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Budget Review 2014

Victoria Bishop, robinson+co’s Tax Partner, together with Technical Manager Brett Bennett, gives her eagerly awaited resume of the 2014 Budget.

 

Is there an election (or referendum) coming?

 

Today’s Budget was meatier than in previous years with lots of announcements that are good news for all - according to Mr Osborne - other than just his “chums and PM’s friends” – according to Mr Miliband. Perhaps the most obvious clue was the fact that for some reason the Chancellor decided to freeze the duty on Scotch Whisky.

 

But there were other hints to the events of the next 12-15 months: giveaways to charities and the squeezed middle such as abolishing the VAT on fuel for Air Ambulances; the changes to funding our retirement; and the establishment of a £200million fund for repairing potholes – these funds must be applied for by district councils so let’s hope our Cumbrian councils are on the ball.

 

Business Tax /Corporation Tax

 

Annual Investment  Allowance (AIA)/Capital Allowances

 

With the current AIA limit of £250,000 due to finish in December 2014, the government has again attempted to encourage businesses to reinvest in capital investment (in particular on integral features, fixtures and fittings and plant & machinery of their businesses).  The Government has extended and increased the maximum relief available from £250,000 to £500,000 for investment made before 31 December 2015.  This means that businesses will potentially receive a 100% deduction on up to the first £500,000 they spend in the year on qualifying capital expenditure.

 

As result a business’ tax position could be dramatically reduced in the year of investment, to the extent that either a loss arises or significant tax savings are secured.

 

As with every other increase in the AIA limit, timing of the capital spend can be critical.  A complicated “apportionment” calculation is needed in the year where your year end spans the transition date.  That is, delaying a purchase between this month and next could result in a significant tax saving to your business.

 

As ever, we are here to advise you on the tax efficient position to adopt so that the relief is maximised for your business.

 

For further details on how this could help your business, please contact David Plaskett on 01900 603623 or davidplaskett@robinsonco.co.uk.

 

Research & Development – Tax Credit

 

Small and Medium sized companies have long been able to sacrifice their losses generated from Research & Development for a tax repayment from the Revenue.  The rate of repayment has been reducing over the past years due to the reduction in the large company rate, with the current rate of the credit being 11%. 

 

However, rules introduced from 1 April 2014 will mean that the rate at which repayments are made on tax losses sacrificed are not dependent on the large company rate, and will be based on a government provided figure, which will be 14.5% on qualifying costs from 1 April 2014.

 

For further details on how this could help your business, please contact Brett Bennett on 01900 603623 or brettbennett@robinsonco.co.uk.

 

 

 

Cars

 

In line with the government’s intention to have tax incentives derived from an environmentally friendly perspective, the rates at which car benefits and fuel benefits are taxed will be increased in the coming years.  Essentially, this means that unless a vehicle’s CO2 emissions are significantly low, the ownership of cars in owner managed businesses is still very unattractive and in most cases tax inefficient.

 

However, with car manufacturers ever “driving” to manufacture vehicles with lower CO2 emissions, there are attractive capital allowance reliefs available on new vehicles with CO2 emissions below 95 g/km.  In addition, the availability of enhanced tax allowances for electric cars means that we have seen a rise in these types of vehicles purchased through our clients’ businesses.

 

As ever we would always suggest that you contact us before making a purchase of vehicle through a business, so that we can ensure that the most tax efficient position is achieved.

 

For further details, please contact your normal contact at robinson+co on 01900 603623, 01946 692423 or 019467 25808.

 

VAT

 

It is another quiet year for VAT. The important things to note are the increases to the Registration and Deregistration thresholds to £81,000 and £79,000 respectively.

 

Do not hesitate to contact Roger Troughton, robinson+co’s VAT Specialist on 01900 603623 or rogertroughton@robinsonco.co.uk if you require any further information on VAT matters.

 

Inheritance Tax

 

Another quiet year in this area as well.

 

However, a consultation has been announced into extending an Inheritance Tax exemption. Members of the armed forces who die on active service (or as a result of injuries incurred on active service) are exempt from inheritance tax. The government will look into extending this exemption to members of the emergency services who die in similar circumstances.

 

Savers

 

The Chancellor has really tried to appeal to the country’s savers, who have been adversely affected by nearly 6 years of historically low interest rates.

 

  1. ISAs

 

Firstly he is reforming the ISA regime – in the process coming up with the nice acronym of “NISA.”

 

From 1 July 2014 the investment limit will increase to £15,000 per year and there will no longer be a split between cash ISAs and stocks and shares ISAs. This means that £15,000 could be invested in bank or building society accounts if so required.

 

  1. Premium Bonds

 

Secondly, the limit on investment in Premium Bonds will increase from 1 June 2014 to £40,000 and there will be two £1million prizes each month. The first month affected by the two prizes will be August 2014.

 

  1. Pensioner Savings Bonds

 

Thirdly, killing two birds with one stone, Mr Osborne also announced that NS&I will offer a new choice of savings products for those over 65. Precise details will be announced in the Autumn Statement leading to a January 2015 launch of the new products.

 

  1. Starting Rate for Savings Income

 

Fourthly, in some circumstances some people are taxed at 10% on their investment income. This 10% rate is being reduced to 0% from 6 April 2015 which will save those people affected £288 per year.

 

For further details of any of these, please contact Jenny Armstrong, robinson+co’s Chartered Financial Planner on 01900 603623 or jennyarmstrong@robinsonco.co.uk.

 

Seed Enterprise Investment Scheme (SEIS) Relief

 

The Government has continued with incentivising investment in new start up companies by extending the CGT reinvestment relief on amounts introduced into qualifying SEIS companies. 

 

The rules exempting 50% of a capital gain reinvested into a qualifying SEIS have been extended to the 2014/2015 tax year and beyond.   This is great news for small start up businesses who are seeking “angel” investment for their innovative companies.  With West Cumbria dubbed as one of the potential “development” sectors of the country, we will be ensuring that investors in new company start ups are maximising the SEIS relief rules.

 

For further details on how this could help your business, please contact Brett Bennett on 01900 603623 or brettbennett@robinsonco.co.uk.

 

Saving for Retirement

 

The Chancellor announced some far reaching changes to the way we fund our retirement, some of which will take effect from 27 March:

 

- reducing the amount of guaranteed pension income people need in retirement to access their savings flexibly, from £20,000 to £12,000

- increasing the capped drawdown limit from 120% to 150% to allow more flexibility to those who would otherwise buy an annuity

- increasing the size of a single pension pot that can be taken as a lump sum, from £2,000 to £10,000

- increasing the number of pension pots of below £10,000 that can be taken as a lump sum, from 2 to 3

- increasing the overall size of pension savings that can be taken as a lump sum, from £18,000 to £30,000

 

The ability to take 25% of your pension pot as a tax-free lump remains, and there will be other changes to the tax rules affecting pension funds, notably reducing the 55% charge on some withdrawals at some trigger events.

 

This is an involved and complicated area and if you have any queries you must contact Jenny Armstrong, robinson+co’s Chartered Financial Planner on 01900 603623 or jennyarmstrong@robinsonco.co.uk.

 

Jenny will also expand on these initial notes about the changes shortly so watch this space!

 

National Insurance

 

Class 2 NIC

 

From April 2016, the collection of Class 2 NIC will no longer be done throughout a tax year and will start to be collected through the Self Assessment regime.  A no doubt welcome reduction in businesses’ tax administration.

 

Employment Allowance

 

Previously announced in last year’s budget was the introduction of the £2,000 employment allowance, effectively increasing the limit at which a business starts to remit Class 1 Secondary NIC (i.e. employer's NIC).  These rules will take effect from April 2014, and will enable a significant saving to small and medium sized businesses.

 

We have already started to proactively plan the remuneration structures of our client base to ensure that this relief is fully utilised in the 2014/2015 tax year, and will contact you as appropriate.

 

Under 21s

 

From April 2015, businesses will no longer suffer a NIC charge on employees that are aged under 21, regardless of whether they are new or an existing member of staff, as long as they do not earn more than (currently) £797 per week. 

 

Anti Avoidance

 

Pay Your Tax Now and We Can Argue Later

 

The Revenue have continued their focus on tax avoiders and the associated tax savings of tax avoidance schemes.  New rules will be introduced, that will require the tax payer to remit to the Revenue any tax saving that has been sought through a tax avoidance scheme, while the dispute is being pursued.

 

This provides an equal footing to other tax payers who currently have tax repayments withheld from the Revenue while they are disputing the technical position of a particular tax treatment.

 

With the above said, the use of tax avoidance schemes, and disclosure to the Revenue of them, declining by more than 50% in the year, the use of tax avoidance schemes looks well and truly under the thumb of the current government.

 

In addition to the above, the Revenue are introducing rules that allow them to apply the ruling of one case against similar “scheme” cases.  That is, mass marketed tax avoidance schemes can sometime be based on a similar “concept”, regardless of who administers the schemes.  The new rules introduced in this budget will enable the Revenue to apply one ruling against all outstanding cases that effectively adopt the same principal in their tax avoidance scheme.  This essentially empowers the Revenue to draw unpaid tax from failed avoidance schemes, rather than them pursuing each scheme on a case by case basis.

 

Stamp Duty on Residential Properties acquired through Companies

 

The government has continued its attack on residential properties owned by companies or “Non Natural Persons”, with reduction in value of properties where the rules apply.  With effect from 20 March 2014, the previous Stamp Duty Land Tax threshold of £2,000,000 will be reduced to £500,000, which will increase the number of properties that would fall within charge.

 

The major impact on these properties will be the 15% stamp duty land tax (SDLT) which is charged on their transfer, but in addition to SDLT, an annual tax charge is also levied on the properties.

 

From 1 April 2015, a new band will be used for determining the rate of the annual charge with an introduction of a £1,000,000 - £2,000,000 band generating a £7,000 charge.  From 1 April 2016, an additional band will be introduced to cover properties with a value between £500,000 - £1,000,000, and which will yield a charge of £3,500.

 

The final sting in the tail for these properties will be an inflated capital gains tax rate of 28% on their disposals, which will be some 8% above the advised company rate applicable from 1 April 2015.

 

However, these rules do not apply to farmhouses or properties within a property development company.

 

A Memory Test

 

Forming part of the 2014 Budget are several measures which were announced either in the 2013 Budget or at the 2013 Autumn Statement.

 

One is the introduction of an Employment Allowance discussed above.

 

Second is the fact that – from April 2015 – part of the Personal Allowance can be transferred between spouses or civil partners. An amount of £1,050 (equivalent to a tax saving of £210) can be transferred if neither spouse or civil partner pays tax at the higher rate. robinson+co will of course be reviewing its clients’ household tax liabilities to ensure that this relief is claimed wherever possible. In the meantime talk to your normal contact at robinson+co if you have any queries.

 

Thirdly, an important capital gains tax change will take effect on 6 April 2014. If you move out of your home you will only have 18 months to sell the property before capital gains tax kicks in. Up to now that period has been 36 months.

 

If you are thinking of moving out of your home it is important that you discuss matters with Victoria Bishop on 01900 603623. Capital gains tax can be mitigated with a little planning.

 

Important things – part 1

 

 

2014/15

2015/16

 

£

£

Personal Allowance

10,000

10,500

Basic Rate Band

31,785

31,785

Capital Gains Tax Annual Exemption

11,000

*

Pensions Saving – Annual allowance

40,000

40,000

Pensions Saving – Lifetime allowance

1,250,000

1,250,000

Inheritance Tax Nil Rate Band

325,000

325,000

ISA limit 06/04/14 to 30/06/14

11,880

n/a

NISA limit from 1 July 2014

15,000

*

Small Profit Corporation Tax Rate

20

20

Corporation Tax Rate

21

20

VAT Registration Threshold

81,000

*

VAT Deregistration Threshold

79,000

*

 

*Amounts to be announced in 2015

 

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.

 

Important things part 2

 

As ever the Chancellor ended his speech with those items that really do affect your day-to-day life, hoping that they will sway you even if nothing else does:

 

- Fuel Duty is again frozen

- Alcohol duties: the duty on beer is reduced for the second year running whilst the duties for wines are increasing by RPI only

- There are a couple of announcements regarding Bingo and gambling. The Bingo Duty rate is halving to 10% for accounting periods starting on or after 30 June 2014 whilst the rate for some (mainly fixed odds) gaming machines will be increased to 25% on 1 March 2015

- The Air Passenger Duty will be reformed from 1 April 2015, hopefully leading to more transparency for ticket prices

- Tobacco Duty will go up by 2% above inflation with immediate effect.

 

Childcare

 

Announced last week were the plans to reform the way parents can claim support for their childcare costs. Parents can claim 20% support of up to £10,000 per year for each child up to age 12. This will start from Autumn 2015.

 

If you want further information on this please contact Linda Little on 01946 692423 or lindalittle@robinsonco.co.uk

 

So......

 

Mr Osborne started his speech by saying that he is “building a resilient economy” and “if you’re a maker, doer, or a saver: this budget is for you.”  Will the measures outlined above achieve this aim? Only time will tell, but in the meantime if you have any queries about matters raised by the Budget, please do not hesitate to contact Victoria Bishop on 01900 603623 or victoriabishop@robinsonco.co.uk.

 

 

- These notes are not a full resume of the Budget Report issued on 19 March 2014
- 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 Brett Bennett and do not necessarily reflect the views of robinson+co

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