Budget Briefing 2012
The main Budget highlights for 2012 are as follows:
Personal Income Tax
Income tax rates from 6 April 2012 remain unchanged.
From 6 April 2013 the additional rate payable on income in excess of £150,000 will reduce to 45%. The additional rate for dividends will reduce to 37.5%.
From 6 April 2012 the income tax personal allowance for individuals under 65 will increase to £8,105. The basic rate limit will reduce to £34,370.
From 6 April 2013 age-related allowances will be restricted to £10,500 for people born on or before 5 April 1948 and to £10,660 for people born on or before 5 April 1938. These allowances will not be increased from 2013/14. People born after 5 April 1948 will be entitled to a personal allowance of £9,205 for 2013/14, and the basic rate limit will be set at £32,245.
From 7 January 2013 a new charge will apply to taxpayers with adjusted net income over £50,000, where they or their partner are in receipt of child benefit, at 1% of the full child benefit for each £100 of income between £50,000 and £60,000. For income above £60,000 the charge will equal that of the full child benefit. Seed Enterprise Investment Scheme (SEIS)
From 6 April 2012 relief will apply to investment in companies carrying on or preparing to carry on a new business, with 25 or fewer employees and gross assets up to £200,000.
Income tax relief of 50% of the amount invested will be granted to individual investors, including directors, who subscribe for less than 30% in such companies. The relief is limited to £100,000 invested each year but unused annual amounts can be carried back to the previous year.
Gains on shares within the SEIS, and gains realised from the disposals of assets in 2012/13 where those gains are reinvested through the new SEIS will be exempt from CGT.
Enterprise Investment Scheme (EIS) & Venture Capital Trusts (VCT)
Enhancements were announced to both the EIS and VCT regimes including:
- In relation to EIS; the abolition of the £500 minimum investment limit, an increase to £1 million of the amount an individual can invest in any one tax year, and an increase to £5 million for the annual amount that any one company can receive in EIS investment;
- In relation to VCT; the removal of the £1 million investment limit for companies not in partnership.
Capital Gains Tax (CGT)
For 2012/13 the annual exemption remains at £10,600 for individuals and personal representatives and at £5,300 for trustees.
From 6 April 2012 CGT will no longer be chargeable on withdrawals from foreign currency bank accounts.
Inheritance Tax (IHT)
The IHT nil rate band threshold is frozen at £325,000 until April 2015 after which it will be increased by reference to the Consumer Price Index.
From 21 March 2012 antiavoidance provisions will be introduced in relation to the acquisition by UKdomiciled individuals of interests in offshore “excluded” property trusts. These provisions will mean that such trusts are brought within the relevant property regime.
The Government will consult on increasing the amount UK domiciled individuals can transfer to nondomiciled spouses or civil partners to align with the current IHT threshold, and so allow nondomiciled spouses to elect to be treated as UK domiciled for IHT purposes.
The Government will consult on simplifying the calculation of IHT trust periodic and exit charges.
To encourage charitable legacies a lower rate of IHT will be introduced where 10% or more of a deceased person’s net estate is left to charity. The rate of IHT will reduce from 40% to 36% where the estate qualifies and the death occurs on or after 6 April 2012.
Domicile & residence
From 6 April 2012 and following the 2011 consultation process, legislation will be introduced to make changes to the taxation of nondomiciled individuals. Keys changes include:
- The annual remittance basis charge will be increased to £50,000 for nondomiciled individuals resident in the UK in 12 or more of the previous 14 tax years;
- Overseas income and gains brought into the UK for commercial investment into a qualifying business will not be subject to UK tax;
- Reducing the complexity of the remittance basis rules.
The statutory residence test will take effect from 6 April 2013.
From 6 April 2013 the concept of ordinary residence will be abolished for tax purposes.
The Government will consult on the introduction of a CGT charge and on the introduction of an annual charge on residential properties over £2 million owned by certain nonresident “nonnatural” persons with the intention of introducing legislation in the Finance Bill 2013.
On 1 April 2012, the main rate of corporation tax, the threshold for which is £1.5 million, will reduce to 24%. Further reductions are proposed, so that the main rate will become 23% on 1 April 2013 and 22% on 1 April 2014.
Stamp Duty Land Tax (SDLT)
For transactions chargeable on or after 22 March 2012 the SDLT rate for residential property increases to 7% where the chargeable consideration is more than £2 million. Transitional relief should ensure that the old rates will apply to contracts entered into before 22 March 2012 but completed on or after that date.
From 21 March 2012, a 15% rate of SDLT will apply to transactions in residential properties where the chargeable consideration is more than £2 million and the property is purchased by certain types of “nonnatural” persons such as companies. Transitional rules will apply where the contract was completed and signed by all parties to the transaction on or before 21 March 2012.
For transactions on or after 21 March 2012, antiavoidance legislation will be introduced to counter SDLT avoidance schemes involving the grant or assignment of an option so that such schemes cannot satisfy the requirements of the subsales rules.
The Government has accepted the introduction of a targeted General AntiAbuse Rule (GAAR) to tackle artificial and abusive tax avoidance schemes, including SDLT. Consultation will take place during the summer with a view to legislation being included in the 2013 Finance Bill.
New measures will be introduced to tackle tax avoidance through the use of personal service companies and to simplify the current IR35 legislation.
From 1 April 2012, HMRC will be able to issue a notice requiring a third party to divulge the identity of taxpayers where a loss of tax is suspected.
New powers to increase the value of fixed penalties in line with inflation will be included in the Finance Bill 2013.
From 2013, new powers will allow HMRC officers undertaking criminal investigations to seize suspected criminal cash and exercise search and seizure warrants.
This briefing is for guidance purposes only. RadcliffesLeBrasseur accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.