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Bloomsbury Professional outlines 10 highlights from the 2012 Budget

1 Personal Taxes - General

For 2013/14 the basic rate of income tax will be 20%, the higher rate will be 40%, and the additional rate will be 45%. The dividend additional rate will be 37.5%, the trust rate will be 45% and the dividend trust rate will be 37.5%.

From April 2013, the personal allowance will rise to £9,205 (£8,105 for 2012/13). The basic rate limit will be reduced to £32,245 (£34,370 for 2012/13).

2 Personal Taxes - Higher Personal Allowances Restriction

From 2013/14, the availability of the ‘age-related’ income tax personal allowances will be restricted. The allowance of £10,500 for 2012/13, available to people aged 65 to 74, will be restricted to people born after 5 April 1938 but before 6 April 1948. The allowance of £10,660 for 2012-13, available to people aged 75 and over, will be restricted to people born before 6 April 1938. From 2013/14, the amounts of these allowances will not be increased. From 2013/14, people born after 5 April 1948 will be entitled to the basic personal allowance of £9,205.

3 Personal Taxes - Child benefit - Income Tax Charge for Those on Higher Income

A new income tax charge will be applied to taxpayers whose income exceeds £50,000 in a tax year and who are in receipt of Child Benefit, and to taxpayers whose income exceeds £50,000 and whose partner is in receipt of Child Benefit. In the event that both partners have an income that exceeds £50,000, the charge will apply only to the partner with the highest income. For taxpayers with income between £50,000 and £60,000, the amount of the charge will be a proportion of the Child Benefit received. For taxpayers with income above £60,000, the amount of the charge will equal the amount of Child Benefit received.

The amount of Child Benefit payable will be unaffected by the new tax charge. This measure takes effect from 7 January 2013.

4 Company Car Taxation - Changes

For 2014/15 the appropriate percentage of the list price subject to tax will be increased by one percentage point for cars emitting more than 75g of carbon dioxide per kilometre, to a maximum of 35%. In both 2015/16 and 2016/17, the appropriate percentages of the list price subject to tax will increase by two percentage points, to a maximum of 37%.

In addition, new European standards which come into force in September 2015 will require diesel cars to have the same air quality emissions as petrol cars. The diesel supplement will therefore be removed in April 2016.

The multiplier used to calculate the cash equivalent of the benefit of free fuel provided to employees is increased from £18,800 to £20,200 for the tax year 2012/13. There is a further commitment to increase the multiplier by two per cent above the rate of inflation (RPI) for the tax year 2013/14 which will be legislated by Order in the autumn, following confirmation of the September 2012 inflation figure. As a result of this change the fuel benefit charge will increase for fuel provided for all cars apart from zero emissions cars.

5 Venture Capital Reliefs - Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs): Increases to Thresholds

Subject to state aid approval, legislation will be introduced in Finance Bill 2012 to increase:

• the thresholds for the maximum size of qualifying company for both EIS and VCTs; and
• the maximum annual amount that can be invested in an individual company under all the venture capital schemes.

Legislation will be introduced in Finance Bill 2012 to increase:

• the employee limit to fewer than 250 employees;
• the size threshold to gross assets of no more than £15 million before investment and £16 million after; and
• the maximum annual amount that can be invested in an individual company, to £5 million.

Legislation will also restrict to £5 million in total the amount of investment which a company may receive in a 12-month period from any State-aided risk capital measure, including EIS and VCT.
Subject to state aid approval these changes will apply to shares in investee companies that are issued on or after 6 April 2012.

Legislation will also increase the annual amount that an individual can invest under the EIS to £1 million. This has already received state aid approval and will apply to the tax year 2012/13 and subsequent years.

6 Business Tax - Corporate Tax Rates Reduction

The main rate of corporation tax will be reduced in Finance Bill 2012 (for all non-ring fence profits) to 24% for the financial year commencing 1 April 2012, and to 23% for the financial year commencing 1 April 2013. The corporation tax main rate will be further reduced (by legislation in Finance Bill 2013) to 22% for the financial year commencing 1 April 2014.   

7 Business Tax - Capital Allowances and Fixtures

Following a consultation process, new rules for the pooling of qualifying fixtures have been proposed.  These are intended to prevent late claims being made for capital allowances on fixtures on property acquired many years before, when the position of the vendor can no longer be verified.  This meant that HMRC could not be sure that the total allowances in respect of fixtures were being restricted to the initial cost of those fixtures, as the allowances that had been claimed by previous owners could not be verified.

Under the new rules a purchaser of fixtures will only be able to claim capital allowances if the previous expenditure on those fixtures had been pooled by the vendor before sale and the vendor and purchaser have agreed the value of the fixtures at the date of transfer.  This agreement must be made within two years of the date of transfer and would normally be done by a joint election for the sale price to be attributed to the fixtures, capped at the original cost to the seller.  If they cannot reach agreement within two years, the matter can be referred to the First-tier Tribunal for a determination. Either party will be able to invoke this facility.  The referral to the Tribunal must be made within the two years following a transfer.

A purchaser of fixtures may also be able to claim capital allowances where, exceptionally, a vendor provides a statement of the disposal value he has brought into account for the fixtures in the past (for example, if he had ceased business some time before).  Again, this statement must be provided within two years of the later sale of the property.

This measure will apply to expenditure on or after 1 April 2012 for corporation tax purposes or 6 April 2012 for income tax purposes.

8 Business Tax - VAT Thresholds

The VAT registration and deregistration thresholds will be changed so that:

• the taxable turnover threshold, which determines whether a person must be registered for VAT, will be increased from £73,000 to £77,000;
• the taxable turnover threshold, which determines whether a person may apply for deregistration, will be increased from £71,000 to £75,000; and
• the registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased from £73,000 to £77,000.

A statutory instrument laid on 21 March 2011 will apply the revised thresholds with effect from 1 April 2012.

9 Business Tax - Capital Allowances in Enterprise Zones

New enterprise zones have been announced and there will be 100% first year allowances for expenditure incurred by trading companies on qualifying plant or machinery between 1 April 2012 and 31 March 2017.  The plant and machinery must be for use primarily in designated assisted areas within enterprise zones.

Enterprise zones are designed to encourage new investment, so qualifying expenditure must be on unused plant and machinery, not second hand, and must actually be an investment and not merely replacement expenditure for old plant and machinery.

There are also a number of restrictions for EU purposes, so that the allowances would not be available to certain firms in financial difficulty, or companies involved in the fisheries, aquaculture, coal, steel, shipbuilding, synthetic fibres, agricultural products, road freight and air transport sectors.

10 Stamp Duty Land Tax - Measures for High Value Residential Properties

There is an increase in the rate of stamp duty land tax for residential property over £2 million from 5% to 7% from 22 March 2012.  This will impact on freehold purchases and the grants or assignments of leases, where the consideration (or premium for the grant of a lease) is over £2 million. It may also impact on exchanges of land, transfers to connected companies and partnerships where the property value is in excess of £2 million.

The legislation will include transitional provisions which mean that if exchange took place before 22 March 2012, the old rates will continue to apply.

There is a new measure to combat the perceived large scale avoidance of stamp duty by owning property though companies (typically offshore companies).  When the measure applies stamp duty land tax will be charged on the acquisition at 15%.

The charge will take effect when the purchaser is a ‘non-natural’ person, which would include a company, a collective investment scheme and a partnership in which a non-natural person is a partner.

Of particular note is that there will be exclusions from charge for property developers and corporate trustees – in certain circumstances.

This measure will apply from 21 March 2012, although there are transitional provisions for purchases where exchange occurred before that date.

Article provided by Bloomsbury Professional - for the Budget Tax Tables 2012-13 please see  Bloomsbury Professional