Transcript Financial Bill update

13.45 – 14.25
Financial Bill update
Richard Curtis
Editor, Financial Accountant Magazine
www.ifa.org.uk
Business Tax Knowhow
– a Budget and
Finance Act 2013 update
October 2013
Richard Curtis
Editor,
Financial Accountant magazine
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What we will cover
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Personal tax for sole traders and partnerships
Corporate tax
Employment taxes
Anti-avoidance and other
…all in 45 minutes!
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Income Tax 2013/14 – by numbers
8,105
>>
9,440
=
£267
42,475 <<
41,450 =
£62
116,210 >>
118,880 =
£(472)
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Cap on income tax reliefs
• From 1 April 2013 otherwise uncapped income tax reliefs
will be restricted to maximum of higher of £50,000 or
25% x adjusted income
• Adjusted income = taxable income minus grossed up
pension and charitable payments if paid net
• Charitable gifts will not be subject to the cap
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Most important capped reliefs
1. Sideways trading loss relief
2. Sideways property loss relief
3. Qualifying loan Interest:
1. Loans to buy shares in or lend to a close trading company
2. Loans to invest in or lend to a trading partnership
3. Loans taken out by personal representatives to pay
inheritance tax
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Simplified taxation for small businesses
• Voluntary cash basis opt in from 2013 where turnover
is below £77,000 – the VAT registration limit
• Must remain in scheme until circumstances are no longer
suitable
• It appears that the ability to opt in and out as trader wishes
has been withdrawn
• Note excluded persons
• Losses only available for carry forward
• No sideways or carry back claims
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Simplified expenses
• Expenses paid wholly and exclusively for the purposes
of the trade,
• but excluding business entertaining and purchase of property or
other “investment” assets
• Interest payments limited to £500pa
• Other expense deductions:
• Standard mileage rate
• Business use of home
• 25-50 hours per month £10; 51-100 hours per month £18;
101 hours or more per month £26
• Business and private use of property adjustments
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Partnerships
• Budget announced consultation on measures to:
– remove the presumption of self-employment for limited liability
partnership (LLP) partners
• in order to tackle the disguising of employment relationships
through LLPs; and
– counter the manipulation of profit/loss allocations by partnerships
including a company, trust or similar vehicle in order to secure
tax advantages.
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Corporation tax rates 2013/14
• Main rate reduced to 23%
• Main rate of CT to fall to 21% from 1 April 2014 and
to 20% from 1 April 2015
• At which point the small profits rate is abolished
• No major announcements affecting profit extraction
and incorporation planning for small businesses
• Position now unlikely to change before 2015
• review remaining sole trades and partnerships for
incorporation
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Close company loans
• Broadening of definition of loans to participators with
effect from 20 March 2013 to include:
– Loans to partnerships and trusts
– Bring transfers of value other than loans into scope
and;
– Prevent “bed & breakfasting”
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Close company loan bed & breakfasting
• New 30-day rule
• Relief from CTA 2010, s 455 to be withdrawn where
more than £5,000 of the repayment is reversed within
30 days
– Previously, only attack from HMRC was under Ramsay
principles
• Also, where loan exceeds £15,000 and there is an
intention to withdraw the repayment then no s 455 relief
will be given
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Seed Enterprise Investment Scheme changes
• SEIS capital gains tax exemption now reduced to just
half of the reinvested gain
– But extended to allow reinvestment in 2013/14 or 2014/15
• Off-the-shelf companies now eligible
– Previous exclusion was a drafting error
• Income tax relief is at 50% as long as there is
tax capacity in year of investment or in the
previous year
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SEIS example – failure of business
post Budget 2013
• Investment £100,000, tax relief £50,000
• CGT exemption 50% of gain at 28%, £14,000
• If business fails, claim loss under ITA 2007, s131
– Conversion of capital loss into an income loss
• Loss £50,000 @ 45% = £22,500
• Net cost to investor is £13,500
• If a 40% taxpayer then net cost is only £16,000
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Annual investment allowance
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Calculate AIA for y/e 28 Feb 2013
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1/12 x £100,000
9/12 x £25,000
2/12 x £250,000
Total
£ 8,333
£18,750
£41,667
£68.750
BUT overriding limits based on previous expectations:
£8,333 + £22,917 (11/12 x £25,000) = £31,250 March 2012
£22,917 Apr – Dec 2012
£18,750 +£41,667 = £60,417 Jan – Feb 2013
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Employment taxes
• Employment allowance worth £2,000 available to all
employers (well, almost all) from April 2014
– To be delivered through RTI
• Replaces the failed Regional Employer’s NIC Holiday
scheme
– Less than 14,000 employers successfully claimed it
• Employment-related loans exemption to double to
£10,000 from 6 April 2014
– Very helpful given ongoing rise in cost of season tickets
– Will also benefit OMBs and reduce the burden of P11D
completion
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Enterprise Management Incentives
• 5% rule to be dis-applied for options granted on or after
6 April 2012
• Will apply where shares are sold on or after 6 April 2013
• The period over which the option is held continues to
qualify towards the 12 months holding requirement
• “Disposal” to be extended to cover shares exchanged as
part of a reorganisation
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Company car charges
• FA 2013 increases company car CO2 percentages
– From 2015/16
– the lowest % rate remains at 5% (currently 5%) for cars
with emissions of 50g/km or lower
– A 9% rate for cars with emission between 51 and 75g/km
– 13% (was 11%) for cars between 76g/km and 94g/km
– Then from 14% to 37% rising in 5g/km bands up to the
new maximum rate of 37% (currently 35%)
– The exemption for zero emission cars ends in April 2015
– The 3% increase for diesel cars ends in April 2016
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Company car charges
• Car fuel scale charge multiplier becomes £21,100
– An increase of £900 (4.5%)
• Typical family car: Ford Mondeo 2.0 Diesel Zetec
– Say average 40 mpg = 8.8 miles per litre (40 x 0.22)
• Tax liability on fuel benefit: £21,100 x 19% = £4,009
– At 40% = £1,604
– At 20% = £802
• Private miles required to break even:
– £1,604/£1.43 = 1,122 litres x 8.8 = 9,874 miles
– £802/£1.43 = 561 litres x 8.8 = 4,937 miles
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RTI penalties
• No late filing penalties will apply to RTI returns in either
2012/13 or 2013/14
• Up to 50 employees, have until April 2014 to comply with
‘on or before’, can report monthly
• Will this become more permanent?
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Owner-employee shares
• Plans for new kind of employment contract called an
employee-owner contract
• Exchange employment rights for rights of ownership in
form of shares
• Will be given £2,000 to £50,000 of shares exempt from
capital gains tax
• Liable to tax and NIC on issue
• First £2,000 exempt – included in Finance Act 2013
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Employment rights
• Rights under Employment Rights Act 1996 are
reduced:
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Request for study & training
Request for flexible working arrangements
Receive a redundancy payment
Limited protection for unfair dismissal
• Incorporated in the Growth & Infrastructure Bill
– Originally blocked by the Lords on day of the Budget but
subsequently made law
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Promoting employee share ownership
• Finance Act 2014 will include a CGT exemption for
qualifying disposals of a controlling interest in a
business to an employee-owned structure.
• Sounds like it could be open to significant abuse
• Employment-related securities version was the basis of
successful schemes
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Changes to car capital allowance thresholds from
1 April 2013
• Low emission cars (100% FYA)
– the 110g/km reduces to 95g/km;
• High emission cars (special rate pool, 8% p.a.)
– the 160g/km reduces to 130g /km
• Many cars have ≤ 110g/km, rather fewer have ≤ 95g/km
but this will undoubtedly change
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General Anti-Abuse Rule
• The anti-abuse rule will took effect from Royal
Assent and targets artificial & abusive arrangements
• “Egregious” “very aggressive” “highly abusive
contrived and artificial”
• GAAR will remove the tax advantage on a just and
reasonable basis
• Intended to have narrower application than an antiavoidance rule
• Tax planning remains possible, provided it is in the
“centre ground”
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Tax relief for the creative sector
• Plan is to extend current film reliefs to
– Animation
– ‘High end’ television
– Video games
• Must be ‘culturally British’
• Offers 100% increment for tax on 80% of ‘core
expenditure’
– Requires state aid approval
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Income Tax 2013/14 – by numbers
8,105
>>
9,440
=
£267
42,475 <<
41,450 =
£62
116,210 >>
118,880 =
£(472)
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Employees - NICs
• Upper earnings limit remains aligned with higher rate IT
– More income in 2% rather than 12% bracket
– Saving of about £102 for someone with earnings above £42,475
• Small increment in the primary threshold
– £7,605 >>£7,755
– Saving £18 for everyone over threshold
• So BR taxpayers save (267+18) £285
• HR taxpayers under 100k save (62+120) £185
• >£118k lose (472-120) £(352)
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Income tax 2014/15
• PA up to £10,000
• Higher rate tax threshold up 1% to £41,865
• Finally realising that the link to NI makes bringing it
down pointless?
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