Weekly Tax Update - Monday 26 March 2012
1.1. Budget 2012
Our Budget 2012 commentary and a 2012/13 tax rate card are available to download from our website:
Link to the Booklet: www.smith.williamson.co.uk/uploads/publications/Budget-Report-2012.pdf
Link to the Tax Rate Card: www.smith.williamson.co.uk/uploads/publications/tax-rate-card-2012.pdf
1.2. Overview of tax legislation and rates
A summary of the tax changes was included in the Budget publications, showing where the change is to be made in Finance Bill 2013, other future finance bills, programme bills or secondary legislation.
2.1 This chapter summarises new tax changes announced in Budget 2012, where the change is to be made in Finance Bill 2013, other future finance bills, programme bills or secondary legislation. In line with the Government's new approach to tax policy making, the vast majority of these measures will be subject to consultation. To assist those who wish to take part in tax consultations, a "tracker" will be published on the HM Treasury and HMRC websites setting out the planned dates of future consultations. Where the policy changes are straightforward (for example routine rate changes or where the policy is settled and will not be subject to consultation), Tax Information and Impact Notes have been published (see Annex A). For other measures, the Government will assess the impacts as part of the consultation and publish a Tax Information and Impact Note alongside the draft legislation in the autumn.
2.2 Income tax personal allowances for 2013-14 – Legislation will be introduced in Finance Bill 2013 to set the personal allowance for those aged under 65 at £9,205 and the basic rate limit at £32,245. A Tax Information and Impact Note for this measure is available at Annex A. Income tax rates and allowances are published in Annex B. The Class 1 Upper Earnings Limit and the Class 4 Upper Profits Limit for National Insurance contributions (NICs) will be aligned with the point at which the higher rate tax becomes payable (£41,450).
2.3 Cap on unlimited tax reliefs – Legislation will be introduced in Finance Bill 2013 to apply a cap on income tax reliefs claimed by individuals from 6 April 2013. The cap will apply only to reliefs which are currently unlimited. For anyone seeking to claim more than £50,000 in reliefs, a cap will be set at 25 per cent of income (or £50,000, whichever is greater). Draft legislation will be published for consultation later this year.
2.4 Statutory residence test – At Budget 2011, the Government announced its intention to introduce a statutory residence test with effect from April 2012. On 6 December 2011, following public consultation over the summer, the Government announced that the test would be legislated in Finance Bill 2013 and take effect from 6 April 2013, to allow further time to finalise the detail of the test. A summary of responses and draft legislation for consultation will be published after Budget 2012.
2.5 Ordinary residence – At Budget 2011, the Government announced its intention to reform ordinary residence with effect from April 2012. On 6 December 2011, following public consultation over the summer, the Government announced that the introduction of any reforms would be deferred until April 2013. At Budget 2012, the Government announced that ordinary residence will be abolished for tax purposes but overseas workday relief will be retained and placed on a statutory footing. A summary of responses will be published with draft legislation after Budget 2012 for consultation. Legislation will be in Finance Bill 2013 and have effect from 6 April 2013.
2.6 Statement of practice 1/09 (SP1/09) – As announced in the consultation on reform of non-domicile taxation in June 2011, the Government will put SP1/09 on a statutory footing. SP1/09 provides an administrative easement for employees who are resident but not ordinarily resident in the UK and have a single contract of employment covering duties carried out in the UK and overseas. The Government will consult on draft legislation which will be introduced in Finance Bill 2013 and will be effective from 6 April 2013. The existing SP1/09 will remain in force for the 2012-13 tax year.
2.7 CGT charge on non-resident non natural persons – The Government will consult on the introduction of a CGT charge on residential property owned by non resident, non natural persons. Legislation will be introduced in Finance Bill 2013 with the measure coming into effect in April 2013. This measure will be consulted on in conjunction with the SDLT enveloping annual charge for high-value residential properties.
2.8 Enterprise Management Incentives(EMI) – EMI is a share option scheme which allows small and medium sized businesses to grant tax-advantaged share options to employees. The Government will make reforms to the EMI scheme in Finance Bill 2013, subject to State aid approval:
so that gains made on shares acquired through exercising EMI options on or after 6 April 2012 will be eligible for capital gains tax entrepreneurs' relief; and the Government will consult on ways to extend access to EMI for academics who are employed by a qualifying company. 2.9 Review of tax advantaged employee share schemes – The Government will consider the recommendations of the Office of Tax Simplification's review of tax advantaged share schemes, and will consult shortly on how to take a number of these proposals forward. Legislation will be in future finance bills.
2.10 Glasgow 2014 Commonwealth Games tax exemption – As announced on 26 January 2012, the Government will provide an exemption from UK taxation for money earned by non-resident athletes in relation to a performance at this event. Legislation will be in Finance Bill 2013.
2.11 Expenses of members of devolved administrations – Legislation will be introduced in Finance Bill 2013 to formalise aspects of the existing income tax treatment of travel and accommodation expenses incurred by Members of the Scottish Parliament, Welsh Assembly Members and Members of the Legislative Assembly on parliamentary or assembly duties. It will also introduce a new tax exemption for expenses incurred on travel by spouses or partners of devolved administration members where they share caring responsibilities for a dependant. These changes will have effect from 6 April 2013.
2.12 Company car tax rates 2015-16 and 2016-17 – In both 2015-16 and 2016-17, the appropriate percentages of the list price subject to tax will increase by two percentage points, to a maximum of 37 per cent. From April 2016, the Government will remove the three percentage point diesel supplement so that diesel cars will be subject to the same level of tax as petrol cars. From April 2015, the five year exemption for zero carbon cars and the lower rate for ultra low emission cars will come to an end as legislated in Finance Act 2010. The appropriate percentage for zero emission and all low carbon cars emitting less than 95g of carbon dioxide per kilometre will be 13 per cent in 2015-16, and will increase by two percentage points in 2016-17. Legislation will be in a future Finance Bill.
2.13 Pensions tax relief – Legislation will be introduced in Finance Bill 2013 to amend the rules which currently allow employers to pay pension contributions into their employees' family members' pensions as part of their employees' remuneration package to remove the tax and NICs advantages from these arrangements. A regulation making power will also be introduced to allow changes to be made to the lifetime allowance fixed protection legislation. Technical improvements will also be made to the annual allowance rules through secondary legislation.
2.14 Pensions tax: abolition of contracting out – Contracting out through a defined contribution scheme will be abolished from 6 April 2012. Legislation will be introduced in Finance Bill 2013 to bring tax legislation into line with Department for Work and Pensions legislation.
2.15 Bridging pensions – Legislation will be introduced in Finance Bill 2013 to amend the pensions tax legislation for bridging pensions to reflect the changes in state pension age. A power will also be created to allow for regulations to be made changing the tax rules on bridging pensions to fit with any further changes to state pension rules.
2.16 Qualifying Recognised Overseas Pensions Schemes (QROPS) – Changes in primary legislation will be introduced in Finance Bill 2013 to strengthen reporting requirements and powers of exclusion relating to the QROPS regime. They will support the changes in secondary legislation published for consultation on 6 December 2011. The Government also announced that where the country or territory in which a QROPS is established makes legislation or otherwise creates or uses a pension scheme to provide tax advantages that are not intended or available under the QROPS rules, the Government will act so that the relevant types of pension scheme in those countries or territories will be excluded from being QROPS.
2.17 Transfer of assets abroad and gains on assets held by foreign companies – The Government will propose amendments in Finance Bill 2013 to two pieces of legislation designed to protect the UK tax base. These are contained in sections 714 to 751 of the Income Tax Act 2007 (transfer of assets abroad) and section 13 of the Taxation of Chargeable Gains Act 1992 (gains on assets held by foreign companies closely controlled by UK participators). The Government will publish a consultation including draft legislation after the Budget.
2.18 Inheritance tax: spouses and civil partners domiciled outside the UK – The Government will consult on legislation to increase the IHT-exempt amount that a UK domiciled individual can transfer to their non UK domiciled spouse or civil partner. The Government similarly proposes to allow individuals who are domiciled outside the UK and who have a UK domiciled spouse or civil partner to elect to be treated as...
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