2012 Chancellors Autumn Statement – Principal Changes Other Announcements

December 10th, 2012

Individual Savings Account (ISAs)
From 6 April 2013 the overall limit is increased to £11,520 (2012-13 £11,280), of which £5,760 can be invested in cash (2012-13 £5,640).
The junior ISA is increased to £3,720 (2012-13 £3,600).
Fuel benefit charge
From 6 April 2013 the car fuel benefit multiplier is increased to £21,100 (2012-13 £20,200). This figure is used to tax company car users whose employers pay for their private petrol usage. The charge can be legitimately avoided if the employee reimburses the cost of private fuel used. The equivalent van fuel benefit charge is increased from the same date to £564 (2012-13 £550).

Reducing tax credit error, fraud and debt
A number of initiatives have been announced aimed at reducing the levels of tax credit error and fraud and recovering tax credit debt. They include:

  • Requiring claimants to provide more evidence to support certain claims for tax credits for children and childcare.
  • Trialling the use of debt collection agencies to collect tax credit debt.
  • The announcement of legislative changes to enable the collection of existing tax credit debt from a new tax credit award.

Recovering debt
New initiatives aimed at recovering debt owed to central government include:

  • Trials and pilots with the Department of Work & Pensions and Debt Collection Agencies.
  • An increase to HMRC’s debt management resource for the rest of this year and for 2013-14.

Digital services
Over the next three years, HMRC will significantly expand the range of digital services to include:

  • 20 million taxpayers receiving a Personal Tax Statement, showing how their tax is calculated and spent by government, and
  • A more joined-up digital experience for taxpayers providing an overview of their HMRC ‘account’. This will include: links to all their online transactions, a facility for accessing tailored help and asking HMRC questions.

Changes to the national minimum wage from 1 October 2012

September 21st, 2012

Every year, in October, the national minimum wage rates change.  From 1 October 2012, you must make sure that you pay your employees at least the new minimum rates. The new hourly rates are:

  • Workers aged 21 and over – £6.19
  • Workers aged 18 to 20 – £4.98 – no change
  • Workers aged 16 and 17 – £3.68 – no change
  • Apprentices – £2.65

The end of the Student Employee?

September 16th, 2012

Well not quite, but an end to the P38(s) student form. This form, once completed and signed, enabled employers to employ students in their holidays etc. without deducting tax from their pay until they had earned enough to use the tax free personal allowance.

From 6th April 2013 the forms will no longer be valid and employers will need to use P46’s. Students will be treated in the same way as all other employees for PAYE tax and NICs purposes regardless of when they work for you

You will have to ask them to complete a P46 and you may need to register for PAYE with HMRC.

Warm down for the Pasty Tax ..

May 28th, 2012

Phew.. we understand that the 20% VAT charge will not be added to hot takeway food,such as pasties, that are served hot from the oven. as long as they are not kept hot or reheated. a 5% VAT rate is however likely !!

Smarter than the Average Phone ?

May 3rd, 2012

HMRC have at last woken up to technological advances in recent years, and in particular, to the so-called smart phones.
Until recently HMRC decreed that smart phones were not mobile phones and therefore subject to tax as a benefit in kind.
Users of iPhones, Blackberries and other “Android” devices, who have suffered a benefit in kind charge in recent years, can now reclaim any tax paid. Claims can be backdated to the tax year 2008/09.
In order to be considered a tax free benefit, the smart phone contract must be between the employer and the phone operator. As with mobile phones there is no restriction or tax charge if private calls are made.

This change of tack by HMRC does not yet apply to tablet devices such as the iPad.

Budget Summary 21 March 2012

March 22nd, 2012

George Osborne continued his fiscal campaigning by attempting to juggle tax take, Government borrowing and economic growth. Only time will tell how many balls he will continue to keep in the air and for how long.There are no dramatic tax changes announced in his Budget Statement. Many of the key items such as reduction of the 50% income tax rate, increases in stamp duty for higher value homes and increases in the personal income tax allowances, were “leaked” in advance. However, there were a few surprises.

Personal Tax Allowances
The income tax allowances and rates for 2012-13 have already been announced. They are:
 
Basic Personal Allowance – £8,105.Age Related Allowance for persons aged 65-74 – £10,500.Age Related Allowance for persons aged 75 and over – £10,660.Married Couples Allowance for those born before 6 April 1935 – £7,705.Blind person’s allowance – £2,100. Age related allowances will continue to be reduced if earnings exceed £25,400.

Personal Allowances will be reduced by £1 for every £2 of income exceeding £100,000.
Tax relief for the Married Couples Allowance is restricted to 10%.
The expected increase in the basic personal allowance to £9,205 from April 2013 was confirmed. This means that individuals earning less than £177 per week will pay no tax at all.  This takes the Government within striking distance of their goal to set a basic personal tax allowance of £10,000 before the end of the current parliament.Age Related Allowances
In an attempt to simplify allowances Aged Related Allowances are to be frozen at 2012-13 levels until they match the basic personal allowance. From 6 April 2013 these allowances will no longer be available to individuals born after 5 April 1948. The higher Aged Related Allowance will only be available to individuals born before 6 April 1938.

State Pension
The current weekly basic State Pension is due to rise to £107.45 from April 2012. This is a weekly increase of £5.30.
George Osborne has also reaffirmed his pledge to simplify the current, over-complex State Pension schemes by merging the basic and second state pension into a single scheme. It is estimated that this single tier State Pension will be about £140 per week.
Income Tax Rates
As expected the 50% rate is to be cut from April 2013 to 45%. Detailed rates are:2012-13
20% basic rate on first £34,370 of taxable income.
40% higher rate on income between £34,371 and £150,000.
50% additional rate on income over £150,000.
2013-14 (subject to confirmation in the Finance Bill 2013)
20% basic rate on first £32,245 of taxable income.
40% higher rate on income between £32,246 and £150,000.
45% additional rate on income over £150,000.

Cap on unlimited tax reliefs
Legislation is to be introduced in Finance Bill 2013 that will seek to apply a limit to income tax reliefs claimed by individuals from 6 April 2013. It would seem that the Chancellor is keen that everyone pays their fair share of tax. Effectively this will set a line in the sand such that tax relief will be denied if: 
Anyone seeks to claim reliefs in excess of 25% of their income or £50,000, whichever is the greater, and Such reliefs are currently not subject to any restriction.
Draft legislation will be published later this year for consultation.
 

Child Benefit income tax charge
In an attempt to deny Child Benefits to higher income families the following new income tax charge will apply from 7 January 2013. The tax charge will be at the rate of 1% of the full Child Benefit award for every £100 of income between £50,000 and £60,000. Therefore if income reaches or exceeds £60,000 the tax charge will equal the Child Benefit received.The aim is to gradually reduce the cash benefit if the following conditions apply: Where a partner has adjusted net income over £50,000 in a tax year and where either they or their partner receives Child Benefit the new tax charge will apply. If both partners have net income over £50,000 the partner with the highest income will suffer the tax charge. 

A partnership is defined as a married couple living together including Civil partners living together and a man and a woman who are not married to each other but who are living together; or Same sex couples who are living together as if they were civil partners.  Tax payers who do not want to pay the new charge can elect to refuse Child Benefit. 

Tax and vehicles
The following changes are announced: 
The car fuel benefit charge multiplier will increase from £18,800 to £20,200 from 6 April 2012. (There will be a further increase, 2% over rate of inflation, from 6 April 2013). The van fuel benefit charge multiplier is frozen at £550. (This charge will be increased by the rate of inflation from 6 April 2013). 

Legislation will be introduced in Finance Bill 2012 to increase the appropriate percentage for company cars emitting more than 75g of carbon dioxide per kilometre by 1% to a maximum of 35% in 2014-15. In both 2015-16 and 2016-17, the appropriate percentages of the list price subject to tax will increase by two percentage points, to a maximum of 37%.  From April 2016 the 3% diesel supplement will be removed. From this date 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. The appropriate percentage for zero emission and all low carbon cars emitting less than 95g of carbon dioxide per kilometre will be 13% in 2015-16, and will increase by two percentage points in 2016-17. 

Employer asset-backed pension contributions
Further legislation has been announced, effective from 21 March 2012, that will ensure unintended excess tax relief should not arise on these contributions.
Qualifying Recognised Overseas Pension Schemes (QROPS)
Changes in 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 published for consultation on 6 December 2011. The Government also announced that when 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.

Corporation Tax Rates

From 1 April 2012 the small company rate is set at 20%, the main standard rate at 24%, down 1% from the previous expected rate of 25%.From 1 April 2013 there will be a further reduction in main standard rate to 23%.From 1 April 2014 there will be a further reduction in main standard rate to 22%.

Tax simplification for small businesses

In a welcome move the Chancellor committed to a process of consultation on a number of tax simplification proposals for smaller businesses. These will include: Unincorporated businesses with a turnover below the VAT registration limit, will be able to adopt a voluntary cash basis for business tax purposes. A simplified system for claiming expenses for use of cars, motorcycles and business use of the home. Finally the consultation will look at the need for a simple way to disincorporate a small limited company so it can revert to a self-employed status. 

Seed Enterprise Investment Scheme (SEIS)
As previously announced, legislation will be included in Finance Bill 2012 to introduce a new Seed Enterprise Investment Scheme from April 2012. Following consultation, changes have been made to the legislation to allow companies: To qualify if they have subsidiaries; To determine eligibility by reference to the age of any trade rather than to the age of the company; To remove reference to the holdings of other entities in calculating asset and employee tests; 

To allow previous (but not current) employees to qualify; and To allow directors who have qualified under SEIS to continue to qualify under EIS, subject to time limits. Patent Box
Legislation will be introduced in Finance Bill 2012 to allow companies to apply a 10 per cent corporation tax rate to a proportion of profits. This would be attributable to patent and certain other qualifying intellectual property from 1 April 2013. In the first year this proportion will be 60 per cent and increase annually to 100 per cent from April 2017.

Wallace & Gromit Relief
George Osborne raised a laugh in Parliament when he referred to his intended corporation tax reliefs for the British video games, animation programs and high end TV productions as “keeping Wallace & Gromit in the UK”.
The industry has lobbied hard for tax concessions so that it can remain competitive with companies based in other non-UK locations. Consultation on the detail will take place during the summer 2012 with a view to legislation being included in the Finance Bill 2013, effective from April 2013.

Stamp Duty Land Tax (SDLT)
The Government seems to have selected SDLT as its tax of choice to target the wealthy in the UK. There are two changes announced today: 
Residential property sold with a consideration in excess of £2m will be subject to SDLT at the rate of 7%. This will affect transactions completed on or after 22 March 2012. Residential property that is purchased by a non-natural person (HMRC’s definition) will be subject to a 15% SDLT charge if the value of the property acquired exceeds £2m. The process of purchasing in this way is sometimes described as “corporate enveloping”. This will apply to appropriate transactions completed 21 March 2012 or later. Alcohol and tobacco duties

With effect from 26 March 2012 increases in duty on alcoholic drinks will add:3p to a pint of beer2p to a litre of cider11p to a bottle of wine, and41p to a bottle of spirits With effect from 6pm on 21 March 2012 increases in duty will add:37p to a pack of 20 cigarettes12p to a pack of 5 small cigars37p to a 25g pouch of hand rolling tobacco, and20p to a 25g pouch of pipe tobacco.  VAT registration limits

From 1 April 2012 the taxable turnover threshold, which determines whether a person must be registered for VAT, will be increased from £73,000 to £77,000; The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £71,000 to £75,000; and The registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased from £73,000 to £77,000. 

Other tax simplification matters

In April 2012 HMRC will provide taxpayers with a “Dashboard” giving access to information on the taxes they pay and how much.  From April 2014 HMRC will provide Personal Tax Statements to individuals who file their returns online and to some PAYE tax payers. The statement will include: details of the amount of tax and National Insurance they have paid, average tax rates and show them how their payments have contributed to public expenditure. The old chestnut of integrating income tax and National Insurance is still on the cards. Consultations are to continue and detailed conclusions will be published in due course.

Anti Avoidance announcements
The Government seems set on legislating to create a general anti avoidance rule – an all-encompassing, catch-all that will aim to block any attempt at reducing tax payments using artificial arrangements. It is unlikely that this will apply before April 2013. The announcements in the Budget to deal with specific schemes include the following topics: 
Inheritance tax: offshore trustsInheritance tax: settlor-interested trustsSale of lessor companiesCapital allowances: changes to anti-avoidance rules for plant and machineryPlant or machinery leasingLife insurance: income tax avoidancePost-cessation trade relief and post-cessation property reliefLoan relationships avoidance: debt buybacksProperty business loss reliefStamp duty land tax (SDLT): envelopingStamp duty land tax: sub-sales rulesSite restoration paymentsDisclosure of tax avoidance schemes (DOTAS)Stamp duty land tax: disclosure of tax avoidance schemesManufactured overseas dividendsGeneral anti avoidance rule (GAAR)Manufactured paymentsTax mitigation and IR35 

Super connected cities
The Chancellor announced that a £100m budget has been made available to create 100Mbps citywide broadband networks in 10 urban areas. Four we knew already: Belfast, Cardiff, London and Edinburgh. The other six declared by the Chancellor today are: Birmingham, Bradford, Bristol, Leeds, Manchester and Newcastle. A further £50m of funding was also announced to be shared amongst ten unnamed smaller cities.
By 2015 it is hoped this investment in cities will provide ultra-fast broadband coverage to 1.7m households and high speed wireless to 3m residents.

Sunday trading
It was confirmed that Sunday Trading regulations would be lifted for 8 Sundays during the Olympics and Paralympics starting 22 July.

Enterprise loans for young people
Budding entrepreneurs will be able to bid for a Government loan to help them start their business under a new £10m pilot scheme. The enterprise loan will operate in a similar way to the current student loans system. It will provide young people aged between 18 and 24 the chance to borrow cash to help them start up their own business. Applicants will need a “viable” business idea to secure a loan. Loans are expected to be worth between £5,000 and £10,000 per individual.National Guarantee Loan Scheme
The published details of the scheme are:The scheme allows banks to raise up to £20bn of funding guaranteed by the Government, to lend directly to smaller businesses (who are more reliant on bank finance) at a lower cost than would otherwise be the case.  UK businesses with a turnover of up to £50m will be eligible to benefit from the scheme.
Banks apply for Government guarantees against the borrowing and they can use the guarantee to raise funds at a lower cost.
 

In order to qualify for the guarantees, banks will demonstrate that they can pass the benefits of the guarantee on to businesses through cheaper loans (as in the European Investment Bank’s (EIB) well-established ‘Loans for SMEs’ scheme).  Participating banks retain the full credit risk of the loans they make under the scheme.  Banks participating in the scheme will have to offer interest rates at 1 percentage point lower than loans outside the scheme.  A range of banks will provide access to the scheme.

DISCLAIMER – PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

National Minimum Wage Rates 01/10/2012

March 19th, 2012

The adult rate of the minimum wage is to rise by 11p to £6.19 an hour from October, Business Secretary Vince Cable has announced.But the rates for younger workers will be frozen at £4.98 for 18 to 20-year-olds and £3.68 for 16 to 17-year-olds. Apprentices will enjoy a 5p increase in their minimum wage to £2.65 an hour. The changes are in line with the recommendations of the independent Low Pay Commission and come into effect on October 1st 2012.

HMRC plans relaunched Business Records Check program

February 3rd, 2012

HMRC has announced a suspension of the Business Records Check (BRC) program until the new tax year, when they will implement a new approach.The pilot programme conducted 2,437 Business Records Checks up to 4th January 2012 and found that 28% of businesses had some issue with their record keeping and that an additional 11% had issues serious enough to warrant a follow-up visit.Any new BRC appointments will be postponed until the revamped approach is launched early in the 2012/13 financial year. However, HMRC will continue to undertake visits already booked (including follow up visits) to those already identified as having seriously inadequate statutory records.HMRC will confirm the new start date of the program in due course. However, when the program does restart, HMRC will initially contact those businesses it considers to be at a higher risk of keeping inadequate records by phone or letter to ask about their record keeping. This information will then be used to determine whether a full Business Record Check is required.

Cash In your small pension pots ?

February 3rd, 2012

Changes to the present pension tax rules will allow over 60s to cash in up to two pension pots as a lump sum.·         Changes apply from April 2012.·         Pension pots of up to £2,000 in value can be considered for this treatment.·         HMRC will allow 25% to be taken free of tax. The balance will be taxed at individual’s marginal income tax rate.·         Only two pension pots can be considered. 

Its always a good idea to a state pension forecast. A BR19 request can be made online.

Reduction In Annual Investment Allowance…

October 7th, 2011

At the end of the current fiscal year, 5 April 2012 for income tax payers and 31 March 2012 for companies, the current level of Annual Investment Allowance is being reduced from £100,000 to £25,000.If your accounting year end coincides with the fiscal year end this presents no computational difficulties as all qualifying expenditure, for the year ending 5 April (31 March) 2012, up to £100,000 will provide a 100% deduction for income tax and corporation tax purposes.But what happens if your trading year end straddles the fiscal year end?

The short answer is that AIA relief is apportioned. In certain circumstances this can result in a loss of relief and higher tax bills.

Consequently if your trading year does not end 5 April (31 March) 2012, and you are contemplating significant capital expenditure in this period, we should meet to discuss tax planning options.