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22.03.2013

Budget 2013 Extracts relevant for small businesses

Business Taxes
National Insurance – employers’ employment allowance: from April 2014, an annual allowance of £2,000 will be introduced,  which all businesses and charities will be able to offset against their employer Class 1  NI liability.
Capital Allowances – low emission vehicles: legislation will be included in Finance Bill 2015 to extend the 100% capital allowance for expenditure on low emission vehicles for an extra 3 years, up to 31 March 2018.
Taxable Profits – small businesses:  from 2013-14 eligible small non-company businesses (generally those whose receipts do not exceed the VAT registration threshold) will be able to work out their taxable profits using the simpler ‘cash basis’, rather than the accruals basis.
Disincorporation relief:  a relief from corporation tax on chargeable gains when a small company transfers its business to its shareholders will be introduced for disincorporations on or after 1 April 2013 to 31 March 2018, provided that certain conditions are met and a valid claim is made.

Personal Tax

Income Tax – personal allowance: for 2014-15, the personal allowance limit will be increased further to £10,000, from £9,440 for 2013-14.   Once the personal allowance has reached £10,000, it will then increase by Consumer Prices Index starting from 2015-16.

Income Tax – basic rate threshold: for 2014-15, the basic rate threshold will be reduced further to £31,865, from £32,010 for 2013-14.

Income Tax – capping unlimited reliefs: as announced at Budget 2012, a cap on all previously unlimited income tax reliefs (excluding charitable reliefs) will be introduced at the greater of £50,000 or 25% of the individual’s income.

National Insurance – administrative simplification: the Government will consult on measures to simplify the administrative process for self-employed persons in respect of Class 2 NI.

Capital Gains Tax – the annual exempt amount will increase by 1% in 2014-15, to £11,000, and by the same percentage in 2015-16, to £11,100.

Inheritance Tax – nil rate band: as announced in February, the IHT nil-rate band will remain frozen at £325,000 until April 2018.

Pensions – lifetime allowance:  The lifetime allowance will be reduced from £1.5 million to £1.25 million for 2014-15.

Pensions – annual allowance: The annual allowance will be reduced from £50,000 to £40,000 for 2014-15.

Statutory and Ordinary Residence: Legislation will be introduced in Finance Bill 2013 to eliminate the concept of ordinary residence and introduce a statutory definition of tax residence for individuals. In addition, Overseas Workday Relief will be placed on a statutory footing.

 

Employment

IR35– as previously announced, the Government will strengthen the existing intermediaries legislation (IR35) to put beyond doubt whether it applies to office holders for tax purposes.

Tax Reliefs – expenditure on health-related interventions: legislation will be introduced in Finance Bill 2014 so that amounts up to £500 paid by employers on health-related interventions recommended to support employees to return to work are not treated as taxable benefits in kind.

 

VAT

Registration and deregistration thresholds: the taxable turnover threshold over which VAT registration is required will increase from £77,000 to £79,000; the taxable turnover threshold under which VAT deregistration is possible will increase from £75,000 to £77,000;

Charitable buildings: Charitable buildings will be withdrawn from the scope of the VAT reduced rate for the supply and installation of energy-saving materials, from 1 August 2013.

HMRC and Tax Administration

General anti-abuse rule: as announced at Budget 2012, a general anti-abuse rule will be introduced in Finance Bill 2013 providing for the counteraction of tax advantages arising from abusive tax arrangements in relation to income tax, NICs, corporation tax, CGT, IHT, petroleum revenue tax, SDLT and the new annual tax on enveloped dwellings.

Anti-avoidance – HMRC offshore evasion strategy: HMRC has published its latest strategy for tackling offshore evasion, entitled ‘No safe havens’. In addition it has agreed packages of measures with the governments of the Isle of Man, Guernsey and Jersey, comprising of automatically exchanging financial information on UK taxpayers with offshore accounts and creating a disclosure facility so that people can disclose this information before it is automatically exchanged.

Anti-avoidance – high-risk promoters: the Government will consult on measures to tackle the actions of high-risk promoters of tax-avoidance schemes, including the proposal to use ‘naming and shaming’ penalties. Legislation will be in Finance Bill 2014.

PAYE – real time information penalties: as announced at Budget 2012, new late filing penalties and amendments to the late payment penalties will be made in respect of RTI returns. Penalties will vary according to the number of employees in the scheme and will apply from 6 April 2014.

Data gathering from card payment processors: HMRC will be given new powers to require card payment processors to provide bulk data about business taxpayers, so that they can identify those who do not declare their full sales.

Customs penalties: the Government will consult on proposals to modernise customs civil penalties by bringing them in line with other HMRC penalties. Legislation will be in Finance Bill 2014.

 

Other

Gift Aid: the Government will consult on measures to improve the take-up of Gift Aid on donations made digitally.

Air passenger duty: air passenger duty rates will be increased in line with inflation (based on RPI) from 1 April 2013.

Social investment tax relief: legislation may be introduced in Finance Bill 2014 following consultation on the introduction of a new tax relief to encourage investment in social enterprises.

 

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