Spring Budget 2013
Blake Morgan's Corporate Tax team provides a summary of some of the main tax changes in the Chancellor George Osborne's Budget 2013 of relevance to the firm's clients and contacts.
As previously announced, the main rate of corporation tax will be reduced to 23% from 6 April 2013 (and to 21% from April 2014). From April 2015 the main rate will reduce to 20% and the small companies rate will be scrapped. The reduction in the main rate will not benefit the banks due to an increase in the bank levy.
From April 2015 there will be a 100% allowance for expenditure incurred on cars with low carbon dioxide emissions and electrically propelled cars. This will be available for three years to 31 March 2018.
There were no substantial changes relating to SDLT in the Budget.
However, by way of reminder, the changes to the SDLT sub-sale rules will be coming into force on 6 April. The most important change is that the transfer from A-B (in an A-B-C contract) will no longer be disregarded for SDLT purposes so 'A' will need to file an SDLT return claiming sub-sale relief (and can do so provided that the new anti-avoidance rules do not apply).
Additionally (and as previously announced) the new Annual Residential Property Tax ("ARPT") is due to come into force on 6 April (with the first payment being due on 1 October or 30 days from the date of Royal Assent for the Finance Act 2013 if later). The ARPT will apply to 'single dwelling interests' (land or buildings used or suitable for use as a single dwelling or in the process of being constructed or adapted for such use (including grounds and garden)) which are worth in excess of £2m where that interest is held by a non-natural person (a company, a partnership with a corporate partner or a collective investment scheme) ("NNP"). A new CGT charge will be introduced for companies disposing of such interests (the intention of which is to bring the disposal by off-shore NNPs into the UK tax net; although it will also apply to UK NNPs). However the CGT charge applies to only the increase in the value of the interest which has accrued after 5 April 2013. Although this is not the mansion tax requested by the Lib Dems, it is a similar concept and may well be extended in the future.
A final reminder of pre-announced changes for SDLT: the SDLT rules on abnormal rent increases will be abolished. The amendments will have effect on and after the date on which Finance Bill 2013 receives Royal Assent. The abolition of the rules on abnormal rent increases will apply to any increases on or after that date.
Help to buy
The Government has extended the help-to-buy scheme. This will now be available for all buyers (and not just first-time buyers) on purchases of newly built homes up to a value of £600,000. The scheme will provide a 20% equity loan which will be interest-free for the first 5 years and will only become repayable when the house is sold.
In addition, the Government have introduced a mortgage guarantee applying to all home buyers with a low deposit. This will apply to new and old homes. The guarantee is for up to 80% of the purchase value and will be valid for up to 7 years after the mortgage is granted.
As previously announced, from September 2013 there will be a new employment status called 'employee-shareholder'. Under this new status the employee gives up certain employment rights (most significantly, the right to claim unfair dismissal unless the claim involves discrimination) in return for the employer giving the employee shares worth at least £2,000. The disposal of the shares given under this status will be capital gains tax exempt (for the first £50,000 worth of shares gifted). The Government have announced today that there will be a deemed payment of £2,000 by the employee for the shares (thus reducing income tax and employee NICs costs for the employee-shareholder).
The new status received a huge amount of criticism at the consultation phase, so it remains to be seen what the level of take-up will be on this, but it does provide a useful alternative for innovative tech start-ups to a traditional employment status. By way of update the clause that introduces the employment status in the Growth and Infrastructure Bill has been defeated in the House of Lords. Unless the House of Commons can amend the clause in a way that the House of Lords approves, this employment status may now not come into force.
The personal allowance for 2013-14 is £9,440 as previously announced. The higher rate threshold will be reduced proportionately so that no higher rate tax payer benefits from the change. From April 2014 the personal allowance will be £10,000.
The additional rate of income tax for earners with taxable income over £150,000 a year will be reduced from 50% to 45% as previously announced, despite strong opposition from Labour.
The Government has introduced an 'employment allowance' the effect of which is that the first £2,000 of employer's NICs for each year will exempt. This will apply to all businesses and charities from April 2014.
The flat rate pension scheme (£144/week) is to be brought forward to April 2016.
These will be scrapped in April 2015 in favour of a new system allowing parents (who must be earning less than £150,000) to claim back 20% of childcare costs up to a maximum £1200 a year for each child. Under the existing childcare voucher scheme there is a maximum tax saving of just over £1800 based on both parents being able to claim at the full rate and regardless of the number of children in the family. Initially the new scheme will cover children up to 5 but will be gradually extended up to age 12. Unlike childcare vouchers, it will be available to self-employed parents. Parents claiming under the childcare voucher scheme will be able to stay in their scheme, but such schemes will be closed to new parents.
Enterprise Management Incentive schemes
As previously announced, for shares acquired pursuant to an EMI scheme after 6 April 2013, the qualifying conditions for attracting Entrepreneur's Relief (which reduces the CGT rate to 10% on the first £10m of qualifying lifetime gains) on a sale of shares will be relaxed so that:
- there will be no minimum equity stake required (currently 5% of the ordinary shares of the company, entitling the holder to 5% of the voting rights);
- and the minimum holding period (of one year) will start to run from the date of grant of the options (not the date of exercise).
There is a capital gains tax exemption for up to £100,000 of gains re-invested in companies qualifying for SEIS (early-stage companies) - the exemption is to be extended for gains arising in the 2013-14 tax year. However, the exemption will be limited to 50% of the gains reinvested (i.e. up to £50,000).
SDRT is to be abolished for shares traded on AIM from April 2014.
A series of anti-avoidance measures have been introduced relating to corporation tax loss relief, loans to participators in close companies (companies controlled by 5 of fewer persons), misuse of the partnership rules (by removing the presumption of self-employment for LLP members and looking into the manipulation of profit/loss allocations) and IHT avoidance (relating to the treatment of liabilities to reduce the value of an estate). If these are of interest, please contact us and we can provide more detail.
The planned rise in fuel duty in September has been scrapped. The planned increase in alcohol duty for beer will not take place and, on Sunday night the duty on beer will be decreased by 1p.