Budget 2012Francis Clark LLP22 March 2012

Private Client Matters

Personal Tax - Contents

• Personal Allowances and Related Issues• 50p Rate• Capital Gains Tax• Other Personal Tax Measures• EIS and SEIS• SDLT Avoidance• IR35• Employee share ownership• Inheritance Tax• Booze, Fags & Petrol

Personal allowances and related issues

• The Government is committed to increasing the personal allowance to £10,000 by 2015

• Increase to £8,105 for 2012/13 • £9,205 for 2013/14• Corresponding adjustments to the basic rate band

Income Tax Thresholds

Basic rate threshold 2011-12£35,000

2012-13£34,370

2013-14£32,245

Additional rate threshold£150,000

The End of the 50p Rate

from 6 April 2013

• £16bn of income advanced in 2010 – not forecast by Labour

• Raised £1bn when £3bn was expected and forecast

• Other measures to cover measure

Capital gains tax

Current situation• Annual exemption remains £10,600• Entrepreneurs’ relief - 10% on the first £10m of gain• Basic rate taxpayers taxed at 18% on gains over the

annual exemption up to the limit of the basic rate band• Gains made by higher rate taxpayers are taxed at 28%.

• Foreign currency bank accounts to be removed from the charge to CGT from 6 April 2012

Other Personal Tax Measures

• Statutory residence test delayed until April 2013• Non-dom investment relief begins April 2012• Income tax charge on child benefit from 7 January

2013 where either partner has income over £50k• From 2013 cap on unlimited reliefs of over

£50,000. 25% maximum shelter

Tax Favoured Investments

Enterprise Investment Scheme (EIS) changes

• Rate increased to 30% from last AprilFrom 6 April 2012:• Increase in max size of qualifying company for both EIS to £15m and

<250 employees• Max amount which can be invested in an individual company increased

to £10m• Annual limit on investment for an individual is £1m• Connection via a holding of 30% of loan capital is removed• Qualifying shares can now include shares with certain preferential rights

to dividends• The definition of qualifying trades has been amended to exclude

businesses based on feed in tariffs for electricity generation

Seed Enterprise Investment Scheme(SEIS)

• Investments made on or after 6 April 2012 for five years• 50% income tax relief is given on qualifying investments, whatever

your marginal rate of tax – tax credit to reduce tax bill• For one year only in 2012/13 where gains are reinvested in SEIS

shares the original gain will be exempted, rather than deferred• 78% tax relief in 2012/13!• Capital gains tax is not charged on disposal (conditions include hold

for three years)• Income tax relief will be withdrawn on the same basis as for EIS if

the shares are not held for at least 3 years • Relief can be claimed in prior year

Seed Enterprise Investment Scheme(SEIS)

• £150,000 maximum raise per company• Gross assets must not exceed £200,000 immediately before the investment is

made• No EIS or VCT investment must have been made before the issue of SEIS shares• Fewer than 25 full time employees • The trade must be a genuine new trade and only within two years of

incorporation• 70% of the funds raised must have been spent on qualifying activities• Maximum annual investment of £100,000 per investor• The investor must not own more than 30% of the company or be an employee• Usual plethora of conditions about qualifying trades and disqualifying events

Personal Service Companies

• New package of measures aimed at PSCs

• HMT suggested that PAYE could be collected on payments to PSCs

• Consultation process to follow

Employee Ownership• Nick Clegg’s big vision• Previously EMI option holders

unlikely to get entrepreneurs relief

• This will be changed going forwards

• EMI allowance increase from £120k to £250k

SDLT Avoidance

• Properties purchased or bought in a company now targeted with high rates of SDLT

• Applies to properties with a value in excess of £2m

• Immediate effect

Inheritance tax

• Nil rate band is currently frozen at £325,000 until 2015

• New rate of 36% from 6 April 2012 where at least 10% of the estate is given to charity.

Booze, Fags and Petrol

• Beer up 3p a pint• Cider up 3p a litre• Wine up 11p a bottle• Spirits up 41p a bottle• Cigarettes up 37p a pack• Cigars up 12p a tin• Petrol no change

Corporate & Business Taxes

Corporate & Business Taxes - Contents

• Corporation tax rates• Capital allowance changes• R&D• Patent box• Video Game & Animation relief• ESC C16• Overseas issues• GAAR• National Insurance• VAT

Corporation tax rates

• Note - bands subdivided by number of associates• Main rate will reduce to 22% by 1 April 2014

(lowest rate UK has ever known)

2010/11 2011/12 2012/13 2013/14 2014/15First £300,000 21% 20% 20% 20% 20%

Upper rate on £1.5m

28% 26% 24% 23% 22%

Capital allowance changes

From April 2012• WDAs reduced to

– 20% to 18% for plant & machinery– 10% to 8% for integral features

• AIA down to £25,000 from £100,000• No 100% ECAs on assets in respect of which the feed-in tariff (FIT)

or renewable heat incentive (RHI) is received• Expenditure on solar panels will only qualify for CAs at 8% (not

18%)• Business Premises Renovation Allowance – extended to 2017• Flat conversion allowance - 100% relief ends April 2013

Capital allowance changes

Capital Allowances For Plant Fixtures from April 2012

• Purchaser and all future owners of the property could forfeit entitlement to claim on any plant fixtures unless done properly

• Allowances can be in the region of 10% - 30% of the purchase price of a property

• The current rules allow a property owner to claim capital allowances at any time whether or not any previous owner has made a claim

• Fundamental need for tax DD on property acquisitions and advice on disposal

R&D

From 1 April 2012

• SME rate 225% from 200% • Repayable R&D credits for loss making SMEs reduced from

12.5% to 11% • Remove PAYE/NIC Cap CTAPs ending on or after 1 April

2012• Remove £10k minimum claim limit from 2012 or after 1

April 2012• Move to 'above the line' tax credit system from 2013

Patent box

• Corporation tax rate of 10% on the exploitation of patents and some other intellectual property

• From 1 April 2013• Phased in from 2013; full benefit from 2017• Deduction calculated to reduce the tax to 10% on relevant income• Elect in• Includes patents granted by certain other EU national patent regimes,

the UK Intellectual Property Office and the European Patent Office• Can claim 10% rate on profits for six years prior to the grant • No special regime for SMEs

Video Game & Animation Relief

• Applies to the ‘creative sector’• Similar to film tax credits• Consultation to follow • Effective 1 April 2013

ESC C16

• No longer exists; legislated with amendments• Winding up unwanted company value below

£25,000• No clearance required - capital• Winding up unwanted company value above

£25,000• Liquidation costs

International Issues

• CFC reform - new ‘gateway test’ • CFC reform - HMRC guidance essential• Update to the foreign branch exemption rules• Consultation on ToAA and s.13 TCGA

Tax Avoidance

‘I regard tax evasion and indeed aggressive tax avoidance as morally

repugnant.’

George Osborne – Chancellor21 March 2012

General Anti-Avoidance Rule - GAAR

• Economic & political climate• Graham Aaronson QC• Double reasonableness test • Clearance procedure• Avoidance or mitigation • Impact on cost of advice

National Insurance Holiday

• ‘NIC holiday’ for small start-up companies taking on new

employees – • Far less take up than the

Chancellor originally predicted (12,827 as at 16 February 2012)

• Local geography is important

Value Added Tax - Thresholds

• VAT registration threshold £77,000 from 1 April 2012 (currently £73,000)

• Deregistration threshold £75,000 from 1 April 2012 (currently £71,000)

• Fuel scale charges – new rates from 1 May 2012

Value Added Tax - Admin

• All VAT returns to be filed online from 1 April 2012

• All VAT registrations, deregistrations and variations to be online from 31 October 2012

• The VAT threshold for businesses not established in the UK will be removed from 1 December 2012

Value Added Tax - AvoidanceHMRC have proposed to address anomalous VAT borderlines by applying VAT to the provision of:

– Self storage facilities– Approved alterations to listed buildings– Catering– Sports drinks– Holiday caravans– Rental of hairdressers’ chairs

(c) copyright Francis Clark LLP, 2012 You shall not copy, make available, retransmit, reproduce, sell, disseminate, separate, licence, distribute, store electronically, publish, broadcast or otherwise circulate either within your business or for public or commercial purposes any of (or any part of) these materials and / or any services provided by Francis Clark LLP in any format whatsoever unless you have obtained prior written consent from Francis Clark LLP to do so and entered into a licence.To the maximum extent permitted by applicable law Francis Clark LLP excludes all representations, warranties and conditions (including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided by Francis Clark LLP. These materials and /or any services provided by Francis Clark LLP are designed solely for the benefit of delegates of Francis Clark LLP. The content of these materials and / or any services provided by Francis Clark LLP does not constitute advice and whilst Francis Clark LLP endeavours to ensure that the materials and / or any services provided by Francis Clark LLP are correct, we do not warrant the completeness or accuracy of the materials and /or any services provided by Francis Clark LLP; nor do we commit to ensuring that these materials and / or any services provided by Francis Clark LLP are up-to-date or error or omission-free. Where indicated, these materials are subject to Crown copyright protection. Re-use of any such Crown copyright-protected material is subject to current law and related regulations on the re-use of Crown copyright extracts in England and Wales.These materials and / or any services provided by Francis Clark LLP are subject to our terms and conditions of business as amended from time to time, a copy of which is available on request.Our liability is limited and to the maximum extent permitted under applicable law Francis Clark LLP will not be liable for any direct, indirect or consequential loss or damage arising in connection with these materials and / or any services provided by Francis Clark LLP, whether arising in tort, contract, or otherwise, including, without limitation, any loss of profit, contracts, business, goodwill, data, income or revenue. Please note however, that our liability for fraud, for death or personal injury caused by our negligence, or for any other liability is not excluded or limited.

Disclaimer & copyright

Stuart RogersStuart.Rogers@francisclark.co.uk