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Budget 2012

Budget 2012. Personal Tax. Investment relief. Business tax. Employment tax. Capital taxes. Other matters. Personal tax. ALLOWANCES. *Reduced by £1 for every £2 adjusted net income exceeds £100,000 ** Reduced by £1 for every £2 adjusted net income exceeds £24,000. ALLOWANCES.

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Budget 2012

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  1. Budget 2012

  2. Personal Tax Investment relief Business tax Employment tax Capital taxes Other matters

  3. Personal tax

  4. ALLOWANCES *Reduced by £1 for every £2 adjusted net income exceeds £100,000 ** Reduced by £1 for every £2 adjusted net income exceeds £24,000

  5. ALLOWANCES *Reduced by £1 for every £2 adjusted net income exceeds £100,000 ** Reduced by £1 for every £2 adjusted net income exceeds £24,000 *** Reduced by £1 for every £2 adjusted net income exceeds £25,400

  6. Higher rate threshold £42,475 £42,475 £126

  7. TAX RATES

  8. Tax as % Income

  9. ALLOWANCES 2013/14 *Reduced by £1 for every £2 adjusted net income exceeds £100,000

  10. Age related allowances • To be frozen at 2012/13 levels • Entitlement • 65+ only for those born before 6 April 1948 • 75+ only for those born before 6 April 1938 • Income limits increased to £100,000 • Once basic PA reaches same level • Extra allowance will disappear

  11. TAX RATES 2013/14

  12. Tax as % Income

  13. Other issues • Dividend rate for additional income • 37.5% • Effective rate 30.6% on net dividend • Trust rate • 45%

  14. Child benefit charge • Tax charge from 7 Jan 2013 • Adjusted net income > £50,000 • Recipient of child benefit • Partner of child benefit recipient • Charge • 1% of benefit per £100 of ANI over £50,000 • At £60,000 ANI full benefit charged

  15. Example

  16. Partnership • Married couple living together • Civil partners living together • Man and woman living together not married • Couple living together as if civil partners

  17. Cap on reliefs • Will apply to reliefs which have no cap • Loss relief • Charitable giving • Relief above £50,000 • Limited to greater of • 25% of income • £50,000 • Consultation on impact on charitable giving

  18. ISAs

  19. Statutory Residence Test • Clear tests • Harder to break away from UK • Applies for individuals • Covers direct taxes • Not NIC • Will supersede all existing law and guidance • Applies from April 2013

  20. Ordinary Residence • Relevant for • Employment income • Remittance basis • CGT • To be abolished from 2013

  21. Remittance basis charge • 7 out of 9 years resident • £30,000 • 12 out of 14 years resident • £50,000 • Individuals born in UK • Will hit £50,000 charge at 18

  22. Remittances – qualifying investment • Exempt remittance for investment • Formal claim required • Investment in a company • Shares direct – eligible trading company • Loan direct • Shares in stakeholder company • No limits

  23. Eligible trading company • Unquoted • Carrying on commercial trade • Preparing to trade within 2 yrs • Trade • Includes commercial property • Some residential property situations • Substantial requirement • 80%+

  24. Benefit restriction • Widely drawn • Anything not provided in course of trade • Anything provided on favourable terms • Can have a commercial salary, dividend etc

  25. Reinstatement of remittance • Potentially chargeable event • Without appropriate mitigation steps • Treat original investment as remittance • At end of period of grace

  26. Business tax

  27. CT rates Plan A

  28. CT rates Plan B

  29. Investment Relief

  30. EIS changes • Relief increased from 6 April 2012 • £1m investment • Connection with company • Removal of loans as a factor • Inclusion of some preference shares • Rights must not be determined by company or investor • Minimum investment level removed

  31. EIS and VCT changes • Some tightening of avoidance rules • Acquisition of existing business • Not acquisition of shares as a trade • Subsidised generation of electricity not qualifying • Increase in size of company that qualifies • £15m gross assets • Increase in investment into company • £5m

  32. SEED ENTERPRISE INVESTMENT SCHEME

  33. SEIS headlines • Income tax relief at 50% • Max investment £100,000 • CGT exemption • Gains made in 2012/13 • Reinvested in SEIS • Company assets < £200,000 • Max investment in company £150,000 • Mass of anti-avoidance!!

  34. Income tax relief • Given as a reduction of tax liability • Cannot create a repayment • Max relief = actual tax liability • Unused relief • Carry back to PY • BUT not 2012/13 to 2011/12

  35. CGT relief • 2012/13 only • Assets sold • Reinvested in SEIS • Reduce gain by SEIS investment • If SEIS withdrawn • CGT charge reinstated

  36. Capital allowances from April 2012 • Annual Investment Allowance • Down to £25,000 • Time apportion • Watch the period post April • Writing down allowances • 20% down to 18% • 10% down to 8% • Hybrid rates

  37. Cars • 100% FYA on low emission cars • To be extended to 31 March 2015 • Qualifying emissions to be reduced in 2013 • 95gm/km

  38. Cars – writing down allowance • Current 20% wda • Emissions 111 – 160 gm/km • From April 2013 • Emissions 96 – 130 gm/km • All other vehicles • 10% (8%) wda

  39. First Year Allowance ‘designated assisted areas’ in Enterprise Zones • 100% • Plant • From 1 April 2012 • For 5 years • Meets 5 conditions • Watch exclusions

  40. 5 conditions • Company within CT • For purpose of trade • New activity • New • Not replacement

  41. Fixtures • Asset installed in a building which becomes part of building • CAs go to person incurring expenditure • Building transferred • Fixture transferred • CAs for purchaser must not exceed disposal value of vendor

  42. New rules • Current owner acquires fixtures from another person • Other person treated as owner • Incurred historic expenditure • Past owner entitled to claim CAs • Requirements for purchaser to get CAs

  43. R&D changes • April 2011 • Credit rises to 100% (200% total) • April 2012 • Credit rises to 125% (225% in total) • £10,000 min spend removed • PAYE limit removed

  44. Patent Box • Intellectual Property • 10% tax rate • 10% rate of corporation tax

  45. Creative sector • New reliefs to be introduced • No details yet • Aimed at • Video games • Animation • High end TV programmes • ‘Wallace and Gromit’ relief!

  46. Issues for small businesses • Unincorporated businesses • Turnover up to VAT threshold • Continue up to £150,000 • From 2013 • Use cash basis rather than full accounting • Reduce record keeping • Some standard expenses • Motoring • Use of home

  47. Other issues • Make disincorporation easier • Integration of tax and NIC • Improving HMRC service • Introducing online Business Dashboard

  48. Employment tax

  49. Car benefits • Cars • Changes announced for future years • Increased percentages • Diesel supplement of 3% • will not apply from April 2016

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