pension protection is apparently on its way and also mooted is personalised protection. Since 2006, five different forms of pension protection have been created – nothing like a bit of complexity.
  • The personal income tax allowance will increase by an additional ┬ú235 to ┬ú9,440 from 6 April 2013 which gave the Government benches something to cheer about.
  • For the tax years 2014/15 and 2015/16, the increase in the higher rate threshold will be capped at 1%.The increases in the personal allowance will mainly benefit basic rate taxpayers, though most higher rate taxpayers will also benefit to some extent in 2014/15. However, capping the increase to the higher rate threshold at 1% per year, (less than the rate of inflation) will result in an additional 400,000 higher rate taxpayers by 2015/16. And that, my friends, is how a squeezed middle actually gets bigger!
  • For 2014/15 and 2015/16, the capital gains annual exempt amount will increase by 1% each year. The annual exempt amount for 2014/15 will be ┬ú11,000 increasing to ┬ú11,100 in 2015/16.
  • The inheritance tax nil-rate band will also increase by 1% in 2015/16. This means that the nil rate band will then apply to estates and transfers valued up to ┬ú329,000.Small beer maybe, but this is the first increase in the nil-rate band since 2009 so best to give thanks now.
  • The Government will consult on permitting direct ISA investments into SMEs, such as AIM listed companies, and will increase the ISA limit to ┬ú11,520 from 6 April 2013.

Corporation and business tax

  • The mainstream rate of Corporation Tax will be reduced to 23% from 1 April 2013 as already announced, then 21% (previously 22%) from 1 April 2014. This would give the UK the lowest mainstream CT rate in the G20 with the exception of the likes of Turkey and Russia. It’s got to be a good bet that there will be a future announcement of a further reduction to 20%, to harmonise with the small profits rate.
  • But don’t think that George has forgotten the public perception of the bank’s role in the financial disaster. The reduction in the CT rate has been countered for them by an increase in the Bank Levy to 0.130%. And this takes effect from 1 January 2013 rather than 1 April 2014. Banks get a further kicking from legislation designed to ensure that foreign bank levies paid by a foreign banking group trading in the UK cannot be claimed as a deduction against UK tax.
  • Remember when the Annual Investment Allowance (AIA), which has provided 100% capital allowances was ┬ú100,000 of qualifying plant and machinery? And then George reduced it to ┬ú25,000? Well now this will increase ten-fold to ┬ú250,000 for expenditure incurred in the 24 months from 1 January 2013. Up and down like the proverbial “drawers”!This will require careful planning for businesses to maximise the cashflow benefit.
  • Updated corporation tax reliefs for the creative sector, specifically in video games, animation and high-end television, have been announced. From 1 April 2013, qualifying companies will be able to choose between an enhanced deduction of 100% of qualifying expenditure or a payable credit of 25% of qualifying losses surrendered.
  • Following the campaigns to discredit multi-nationals such as Google, Starbucks and Amazon, new resources have been given to HMRC to counter abuse and specifically “risk identification and assessment capability for large multinationals”. Good luck with that – the results lately appear to be more to do with pressure from the public boycott of Starbucks than the ability of HMRC inspectors.
  • HMRC are also getting new transfer pricing specialist resources to accelerate the identification, challenge and resolution of these issues. Some might say that multinationals will conveniently need to review their transfer pricing policies and documentation at a time when the UKÔÇÖs tax rates are set to become some of the lowest in the G20 but I obviously wouldn’t comment on that sort of cynical speculation.
  • The Government has confirmed the introduction of a new cash basis for small unincorporated businesses. From April 2013, businesses with annual receipts of up to ┬ú77,000 (the VAT threshold)┬áwill be given the option to account for taxable profits on a cash receipts and payments basis. These businesses will also┬ábe allowed to remain on the cash basis as long as their turnover remains below ┬ú154,000.In addition, unincorporated businesses will also be able to use flat rates to calculate some types of expenses rather than have to calculate the actual amounts.

    Reduction of the administrative burden faced by very small businesses is always useful. However, some aspects of the proposal, which had been consulted on earlier in 2012, were controversial. It is not yet clear whether any changes have been made to those aspects and consequently how beneficial the proposals are likely to be.

Share incentives

For the last year or so, the Government has been consulting on a new ÔÇÿemployee shareholderÔÇÖ status. This is suggested to combine tax relief on employee shares (where no CGT would be payable on the disposal of shares acquired under the scheme) with the connected surrender of certain employment rights. It’s intended to create a more flexible labour market and to exploit employee share ownership as a way of boosting productivity by means of a more “engaged” workforce.
This is obviously sensible but it does rely on making the package as a whole is attractive to potential employees – and that has so far been announced piecemeal. The proposed relief from CGT came in October 2012 – todayÔÇÖs announcement merely reiterates this. (Didn’t the last government do this with “new money for this and that”? Thought so.) We’re going to have to wait for the draft Finance Bill to see the details of these rules, and hope that they do not introduce crazy tax complexity for employees who hold shares in what will be, in many cases, small and medium sized businesses.
Many in business have questioned whether the up-front charges to income tax created by employment-related securities legislation will act as a┬ápotential deterrent when shares are acquired. To help, George announced today that he is considering a┬áverylimited income tax relief for this up front charge. How big does the first ┬ú2,000 of value sound? Small change when shares of between ┬ú2,000 and ┬ú50,000 can actually be acquired under the arrangement. Obviously it’s great that they noticed but this would severely limit the attractiveness and scope of application of employee shareholder status.
Employers are still waiting for detailed rules on the terms of such shares. There is nothing new here – carry on.

Fuel duty

The Government has cancelled the 3.02 pence per litre fuel duty increase that was planned for 1 January 2013. The increase planned for April 2013 will now be deferred until September 2013. Future escalations will be implemented in September each year rather than April.

Tax avoidance measures

There was much trumpeting of the fiscal benefit of the UK-Swiss tax repatriation agreement. This has now been agreed in both parliaments and is calculated to be more than £5 billion over six years, including settlements, penalties and withholding tax revenues.

Four further specific avoidance schemes were targeted and George reiterated a commitment to introducing the General Anti Abuse Rule in 2013. He also listed a wide range of other initiatives designed to address the recent media furore mentioned above with Starbucks, Google and Amazon. A formal offshore evasion strategy will be published in 2013 – no, not how to do it, rather how they will stop it. Issues as widely disparate as evasion, avoidance and aggressive planning will be covered.

As a measure of how seriously he takes this issue, George announced that HMRC would escape the general cut in other Whitehall budgets and awarded them an extra ┬ú1bn of resources. With this they are expected to do great things including establishing a Centre of Excellence on offshore tax evasion. Strange that – the recent Select Committee sessions appeared to suggest that the UK already had one of those!
George announced that the Government won’t proceed with their 2012 proposal to deal with personal service companies. Apparently ┬áthey believe that HMRC’s new approach to policing IR35, together with the measures introduced in the public sector, are sufficient to prevent any tax loss resulting from employment which is disguised in this way. So no problem there with any public sector “employees” who are using companies? Yeah, right.

And finally….

The Government will set up the “Office for Unconventional Gas” – you heard it here first! This is part of its “drive to maximise economic production from natural gas resources, and consult on the tax regime for shale gas”. At least that’s what George said – but I think we all know better.

As ever, please call Princess Bernice (It is worth clicking that link, honest) or any other member of the Riley Tax Team if you have any questions or comments. You can get them on 01752 203651 or

Jon Stacey

Princess Bernice

December 6th, 2012

During December Princess Bernice, our tax partner has offered to wear her tiara in the office and to client meetings. Normally only known to wear her tiara and wand at weekends, Bernice has agreed to do this in exchange for donations to Hannah’s from members of the Riley team.

Princess Bernice with tiara & wand for December

Anyone who would like to support Princess Bernice, please donate through the link above and let us know you have done so. We’d like to know that she┬áhasn’t been ridiculed in vain.

Princess Bernice with tiara & wand for December

3 August 1995………

October 16th, 2012
Yup, 3 August 1995 was when this article was written. I found the yellowing paper when I cleared out a file of newsletters (I know, you shouldn’t start) when we had a recent seating change. Sure, stylistically I wouldn’t write the same way now but the message is pretty strong and very relevant still…….
The recent flurry of government statistics and parliamentary announcements are alleged to show that the latest recession has finally bitten the dust.

However, before jumping head-first into the next part of the interminable economic cycle, it is worth considering the businesses that survived the recession and the reasons for their success.

The most successful of our clients are those that recognised that they were in a recession and┬áadjusted budgets and expectations (such as drawings) early enough to cope. The same clients┬áhave used the recession to gain quality assurances such as BS 5750 (I know we’re on ISO 9000 series now) and improve systems and┬ástaff training in anticipation of the eventual recovery.

Of course, they have also looked critically at their cost structures, staffing and systems such as credit control as have all businesses. The important point to note is that these businesses are now in the perfect position to take advantage of new opportunities without fear of over-trading. The key to this level of anticipation lies in corporate planning.

To be successful in business over a number of years requires a goal. Planning and the application of strategy are of fundamental importance in both the achievement of that goal and the┬ácontrol of the business while ÔÇ£en routeÔÇØ to it.

Some business people may baulk at this point; justifying this by saying that they are too small to benefit from corporate planning. However, do not be put off by the name, from the largest international company to the smallest one man business, establishing targets and planning for their achievement is essential to success.

Increasing emphasis has been placed by successive governments on the small firm sector as an important constituent of economic growth. Estimates suggest that only 10% of business start ups survive the first five years. By contrast, in franchise operations where corporate plans are nearly always established before business commences, the success rate is said to be nearer to 90%. It seems likely that the firms that are going to survive are the ones that plan their future growth most carefully.

More than any other sector, small firms suffer from the┬átendency┬áto adopt the ÔÇ£seat of the┬ápants approachÔÇØ to manage their affairs. During times of stress or┬árecession, this deteriorates┬áeven further into ÔÇ£crisis managementÔÇØ where the firm lurches uncontrollably from one crisis to┬áanother. The attitude that long-term planning is a luxury that only larger firms can afford,┬áholds back the small business.

Despite the inevitable complications that are placed around it, corporate planning is, in fact, quite simple. corporate planning is the process of getting your business from its current position to where you want it to be at some time in the future. In order to do this, you will need to answer three seemingly simple questions:

Where are you now?

Where do wish your business to be in the future?

How are you going to get there?

The answers to these questions are time consuming to produce but afford the planner a unique view of the strengths, weaknesses, opportunities and threats associated with their business and the ability to utilise these factors to achieve their goals.

Family business – Japanese style

September 20th, 2012

What do you do when there is no male line to pass the family business on to? In Japan, the solution is to “adopt” a son-in-law to run it. It’s an interesting cultural divide described a recent BBC article here.

All pigs are equal says George (not Orwell)…

May 3rd, 2012

During his Budget 2012 speech, George Osbourne became pretty exercised about “aggressive tax avoidance”, calling it “morally repugnant”.

Obviously, the whole world stepped back, took notice and addressed their plans in such a way as to ensure that they were trying to match the incredibly high moral standards set by our government and its civil service servants.

Apart, obviously, from the government and the civil service who have continued to allow public sector officials to be paid through service companies to avoid payroll taxes – see article in the Guardian today.

Now that it’s been brought to their attention (as if they hadn’t approved the policies in each case anyway) they will do something about it (until the media heat wanes and they can find another way).

Now, where’s my copy of Animal Farm?

The Riley take on Budget 2012

March 23rd, 2012

I would have thought it unlikely that we would see the term “Granny tax” trending on Twitter but that’s what George managed to achieve yesterday.┬áNick Clegg had claimed in the pre-briefings that this year’s budget was the “Robin Hood” budget, taxing the rich to pay the poor. But George Osborne wasn’t quite listening properly when he said that and has proceeded to tax the old to pay just about everyone else! OK, so that’s a bit of a sweeping generalisation but it will be one of the lasting impressions left by the Budget of 2012. Robert Peston says, “It’s easier to tax pensioners than rock stars” and Nick Robinson commented that “Tony Blair once compared angry pensioners to “rottweilers on speed“. He learnt the lesson that in a battle between the old and any politician there is only ever one winner.”

The other is that feeling that in common with many budget speeches this was one in which what was said at the despatch box was very different to what had been written in the technical releases – so the impact of what George said lasted all of five minutes.┬á┬á

Here’s a summary of the main changes announced;

Corporation Tax

  • The main rate of corporation tax is to be reduced by an unexpected 1% to 24% from 1 April 2012 and by 1% annually for the next two years to end up at 22%, the small companies rate remains at 20%, no benefit for SME’s with annual profits below the ┬ú300,000 limit.
  • No changes were announced to any of the thresholds for profits at which the different rates kick in.
  • R&D tax relief for SMEs has been increased to 225% from 1 April 2012 and an “above the line credit” will be introduced for large businesses from April 2013, with a minimum rate of 9.1% before tax and payable credit for companies making losses.
  • Don’t forget (as if you could) that the Patent Box rules are phased in from April 2013 to produce a 10% future corporation tax rate on profits from qualifying patents.
  • The 100% capital allowances on plant and machinery have been extended to some Scottish & Welsh and London Enterprise Zones from 1 April 2012 (but not in all Enterprise Zones including Newquay).
  • Significant oil and gas tax changes were announced relating to new fields and decommissioning to secure additional investment in the UK. Perhaps this reflects the “raid” George made in 2011 when he was even shorter of cash – cynical? Moi?
  • Apparently the film tax credit approach has been so successful that it is to be mirrored for video games, animation and high-end TV production from April 2013. The aim being to make the UK the world leader in these fields.
  • It may have slipped your notice but it appeared earlier in this section that the cut in corporation tax could also benefit the nations’ favourite workers, the “greedy bankers” as the tabloids would characterise them. But “never fear, George is here” – he had thought that one through and the bank Levy will be increased to 0.105% from 1 January 2013 to counteract the benefit of the additional corporation tax rate reduction.
  • The government announced a consultation on the potential role for social housing Real Estate Investment Trusts (REITs) to support investment in this sector.
  • The Government confirmed that Finance Bill 2012 will┬ácontain the final draft of the new Controlled Foreign Company (CFC) rules. This marks┬áthe conclusion of a Government programme, which started┬áin 2007, to modernise the rules for the taxation of foreign┬áprofits and make the UK more attractive to international┬ábusiness. It’s all about challenging “the artificial diversion” of┬áprofits from┬áthe UK and includes such gems as┬áÔÇÿall out unless inÔÇÖ and the┬áeye-catching Partial┬áFinance Company Exemption (PFCE). Please can someone phone Bernice about these as the rest of us won’t talk to her about it and she gets grumpy if she can’t talk CFC at least once a day.┬áThe new rules will apply for accounting periods beginning┬áon or after 1 January 2013.
The majority of the changes are wholly beneficial for business and should be welcomed. The government are obviously adopting a clear policy of backing industries where UK business has already developed a competitive advantage. Many of these policies should encourage further investment. However, in amongst all the comment the clear view appears to be that most businesses, SME’s in particular would rather have seen a 1% cut in the Employers NIC burden to encourage employment than a 1% cut in corporation tax particularly as only the large company rate has been reduced.

Capital allowances

  • No further detail was announced in Budget 2012 on the┬ánew rules relating to fixtures. We are still expecting the new┬álegislation to be published in Finance Bill 2012 which will┬átighten the rules on claiming capital allowances on fixtures┬áin a second hand property, effective from April 2012. The┬áchanges principally introduce a time limit for identifying┬áqualifying expenditure and a prescribed method of valuing┬áthat expenditure.
  • The 100% first year allowances for low emission cars┬áwill be extended for 2 years beyond the current expiry┬ádate of 31 March 2013. Don’t worry though, it’s not a simple give-away as the qualifying┬áthreshold will be reduced to 95g/km (down from┬á110g/km) from April 2013 to match EU emissions┬átargets for 2015. So┬ábusinesses can claim heightened allowances on any┬ásuch purchases until at least March 2015, but it┬áwill be more difficult to meet the requirements to be┬ágranted the accelerated relief.
  • The emissions threshold on “big” cars on which a business can only claim reduced┬áwriting down allowances (8% rather than 18%) will be┬áreduced to 130 g/km (down from 160 g/km) from April┬á2013 to match EU emissions targets for 2020. The┬áassociated lease restriction will also mirror this new┬áreduced threshold. So for business buying expensive, polluting cars, this will mean reduced capital┬áallowances for cars which┬áfall above this new threshold.
  • For those of you about to commence the building works on a┬ágas,┬ábiogas and hydrogen refuelling stations (and I know a number of you are), you’ll be pleased to know that the availability of 100% first year allowances for these will be┬áextended for two years beyond the current expiry date┬áof 31 March 2015.

Other business tax issues

  • The company car benefit in kind charge on which tax and┬áClass 1A NICs is based is calculated on a┬ápercentage based on the level of CO2 emissions, multiplied┬áby the list price of the car. Currently these┬árange from 5% to 35%. The Budget announced increases in┬áthe percentage, an increase in the cap from 35% to 37% in 2015/16,┬áand also a withdrawal of the diesel supplement from 2016/17.

    Perhaps this is the time to review your company car policy to take these changes into consideration and check whether cash alternatives or other measures should now be introduced for company car drivers.

  • Employees who are provided with free fuel for private┬ámotoring by their employers suffer a benefit in kind charge┬áon which tax and Class 1A NICs charges are based.┬áThis┬ácharge currently ranges┬ábetween ┬ú940 and ┬ú6,580. For 2012/13 this will increase to┬ábetween ┬ú1,010 and ┬ú7,070. For┬á2013/14┬áGeorge intends┬áto increase the fuel benefit charge again but he won’t┬áconfirm the level of increase until autumn 2012 just to keep your interest levels up. I can tell it’s not really working is it?
  • Now I know you’ve all been waiting for me to mention the QROPS – you know, the┬áQualifying┬áRecognised Overseas Pension Schemes rules so here we go.┬áTax-free transfers of UK pensions to overseas pensions┬áhave been permitted under the QROPS rules since 2006,┬ábut HMRC has been getting ever stroppier about abuses,┬ágenerally involving pension funds being released early and┬ánot used for retirement purposes. So they have now tightened up the rules on transfers with more rigorous reporting and transfer┬áprocedures. These include the terrifying requirement that the┬átransferring member signs an HMRC form to acknowledge┬áthat there may be dire tax consequences if the rules are┬ánot followed!
  • HMRC are aware that some employers have been making┬ápension contributions into their employeesÔÇÖ family┬ámembersÔÇÖ pensions as part of their remuneration package┬áto obtain tax and NICs advantages typically using┬áa Self Invested Personal Pension.┬á┬á- surely not? Anyway, George is going to stop that party with┬álegislation┬áin Finance Bill 2013.
  • Following the Office of Tax Simplification (OTS) review of small┬ábusiness taxation, the government will consult on┬áintroducing a voluntary cash basis for accounting for unincorporated┬ábusinesses up to the VAT registration threshold (currently┬á┬ú77,000), with a view to introducing legislation in Finance┬áBill 2013. The proposals include a simplified expenses┬ásystem for business use of cars, motorcycles and home. In our opinion anyone running a business should be aware of what they owe and are owed, how else can they run their business? However, there could potentially be a tax advantage to adopting the proposed new system but we’ll have to see what the OTS produce. Is it my imagination that the OTS sounds remarkably like “otiose” – definition:┬á”serving no useful purpose”?

Income tax

  • As announced last year, the personal allowance is to increase to ┬ú8,105 from 6 April 2012 but this is being funded by a corresponding reduction in the higher rate threshold.
  • The new announcement was that from 6 April 2013, the personal allowance will increase by ┬ú1,100 to ┬ú9,205 but only a quarter of this additional benefit is being passed on to higher rate taxpayers. This means that although 800,000 earners drop out of the tax system at the bottom, 300,000 are also pushed into the 40% band by the reduction in that threshold – you know the rules, “he giveth with one hand and with the other he takes away”.
  • And so to the “Granny tax” – from 2013/14 the higher income tax personal allowances┬áfor the over 65’s are to be restricted. For 2012/13┬áthe allowance of ┬ú10,550 is restricted to those born after┬á5 April 1938 and before 6 April 1948. The allowance of┬á┬ú10,660 for 2012/13 is restricted to those born before 6┬áApril 1938.┬áFrom 2013/14 it is proposed that these allowances will not┬ábe increased and that people born after 5 April 1948 will┬áonly be entitled to the normal personal allowance of┬á┬ú9,205. George is obviously┬átrying to support the goal┬áof a single personal allowance for all taxpayers┬áregardless of age and spread tax relief equally across┬áworking age people and pensioners.
  • No changes were announced to basic (20%) or higher (40%) rates of tax, or to the tapering of personal allowances on earnings over ┬ú100,000.
  • However, the 50% rate has been reduced to 45% from 6 April 2013 as it has “damaged the economy and raised next to nothing”. The price George paid for this with his coalition “partners” is shown in the additional personal allowance and the stamp duty changes below. These changes mean that the new effective top rate for tax on dividends will be 30.6%.
  • Surprisingly for many commentators, no changes were announced to pension contributions tax relief.
  • You’ll all be pleased to know that from April 2014, HMRC aim to provide a new Personal Tax┬áStatement, which will be available to all individuals who┬áfile their Self Assessment return online. It will detail how much tax and┬áNational Insurance taxpayers have paid, the average rate┬áof tax paid and, joy of joys, explain how those deductions contribute┬áto public expenditure. In our opinion this will just wind up the majority of tax payers who open the envelope, rail against the levels of wasteful expenditure and then throw it in the bin.
  • A summary of the responses to consultation and draft legislation for the Statutory Residence Test to be published shortly. I’m sure they said that last year too?
  • Now here’s a strange one. George proposes to put a cap on the total ┬áamount of income tax reliefs that an individual may claim┬áfrom 6 April 2013. It is proposed that a limit will be set at┬á25% of income on all uncapped income tax reliefs for┬áanyone seeking to claim more than ┬ú50,000 of reliefs. Apparently, the cap is designed to prevent individuals with potentially┬álarge income tax liabilities from utilising the array of┬áincome tax reliefs currently available to substantially┬áreduce or eliminate their income tax bill. We’re not really sure how this will work yet but draft legislation will be available for consultation later in┬áthe year, with a view to the measures being introduced┬áfrom 6 April 2013. The proposals should not apply to reliefs┬áthat are already capped such as pension contributions, EIS┬áor VCT.
One of the reasons for the very low collections of tax at 50% has been the ability of many business owners to defer payments to themselves to future tax years. No doubt there will be further deferral where possible until after 6 April 2013. It appears quite clear that the 45% rate will be removed as soon as they have an opportunity to do so.
While there is obviously relatively good news for those at the lower end of the tax ladder but those around the higher rate threshold will be remembering why the press has dubbed them the “squeezed middle”. And those earning ┬ú100,000 will be wondering how their marginal rate of tax is still remaining at 62%. Meanwhile, older members of society are already questioning what the hell is going on in a sector that has traditionally been protected from George’s beady eye.

National insurance

  • No changes announced to main rates.
  • Detailed consultation on integrating the operation of NIC and income tax to be launched in April 2012. We all thought they were going to do this last year but no, far better to have an even longer consultation. Why not just get it over and done with and just merge the two taxes. After all, unless the NIC is hypothecated for pension purposes, (yeah, right!) what’s the point?

Capital gains tax

  • No change to headline 18% or 28% rate
  • Entrepreneurs’ Relief remains at 10% on lifetime qualifying gains of ┬ú10m.
  • The Enterprise Management Initiative individual grant limit is to be increased to ┬ú250,000 of options and the qualifying conditions have been relaxed.
  • Entrepreneurs’ Relief will be extended to gains on shares acquired through an EMI option in 2013.┬áThis effectively means that gains on options will be taxed at the lowest rate of 10% after the one year holding requirement has been met – there is no proposal to relax this time limit.
  • CGT will apply to gains on UK residential property held by overseas companies from April 2013.
The extension of Entrepreneurs’ Relief to EMI shareholdings is very welcome given the still very real difference between income tax rates at 45% and CGT with Entrepeneurs Relief at 10%. And the general extension of the EMI thresholds and some criteria will be useful if it’s not curtailed by often complex qualifying criteria.
The planned extension of CGT to property gains will require many to re-evaluate ownership structures and plan accordingly.

Stamp Duty Land Tax

  • No changes announced to the pre-existing rates and thresholds.
  • The avoidance of SDLT through what’s known as “Sub-sales planning techniques” to be blocked from 21 March 2012 and further avoidance schemes may also be blocked from that date.
  • 7% SDLT will apply from 22 March 2012 to residential properties costing over ┬ú2m.
  • 15% SDLT will apply from 21 March 2012 to residential properties costing over ┬ú2m that are held within a company, with consultation to introduce an additional annual charge from April 2013.
  • Clear warning not to plan around the new rules or face the consequences.
This is the major tax increase for “rich” property buyers and, potentially owners, and will require reviews of the ownership structures of all significant holdings of UK residential property. It was not unexpected, should prove easier to collect than 50% income tax, and yet again the new rates have been designed to deter planning. Whether this (coupled with the reduction of the top tax rate) will raise the much vaunted five times the amount that the 50% band raised is obviously open to speculation. Apparently these changes will spur behaviour changes amongst the “rich” – I think that this is highly unlikely.

Inheritance tax

  • No change announced to headline 40% rate.
  • Threshold remains at ┬ú325,000 (frozen until 5/4/15).

Indirect tax

  • All VAT rates are unchanged but the registration threshold has been increased to ┬ú77k from 1 April 2012.
  • A measure will be introduced to ensure that all sales of┬áhot food (with the exception of freshly baked bread) are┬ástandard-rated. This is acceptance by HMRC that their interpretation of the current rules has been wrong and will encourage claims by businesses under the old rules.
  • Other VAT anomalies will be reviewed so that the same rate applies to all similar goods and services. These include sports drinks, hairdressers “rent a chair” schemes and self-storage.
  • The rates of Machine Games Duty have been announced,┬áand these will be┬á5% for machines where the stake is no more than 10p┬áand the maximum prize is ┬ú8; and┬á20% for all other machines. These┬árates are higher than was expected and many say they will┬áhave an adverse effect on the Industry as a┬áwhole. Many pubs will become partially exempt and┬ápotentially have to restrict their VAT recovery under┬áthe partial exemption rules.
  • Further reviews of loopholes will be undertaken.

Other tax announcements

  • The Government announced in Budget 2011 that it is┬ácommitted to keeping the legislation for Personal Service Companies (PSCs) or┬áIR35 as we know it. In Budget 2012 George announced that a┬árange of measures will be introduced to tackle IR35┬árelated tax avoidance, including the strengthening of┬áspecialist compliance teams (more IR35 attack dogs) and the simplification (unlikely!) of the┬áadministration of IR35.┬áIt has also signalled that in Finance Bill 2013 measures will┬ábe introduced requiring office holders or ÔÇÿcontrolling┬ápersonsÔÇÖ who are integral to the running of an organisation┬áto have PAYE and NICs deducted at source by the┬áorganisation which engages them.┬áThis measure follows recent high profile examples from right under their own noses in the┬ápublic sector – unbelievable that these had been “approved” too! Potentially, the largest┬áimpact could be for employers who currently have┬áexecutive or non-executive directors on the board who┬áoperate via a PSC. This will further complicate┬ácompliance, as at present an employer may have a PAYE┬áand/or NIC liability if a PSC is registered offshore, or if┬áit is the individual and not the PSC that is registered┬áwith Companies House as a board member. Following┬áthe introduction of this measure the employer may have┬áa PAYE/NIC liability regardless of how the board member is “engaged”.
  • George has taken just about as much flack as he could take on the withdrawal of child benefit and has decided that enough is enough. He’ decided to remove the previous “cliff edge” proposal and introduce a much more gentle slope to oblivion instead.┬á
    Under the new proposals, from 7 January 2013 any┬áindividual whose income exceeds ┬ú50,000 and who is in┬áreceipt of child benefit will be subject to an additional tax┬ácharge. The charge will also apply to any taxpayer whose┬áincome exceeds ┬ú50,000 and whose partner is in receipt of┬áchild benefit. And if both partners have an income that┬áexceeds ┬ú50,000 the charge will apply to the partner with┬áthe higher income.┬áThe charge will be 1% of the amount of child benefit for┬áevery ┬ú100 of income that exceeds ┬ú50,000 so that the┬ácharge will equal the full amount of the child benefit┬áwhere a taxpayerÔÇÖs income exceeds ┬ú60,000. While this is better than the previous proposal, it’s pretty obvious that the aforementioned Office of Tax Simplification didn’t have a lot to do with it! Perhaps they were “at lunch”┬áon that day…
  • There are various anti-avoidance measures relating to both Life Insurance policies and excluded property trusts. They’ve had a go at both these before and failed. This is their attempt to deliver the final death knell and I’m sure we all wish them well with that.
  • Surely you are all the beneficial owners of┬áundeclared funds in Swiss bank accounts? If that’s true,┬áyou will be subject to┬áa one off levy on your Swiss funds. This levy will be┬ábetween 19% and 34% of the funds held.┬áAdditionally, undeclared accounts will also be subject to a┬ánew withholding tax from 1 January 2013. The rates of the┬ánew withholding tax are 48% on investment income, 40%┬áon dividends and 27% on capital gains.
  • A General Anti-Abuse Rule will be consulted on, introduced, and legislated in FA2013 as expected.┬áA GAAR could make it easier for HMRC to more┬áeffectively deal with the most aggressive of tax┬áavoidance schemes. This is in line with the approach that HMRC are taking and illustrates the difficulty of defining the gap between their┬áperceptions of tax evasion, tax avoidance and aggressive┬áplanning. George did get pretty exercised during his speech on the whole “abuse thing” and called it “morally repugnant” while warning of dire consequences for those undertaking it. We think he’s been reading too many┬áDaily Mash articles ourselves.

How widely drawn will the GAAR will be? Well, we will have to wait and see but if it’s too far reaching, it’s┬ádifficult to see how it can be sensibly introduced┬áwithout some form of clearance mechanism to give┬ácertainty for taxpayers. Other GAAR’s overseas are regularly ruled to be┬áineffective by the court system, often because they are too widely┬ádrawn. George says that the proposal is not aimed at legitimate tax planning such as disposing of┬áassets in an efficient way for capital gains tax. Our expectation would be that if there is a legitimate explanation, or valid commercial reason for a tax relief being┬áutilised, we would not expect this to be targeted by the GAAR but we wait, with bated breath, for the details of the proposal. No really, we do!

And finally

It was revealed on Tuesday that the average purchase on civil servants’ credit cards is ┬ú184. In two thirds of the audited transactions, no one could find a receipt or invoice to support the claim. Since all businesses have to keep their supporting receipts for seven years, I’m not quite sure why civil servants are allowed to file theirs in the bin. This is of course the trouble with transparency: behaviour only improves after it has been scrutinised and found wanting, and sometimes not even then!

As always, please give us a call to discuss anything arising from the text above or indeed other coverage of the budget. We, especially Bernice (01752 203651) and Nicola (01752 203600) have been trolling through the legislation and guidance as it’s being released and would welcome any excuse to talk to a real person.


The Chancellor’s Autumn Statement 2011

December 1st, 2011

Last week┬áThe Economist said that the Chancellor had made it clear that he does not regard The Autumn Statement “as a ÔÇ£fiscal eventÔÇØ where spending and tax changes are announced; that will be saved for the budget in March. But it is a political set-piece all the same. So the chancellor will try to knit together a variety of small, fairly cheap policy strands, such as measures to help small businesses with credit, into a coherent growth strategy. Given the unfolding catastrophe on BritainÔÇÖs doorstep, it is likely to look threadbare.”
Well, George delivered the 2011 Autumn Statement and guess what, it does. He hasn’t really wavered from the path he set out last year despite the dramatic change in economic circumstances in the UK and European economies. In true KISS style, he made no adjustment to overall spending and borrowing, saying ÔÇ£people know that promises of quick fixes and more spending this country canÔÇÖt afford, at times like this, are like the promises of a quack doctor selling a miracle cureÔÇØ. Too true, but sometimes it might be useful to at least float something that looks like a duck to encourage a positive attitude!

What he did announce were initiatives to drive private sector growth and further restrain the cost of the public sector in response to the OBRÔÇÖs forecasts. In contrast, as expected, there were few tax announcements.

But don’t go away because there were a few important surprises, which are highlighted here.

Corporate tax system

There was, as usual, much “guff” about the GovernmentÔÇÖs commitment to develop the most competitive corporate tax regime in the G20 (jam some time in the future), much trailing of next yearÔÇÖs reduction in the mainstream rate to 25% (jam tomorrow) and the draft foreign profits legislation to be released in early December (jam next week!).

He also announced that 100% capital allowances would be available for plant and machinery investment incurred between April 2012 and March 2017 in six English Enterprise Zones:┬áBlack Country,┬áHumber,┬áNorth Eastern,┬áSheffield,┬áTees Valley,┬áLiverpool but, as you will all have noticed, nothing in the South West. Apparently, discussions between the Government and the devolved administrations may lead to enhanced capital allowances becoming available in other UK Enterprise Zones….don’t hold your breath.

Large companies also get an opportunity to argue their position for R&D tax credit extension as a consultation will commence at Budget 2012 to introduce an ÔÇÿabove the lineÔÇÖ tax credit to encourage research and development activity. This is intended to enhance the measures announced in Budget 2011 to “increase the generosity and accessibility of R&D tax credits for┬áSMEs”. No details have been announced at this stage.

Perhaps surprisingly, relatively little new corporate tax anti-avoidance legislation was announced. Measures mainly concentrated on “manufactured overseas dividends” which cannot be used to obtain repayment or set off of income tax not paid over to┬áHMRC┬áand clarification of the amount of tax relief given to employers making asset-backed pension contributions to registered pension schemes.

Bank Levy

The Chancellor confirmed his opposition to the European proposals for a Financial Transactions Tax, referring to it as a tax on pension funds rather than a tax on bankers. Did I hear anyone mention the abolition of ACT?

He also basically admitted that the Treasury had “misunderstood” the structure of the UK banking market as they had expected foreign banks operating in the UK to raise capital in the UK. They don’t. Therefore tax collections from the Bank Levy are falling short of the targeted ┬ú2.5bn pa. The effective full rate of the Bank Levy from 1 January 2012 has therefore been increased from 0.078% to 0.088%, raising an additional c. ┬ú0.3bn pa.

Income tax and capital gains tax

From April 2012, in a further significant improvement to the Enterprise Investment Scheme, 50% income tax relief will be provided in qualifying new start ups of up to ┬ú100,000, regardless of the investorÔÇÖs marginal rate of income tax.

This new Seed Enterprise Investment Scheme (SEIS┬á- note the new acronym) may be more “major headline” than “major new tax incentive”, however, as individual companies are restricted to a cumulative investment limit of ┬ú150,000 (what will this be net of the due diligence costs I wonder?) and the budgeted cost is a mere ┬ú50m in year one. It is also subject to state aid approval as usual from Europe.

A capital gains tax holiday will be offered for investments made to the SEIS. This will provide for CGT exemption on gains realised on disposal of an asset in 2012/13 and invested through SEIS in the same tax year, giving overall tax relief of up to 78%.

There will also be consultations on relaxing connected person rules for the Enterprise Investment Scheme and anti-avoidance to prevent its general abuse. The £1m investment limit per company for Venture Capital Trusts will be removed to reduce the administrative burden of the scheme.

The above measures will largely be paid for by a freezing of the CGT annual exemption of £10,600 for 2012/13. Yup, many benefits go up by over 5% (due to the rate of inflation in September 2011) but the exemption is frozen.

Credit easing

It’s fairly obvious to most businesses that the “adverse credit conditions” in the euro area are having a knock-on effect for small and mid-size businesses borrowing from the clearing banks. In order to try and provide further support the Government is launching a range of support schemes which they reckon are worth up to ┬ú21 billion. There are two main schemes intended to improve the flow of credit to businesses.

The┬áNational Loan Guarantee Scheme┬áprovides funds of up to ┬ú20 billion of guarantees for bank funding over two years. This is intended to permit banks to offer lower cost lending to smaller businesses. This lending is subject to state aid approval. If you think that it sounds like the Small Firms Loan Guarantee Scheme or the Enterprise Finance Guarantee you’d be right – but surely we need another acronym to change our perception…..SFLGS,┬áEFG┬ánow┬áNLGS. I know, I know… there were many more before too but you get the message!

The second scheme is the Business Finance Partnership which will administer the remaining £1 billion of the credit easing funds being made available. This is to be available to invest in SMEs and mid-sized companies in the UK through non-bank lenders. Initially, these funds will be targeted toward co-investment with the private sector with loan funds that lend directly to mid-sized businesses.

In conclusion

We were expecting very little in the way of new announcements, and we were not disappointed. Nothing was said on the 50% rate of income tax or reliefs generally. There was an extension of business rate relief for small businesses until April 2013 and a ┬ú50 cut in water bills for families in the┬ásouth-west of England. And of course the headline grabbing suspension of the fuel duty increase which was due in January. The 3p rise planned for August 2012 will still stay. Perhaps he’s saving that little gem for the March 2012 budget.

A significant amount of draft legislation is due to be released on Tuesday 6 December – if there’s anything startling we’ll let you know once we’ve read it. Bet you don’t envy us that foray into the sparkling narrative from the Treasury!

If you would like to discuss anything you’ve read about the Autumn Statement or other issues, please give us a call. We’d love to hear from you.

“Accounting ahead of the curve”?

August 19th, 2011

Riley are the subject of an interview with Cloud Computing specialists BoxFreeIT in Australia.

You can find the article here.

Riley Go Ape!

July 11th, 2011

The Riley team had a day of fun at Go Ape! in Haldon Forest near Exeter.

The Riley team at Go Ape! 

Having fluked a great weekend for weather, the team turned up for a day of tree climbing, zip wires and some mild cases of panic. They all enjoyed a good day with groaning tables of food and drink.

Monday has brought tales of aching muscles and realisation of height fears never before suspected.

The guys completed all 5 courses in just under 3 hours and would go again like a shot!

Budget 2011 review

March 24th, 2011

“Forget the cuts, just fill up your petrol tanks” was the headline in the┬áGuardian this morning. While The┬áTelegraph weighs in with “Osborne puts fuel in the tank, but potholes lie ahead”. I personally wasn’t sure whether these comments were aimed at me or at Muammar Gaddafi until I drove into work this morning and discovered again the enormous pothole on the main road into Plymouth – perhaps it was aimed at us after all?

Having laid his strategy out in sweeping style in the Emergency Budget last year, Osborne maintained his route and refused to diverge from Plan A – cut, cut, cut to reduce national debt. This is slightly tempered by targeted reductions in tax where this will help to create what Osborne called a┬á”Britain carried aloft by the march of the maker”. Fine rhetoric for the country that invented the Airfix Kit.

The main changes:

Business Tax

  • The Emergency Budget in June 2010 announced measures to reduce the main rate of Corporation Tax from 28% to 24% through annual 1% reductions starting from 1 April 2011.┬áThe March 2011 Budget announced that the first rate reduction will be increased to 2% which means that the end rate will be 23% in 2014.
  • SME’s carrying out R&D activities are currently entitled to claim relief for qualifying expenditure so that, for every ┬ú100 of expenditure, tax relief of ┬ú175 is given. From┬á1 April 2011 relief of ┬ú200 will be available for every ┬ú100 of expenditure and from┬á1 April 2012 relief of ┬ú225 will be available for every ┬ú100 of expenditure. This is all subject to EU approval as it falls within the State Aid rules.
  • Businesses that invest in plant and machinery will, from April 2011 be able to elect for items to be treated as short life assets if they expect to sell or scrap them within eight years from the end of the accounting period in which it was acquired. Previously, short life asset elections were only beneficial where the useful economic life of the asset was less than four years.This is a useful relief as it provides significant mitigation against the reduction in capital allowance rates in recent years, given that many assets will have a useful life of less than eight years.┬á However, there are issues which might restrict the benefit to businesses in practice, in particular:

    – It is not possible to make short life asset elections for all assets.┬á Long-life assets, most cars and integral features are excluded – see, you thought it was too good to be true, and it was!
    – This measure will only be beneficial for businesses which spend in excess of the Annual Investment Allowance which is currently ┬ú100,000 but is reduced to ┬ú25,000 with effect from April 2012. Time to dust off your capital investment budgets and speak to your funders.

  • The enhanced capital allowances scheme provides 100% first year allowances for certain designated energy efficient plant and machinery. This year it is to be extended to include certain energy efficient, wait for it……….. hand dryers. Relax, breathe deeply, I know it’s exciting but just try to keep calm!┬áThe product list is updated annually and this new technology will be included from summer 2011.
    – This measure will only have an impact where capital expenditure is in excess of the Annual Investment Allowance
  • There is news of feed-in tariffs and renewable heat initiatives – if you’re interested in this please give Bernice a call. She knows all about it, honest.
  • 21 new Enterprise Zones are to be set up across the UK. One will be in London and Boris gets to choose where it goes – he’s got his┬ápin ready now! Apparently, in the future the scope for introducing 100% capital allowances will be considered – promises, promises.
  • Business premises renovation allowance – this relief was expected to be withdrawn with effect from April 2012 but the Government announced its intention to extend the relief for a further five years.┬áIt allows businesses to claim 100% tax relief on qualifying expenditure in certain disadvantaged areas when bringing disused commercial premises back into use.
  • Fixtures Mandatory Pooling – no, nothing to do with the hunt for toilet facilities after a heavy night, much more relevant to the elections property owners make on capital allowances claims – these are to be shortened rather than remaining at the generous “during the period of ownership” as currently exists.
  • CFC’s – no, not that stuff that used to be in fridges, Controlled Foreign Companies. There is to be a wholesale rewrite of the rules surrounding CFC’s which will come into the 2012 Finance Act. This yearÔÇÖs changes include:
    – An exemption for certain intra-group trading and service activities with little UK connection.
    – An exemption for CFCs whose main business is intellectual property (IP) exploitation but which have minimal UK connection.
    – Extension of the grace period from one year to up to three years, where a UK-parented group acquires or reorganises a foreign group resulting in foreign subsidiaries entering the CFC net.
    – Changes to the de-minimis exemption to increase the limit from ┬ú50,000 to ┬ú200,000 and amendment to the basis of calculation to an accounts-based measure.
    – Extension to the transitional rules for superior and non-local holding companies until July 2012.
  • Foreign Permanent Establishments -┬áThe Government announced that Finance Bill 2011 will contain legislation to exempt the profits of foreign branches of UK resident companies.
  • Patent Box -┬áA longer-term reform scheduled to apply to relevant patent income arising from 1 April 2013.┬áThe aim is to encourage investment and innovation in the UK by providing a reduced 10% corporate tax rate for profits from certain patents.
  • Foreign Exchange schemes, Group mismatch schemes, Accounting derecognition schemes, Corporate Gains de-grouping, Value shifting, Depreciatory transactions, Pre-entry losses and Index-Linked gilt-edged securities – all schemes targeted by anti-avoidance legislation introduced today.
  • And if you’re thinking of issuing Sharia Compliant Bonds, you’ll be disappointed to hear that┬á”the unintended tax consequences of companies issuing certain sukuk bonds will be reversed with retrospective effect.” Interested in Sukuk Bonds? You’ll needSukuk News then.
  • There are to be changes in the way that accounting regulations disclose lease agreements in company accounts. The tax regulations have been changed to ensure that there is no change in tax treatment arising from this.
  • Small companies Corporation Tax rate and associated companies.┬áProvisions will be included in Finance Bill 2011 to ensure that companies are not treated as associated solely by virtue of (sometimes quite distant and difficult to monitor) relationships between shareholders and relatives. A level of commercial inter-dependence between the companies themselves will also be required to justify associated treatment in these circumstances. We await further guidance on how commercial inter-dependence will be interpreted but this has to be good news for many complex groups and will probably reduce the numbers of associated companies and therefore reduce the effective corporation tax rates paid.
  • Film tax relief is due to expire in 2012 due to the EU state aid rules – they’re going to go for something called “renotification” to enable its retention.
  • Banks – continuation of the bashing through bank levy
  • Oil & gas – new bashing due to fuel stabiliser – they get an increase in tax of 12%, we get 1p off at the pump – yeah, I know it’s a bit simplistic but even so…..
  • There are some slightly more esoteric changes to Stamp Duty Land Tax and the structure of REIT’s for property purchase and building but, to be honest they’re not that interesting.

Employment taxes

  • There were no changes to the rates announced in the June 2010 Emergency Budget. See our comments┬áhere
  • There will be a consultation on the integration of Income Tax and NIC – this has got to be sensible but could result in a high headline rate of IT!
  • IR35 – retained, simplified and now with a dedicated pre-transaction helpline, guidance and specialist teams.
  • Approved Mileage Allowance payments – This has been 40p per mile since the time of the great flood but from 6 April 2011 will be 45ppm for the first 10,000 miles. Other rates are remaining the same – that’s 25ppm and 5ppm for passengers which will be extended to include volunteers from 6 April 2011.
  • Employer supported childcare – tax relief for 40% and 50% tax payers to be restricted for new scheme joiners after 6 April 2011 to ┬ú28 and ┬ú22 respectively. Queue nicely now, we’re not in France you know!
  • Company car taxation -┬áThe Finance Bill 2011 will include a measure to freeze the company car tax charge for cars with CO2 emission levels of less than 95g/km at the current rate of 10%. However cars with CO2 emission levels between 95g/km and 219g/km will see a 1% percentage increase from 2012/13.
  • Company car and van fuel charge benefit – the company car rate is based on a fixed amount of ┬ú18,000 (producing a tax bill of between ┬ú1,800 and ┬ú6,300). The van rate is based on a fixed a charge of ┬ú500. These rates will be increased to ┬ú18,800 and ┬ú550 from 6 April 2011 which means that company car and van drivers with the benefit will have to drive more private miles for the benefit to be worthwhile – nice of the Chancellor to encourage a reduction in fuel use!
  • Disguised remuneration -┬áProvisions will be introduced to impose charges to income tax under PAYE and NIC where employers use arrangements that provide loans, reward or recognition through third parties.┬á The measures are targeted at employers who use employee benefit trusts (EBTs) and employer financed retirement benefit schemes (EFRBS) as a means of structuring remuneration packages and are aimed at schemes offered by various accounting firms.

Personal taxes

  • The Chancellor is still aiming at a personal allowance of ┬ú10,000 per person so as a step along that route the PA for the under 65’s for 2012/13 will be increased to ┬ú8,105 – but the basic rate of tax threshold stops at ┬ú34,370.
  • CGT – the annual exempt amount will be increased from ┬ú10,100 to ┬ú10,600 from 6 April 2011. That’s ┬ú140 in tax saving. From 6 April increases will be governed by CPI, not RPI.
  • Entrepreneurs’ Relief -┬áThe rate of CGT on gains qualifying for ER remains at 10 per cent, but the lifetime limit for ER is to be doubled from ┬ú5m to ┬ú10m for gains made on or after 6 April 2011.The doubling of the lifetime limit could lead to a maximum CGT saving for a husband and wife of ┬ú3.6m.

    It is therefore even more vital that owners of a business/company review their specific situation, to ensure that they will fulfil all the qualifying requirements on a disposal of their business/company, in order to obtain the optimum ER tax benefits. It is, unfortunately, very easy to fall foul of one or more of the many legislative provisions. If you think that this could be relevant, please call either Bernice or Nicola on 01752 203600.

  • The IHT nil rate band has been frozen at ┬ú325,000 until April 2015 and the headline rate remains at 40%. Also, where 10% or more of the estate is left to charity, there will be a 10% reduction in the IHT rate to 36%.
  • The Chancellor announced a consultation on residence and domicile – if you don’t know where you live you can call 11 Downing Street and they will tell you!
  • Non-doms who have been UK residents for 12 or more years will pay ┬ú50k per year rather than the ┬ú30k previously charged. I’m sure that this will make a massive difference to the tax take from this measure – Not! Oh, and this won’t take effect until 2012 either.
  • The maximum value of benefits an individual or company can receive through a charitable donation under Gift Aid of more than ┬ú10,000 has been increased from ┬ú500 to ┬ú2,500.┬á The benefit still must not exceed 5% of the gift.┬á This applies to donations made on or after 6 April 2011 by individual donors and accounting periods ending 1 April 2011 by corporate donors. This should encourage individuals and companies to donate to charity.
  • Junior ISA’s are to be introduced in Autumn 2011 to compensate for the removal of the Child Trust Funds in the June budget
  • The rules relating to the taxation of furnished holiday lettings (FHL) are to be amended from April 2011 following a period of consultation.┬á It was originally proposed that the rules should be extended to qualifying properties anywhere in the European Economic Area (EEA) and then abolished.┬á The rules will now be retained but with modifications as follows;
    – From April 2011 loss relief may only be offset against┬áincome from the same FHL business.
    – UK losses can relieve UK FHL income only and similarly with EEA losses.
    – From April 2012 a property must be available to let for 210 days (previously 140) and actually let for 105 days (previously 70) in a year
    – Having met the ‘actually let’ condition in one year businesses may elect to be treated as meeting it in the next 2 years if certain conditions are met.
  • No changes to the pension contributions rules announced in June 2010 so relief on contributions is reduced from ┬ú225k pa to ┬ú50k pa. Lifetime allowances reduced from ┬ú1.8m to ┬ú1.5m from 6 April 2010.
  • Pensions taxation -┬áAs expected, the requirement for members of registered pension schemes to buy an annuity by the age of 75 is removed from April 2011.┬á Those who choose to draw a pension income directly from their fund rather than purchase an annuity will be able to continue to do so after age 75, with the pre-75 income limits continuing to apply.For all members, the tax charge on death for pension funds will become a flat rate of 55%.┬á This rate will apply to funds which are not used to provide a continuing income for a spouse.┬á This increases the charge from 35% to 55% for those who die before age 75, but reduces the charge from 82% to 55% for those who die aged 75 and over. That still seems extremely high but remember that these funds have been relieved on the way into the scheme.

    Lump sum benefits will not be subject to a tax charge for those who die before age 75 and had not previously drawn benefits.┬á However, the 55% tax charge will become payable on all funds remaining in the scheme if a member dies aged 75 or over. I’m reminded of one client who informed me he had booked the date he was going to die – I don’t recommend this as a strategy.

  • Pensions consultation introduced and 66 to be the age of retirement from 2020.
  • EIS & VCT – from 6 April 2011, ┬áincome tax relief raised from 20% to 30%. From 6 April 2012, EIS investment doubled to ┬ú1m but rules on what these companies can do and their size are tightened up.

VAT & other duties

  • Changes will be made to the Low Value Consignment Relief with effect from 1 November 2011.┬á The limit on which VAT will not be payable on goods imported from outside the European Union will be reduced from ┬ú18 to ┬ú15 per consignment – this means you will get less split deliveries from Amazon!
  • The VAT registration turnover threshold has been increased with effect from 1 April 2011 to ┬ú73,000, which is a larger than expected increase from the current threshold of ┬ú70,000.
  • Zero-rating will be removed from printed matter if it is supplied with a service that is liable to VAT at a different rate, but the supply of publications is made by a separate entity. This provision will only apply if the printer matter and services would have been seen as a single supply if they were supplied by the same person. This is aimed at the Telewest case decided at the Court of Appeal.
  • A VAT refund scheme will be introduced for academy schools to allow them to obtain a refund of any VAT that they are currently unable to recover as a result of them supplying education for no charge. The scheme will apply to purchases made on or after 1 April 2011. This will give the new academies parity with Local Authority controlled schools which enjoy VAT deduction under a special scheme.
  • Finance Bill 2011 will contain legislation to allow HMRC to proceed with and develop the newly announced Machine Games Duty, which will be a profits-based duty. This new duty will replace Amusement Machine Licence Duty, and any games played on machines liable to the new tax will become exempt from VAT.
  • All tobacco products that are manufactured or imported into the UK will suffer increased rates of duty┬áfrom┬á23 March 2011. Changes to EU legislation have allowed the Government to change the ratio of the price versus quantity for calculating duties charged on tobacco products, resulting in higher duty of budget brands. The Government has also increased the duty on hand-rolling tobacco by 12% above the Retail Price Index. ┬áSo, if you smoke rollies or cheap fags you’re stuffed!
  • Vehicle excise duty will be increased for certain higher emitting lorries
  • An increased rate of duty will apply to beer with a strength above 7.2% alcohol by volume (ABV) and a reduced rate of duty will apply to boy’s beer with a strength at or below 2.8% ABV.┬á Home brewing of beer will remain exempt from Beer Duty, and the new high strength Beer Duty. The changes will come into effect from Autumn 2011.

Administration & other guff

  • “Time to pay” arrangement extended. Crucially we would advise that businesses seek advice prior to defaulting on a payment date, help is available only to “viable businesses” with a “genuine business need” and business owners must be taking steps to rectify the situation with cost cutting and other approaches.
  • In certain PAYE non-payment situations security will be demanded and a criminal offence will occur if this is not forthcoming.
  • New penalties introduced for late filing of returns and late payment of tax – they’re not that different to the ones that already exist
  • Lots of anti-avoidance aimed at┬áLichtenstein┬á(I remember typing that last June and do you know what, I have not used it since surprisingly), Offshore tax evasion and Plumbers/heating engineers.

And finally, the Government is asking for views on extending Air Passenger Duty to journeys flown in private jets.


I’m sure the Nom-doms will appreciate the warning – another year before their annual charge goes up from ┬ú30k to ┬ú50k and the jet could cost a bit more to run. I would have thought that most of us would have expected the government to know our views on whether the owners of private jets ought to be paying APD. But perhaps it’s me who is out of touch?

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