22 March 2012
Budget March 2012
I watched the Budget speech and have now read the first tranche of official Press Releases which often contain items not referred to in the speech. As usual I am not covering the main topics which are well publicised in the media but looking for items not quite so well identified which may impact on our clientele.
Reduction in the main rate of Corporation Tax. While this impacts on companies earning over @pound;300k it will have a more widespread impact on those of you with Associated Companies. People can be inadvertently caught by a higher rate of Corporation Tax when investing in more than one company. The effect of the reduction in the main rate is to reduce the rate which can impact due to the existence of the Associates.
Seed Enterprise Investment Scheme - was announced last year and could be of interest to those who have or may have an interest in investing in certain new start-up businesses (less than two years old). In 2012/13 it provides 50% tax relief plus Capital Gains Tax relief and CGT exemption on disposal. Individuals with Capital Gains realised in 2012/13 who pay reasonable amounts of income tax can make significant savings using this scheme although beware you cannot invest in businesses which are largely property backed nor conducted by associates (generally direct family members although brothers and sisters are acceptable).
Tax simplification measures - 1 - from 2013 simplified accounting for businesses with turnover below £77,000 per annum. The effect of associated businesses will be of interest when detailed rules are announced but really the main envisaged benefit would be cash flow in the ability to perhaps defer the date of payment of tax.
Tax simplification measures - 2 - PAYE simplification. Real time information is the HMRC solution although there is a danger of increasing penalties for getting it wrong! Watch this space.
VAT- 1- the compulsory registration threshold increasing to £77,000 per annum with effect from April 2012. Of course this does not impact on those who wish to voluntarily register and benefit from the Flat Rate Scheme.
VAT - 2 - changes in the rate of VAT applying to inter alia take away food, holiday caravans, hairdresser chair rentals and significantly the removal of the zero rate applying to the approved alterations to listed buildings. If you have already contracted an approved alteration you should not be affected but any such work contemplated and not started, please check the new rules with us. More information on these topics can be found at http://www.hmrc.gov.uk/budget2012/vat-con-4801.pdf
What is not mentioned:
- Any reference to IR35
- Any intention to introduce legislation relating to service or contracting companies
- Any intention to amend the law with regard to dividends paid to non-working spouses
- Any changes to Entrepreneurs Relief
- Any further changes to the extraction of funds on the liquidation of a company (following the change re ESC C16 informal striking off in February 2012)
- Aany change to the penal rate of Capital Gains Tax which remains at 28%
Tax Credits - the rules are tightening, the income levels at which credit is paid reducing and importantly the income disregard* very much reducing. However we still do find occasionally people who are entitled to Tax Credits who are not claiming them. If this may apply to you please let us know.
*The income disregard is the amount by which your income can increase without having to repay tax credits received in the previous tax year.
Ian
