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Budget confusion

The Chancellor’s comments during the Autumn Statement about it being his first and last one have caused some confusion. Let us explain what is happening…

Maybe to announce his Chancellorship with a fanfare, or maybe because it might just make sense, the new Chancellor decided to do away with the Autumn Statement and just have one annual Budget (except in 2017 when there will be two!). Why?

There is some logic to this. The Autumn Statement was originally meant to be a review of the financial and economic state of the nation, a scene-setting if you like. But in recent years it has become more like a second Budget with many tax changes announced. And with a new tax year commencing on 6 April each year, a spring Budget doesn’t really fit with announcing new tax rates, allowances etc, so these also became part of the Autumn Statement. It also meant that in most years we had two Finance Bills, and in some years (eg election year) there were three.

The Chancellor’s new system will be to have one annual Budget, sometime in the autumn (late October/early November) when the tax rates and allowances for the next tax year are announced, changes to tax law are announced, and consultations on changes are instigated. These will then be legislated for in a single annual Finance Bill which will probably receive Royal Assent before the start of the next tax year. BUT for 2017 only, there will also be a Budget in March as the Chancellor clearly needed to transition from the old system to the new system.

Easy, isn’t it?

In subsequent posts we will speculate on what might be in the March Budget and what we would like to see but don’t necessarily expect to see.

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The Autumn Statement 2016

The Chancellor has presented his first, and last, Autumn Statement. His closing announcement was that from 2017, the main fiscal Budget will be in the Autumn, well in advance of the new tax year, with a brief Spring Statement which will be a response to the OBR forecast, rather than making significant fiscal changes. There will be a Budget in spring 2017, followed by a Finance Bill, followed by a second Budget in autumn 2017.

What was the economic backdrop to what he had to say?

The UK economy is forecast to be the fastest growing major economy in 2016, but the Office for Budget Responsibility (OBR) has forecast growth to slow and inflation to rise over the next two years.

Although the government has cut borrowing by nearly two-thirds since 2010, following the EU Referendum decision it announced that it will no longer aim for a budget surplus by 2019, something the previous Government had committed to doing. The Chancellor said that new fiscal targets are needed to provide the flexibility to support the economy and create space for more investment in roads, rail, research, and housing; the aim is for 2% underlying deficit and debt falling by 2020, and a balanced budget as soon as possible thereafter.

The main announcements

  • Personal Allowance to increase to £12,500 and the Higher Rate Threshold to £50,000 by 2020-21

The PA (the amount of income you can earn before you start paying income tax) is currently £11,000 (£11,500 in 2017-18). The point at which you pay the higher rate of income tax will increase from £43,000 this year, to £45,000 in 2017-18.

Once the PA reaches £12,500, it will increase in line with inflation.

  • National insurance thresholds

The employer and employee threshold will be aligned from April 2017, meaning that both employees and employers will start paying NI on weekly earnings above £157. Class 2 NICs will be abolished from April 2018, with self-employed NI being collected via Class 3 and Class 4 NICs. We still hope/expect that at some stage NI and tax will be fully-aligned, but that’s probably for after the next Election.

  • Investing in infrastructure and innovation to improve long-term productivity

There’s lots here, and it underlies the Chancellor’s commitment to boosting investment, jobs and productivity.

  • A new National Productivity Investment Fund will be established to provide £23 billion of additional spending. The National Productivity Investment Fund (NPIF) will provide major additional spending in areas that are key to boosting productivity: transport, digital communications, research and development (R&D), and housing.
  • £2.3 billion for a new Housing Infrastructure Fund. The fund will be used for projects such as roads and water connections that will support the construction of up to 100,000 new homes in the areas where they are needed most. On top of that, £1.4 billion will be used to provide 40,000 new affordable homes, including some for shared ownership and some for affordable rent. Another £1.7 billion will be used to speed up the construction of new homes on public sector land.
  • 390 million will go to future transport technology, including driverless cars, renewable fuels and energy efficient transport.
  • A major new investment in transport infrastructure. There will also be a two-year 100% first year allowance for companies who install electric charge-points, coming in from today‎. This allows companies to deduct the cost of the charge-point from their pre-tax profits in that year‎.
  • £450 million will also be spent on trialling railway digital signalling technology which will expand capacity and improve reliability.
  • £1 billion to invest in full-fibre broadband and trialling 5G networks. Investment will support the private sector to roll out more full-fibre broadband by 2020-21. Funding will also support trials of 5G mobile communications.
  • £2 billion more per year in research and development funding by 2020-21

As trailed earlier in the week by the Prime Minister. there will be a major increase in research and development funding for universities and businesses with R&D projects to help the UK remain an attractive place for businesses to invest in innovative research.

  • Corporation tax to 17% by 2020

The main rate of corporation tax has already been cut from 28% in 2010 to 20%, and will be cut again to 17% by 2020, by far the lowest in the G20. This isn’t new news, and indeed, the former Chancellor had pledged to cut the main rate to 15%.

  • Business tax – other changes (we need to see more details on all of these)
  •  Amendments to the Patent Box rules where there are cost-sharing arrangements
  • Changes to certain aspects of partnership taxation to make profit allocation to partners more fairly calculated
  • Technical changes to SEIS/EIS and VCTs, including:
    • Changes regarding share conversion rights
    • More flexibility for follow-on investments
    • VCT share for share exchange changes
    • Clarify and streamline the share option advance clearance process
  • £400 million through the British Business Bank to invest in growing innovative firms

Essentially a new VC fund which will be invested in innovative small businesses with potential for growth, to provide the finance that they need to expand. This will support up to £1 billion of new investment.

  • VAT Flat Rate Scheme (FRS)

It is proposed to introduce a new 16.5% VAT flat rate for businesses with “limited costs”. This will take effect from 1 April 2017.

  • Employee shareholder shares

 From 1 December 2016 no income tax or CGT exemption will be available on any shares acquired in consideration of an Employee Shareholder agreement entered into on or after that date. Note that this does NOT affect EMI schemes which, as far as we can see, remain unchanged.

  • Tax avoidance

More tinkering – as always. A new penalty is being introduced for those helping someone else to use a tax avoidance scheme.

  • Salary sacrifice schemes

As trailed in the weekend press, from April 2017, most salary sacrifice schemes will be subject to the same tax as cash income. Salary sacrifice is when someone gives up some basic cash salary in exchange for various benefits provided in non-cash forms.

This will affect types of salary sacrifice schemes differently:

  • pensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exempt
  • all arrangements in place before April 2017 will be protected for up to a year, and arrangements in place before April 2017 for cars, accommodation and school fees will be protected for up to 4 years
  • Personal taxes – other changes
    • Simplification of the PSA process for 2018/19 et seq
    • Making good of benefits in kind must be by 6 July after the end of the tax year
    • Employees will only be taxed on business assets for the period that the asset is made available for their private use
  • Non-domiciled individuals

There are several technical changes to the tax treatment of non-doms.

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Social Media Indicators of what to expect in the Autumn Statement 2016

The Autumn Statement is on Wednesday 23 November 2016.  Some clues as to what the Chancellor is thinking can be gleaned from recent Social Media pronouncements. 

Will it be the last? The Chancellor, Philip Hammond, recently questioned the need for one. But we know there will be one this year, and post-Brexit decision, post US elections, and post new Prime Minister, it will surely be more like a Budget.

Some clues as to what the Chancellor is thinking can be gleaned from recent Social Media pronouncements.

September 4: “Also meeting world finance leaders at G20. Fundamental strengths of British economy means we prepare for Brexit from position of strength”.

 “At the G20 in China where we are making it clearer than ever that the UK will continue to be a global leader in free trade.”

 “In Bratislava for mtg with EU finance ministers. We continue to work constructively with our EU partners as we forge a new role for the UK.”

EU partners? Not for long. The Chancellor recognises that things have to change.

September 7: “Hosting financial services leaders at HM Treasury to discuss impact of Brexit & how to ensure continued investment to create jobs & wage growth.”

 So, we have investment in Heathrow and Hinckley Point confirmed; will we see more large infrastructure projects announced or consulted on to further boost jobs and wages post-Brexit? We suspect so.

September 7: “Leading up to Autumn Statement I’ll meet business reps spanning every aspect of the economy. Next meeting is with major importers/exporters.

 September 20: “This afternoon I met with @fsb.policy members to discuss investment in infrastructure & skills – crucial for UK’s growth & productivity.

 There’s much more on similar themes, and then, of course, we have the Governor of the Bank of England. The Chancellor said: “Very pleased that Mark Carney will stay as Governor to 2019 – extending his highly effective leadership of the Bank.

 So, continued low inflation, low interest rates (they may even go negative), and focus on increasing employment opportunities.

What does all this actually mean for businesses though? We don’t expect anything too radical. In a sense, the Chancellor has an open cheque book, as he has abandoned the plans for a balanced budget by the end of this Parliament (whether that be next year or in 2020).

Watch out for:

  • Commitment to single rate of corporation tax of 17% (but not 15% as Mr Osborne had trailed)
  • Simplification of tax and accounting for small businesses
  • Taxing some small businesses directly on the owners (rather like partnerships)
  • A trail to align tax and National Insurance if the Conservatives are elected again
  • A more flexible approach to VAT, including new rates in the future (post Brexit)
  • Tackling avoidance (this may as well be written in blood as it is a recurring theme)
  • Long-term commitment to a highest rate of income tax of 40%

And in our view, the tax code is already far too long. Let’s get back to one annual Budget and Finance Act, and as much of the UK’s legislation will be re-written over a period of time post-Brexit, let’s have a fundamental re-write of the ridiculously complicated, contradictory, expensive, time-consuming, and frankly un-understandable taxes acts.

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The Autumn Statement – does it matter?

The Chancellor presents his first Autumn Statement on Wednesday 23 November. But do business owners really care? The answer is a resounding “no” but they should care.

In recent years, the Autumn Statement has become a second Budget. In fact, in recent years there’s probably been more detailed changes in the Statement than in the Spring Budget. And as this will be the first opportunity for the new Chancellor, Philip Hammond, to set out his stall, we can expect a few surprises.

It may also give us a clue as to whether the Prime Minister expects to run this Parliament to the end of its fixed term in 2020, or to “cut and run” sometime next year, probably in May.

Of course, the Government has a slim majority in Parliament, and any changes in the Autumn Statement will need to be the subject of a Finance Bill which is debated and scrutinised by the Commons. The Chancellor cannot, therefore, be too radical, or there is a risk that he will alienate some of his back-benchers and not get the changes passed into law. He also has to prepare for Brexit, as the Prime Minister has announced that Article 50 will be activated by the end of March.

There will be three main elements to the Autumn Statement.

1                     The setting of the economic environment, presentation of growth forecasts, and almost certainly confirmation that a balanced budget by the end of this Parliament (whenever that might be) is no longer a target. A U-turn if ever there was one.

2                     Confirmation of tax rates and allowances for the coming year. We don’t expect any major surprises here.

3                     Tax policy and detailed changes. In our first Blog on the Autumn Statement we stated what we might see/what we would like to see. Nothing has happened in recent weeks to change these predictions.

If we could speculate on one thing, which would be a major surprise, but, in our view, would make a lot of sense, is a fundamental review of VAT rates. At the moment, we are bound by EU rules not to have a VAT rate of less than 5%, other than on a number of goods and services that were zero-rated and have been ring-fenced and protected. With our withdrawal from the EU, we are likely to be able to set varying VAT rates in the future. What we might see is a raising of the standard rate of VAT to, say, 25%, with lower rates on a number of “essential goods and services”. VAT at the highest rate could then be seen as a “discretionary” tax on non-essential items, with a lower rate on essential goods and services. Radical? Yes. But if it’s going to happen, now is the time to start selling it.

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The Autumn Statement 2016

The Chancellor, Philip Hammond, will present his first Autumn Statement on 23 November. As always, we will be following the Statement closely and issuing Tweets and a post-Statement summary with our views. What do we expect to see?

It has been widely leaked that the Chancellor is unlikely to adopt George Osborne’s promise of cutting the main rate of corporation tax to 15%. Mr Hammond recently told a meeting of Finance Ministers in Bratislava that he intended to stick to a plan to cut the rate from 20% to 17% by April 2020.

The wider picture is more uncertain, though. The financial markets did not react as many had predicted following the EU Referendum. The UK stock markets have been performing strongly, and Sterling has recovered much of the lost ground. Despite this, trade talks have yet to start and the longer run implications for the macro-economy remain uncertain. Probably, due to this, the Prime Minister has confirmed that the Government will not attempt to balance the books by the end of the decade, although a budget surplus remains the long-term ambition.

There have also been strong hints that and fiscal stimulus in the Autumn Statement will be aimed at boosting Britain’s roads and rail infrastructure.

In terms of the clients for which we predominantly work with, what would we like to see?

Lower tax on profits is fine, but you need to first earn those profits. We’d like to see more immediate help such as cutting business rates and increasing incentives for investing in plant and machinery, both strong spurs for investment. We hope very much that there won’t be any changes to incentives such as R&D tax credits, and we would welcome some simplification to the unduly complex rules for raising finance under the Enterprise Investment Scheme.

In relation to personal taxes, there’s probably little more to be done with capital gains tax, and inheritance tax doesn’t raise sufficient revenue to make tinkering worthwhile. We strongly oppose an increase in the rates of income tax, and hope that the continued increase to the personal allowance will be accelerated to take more lower paid earners out of the tax net completely.

And assuming that Brexit does eventually happen, we will have more freedom with VAT. A bold Chancellor might increase the rate of VAT on non-essential goods and services, whilst introducing a zero rate on many more essential items. Currently, under EU law, the lowest rate of VAT that can be levied is 5%. VAT is simple to collect, is transparent, and as far as any tax can be, is a tax of choice. Probably not something for this Government, but it could form the corner-stone of policy for one of the parties at the next General Election.

We will be monitoring the signals in the wider press, and from Parliament over the coming weeks leading up to the Autumn Statement and will be posting updates here.

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Budget 2016 Commentary

This is the first really full Budget of the new Parliament (Mr Osborne’s 8th Budget), although the summer 2015 Budget and the Autumn Statement were mini-Budgets in themselves. Both those painted a pretty optimistic view of the nation’s finances and economic well-being. However, since then, things have changed considerably and today’s Budget took a longer-term view of things. Mr Osborne said that “the world outlook was materially weaker”. But, the UK economy will grow faster than any other major economy in the world.

The Chancellor has previously said that he is “fixing the roof whilst the sun is shining”, but it seems that there are now more storm clouds than sunshine. Today he said he is “putting stability first”.

Of course, this Budget came only three months before the EU Referendum, and so Mr Osborne had to be particularly careful to try and avoid antagonising either side of the debate with his announcements. By the end of the speech, he was certainly popular with his Conservative colleagues who were busy cheering. And there were a number of surprises in his hat, particularly the changes to capital gains tax.

A surplus by 2019-20

The Government claims that this year the deficit will have been cut by almost two thirds from its peak. Over the next four years, the deficit will have been eliminated and the government will be running a surplus – where more tax is raised than is spent.

To help achieve this, there will be a further £3.5 billion of savings from departmental spending in 2019-20, less than 50p in every £100 the government spends. There will be an efficiency review to inform future spending decisions.

It’s also important to note that the OBR’s forecasts, on which this Budget is based, are predicated on the UK remaining in the EU. Things could be very different if we leave the EU.

So what are the main measures affecting businesses and individuals?

Capital Gains Tax

Capital Gains Tax rates will be cut from 6 April 2016, but residential property will still be taxed at current rates

From April 2016, the higher rate of capital gains tax will be cut from 28% to 20% and the basic rate from 18% to 10%. There will be an additional 8% to be paid on residential property (not main residences though) and carried interest (the share of profits or gains that is paid to asset managers).

In addition, entrepreneurs’ relief will be extended to long-term investors in unlisted companies. This will apply to newly-issued shares on or after 17 March 2016, held for a minimum of three years from 6 April 2016, and subject to a separate lifetime limit of £10 million of gains.

Corporation tax

Corporation tax will be cut again to 17% in 2020

The main rate of corporation tax has already been cut from 28% in 2010 to 20%, the lowest in the G20. It will now be cut again to 17% in 2020, benefitting over 1 million businesses.

Loss relief

There will be changes to loss relief, making the system more flexible for businesses, but limiting how many losses brought forward can be used against current years’ profits.

For losses incurred on or after 1 April 2017, businesses will be able to use carried forward losses against profits from all other income streams or from other companies within a group. From 1 April 2017, for profits in excess of £5 million, only 50% of the profit can be reduced by brought forward losses.

Corporation tax payment dates

The expected bringing forward of the CT payment dates for large companies will be delayed until accounting periods beginning on or after 1 April 2019.

Savings

Lifetime ISA: a new £4,000 ISA that you can use to save for retirement or to buy your first home

From April 2017, any adult under 40 will be able to open a new Lifetime ISA. Up to £4,000 can be saved each year and savers will receive a 25% bonus from the government on this money. Money put into this account can be saved until you are over 60 and used as retirement income, or you can withdraw it to help buy your first home.

For main ISAs, the annual savings limit will be increased from £15,240 to £20,000 from April.

Personal tax

The personal allowance will increase to £11,500, and the higher rate threshold will rise to £45,000 in April 2017

The personal allowance is the amount of income you can earn before you start paying tax. This is currently £10,600 – it will already rise to £11,000 in 2016, and will now increase further to £11,500 in April 2017. The point at which you pay the higher rate of income tax will increase from £42,385 to £43,000 in 2016 and to £45,000 in April 2017.

Business tax

New tax allowances for micro businesses

From April 2017, there will be two new tax-free £1,000 allowances – one for selling goods or providing services, and one income from property you own. People who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income. The first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free.

Cutting business rates for all rate payers

From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. Currently, this 100% relief is available if you’re a business that occupies a property (eg, a shop or office) with a value of £6,000 or less. As for residential dwellings, where there were changes last year, there will be a tapered rate of relief on properties worth up to £15,000. This means that 600,000 businesses will pay no rates.

Tax avoidance

Shifting profits out of the UK

Some large companies use interest payments to reduce the tax they pay on their profits in the UK. Relief on interest payments will now be capped at 30% of UK earnings, with exceptions for groups with legitimately high interest payments.

There will be rules to prevent multinational companies avoid paying tax in any of the countries they do business in, a technique called hybrid mismatches. For those using intellectual property there will be changes to outbound royalty payments meaning multinationals pay more tax in the UK.

Employers will pay National Insurance on termination payments above £30,000 from April 2018

From April 2018 employers will now need to pay National Insurance contributions on termination payments in excess of £30,000 where income tax is also due.

Loans to participators

The rate of tax on loans to participators (essentially shareholders in SMEs) will increase to 32.5% for new arrangements made on or after 6 April 2016.

Disguised remuneration schemes

There will be further legislation in the 2016 Finance Bill to block the use of disguised remuneration schemes and EBTs.

Personal service companies

From April 2017, there will be a new requirement for public sector bodies to ensure that the rules are being applied correctly.

Employee shareholder status

There will be a new £100,000 individual lifetime limit on gains eligible for exemption through the ESS.

National Insurance

Class 2 National Insurance contributions (NICs) for self-employed people will be scrapped from April 2018

Currently, self-employed people have to pay Class 2 NICs at £2.80 per week if they make a profit of £5,965 or over per year. They also pay Class 4 NICs if their profits are over £8,060 per year. From April 2018, they will only need to pay one type of National Insurance on their profits, Class 4 NICs. After April 2018, Class 4 NICs will also be reformed so self-employed people can continue to build benefit entitlement.

Stamp Duty Land Tax

New stamp duty rates for commercial property from 17 March 2016

The way stamp duty on freehold commercial property and leasehold premium transactions is calculated will change. Currently, these rates apply to the whole transaction value. From 17 March 2016 the rates will apply to the value of the property over each tax band, in a similar way to residential property. The new rates and tax bands will be 0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000.

Yet to come…

There’s more to come. We know that the Finance Bill will contain technical changes on SEIS/EIS/VCTs, share schemes, flexible benefits, home to work travel, trivial expenses, PSAs, pension draw-down, lump sum critical illness/life assurance benefits, Patent Box, OECD/BEPS transfer pricing rules, CGT entrepreneurs’ relief, and much more…

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Research & Development (R&D) tax credits

Are you claiming R&D tax credits? If you are, are you maximising them?

The Government has recently launched a two year plan to increase the number of SMEs securing Research & Development (R&D) tax relief. By raising awareness and simplifying application procedures, the Government hopes to encourage more businesses to invest in R&D and benefit from the relief.

R&D tax relief allows businesses to reduce the corporation tax payable on their profits by increasing the tax deduction on expenditure in research and development. This either reduces the tax bill, or if the company is loss-making, allows it to claim a repayable tax credit, giving a welcome boost to cash-flow.

Many businesses have been unaware of the scope of what qualifies for R&D. The plan, ‘Making R&D Easier: HMRC’s plan for small business R&D tax relief’, will look to address any misconceptions and encourage more investment in R&D which the Government believes is essential for the long term growth of the economy.

In the plan, the Government has provided greater certainty to companies with a turnover under £2 million and fewer than 50 employees by allowing them to seek advance assurance on R&D tax relief.

The plan also outlines the Government’s intention to use data from other Government agencies to identify companies who have invested in R&D but not claimed the relief.

However, the best way to explore whether any of your expenditure qualifies is to discuss it with us. With a PhD in scientific research, and 15 years’ experience in maximising claims, Andrew is one of the country’s leading specialists in this area. The types of companies he has made successful claims for have varied from a firm of actuarial consultants, a blacksmith, and a train company. There are many more obviously innovative companies too!

We’re happy to do the work on a contingent basis and do not ask for any ongoing commitment.

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Autumn Statement 2015

Autumn Statement 2015

The Chancellor, George Osborne, set out government spending plans up to 2020.

This was a massive Autumn Statement and Spending Review with lots of detail, much of which has only emerged since the Chancellor sat down. In summary, the Autumn Statement and Spending Review outlined £20bn of cuts to Whitehall budgets and £12bn to welfare, and made a number of changes to the tax system to partially pay for the increased spending in some departments and to tackle the overall budget deficit.

Headlines included:

  • Pledging almost £7bn to make housebuilding a priority, with more than 400,000 “affordable homes” to be built in England.
  • Plans to mitigate the effect of tax credit cuts.
  • The Chancellor also hopes to raise nearly £8bn with a further crackdown on tax avoidance.

The specific tax measures announced

  • There will be an investment in a new digitally advanced tax administration, so that every individual and every small business will have their own digital tax account by the end of the decade, in order to manage their tax online.
  • From 2019, once those accounts are up and running, capital gains tax is to be paid within 30 days of completion of any disposal of residential property (there is an issue here where there is a contract that becomes unconditional and there is delayed completion, or where the marginal rate of tax changes during the year).
  • There is a new measure which will exempt loans or advances made by close companies to trustees of charities for charitable purposes from the tax charge applied under the loans to participators rules.
  • There are amendments that clarify when intangible fixed assets held by a partnership come within the intangible fixed asset rules. These rules will ensure that such assets are treated appropriately, as either assets to which the intangible fixed asset rules apply or assets within the capital gains code, when calculating the chargeable profits allocated to a corporate partner.
  • A new measure will affect businesses which seek to obtain tax advantages by either manipulating disposal values leading to excess capital allowances or receiving a consideration in a non-taxable form in return for agreeing to take over tax deductible lease payments.
  • There is to be a new rate of Stamp Duty that will be 3 per cent higher on the purchase of additional properties like buy-to-lets and second homes. It will be introduced from April next year and corporate property development will not be affected.
  • Sixth Form Colleges will be able to become Academies, so they no longer have to pay VAT.
  • The apprenticeship levy on larger employers announced in the Summer Budget will be introduced in April 2017. It will be set at a rate of 0.5% of an employer’s paybill. Each employer will receive an allowance of £15,000 to offset against their levy payment. This means that the levy will only be paid on any paybill in excess of £3 million and that less than 2% of UK employers will pay it. The levy will be paid through PAYE.
  • Venture Capital Schemes: to ensure the tax-advantaged venture capital schemes continue to provide effective and sustainable support to small and growing businesses, the eligibility criteria of the schemes will be changed to exclude all energy generation activities and there will be further exploration of options to introduce increased flexibility for replacement capital within the schemes.
  • GAAR: There will be a new penalty of 60% of the tax due to be charged in all cases successfully tackled by the General Anti Abuse Rule (GAAR) and there will be small changes to the GAAR’s procedure to improve its ability to tackle marketed avoidance schemes.
  • New rules will be introduced to stop avoidance of stamp tax where ‘deep in the money’ options are used to transfer shares to a depositary receipt issuer or clearance service.
  • Disguised remuneration: to reduce opportunities for income to be converted to capital to gain a tax advantage, there will be a consultation on the company distributions rules, and the Transactions in Securities rules will have a Targeted Anti-Avoidance Rule.

Conclusion

It doesn’t appear that there are any massive changes to the tax code, other than the very specific changes aimed at tackling avoidance. We await with interest the consultation on disguised remuneration which is probably the area that will most impact our clients.

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Budget 2015 – summary

This is the second Budget of 2015, but the first that a Conservative-only administration has been able to deliver in the past 20 years. Without the constraints of a Coalition partner, The Chancellor has been able to announce a number of measures promised in the Manifesto, some of which have already been leaked in recent days.

This is the second Budget of 2015, but the first that a Conservative-only administration has been able to deliver in the past 20 years. Without the constraints of a Coalition partner, The Chancellor has been able to announce a number of measures promised in the Manifesto, some of which have already been leaked in recent days.

The Budget was presented with a background of continuing recovery from recession, the economic and political instability in Greece, austerity measures in every country in the EU, but strong signs of recovery in the UK. The Chancellor’s pension reforms announced last year have given a higher-than-expected boost to income tax revenues, and whilst the financial prudence of these changes will be debated for many years, it has given the Chancellor more room for manoeuvre than he might have expected.

Surprisingly, whilst we are thin on detail, a lot was announced today However, it will only be when the draft Finance Bill is published next week that we will be able to fully understand what some of the measures mean. We will, or course, be commenting further once we have seen the detail, but we highlight below the key measures that we consider will directly impact our clients.

Overall, this was a tax-raising Budget, not a tax-cutting Budget. The Chancellor has, in our view, been clever in meeting his Election promises, introducing measures to encourage the low-paid and UK businesses, whilst not being seen to be profligate in his spending

 

Personal tax

  • Personal allowance to be increased to £10,60 in 2015/16 to £11,000 in April 2016. This means that anyone earning less than this does not pay income tax at all. The Chancellor said that there is an ambition to increase the PA to £12,500 by 2020, and people working 30 hours a week on the National Living Wage won’t pay income tax at all.
  • 40% tax rate now won’t cut in until earnings are £43,000 a year.
  • Major changes to tax relief for buy to let properties – mortgage interest relief will be restricted to the basic rate by April 2020. The “wear and tear” allowance will also be reformed so that only replacement expenditure qualifies for tax relief.

 

Dividend tax

  • This is a surprise. The dividend tax credit (which reduces the tax payable on income from shares) will be replaced by a new £5,000 tax-free dividend allowance from April 2016. Tax rates on dividend income will be increased overall.

 

 

Inheritance tax (IHT)

  • As widely predicted, there is going to be a £1 million nil rate band for IHT in order to permit most family homes to be passed to the next generation free of IHT. This will be effective from 6 April 2017. This will work by introducing a new £175,000 allowance for family homes over and above the current £325,000 nil rate band. There will be a withdrawal of relief for estates worth more than £2million.

 

Pensions tax relief

  • The amount that people who earn over £150,000 can pay tax-free into a pension will be reduced
  • Consultation paper on tax relief for pensions and the taxation of pension receipts

 

Business tax relief

  • The rate of corporation tax will be cut to 19% in 2017 and 18% in 2020, making it the lowest rate of CT in the developed world.
  • The annual investment allowance for investment in plant & machinery will be set at its highest ever level of £200,000 as a permanent measure.
  • The Employment Allowance will increase by a further £1,000 to £3,000 – this means that businesses will play less employers’ NI.

 

 

Anti-avoidance and non-doms

  • As widely expected, there are changes to the taxation of non-domiciliaries. Non-doms who live in the UK will be fully liable to UK tax if they have been tax resident in the UK for 15 of the past 20 years.
  • Over £5million is expected to be raised from further crackdown’s on anti-avoidance. In particular, there are changes to the way in which fund managers and similar people are taxed on “carried interest”, and certain specific tax avoidance schemes have been stopped. There is also a suggestion that clever planning using the tax code might be under attack.
  • Further strengthening of the “name and shame” policy and investment in HMRC powers to investigate complex tax crime.

 

 

Indirect taxes

  • No fundamental changes to CAT or Stamp Duty.
  • Vehicle Excise Duty revised to make it fairer and more sustainable. There will be a flat rate of £140 for most cars with a lower and premium rate. Existing cars won’t be affected. Money raised by VED will be ring-fenced (hypothecated) to expenditure on roads etc.

 

 

Other key measures

 

  • Consultation on “salary sacrifice” schemes for rewarding employees
  • Improve/reform the IR35 legislation for one-man service companies
  • Reform of rules to prevent companies from claiming a deduction for the value of “brands” and similar intangibles
  • Changes to tax payments dates for very large companies
  • Changes to VCT schemes
  • Removal of requirement that 70% of SEIS funding be spent before EIS or VCT funding can be used with effect from 6 April 2016
  • Averaging period for farmers to be extended from 2 years to 5 years from April 2016
150 150 AJ

Jupp Consulting is supporting this event – please see attached

 

Table Top Sale

Saturday 4th July

1-3pm

Kings Hall, Church Piece,

Charlton Kings

                                   GL53 8JN

Clothes, Jewellery, Bric-a-brac, Books, Toys.

Refreshments with a choice of freshly baked treats!

Please come along and support us-All proceeds go to Vale Wildlife.

 

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