The News Latest in Tax & Finance

Having had a look through the written detail, as set out in the 121 page Budget 2014 Document here are some of the tax related highlights I’d like to share. The Finance Bill 2014 will be published on 27 March 2014.

Sophie White - Director

Personal Tax

Income tax personal allowances for 2015-16:

Increase the personal allowance for those born after 5 April 1948 to £10,500. Basic rate tax limit to £31,785 for 2015-16. These changes will have effect from 6 April 2015

Transferable tax allowance for married couples and civil partners – effective for the 2015-16 tax year, allows a spouse or civil partner to apply to transfer £1,050 of their personal allowance to their spouse or civil partner.

Pensions

• Legislation will be introduced in Finance Bill 2014 to:
• reduce the minimum income requirement for accessing flexible drawdown to £12,000;
• increase the capped draw down limit to 150% of an equivalent annuity;
• increase the total pension wealth that people can have before they are no
• longer entitled to receive lump sums under trivial commutation rules to £30,000;
• increase the small pots limit, raising the size of a pension pot that can be taken as a lump sum regardless of total pension wealth, to £10,000;
• increase the number of small personal pension pots that can be taken as a lump sum to three.

Business Tax

Annual Investment Allowance (AIA)

Increase the current temporary maximum of the AIA from £250,000 to £500,000. The legislation will also extend the period of the temporary increase. These changes will have effect:

from 1 April 2014 to 31 December 2015 for corporation tax; and
from 6 April 2014 to 31 December 2015 for income tax.

Increasing small and medium sized enterprises (SMEs) payable research and development (R&D) tax credit – increase the rate of R&D payable credit for loss-making SMEs to 14.5 per cent from 11 per cent for qualifying expenditure incurred on or after 1 April 2014.

Extending the Seed Enterprise Investment Scheme (SEIS)

Remove the time limit from SEIS and make it permanent. The legislation will also make permanent the capital gains tax (CGT) relief for reinvesting gains in SEIS shares. These changes will come into force from Royal Assent to Finance Bill 2014 and, for CGT reinvestment relief, have effect for 2014-15 and subsequent years.

VAT

Registration and deregistration thresholds in line with inflation so that:

the taxable turnover threshold which determines whether a person must be registered for VAT, will be increased from £79,000 to £81,000;

the taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £77,000 to £79,000

the registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased from £79,000 to £81,000

Tax Avoidance Measures

Stamp Duty Land Tax (SDLT):

Threshold for the 15 per cent higher rate for residential property purchased by “envelopes” – reduced to £500,000 where the effective date is on or after 20 March 2014. However the existing £2 million threshold will continue to apply, subject to exceptions, where contracts were entered into before that date.

Annual Tax on Enveloped Dwellings (ATED) 

Reduced threshold to £500,000. From 1 April 2015 a new band will come into effect for properties with a value greater than £1 million but not more than £2 million with an annual charge of £7,000. From 1 April 2016 a further new band will come into effect for properties with a value greater than £500,000 but not more than £1 million with an annual charge of £3,500. There will be a transitional rule for the £1 million to £2 million band requiring returns to be filed on 1 October 2015 and payment by 31 October 2015.

High-risk promoters 

Further information requirements for the Disclosure of Tax Avoidance Scheme (DOTAS) rules, alongside new information powers and penalties for high-risk promoters. Following consultation, the definitions, appeal rights, and the threshold conditions in the high-risk promoter legislation have been revised. These changes will have effect from Royal Assent to Finance Bill 2014.

Requirement for users of failed avoidance schemes

HMRC to have the power to give notice to taxpayers who have used avoidance's schemes which are defeated in another party's litigation that they should amend their returns or settle their disputes with HMRC accordingly. Taxpayers who decide not to settle their case will risk a penalty. This change will have effect from Royal Assent to Finance Bill 2014.

Accelerated payment in tax avoidance cases

Taxpayers who have used avoidance schemes which are defeated in another party's litigation, and who do not settle the dispute, required to pay the disputed amount to HMRC on demand.

Extend accelerated payment of tax to users of schemes disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, and to taxpayers involved in schemes subject to counteraction under the General Anti-Abuse Rule (GAAR), so that the amount in dispute is held by HMRC while the dispute is resolved.

These changes will take effect from Royal Assent to Finance Bill 2014.