June 2010 Winter Rule Budget

www.winterrule.co.uk

Budget Seminar24 June 2010


makingthe Budgetless taxing


3Speakers

John Endacott

Peter Penneycard

Scott Bentley


a strongrelationship isbuilt on trustJohn Endacott


5World Cup Fever

4 - 1


6Welfare Spending

Tax Credits

Thresholds at which tax credits payable:

CTC WTC WTC(Couple) (Individual)

£ £ £

2010/11 58,213 18,231 13,383

2011/12 41,330 17,654 13,043


7Employment Disincentives

Marginal Tax Rates

Employed Self-Employed% %

Tax Credits 41 41

Income Tax 20 20

National Insurance 12 9

Student Loan 9 9------ ------82% 79%==== ====


8Labour’s Tax Increases

Income Tax Changes – Story so Far

• Income > £150k – 50% rate

• Income £100k - £113k – loss of personal allowances

• Income > £130k – loss of pension tax relief

• National insurance rises


9Parliamentary Process

Finance Bills

• April – Pensions in – Holiday lets out

• Next one – will the whips get a majority?

• Hence Budget was very light


10Our Tax Campaign

Furnished Holiday Lets

• Rules unchanged for 2010/11

• Changes from April 2011

• Consultation on new rules

• Tighter rules/less reliefs – probably


11Capital Gains Tax

Capital Gains Tax – New Rates

• Non-business assets (no entrepreneurs’ relief)– 18% (basic rate)– 28% (higher rate)

• Entrepreneurs’ Relief – 10%

• Trustees – 28%

• From 23 June 2010


12Capital Gains Tax

Entrepreneurs’ Relief

• New £5m lifetime limit (£1m in 2010/11)

• £10m for a married couple

• BUT limited relief

• Can not afford to miss out– Value now £900k (£5m @ 18%)– Value April 2008 £80k (£1m @ 8%)


13Unanswered Questions

Dogs That Didn’t Bark

• CGT main residence relief

• Inheritance tax nil rate band (stealth tax)

• Anti-avoidance measures

• Next year?


trading intax advice

Peter Penneycard


15Tax Changes Affecting Larger Businesses

Oldrate

Newrate

VAT 17.5 20 Will raise about £13bn each year

Corporation tax main rate

28 27 24

}}} Will cost £1.25bn

Corporation tax small companies 21 20

} each year}

Capital allowances – P&MNormalIntegral featuresAnnual investment allowance

2010

£100K

188

£25K


16Size Counts

Number of employees Total tax as%-age of PBT

5 33%

20 38%

100 44%


17Standard Rates of VAT in the EU

Country Rate

France 19.6

Germany 19

Ireland 21

Italy 20

Netherlands 19

Spain 16

UK 17.5 20


18VAT - Change of Standard Rate

Planning Zone

4 Jan 2011

17.5% 20%


19

Hotel Lowin Invoice for Accommodation

Net VAT

Room charge 10 to 13 January 2011

3 days at £100 300.00

less: deposit received 30 Nov 2010 100.00 17.50

--------

200.00

add: VAT at 20% 40.00 40.00

---------

To pay 240.00


20

Hotel Lowin Invoice for Accommodation

Net VAT

Room charge 10 to 13 January 2011

3 days at £100 300.00

less: deposit received 30 Nov 2010 85.10 14.90

--------

214.90

add: VAT at 20% 42.98 42.98

---------

To pay 257.88


21Corporate Tax Rates

05

1015202530

2010 2012 2014

Main rate

Marginalrelief

Small Corate

Main rate 28% 27% 26% 25% 24%

Small companies 21% 20%


22Corporation Tax Reform

• Capital distributions – FA (No 3) 2010

• Consortium relief – FA (No 3) 2010

• Simplification of associated company rules from 1/4/11

• Review of taxation of overseas branches

• Review of capital gains in groups

• Review of controlled foreign companies


23Capital Allowances

Plant & Machinery Rate Rate

First year allowances 1/4/10 § 40 Nil

AIAs at 100% 1/4/12 max exp £100k £25k

Integral features etc 1/4/12 10 8

Green kit 100 100

Other 1/4/12 20 18

IBAs (incl hotels) + ABAs 1/4/11 § 1 Nil

Land remediation 100 100

Business premises renovation 100 100

Flat conversion 100 100


24Support for Enterprise

• NIC holiday for new businesses

• Extension of Enterprise Finance Guarantee Scheme

• Proposed Regional Growth Fund– employment– Innovation

• Green Investment Bank


25The Future Revealed

• Taxation of non-doms

• Taxation of R&D and intellectual property

• Anti-avoidance legislation to combat SDLT avoidance arrangements on high value properties

• Consultation re introduction of a GAAR – “here we go again”

• Corporation tax reform– taxation of overseas branches– capital gains in groups– controlled foreign companies


26Summary for Larger Businesses

• Increase in rate of VAT to 20%

• Decrease in main rate of corporation tax to 24%

• Decrease in small companies CT rate to 20%

• Reduction in main rate of CAs to 18%

• NIC changes

• Sources of finance

• Consultation re tax reform– avoidance– overseas income


taking all yourbusiness needsinto accountScott Bentley


28OMB - Issues

How has the Budget Impacted on OwnerManaged Businesses?

Two key areas:-

• Employment costs for staff

• Taxation of profits and remuneration


29Employment Costs

What is happening to NIC?

Employees Employers2010/11 2011/12 2010/11 2011/12

Above Primary/Secondary 11% 12% 12.8% 13.8%

Threshold2010/11 - £5,715 - £43,875

Above upper earnings limit

2010/11 > £43,875 1% 2% 12.8% 13.8%

These increases were announced previously but not referred to in the Budget speech.


30What do these Increases mean in Practice?

So what is new?

• Starting point for contributions for employer to increase by an additional £21 per week over and above inflation in 2011/12

• Actual number will not be known until September

• Scheme to exempt the first £5,000 of employer NIC for up to 10 employees in respect of genuine new start up businesses.


31What do these Issues mean in Practice

Example

Employee earning £20,000 per annum

2010/11 2011/12 Change

Employer’s NIC 1,828 1,821 (7)

Employee’s NIC 1,572 1,715 143

The above includes the announced £21 increase to the employer’s threshold but ignores any inflationary rises to the 2011/12 rates.


32So what about the NIC Holiday?

What we know

• Effective no later than September but will benefit start ups from today

• Qualifying start ups will get exemption from paying employer NIC on the first 10 employees up to £5k per employee

• Employee must be hired within first 12 months of the business

• Exemption is from employer’s NIC on each employee for the first 12 months of their employment up to a maximum of £5k per employees (earnings £50k)

• South West is a qualifying region


33So What About the NIC Holiday

What we don’t know

• Exact definition of a new start up business

• What businesses will qualify

• How businesses claim the benefit

• Exact start date (6 September is mentioned)


34Taxation of Profits and Remuneration

So what’s new?

• NIC changes already mentioned

• Changes to corporation tax rates

• Impact of capital allowances on the self-employed

• Alterations to tax credits


35Tax Credits and Remuneration

Why do Changes to tax credits matter?

• Income disregard particularly for the self-employed down from £25k to £10k in 2011/12. Plan to reduce to £5k in April 2013.

• Where income is variable and not ascertained for some time this can create significant problems.

• Losing tax credits is the same as paying tax and the taper rate is increasing in April 2011 from 39% to 41%.


36Profit Extraction

Remuneration Planning and Business Structure

• Incorporation certainly not off the agenda

• Dividends still efficient for owner manager with a modest salary– Basic rate 34% more– Higher rate 18% more

• Maximise use of other benefits

• Ensure financing is efficient


37Profit Extraction

Relevant Issues that have not changed

• Nothing yet affecting taxation of spouses (income shifting)

• Still no NIC on dividends from owner managed companies

• But…


making the Budget less taxing

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June 2010 Winter Rule Budget

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