AAT Budget Update 13 April 2011

1. AAT Budget Update13 April 2011 Speakers Phil Cook FCA CTA - Head of Tax Steve Simmonds AIIT - Director of VAT Services

2. Budget Update Value Added Tax

3. Budget Update Registration & Deregistration limits • Registration limit increased from £70,000 to £73,000 • De-registration limit increased from £68,000 to £71,000 Effective from 1 April 2011

4. Budget Update Fuel Scale charges new rates from 1 May 2011 • See Tax Data Card • Approved Mileage Allowance (from 6 April) • Increased to 45p per mile for first 10,000 miles but remains at 25p mile thereafter • Fuel Element of the 45p/25p is from 1 March 2011 Petrol Diesel LPG • up to 1400cc 14p 13p 10p • 1401 – 2000cc 16p 13p 12p • Over 2000cc 23p 16p 17p All including VAT

5. Budget Update Online VAT Returns • 1 April 2012 all businesses must be filing online VAT returns • Must also pay electronically (BACS, CHAPS, DD) • Can pay by Internet Banking, BillPay and Credit Card (Fee applies) • Note – BACS, BillPay & Credit Card take 3 working days to process

6. Budget Update Reporting EC Trade from 1 Jan 2011 • New rules mean that most B2B supplies of services now subject to reverse charge • Still need evidence that client is receiving supply by way of business • Need to put reference on invoice referring to supply as Intra Community supply of services subject to reverse charge

7. Budget Update Penalty update • Under the old rules no penalty was imposed when an error was or was due to be corrected on the next VAT return • When new penalties introduced in 2007 this was rule was dropped • HMRC have reinstated rule backdating it to introduction of the new penalties (see R&C Brief 15/11 - copy attached). Scope for appealing any penalty where error would have been discovered and corrected

8. Budget Update • Business Records Checks (BRC) • HMRC claim that “poor business record keeping is responsible for a loss of tax in up to 2 million SME cases annually” • HMRCintends to undertake some 50,000 checks per year into the adequacy of the business records starting this Autumn • An unannounced pilot has started with over 1,500 businesses already being contacted - HMRC say this is a trial & learn exercise • Where HMRC consider records are inadequate then a penalty of up to £3,000 could be levied even if no tax has been lost • No guidance as to what HMRC will consider adequate or inadequate just vague comments although HMRC say guidance will be published in the next 2 weeks

9. Budget Update Direct Taxation

10. Budget Update • Personal Taxes • Personal allowance £7,475; £8,105 in 2012/13 • Lower basic rate limit to restrict PA increase to basic rate • £100,000 income limit • £150,000 Additional limit rate – 50%/42.5% • NIC’s increase • Class 1; Primary 12% + 2%, Secondary 13.8% • Class 4; 9% + 2% • Lower upper threshold @ £42,475

11. Budget Update • Personal Tax • Car Fuel Benefit £18,800 • List Price cap of £80,000 removed • Approved mileage rate 45p for first 10,000 miles • Child care vouchers higher rate restriction (new entries only) • Non-dom charge £50,000pa >12 years residence to claim remittance basis • Remains at £30,000pa >7yrs residence but <12yrs • Statutory residence test planned for 2012/13

12. Budget Update • Personal Tax • Furnished Holiday Lets • UK & EEA eligible as qualifying FHL on statutory basis • Day count increase by 50% for availability and actual letting • 2 year average arrangement on actual letting requirement • Losses no longer available for sideways offset • CGT rate @ 10% still available

13. Budget Update • Capital Allowances • AIA reduced to £25,000 from April 2012 • Transitional hybrid rate for periods spanning 1 April/6April. • WDA’s down • Main Pool 18% from 20% • Special Pool 8% from 10% • Periods ending after April 2012 with hybrid rate spanning that time • Short Life Assets • 4year period extended to 8 years • From April 2011 • ECA extended • Changes from summer 2011

14. Budget Update • Corporation Tax • Main rate down to 26% from 1.4.11 • Small Company rate down to 20% from 1.4.11 • Marginal rate down to 27.5% • R&D enhancement for SME’s up to 100% from 1.4.11 • Subject to EU state aid approval up to 125% from 1.4.12

15. Budget Update • Capital Taxes • Inheritance Tax • Nil Rate Band frozen at £325,000 until 5 April 2015 • Death rate reduced to 36% on Estates where 10% or more is given to charity. • Capital Gains Tax • Annual Exemption up to £10,600 • 18%/28% rates remain for basic rate/higher rate/trustees • Entrepreneurs relief Lifetime limit increased to £10million • Applies only to gains after 6April 2011. Gains in excess of previous limit remain unrelieved

16. Budget Update • Savings & Investments • EIS Income Tax relief up to 30% for shares acquired post 5 April 2011. • EIS limits and restrictions improved from 2012 • 21 New Enterprise Zones announced with city partnerships to decide exact details in Summer 2011 • Junior ISA’s planned

17. Budget Update • Pension Changes • Annual Allowance reduced to £50,000 • 3 year carry forward of unused Annual Allowance • c/fwd calculated from 2008/09 for 2011/12 • Lifetime Allowance reduced to £1.5million • Compulsory annuity purchase at age 75 abolished • Tax Rate on death benefits if pension in payment or aged greater than 75 fixed at 55% • Minimum Income Requirement £20,000 for fund application

18. Budget Update • Consultations • Enterprise Zone designation • CA’s on Generating Equipment • IR35 Review • Pre-transaction certainty • Example guidance • High risk areas only • Forum for discussion • Income Tax & NIC Reform • Office of Tax Simplification • Review of 1,042 reliefs

19. Budget Update Any Questions?