The Finance Bill 2013 will introduce a range of tax changes. Here are the key ones which could affect you.
Corporation tax rates
The main rate of corporation tax will reduce to 21% from 1 April 2014; this is an additional reduction of 1% against the planned rate. The small profits rate remains 20%e:
The rate of bank levy will be increased to offset the benefits of the reduction in the main rate.
We feel it’s probably that a single rate of corporation tax of 20% will be introduced before very long. Although the single rate will present some simplification for SMEs you will still need to consider associated companies in deciding whether they need to pay tax by quarterly instalment payments, so this aspect of complexity is likely to remain.
Research and Development Relief
A new scheme of tax credits for R&D will be introduced for the large company scheme – that is companies not entitled to relief under the SME scheme. An “above the line” (ATL) credit of 9.1% will apply in respect of qualifying expenditure incurred on or after 1 April 2013.
The credit will be fully payable where a company has no corporation tax liability for the period, and will exist alongside the existing uplifted deduction for R&D spend (at 130% of the qualifying expenditure). There will be a higher rate for companies in the oil and gas ring fence.
Companies that wish to benefit from ATL relief will make a claim for the relevant accounting period, until 31 March 2016, after which the existing scheme of relief will be abolished and ATL will be the only additional relief for R&D activities of large companies.
Those companies which prefer to remain within the old system of R&D additional deduction may do so until the scheme terminates.
ATL will be taxable when available to companies which are profitable, so the 9.1% rate is the pre-tax rate. The full amount will be payable to claimants where there is no corporation tax liability. A consultation document and draft legislation were issued on 11 December 2012.
A simple relief will be available for a limited period of five years, for disincorporations starting on 1 April 2013; the relief will actually be effective from the date of Royal Assent. The relief will allow companies to transfer goodwill and an interest in land to the shareholders of the company without incurring capital gains tax in the company. The relief will apply when the value of assets transferred on disincorporation does not exceed £100,000.
The conditions for the relief to apply are:
- The business is transferred as a going concern to some or all of the shareholders of the company.
- The transfer is of all of the assets, or all of the assets except cash.
- The total market value of the qualifying assets (goodwill and land not held as trading stock) included in the transfer does not exceed £100,000.
- All of the shareholders to whom the assets are transferred are individuals, each of whom has held shares in the company throughout the period of 12 months ending on the business transfer date.
- The relief will be available on a joint claim within 2 years of the business transfer date and the effect will be to transfer the relevant assets at a value that means no corporation tax is payable by the company on the transfer. The election will be irrevocable.
- The individual shareholder will acquire the asset for CGT purposes at the value ascribed for CT purposes, so the relief models hold over relief.
- Where the goodwill has been subject to intangibles relief, the value for these purposes is the lower of the tax written down value and the market value. This is likely to mean that where amortisation has been claimed on goodwill in the company (under the corporate intangibles regime) that the goodwill will be re-acquired at nil value (if the goodwill has been fully amortised).
- Where the goodwill was not subject to the intangibles regime, the value ascribed is the lower of the cost and current market value.
|Number of relevant occupants||Applicable amount|
|3 or more||£650|
First year tax credits
Companies making a loss as a result of claiming enhanced capital allowances (ECAs) can surrender the loss for payment of a tax credit at 19% of the amount of the loss (subject to a maximum of £250,000 or the PAYE and NIC payable in respect of the period if greater).
The allowances provide for 100% relief on energy efficient and water efficient technologies. More information on these important allowances is available at www.eca.gov.uk The scheme was due to come to an end on 31 March 2013, but will now be extended for a further five years to 31 March 2018.
Personal allowance and tax bands
The personal allowance for 2013/14 will be £9,440, an increase over the amount announced at Budget 2012. The basic rate band has been set at £32,010, or total income of £41,450; this is a reduction of £1,025 from the current year.
For 2014-15 and 2015-16, the increase in the higher rate threshold will be capped at 1%. It would seem likely that the intended personal allowance of £10,000 will now be reached by April 2014 and apply to the 2014-15 tax year. This requires an increase of a further 5.9% over the amount for 2013-14.
Cap on income tax reliefs
The proposals will go ahead as planned. The cap will apply to reliefs that are deducted from income under ITA 2007, s24. Those reliefs that do not currently have a cap on them will be restricted so that an overall cap of the greater of £50,000 or 25% of income will apply. The main reliefs that will be affected are trade and property loss reliefs and qualifying loan interest relief.
- The restriction of set off of trade loss relief against general income will not include relief for overlap profits (and transitional overlap profits) and business premises renovation allowance (BPRA) both of which may be claimed in full without limit.
- The restriction for property losses available against general income (losses arising as a result of capital allowances or certain agricultural expenses) will similarly exclude BPRA which may be claimed in full.
- Relief for losses in the first four years of trade will also be affected, as will post cessation loss reliefs (both trade and property)
- Income tax relief for losses on shares will also be restricted.
The restriction will not apply to the set off of losses brought forward against profits of the same trade or property business.
Employer supported childcare
Employees who are additional rate taxpayers and joined an employer’s childcare scheme on or after 6 April 2011 are currently restricted to £22 per week in tax free childcare vouchers. This will increase to £25 with effect from 6 April 2013, to reflect the reduction in the additional rate from 50% to 45%.
CGT exemption for employee owners
Provided the employees under the new contracts (see personal tax) receive a minimum of £2,000 worth of shares, the disposal of these shares at the termination of the employment will be free of CGT. This is limited to gains on shares worth up to £50,000 at the date of disposal.
Although this measure has been widely criticised the Government intends to press ahead with it for commencement in April 2013.
Reduced rate VAT on energy saving installations.
The reduced rate will be removed from charity buildings and will only be available to residential buildings (including those operated by charities). The change will affect supplies made on or after 1 August 2013.
Reduced rate VAT for small cable based transport
Cable based transport carrying less than 10 people per car is currently standard rate. Where 10 or more passengers can be carried, this is a zero rated supply of public transport. The rate applying to the carriage of passengers in smaller cable based transport will reduce from 20% to 5% from 1 April 2013. The relief will be reviewed after three years in operation.
OTHER INDIRECT TAXES
Herbal smoking products
Herbal smoking products, other than those used exclusively for medicinal purposes are to be liable to excise duty in the same way as tobacco smoking products.
Air passenger duty – business jets
There will be a new accounting system for APD in relation to business jets. The details will be released by secondary legislation. Draft legislation and TIIN will be released early in 2013. Vehicle excise duty (Road Fund licence).
The legislation about displaying a tax disc will be extended to allow 14 days from payment of duty for the disc to be displayed, to allow the cost of posting discs to be reduced. This will apply to discs posted on or after Royal Assent.
HMRC information gathering powers
HMRC’s powers to accumulate data about taxpayers will take another big step forward in 2013 when powers will be legislated for to obtain bulk data from businesses handling credit card and debit card transactions. The present indications are that the information will relate to businesses accepting debit and credit card payments, rather than underlying personal transactions. The policy objective is stated to be compliance activity in respect of businesses that do not declare all of their sales.