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2013 Budget Report

Victoria Bishop, robinson+co’s Tax Partner, gives her eagerly awaited resume of the 2013 Budget.

Are you a wine drinker? If so, you will have been disappointed that the Excise Duty on wine has not been cut as it has been for beer, whilst the Chancellor is clearly hoping that tomorrow’s headlines will repeat his phrase “penny off a pint!”

Mr Osborne may be disappointed in this regard though, as a quick trawl of headlines at the time of writing indicate that the help for home buyers and the reduction in fuel duties are the headlines, rather than alcohol.

From a tax and accountancy point of view, however, two measure share the headlines:               

  • The two Corporation Tax rates aligned at 20% from April 2015

and

  • Personal Allowance increased to £10,000 from April 2014.

Neither measure is a surprise. However, whilst the first may indeed be hailed as a simplification, the second has a nasty sting in its tail. The increase in the personal allowance is linked to a reduction in the basic rate band. Thus you may get more without paying any tax, but equally you don’t have to earn as much before you are paying tax at the higher rate of 40%.

robinson+co’s annual Tax Data Card, which detail tax rates and bands, will be posted out to our clients and professional contacts shortly; please contact Philip Allison on 01900 603623 or philipallison@robinsonco.co.uk if you will require more than one card.

Anti Avoidance

One of the first things tax and accountancy students are taught is the difference between (legal) tax avoidance and (illegal) tax evasion, but over the last few years politicians of all parties have been blurring the boundaries between the two. The furore over the tax affairs of Jimmy Carr, Starbucks, and Amazon - inter alia – have shown how legality is no longer enough in the tax world.

Last year Mr Osborne called tax avoidance “morally repugnant” – for 2013 he restrained himself by talking about “aggressive” tax avoidance only, but released an armoury of further weapons in his war against avoidance.

Victoria explained the “GAAR” in last year’s Budget review  but now we have further tax agreements with the Isle of Man, Jersey and Guernsey to make sure that there are “No Safe Havens” for the tax evader’s money – be careful though: there is nothing wrong at all in investing offshore! What is wrong, is not telling the taxman about the income earned on those investments.

There is also an announcement of changes to the corporation tax rules where a shareholder in a company borrows money from the company. The corporate team at robinson+co will be examining these new rules carefully to ensure that they do not affect  our clients, but contact David Plaskett, robinson+co’s Corporate Specialist, on davidplaskett@robinsonco.co.uk if you require further information.

 

This is allied to a relaxation in the income tax rules for when an employee is lent money by their employer. Currently there are no income tax consequences as long as the loan does not exceed £5,000 but in April 2014 this will increase to £10,000. This will bring a welcome reduction in form filling as well.

H M Revenue & Customs is also to look at the taxation of limited liability partnerships as part of its anti avoidance strategy.

Another measure is to “name and shame” what the government calls “high risk promoters of tax avoidance schemes.” Is it Victoria being cynical, or is this just the positive publicity such promoters will want – remember: tax avoidance is legal.

Lastly, buried in the Budget documents is an announcement that, from the autumn of 2013, H M Revenue & Customs will be able to obtain information from card payment processors about their retail customers. H M Revenue & Customs want to cross check the information held by the companies against the VAT and tax information held by itself. 

National Insurance Break for Employers

The news that the Chancellor kept to last in his speech – and consequently is what he is hoping we all remember - is news about the “Jobs Tax.” It took the team at robinson+co a few moments to realise he was talking about employer’s Class 1 national insurance contributions (NIC).

However, once his words were decoded, the Chancellor’s news seems to be good: from April 2014 each employer will receive an allowance of £2,000 to set against its employer’s NIC. As employer’s NIC are currently 13.8% on all wages above £149 per week, the average small employer in the UK will see a notable difference in their national insurance bill for 2014/15. Indeed, the government’s figures suggest that one third of all business employers will pay no national insurance at all with the introduction of this allowance.

The allowance will be claimed through the “RTI” system – presumably by submitting an “EPS.” If you are an employer and have no idea what “RTI” and “EPS” are then you should contact Victoria immediately on victoriabishop@robinsonco.co.uk as they are changes to the PAYE system which will affect you on 6 April 2013. If you are not an employer – then you can ignore this section!

Also on RTI, details about the new late filing penalties have been issued with the Budget documents. These will differ depending on the number of employees and will be limited to one penalty per month, even if you should have submitted more than one return in the month.

VAT

After last year’s debacle with the “Pasty Tax,” for 2013 the Chancellor has kept quiet on VAT. The important things to note are the increases to the Registration and Deregistration thresholds to £79,000 and £77,000 respectively, and also the changes to the scale charges.

Do not hesitate to contact Roger Troughton, robinson+co’s VAT Specialist on rogertroughton@robinsonco.co.uk if you require any further information on VAT matters.

Inheritance Tax 

Silence from the Chancellor on Inheritance Tax – although a Press Notice published immediately after the Speech confirmed that the nil rate band will remain at £325,000 per person until 5 April 2018.

Mr Osborne also confirmed the changes to the Inheritance Tax rules where one spouse or civil partner is “non-domiciled” in the UK. Unless your spouse or civil partner is not British you do not need to worry about this (and even if they aren’t British, this could well be irrelevant).

For further information in this area contact Victoria on 01900 603623.

Connected with Inheritance Tax was the formal announcement that, with effect from April 2016, there will be a cap of £72,000 on the contribution expected from the individual towards their social care costs when elderly. The matter of care fees is often an important factor in inheritance tax planning so it is to be hoped that the cap will provide some peace of mind to those planning for the future of themselves and their descendents.

Equally the Chancellor announced that the introduction of the single tier state pension will be introduced in 2016/17. This means that all pensioners will receive a standard weekly amount, currently estimated at around £142 per week.

However, if you already receive a higher amount of weekly state pension you will continue to receive the higher rate.

A consequence of the single tier pension is that one will no longer be able to contract out of the second state pension. This means that some people, mainly those in company pension schemes will pay more national insurance contributions. However, the Budget notes reassure them that they will get back nearly three times the additional national insurance contributions in state pension!

There are other measures in the Budget important to pension provision – the reduction of the amounts that can be paid into a pension plan, both each year, and over your lifetime; and an increase in the amount that can be drawn-down each year.

This is a very complicated area and if you are in any doubt you should contact robinson+co’s Chartered Financial Planner, Jenny Armstrong, at jennyarmstrong@robinsonco.co.uk.

What else?

As ever the Budget encompassed a myriad of other measures, not necessarily accountancy or tax issues.

One such area is the measure announced to cover 20% of childcare costs up to £1,200 per child. As ever there are various hoops through which one must jump before getting the relief. One important hoop is that all parents in the household must be in paid employment but as yet it is not clear whether there will be rules about hours worked.

What has been announced, however, is that the scheme will be available to households where neither parent earns over £150,000. This seems somewhat contradictory when we are now in a tax regime where child benefit is clawed back if one earner’s income exceeds £50,000.

Another headline maker is the attempts to open up the housing market with various schemes to make it easier for people to buy a home.

Other matters to note include:

  • Extension of the capital gains tax holiday for people investing in certain small, early stage companies. This is called the Seed Enterprise Investment Scheme.
  • Abolishing stamp duty on the purchase and sale of shares quoted on “AIM.”
  • Various incentives for employee share ownership, including when a controlling interest is sold into an employee ownership structure.
  • Extending Research and Development tax reliefs
  • Consultation on a scheme whereby employers can spend up to £500 on health measures aimed to encourage employees back to work from sickness. This amount will not be treated as taxable in the employee’s hand
  • Consulting on whether more of a tax debt can be collected through the PAYE code. This will only apply to people on higher incomes.
  • Compensation to be paid to people who bought an Equitable Life annuity before 1 September 1992.

Conclusion

Twice in his speech the Chancellor used the phrase “aspiration nation.” Just as 12 years ago linguistic pedants were wondering how you could declare war on an adjective, now the linguistic pedants at robinson+co are wondering just what this juxtaposition of two nouns means.

“There can be little doubt that the two headline tax measures – corporation tax at 20% for all companies – and a personal allowance of £10,000 – are impressive accomplishments,” says Victoria Bishop, “but only time will tell whether they do allow us as a nation to reach the aspiration with which Mr Osborne ended his speech: ‘... a Britain ... to be prosperous, solvent and free ...’.“

As ever, please do not hesitate to contact Victoria Bishop on 01900 603623 or victoriabishop@robinsonco.co.uk for further information on any matter arising from the 2013 Budget.

 

 

• These notes are not a full resume of the Budget Report issued on 20 March 2013
• All care has been taken in preparing this material. However no responsibility can be accepted for any losses arising to any person acting or refraining from acting as a result of this material
• Any comments are those of Victoria Bishop and do not necessarily reflect the views of robinson+co

 

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