Newsletter – September 2013

Posted on September 19, 2013 by Henry Cooper

In this month’s enews we report on a variety of issues including an update for employers on payroll and NMW increases. We also report on the implementation of Universal Credit and the latest crackdown by HMRC utilising card payment transactions.

Please do get in touch if you would like more detail on any of the articles.

eNEWS quicklinks
Advisory fuel rates for company cars	Data payment crackdown
HMRC chase those who have missed RTI deadlines	Universal Credit criticised by NAO
HSE guidance on new first aid training rules	RTI issue affecting student loan borrowers
HMRC issue guidance on the Statutory Residence Test	National Minimum Wage
Deadline for ‘paper’ self assessment tax returns	Latest Job figures

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 September 2013. HMRC’s website states:

‘These rates apply to all journeys on or after 1 September 2013 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’

The advisory fuel rates for journeys undertaken on or after 1 September 2013 are:

Engine size Petrol LPG

1400cc or less 15p 10p

1401cc – 2000cc 18p (17p) 11p (12p)

Over 2000cc 26p (25p) 16p (18p)

Engine size Diesel

1600cc or less 12p

1601cc – 2000cc 15p (14p)

Over 2000cc 18p

Please note that not all of the rates have been amended, so care must be taken to apply the correct rate. The amounts for the previous quarter are shown in brackets where the rate has been amended.

Other points to be aware of about the advisory fuel rates:

Employers do not need a dispensation to use these rates.
Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

If you would like to discuss your car policy, please contact us.

Internet link: HMRC advisory fuel rates

Data payment crackdown

HMRC have announced that for the first time they now have access to information on all credit and debit card payments to UK businesses. HMRC intend to use this information to aid them in a new crackdown on tax evasion.

Under new powers introduced from 1 September, HMRC can now access information from ‘merchant acquirers’ which are the companies that process card payment transactions. HMRC will use the information to determine the amount and value of transactions completed by a specific trader.

HMRC do not have access to personal data identifying the card owners or card numbers but this data will be used to ensure that traders have correctly accounted for all taxes due.

HMRC estimate that this information could reduce fraud by over £50 million a year.

Exchequer Secretary to the Treasury David Gauke said:

‘Tax evasion and the hidden economy cost the taxpayer £9 billion a year. While the majority of traders are honest, they may find themselves undercut by the minority who seek to lower prices by cheating the tax system.’

‘The Government has given HMRC nearly £1 billion to tackle fraud and evasion, and these new powers give HMRC an extra tool to ensure a level playing field between businesses, and also reducing opportunities for those who try and cheat the system.’

Internet link: News

HMRC chase those who have missed RTI deadlines

HMRC are writing to the 167,000 employers who have missed one or more of the deadlines for reporting their PAYE information in real time.

The majority of employers should have started to report their PAYE information under RTI from the first payday on or after 6 April 2013. According to HMRC more than 1.6 million employer PAYE schemes, covering over 40 million individual records, are already reporting under RTI.

If you receive a letter and would like help with your payroll procedures, or do not believe you need to report any payments, please do get in touch.

Internet link: Press release

Universal Credit criticised by NAO

The implementation of the Government’s welfare reform programme, Universal Credit, has been criticised in a report by the National Audit Office (NAO).

Universal Credit will merge a number of existing benefits into a single payment in order to reduce the costs and fraud associated with the current multi-benefit system.

Amyas Morse, head of the National Audit Office said

‘The Department’s plans for Universal Credit were driven by an ambitious timescale, and this led to the adoption of a systems development approach new to the Department. The relatively high risk trajectory was not, however, matched by an appropriate management approach. Instead, the programme suffered from weak management, ineffective control and poor governance. Universal Credit could well go on to achieve considerable benefits if the Department learns from these early setbacks and puts realistic plans and strong discipline in place for its future roll-out.’

The DWP will now extend pilot schemes to six more areas of the UK, with these sites taking on simple welfare claims.

Internet links: Response NAO report

HSE guidance on new first aid training rules

The Health and Safety Executive has issued guidance to help employers assess their first aid training needs and comply with amendments to the Health and Safety (First Aid) Regulations.

Under the amended regulations the requirement for workplace first aid training providers to be approved by the HSE is removed from 1 October 2013.The amendments cover carrying out a first aid needs assessment and selecting a first aid training provider.

Internet link: HSE press release

RTI issue affecting student loan borrowers

HMRC would like employers to be aware that they have identified an issue with some employees who have student loans.

A few of the employees in this situation have had their employment status incorrectly ‘ceased’ on HMRC’s PAYE systems and this incorrect information has been passed to the Student Loans Company (SLC).

The SLC have written to these borrowers, querying their employment status. Employees affected by this issue are being asked to reply to the SLC saying they have not ceased or changed employer.

HMRC are hoping to correct their systems in the next few weeks. They have identified that there is an issue getting this corrected information on to the student loans system and are taking steps to resolve this issue.

Internet link: HMRC website

HMRC issue guidance on the Statutory Residence Test

HMRC have issued some updated guidance on the Statutory Residence Test which took effect from 6 April 2013.

Residence is a complex issue, if you would like any advice in this area please do get in touch.

Internet link: SRT guidance

National Minimum Wage

National Minimum Wage rates increases come into effect on 1 October 2013:

the adult rate will increase by 12p to £6.31 an hour
the rate for 18-20 year olds will increase by 5p to £5.03 an hour
the rate for 16-17 year olds will increase by 4p to £3.72 an hour
the apprentice rate will increase by 3p to £2.68 an hour and
the accommodation offset increases from the current £4.82 to £4.91 a day.

The accommodation offset rate is used where the employer provides you with accommodation, some of the value of which can count towards NMW pay.

It is important to note that these rates, which are in force from 1 October 2013, apply to pay reference periods beginning on or after that date.

Most workers in the UK over school leaving age are entitled to be paid at least the National Minimum Wage (NMW) for details of exceptions see the Acas website.

Internet links: Gov.uk ACAS

Deadline for ‘paper’ self assessment tax returns

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2012/13 return is 31 October 2013. Returns submitted after that date must be submitted electronically or they will incur a minimum penalty of £100. The penalty applies even when there is no tax to pay or the tax is paid on time.

If you would like any help with the completion of your return please do get in touch.

Internet link: HRMC deadlines

Latest Job figures

According to the latest information published by the ONS, employment rose by 80,000 and unemployment fell by 24,000 in the three months to July.

The employment rate for those aged from 16 to 64 (for May to July 2013) was 71.6%, an increase of 0.2%. There were 29.84 million people in employment aged 16 and over.

The unemployment rate for May to July 2013 was 7.7% of the economically active population a reduction in 0.1%. There were 2.49 million unemployed people.

Between May to July 2012 and May to July 2013 total pay rose by 1.1% and regular pay rose by 1.0%.

Stephen Gifford, CBI Director of Economics, said:

‘These figures show the upturn in economic data we’ve seen through the spring and summer is starting to show up in job creation. Encouragingly, jobs growth in the private sector was more than three times greater than losses in the public sector.’

‘Despite better news on the direction of travel, youth unemployment is persistently high and growth alone will not address this problem.’

‘We’ve called on the Government to reduce employers’ National Insurance to help tackle this, and the launch of the Million Jobs campaign further emphasises the need for action to help young people enter a tough jobs market.’

Internet links: ONS report Press release

Newsletter – December 2012

Posted on December 22, 2012 by Henry Cooper

eNEWS – December 2012

In this month’s enews we report on some key issues from the Autumn Statement and subsequent publication of draft Finance Bill legislation. The Autumn Statement has sparked much debate with the biggest surprise being the tenfold increase in the AIA only months after it was reduced.

We also report that HMRC are urging those who have not yet filed their self assessment tax return to do so now and experience ‘inner peace’.

Please contact us if you would like any further details on any of the issues covered.

With all best wishes for the festive season and the New Year.

eNEWS quicklinks
Tenfold increase in Annual Investment Allowance	Personal allowance for 2013/14
Pensions Saving	A simpler tax system for smaller businesses
Statutory residence test	Government must tackle red tape
Reminder to those with high income and child benefit	Advisory fuel rates for company cars
2013/14 statutory payments	Charities and Gift Aid
File your self assessment return

Tenfold increase in Annual Investment Allowance

The shock announcement of the Autumn Statement was the tenfold increase in the amount of the Annual Investment Allowance (AIA).

The AIA provides a 100% deduction for the cost of plant and machinery purchased by a business up to an annual limit which is currently £25,000 for expenditure incurred from April 2012. The Chancellor announced that this limit will rise to £250,000 for a period of two years for expenditure incurred from 1 January 2013.

Where a business has an accounting period that straddles the date of change the allowances have to be apportioned on a time basis.

Where a company has a 12 month accounting period ending on 30 June 2013 the AIA will be £137,500 (£25,000 x 6/12 + £250,000 x 6/12).

However for expenditure incurred before the 1 January 2013, rules will limit the maximum figure available. The maximum allowance will be the AIA that would have been due for the whole of the accounting period to 30 June 2013 if the increase in AIA had not taken place. This would have meant that the company would have been entitled to £25,000 for the 12 months and so this is the limit for the six months to 31 December.

The rules for accounting periods straddling 1 January are complicated and this is without the additional complications that arise if part of the accounting period commences prior to April 2012 (as yet another AIA limit needs to be factored in).

The main point to appreciate is that expenditure incurred after 31 December 2012 may give a full tax write off but expenditure incurred before the 1 January 2013 may not give this result.

Please contact us before capital expenditure is incurred for your business in a current accounting period, so that we can help you to maximise the AIA available.

Internet link: HMRC TIIN

Personal allowance for 2013/14

For those aged under 65 the personal allowance will be increased from the current £8,105 to £9,440. This increase in the personal allowance is greater than the amount previously announced and is part of the plan of the Coalition Government to ultimately raise the allowance to £10,000.

For basic rate taxpayers this increase in the personal allowance should result in a tax saving next year of £267.

The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 will continue. The reduction is £1 for every £2 of income above £100,000. Next year the allowance ceases when net adjusted income exceeds £118,880.

Tax band and rates 2013/14

The basic rate of tax is currently 20%. The band of income taxable at this rate is being reduced from £34,370 to £32,010 so that the threshold at which the 40% band applies will fall from £42,475 to £41,450.

Additional rate tax payers

The 50% band currently applies where taxable income exceeds £150,000 but the rate will fall to 45% next year.

Tax bands for 2014/15 and 2015/16

For 2014/15 and 2015/16 the increase in the higher rate threshold will be capped at 1%. Over the last few years the value of the higher rate threshold has fallen so a small increase should be welcome.

Internet link: HMRC autumn statement personal

Pensions Saving

It was announced in the Autumn Statement that for tax year 2014/15 onwards:

the annual allowance for pensions tax relieved savings will be reduced from £50,000 to £40,000
the standard lifetime allowance for pensions tax relieved savings will be reduced from £1.5 million to £1.25 million
a transitional ‘fixed protection’ regime will be introduced for those who believe they may be affected by the reduction in the lifetime allowance.

Legislation will be introduced in Finance Bill 2013 to make these changes.

The Government considers that these measures are expected to affect only the wealthiest pension savers as 98% of individuals currently approaching retirement have a pension pot worth less than £1.25 million which is the revised level of the lifetime limit. Annual contributions made by 99% of pension savers are below £40,000, the average annual contribution being around £6,000 per annum.

Please contact us if you would like any pensions advice.

Internet link: HMRC pensions tax relief

A simpler tax system for smaller businesses

The Chancellor is to proceed with proposals to make the tax system simpler for small unincorporated businesses from April 2013. Where a business has a turnover up to £77,000 it will be able to calculate its profits on a simplified cash basis. In addition it will not have to distinguish between revenue expenditure and capital expenditure. A business will be able to continue to use this basis until its turnover reaches £154,000.

Flat rate expenses will be available for some types of expense including:

Cars, vans and motorcycles

For cars or vans the rate for the first 10,000 business miles is 45p, after which the rate reduces to 25p. For motorcycles the rate is 24p

Business use of a home

Provided certain conditions are satisfied, the following monthly rates will be allowed:

Business use in a month	Deduction
25 hours or more	£10
51 hours or more	£18
101 hours or more	£26

The new rules are not quite as simple as the Government would have us believe. Whilst the actual accounting treatment may be simpler it will still be necessary to have regard to tax rules for the deductibility of some expenses. There will also be transitional rules for existing businesses wishing to opt into the new system.

Please do get in touch if you think this may be of interest to you.

Internet link: HMRC update

Statutory residence test

HMRC have announced that legislation will be introduced in Finance Bill 2013 to put the rules which determine an individual’s tax residence on a statutory basis. The new statutory residence test will come into force from the start of the 2013/14 tax year.

The new legislation includes circumstances such as the situation where a tax year is split into a UK part and an overseas part. The rules also cover the taxation of certain income and gains arising during a period of temporary non-residence.

HMRC has published draft guidance to assist individuals on the application of the statutory residence test and on eligibility for overseas workday relief.

Please do contact us if you would like any assistance in this complex area.

Internet link: HMRC finance bill draft

Government must tackle red tape

The CBI is calling on the Government to tackle ‘red tape’. The CBI is warning that economic growth faces being held back because of tens of millions of pounds in extra business red tape coming from the UK Government and Europe.

It has published a report ‘Changing the rules – eight steps to a better regulatory regime’, which calls on ministers to tackle the red tape and bureaucracy created in Whitehall.

According to the report the net added cost of regulation on UK businesses will increase by £177.7m as a result of policies created in 2011 alone, when for every £3 of costs removed, another £5 was added.

Katja Hall, CBI Chief Policy Director, said:

‘Regulation has an essential role to play in a thriving market economy, promoting competition and protecting consumers, but we know it can be a major barrier to growth.’

‘The Autumn Statement contained some really welcome proposals to improve the accessibility and accountability of the regulators that enforce many of the rules, but the facts speak for themselves. Small and medium-sized businesses are the engines of growth, but they’re telling us they are drowning under the weight of extra regulation coming out of Whitehall, layered on top of outdated red tape which has not been repealed.’

‘We’re calling on the Government to back up its words with action. We want to toughen up the law so there is a presumption that every piece of regulation has a sunset clause, so it expires after a set date unless it is actively renewed.’

Internet link: Press release

Reminder to those with high income and child benefit

HMRC are reminding Child Benefit recipients with higher incomes that they have a month to decide whether to stop receiving the benefit or to pay a charge on it through self assessment.

Lin Homer, HMRC’s Chief Executive, said:

‘Over 680,000 people have already looked at information on HMRC’s website that explains the changes and what steps those affected can take. It is really easy to use and will help families come to a decision.’

The High Income Child Benefit Charge (HICBC) is being introduced from 7 January 2013. It will mainly apply to a taxpayer who has ‘adjusted net income’ in excess of £50,000, where either they or their partner is in receipt of Child Benefit. The effect of the charge is to claw back some or all of the Child Benefit paid. Where both partners have income in excess of £50,000 the charge will apply to the partner with the higher income.

Adjusted net income, which is broadly gross income less pension payments and gift aid payments, has the same meaning as for the withdrawal of the personal allowance for taxpayers with income above £100,000.

Where a taxpayer has adjusted net income of £60,000 or more then the charge has the effect of cancelling out the Child Benefit paid. A sliding scale charge operates where income is between £50,000 and £60,000.

The charge will apply to the Child Benefit paid from 7 January to the end of the tax year. However, the income taken into account will be the full income for 2012/13.

Child Benefit claimants will be able to elect not to receive Child Benefit if they or their partner do not wish to pay the new charge.

If Child Benefit recipients want to stop receiving the benefit, they should contact HMRC before 7 January 2013. Please visit the HMRC Child Benefit guidance link below for more details.

Internet links: Press release HMRC Child Benefit guidance

Advisory fuel rates for company cars

New company car advisory fuel rates took effect from 1 December 2012. HMRC’s website states:

‘These rates apply to all journeys on or after 1 December 2012 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’

The advisory fuel rates for journeys undertaken on or after 1 December 2012 are:

Engine size	Petrol	LPG
1400cc or less	15p	11p
51 hours or more	18p	13p
101 hours or more	26p	18p

Engine size	Diesel
1600cc or less	12p
1601cc – 2000cc	15p
Over 2000cc	18p

Please note that not all of the rates have been increased, so care must be taken to apply the correct rate.

Other points to be aware of about the advisory fuel rates:

Employers do not need a dispensation to use these rates.
Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

If you would like to discuss your car policy, please contact us.

Internet link: HMRC advisory fuel rates

2013/14 statutory payments

HMRC have announced the following statutory payment rates for 2013/14. These rates are still subject to Parliamentary approval and will be confirmed by HMRC before the start of the new tax year.

Statutory Maternity Pay (SMP)	£136.78 per week
Ordinary Statutory Paternity Pay (OSPP)	£136.78 per week
Additional Statutory Paternity Pay (ASPP)	£136.78 per week
Statutory Adoption Pay (SAP)	£136.78 per week
Statutory Sick Pay (SSP)	£86.70 per week

Please contact us if you would like any help with payroll issues.

Internet link: Proposed benefit rates

Charities and Gift Aid

HMRC will introduce a new online service which will enable Charities and Community Amateur Sports Clubs (CASCs) to submit repayment claims electronically, Charities Online, in April 2013.

It will replace the current R68(i) Gift Aid and tax repayments claims form and will be a way for charities and CASCs to claim Gift Aid, tax repayments on other income and Gift Aid Small Donations Scheme top-up payments by using an online form.

Internet link: HMRC charities online

File your self assessment return

A HMRC advertising campaign is urging anyone who hasn’t sent in their 2011/12 self assessment tax return to do it now and find ‘inner peace‘.

The new advertising campaign, highlights the imminent 31 January 2013 deadline for online returns, and the automatic £100 penalty for missing the deadline. The adverts will encourage people who still haven’t sent their return to ‘do it today, pay what you owe and take a load off your mind‘, so they can experience ‘inner peace‘.

According to HMRC, the campaign has been developed to touch on the emotions that HMRC found people typically experience after they have filled in their tax return, often described ‘as a real sense of relief or peace of mind, like a weight being lifted from their shoulders‘. The new adverts will feature individuals from different professions experiencing this feeling of post return wellbeing.

The 31 January 2013 deadline is relevant to individuals who need to complete a self assessment tax return and make direct payments to HMRC in respect of their income tax, Class 4 National Insurance and any capital gains tax liabilities. There is an automatic penalty of £100 if the return is not submitted on time, even if there is not tax due or the return shows that a refund is due.

The balance of any outstanding income tax, Class 4 NI and capital gains tax for 2011/12 is also due for payment by 31 January 2013. Where the payment is made late interest will be charged.

The first payment on account for 2012/13 is also due for payment by 31 January 2013.

If we have already dealt with your self assessment return on your behalf and advised you what you need to pay you need take no additional action.

Internet links: Press release HMRC SA deadlines and penalties

Newsletter – December 2011

Posted on December 31, 2011 by Henry Cooper

eNEWS – December 2011

In this month’s enews we report on some further announcements made following the Autumn Statement.

Please browse through this month’s articles using the links below and contact us if any issues or questions arise.

With best wishes for 2012.

eNEWS quicklinks
Pensions Auto Enrolment	Advisory fuel rates for company cars
Capital allowances in Enterprise Zones	Seed Enterprise Investment Scheme
Statutory Residence Test	Self assessment deadline fast approaching
The Portas Review	HMRC to accept Faster Payments
2012/13 Statutory Payments

Pensions Auto Enrolment

The Government has confirmed that pensions auto enrolment will commence in Autumn 2012 and all employers will remain within the scope of the rules.

However small businesses, those with less than 50 employees, will be given additional time to prepare for the implementation. The government have confirmed that no small employers are affected by the reforms before the end of this Parliament.

Minister for Pensions Steve Webb said:

‘Our society and economy needs to be based on a foundation of saving, not debt. Automatic enrolment will help millions save, and to not act will leave people poorer in retirement. That is why I am confirming today that automatic enrolment will start on time and all employers will be part of it.

We recognise that small businesses are operating in tough economic times so we are softening the timetable for implementation to give them some additional breathing space. This is a sensible step that ensures long term pension issues are addressed while meeting the short and medium term needs of small business.

We are committed to ensuring the employees of these small businesses get the chance to save and that is why no one will miss out.

Under the revised timeline, small business would begin automatically enrolling their staff in May 2015, instead of the current timing of April 2014. Half of all workers will still be automatically enrolled before the end of this Parliament.’

It is expected that further details will be announced in January 2012 and we will keep you informed of developments.

Internet link: DWP press release

Advisory fuel rates for company cars

New company car advisory fuel rates have been published to take effect from 1 December 2011. HMRC’s website states:

‘These rates apply to all journeys on or after 1 December 2011 until further notice, allowing them to reflect fuel prices more quickly. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’

The advisory fuel rates for journeys undertaken on or after 1 December 2011 are:

Engine size	Petrol	Diesel	LPG
1400cc or less	15p (15p)		10p (11p)
1401cc – 2000cc	18p (18p)		12p (12p)
Over 2000cc	26p (26p)		18p (18p)
1600cc or less		12p (12p)
1601cc – 2000cc		15p (15p)
Over 2000cc		18p (18p)

Please note that most rates have not changed. However the rate for LPG cars has reduced for those with an engine size of 1400cc or less.

Other points to be aware of about the advisory fuel rates:

Employers do not need a dispensation to use these rates.
Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

If you would like to discuss your car policy, please contact us.

Internet link: HMRC advisory fuel rates

Capital allowances in Enterprise Zones

Following the Autumn Statement at the end of November 2011, more information is now available in respect of the proposal to give 100% first year allowances on plant and machinery expenditure for use in some Enterprise Zone areas.

The relief will only be available to trading companies.
The plant must be new and represent an investment not a replacement of existing plant.
The plant must be used primarily in designated assisted areas within Enterprise Zones.
The allowance will apply for purchases made from 1 April 2012 up to 31 March 2017.
Some businesses and some types of expenditure are specifically excluded from the provisions.

Internet link: Draft rules CA Enterprise Zones

Seed Enterprise Investment Scheme

The government has released more information on the new Seed Enterprise Investment Scheme (SEIS) aimed at smaller companies. The proposals include the following:

The relief will initially run from 6 April 2012 until 5 April 2017 but may continue after that date.
Income tax relief on a qualifying investment will be 50%.The relief is available to be set against any income tax liability that is due, whether at basic, higher or additional rate.
Income tax relief will be withdrawn in certain circumstances including a disposal of the shares within three years.
There will be an annual limit of £100,000 investment by an individual.
A director may make a qualifying investment but not an employee or an associate of an employee.
An individual may not hold more than 30% of the shares in the company.
The issuing company must have been incorporated within two years of the date on which the qualifying shares are issued.
The company must exist to carry on a qualifying trade.
The gross assets of the company (including a proportion of assets of companies which hold at least 25% of the shares in the issuing company) must not exceed £200,000 immediately before the shares are issued.
The issuing company must not have more than the equivalent of 25 full-time employees immediately before the shares are issued.
The maximum amount which can be raised by a company through SEIS is £150,000 and this is an overall total not an annual limit.
Subject to conditions, the disposal of SEIS shares will be exempt from CGT.
Where an individual makes a capital gain in 2012/13 and invests an amount which is at least equal to the gain in qualifying SEIS shares before 6 April 2013 then the gain will be exempt from CGT. If the shares fail to meet the qualifications for SEIS for three years then the exemption will be withdrawn.

If you are interested in this new relief and wonder if it may be relevant to you or your business please do get in touch.

Internet link: Treasury SEIS

Statutory Residence Test

The government has been consulting on introducing a Statutory Residence Test (SRT). The test which was expected to be introduced from 2012 has been delayed until 6 April 2013. More details are expected to be announced in the 2012 Budget.

There is currently no definition of ‘residence’ in UK tax law and yet the liability to income tax and capital gains tax (CGT) rests on knowing an individual’s UK residence status for a tax year. Currently the determination of residence is based on old case law and, as a recent Supreme Court decision has shown, it can lead to significant uncertainty and large tax liabilities.

The SRT is expected to be based on three parts and an individual would consider each part in turn. If a definite answer on their residence status is found on the first part then there is no need to proceed further. Similarly if the second part gives a definitive answer there is no need to move to the third part. That final test then provides a definitive answer.

The parts and the conditions are as follows:

Part A – satisfy any one of three conditions and the individual is conclusively non-resident in the year.

Part B – satisfy any one of three conditions and the individual is conclusively resident for the year.

If no definite answer under Part B then proceed to Part C

Part C – here the rules combine the time spent in the UK and a number of connection factors which are deemed to link an individual to the UK.

Some individuals who are currently outside the UK, particularly those working abroad, will need to note that the new rules could change their residence status and they may wish to review plans for visits back to the UK and the impact of any potential connecting factors.

Please contact us if you have any concerns in this area.

Internet link: Treasury consultation on residence

Self assessment deadline fast approaching

HMRC are reminding taxpayers that the deadline for filing self assessment tax returns is fast approaching. According to their website:

‘You must send your online tax return by midnight on Tuesday 31 January 2012.

The deadline is only later than this if you received your tax return, or the letter telling you to complete a tax return, after 31 October 2011. In this case you’ll have three months from the date you received that letter.

If your online tax return is late, you’ll have to pay a penalty. This applies even if you have no tax to pay or if you pay all the tax you owe on time.’

The following illustrates that missing the deadline and failing to submit the return online may result in significant penalties.

‘What happens if you miss the deadline?

If you miss the 31 January deadline for online tax returns, you will have to pay a penalty.

The penalty is £100. You’ll still have to pay this even if

your return is just a day late
you have no tax to pay
you pay all the tax you owe before 31 January 2012.

The longer you delay, the more you’ll have to pay. If your tax return is three months late, you’ll have to pay a penalty for each additional day it is late. If it’s six months late, you’ll have to pay a further penalty and another final penalty if it’s 12 months late. Together these could add up to a penalty of £1,600 or more.

Don’t send a paper tax return now – the deadline was 31 October 2011. You’ll have to pay a £100 penalty straight away if you do and the daily penalties above will start even earlier. Send it online instead.’

If you require any help with your tax return please do get in touch.

Internet link: HMRC news

The Portas Review

The CBI commented on a report by Mary Portas on the future of the high street.

Dr Neil Bentley, CBI Deputy Director-General, said:

‘Retail represents about 10% of our economy, and the high street is a vital part of this.

The Portas Review makes some sensible suggestions about how we can inject life back into town centres, including increased use of Business Improvement Districts and relaxing planning restrictions on the high street, in particular on change of use.

More importantly, she recognises the growing burden business rates are placing on companies right across the country at a critical time.

We need to make sure the UK remains attractive to investors, as it’s their decisions that will ultimately lead to regeneration of our town centres. Any changes to the planning and business rate regimes must therefore encourage investment in the broadest sense, and not just rob Peter to pay Paul.’

Internet links: BIS press release with access to report CBI press release

HMRC to accept Faster Payments

HMRC have announced that they will now accept payments made using the Faster Payments Service. This will allow taxpayers to make faster electronic payments, typically via internet or telephone banking, enabling them to be processed on the same or next day.

HMRC advise that if you want make payments using this method you should contact your bank or building society to confirm the following:

the services available to you
whether there are any single transaction or daily limits on the amount you can pay
their latest cut off times for making a payment.

They are also stressing that when making a payment to HMRC it is important to ensure that you are using the correct bank account details and reference number.

Internet link: HMRC news

2012/13 Statutory Payments

HMRC have announced the following statutory payment rates which are due to take affect for 2012/13. These rates are still subject to Parliamentary approval and HMRC will confirm the rates before 1 April 2012.

Statutory Maternity Pay (SMP) £135.45 per week

Ordinary Statutory Paternity Pay £135.45 per week

Additional Statutory Paternity Pay £135.45 per week

Statutory Adoption Pay (SAP) £135.45 per week

Statutory Sick Pay (SSP) £85.85 per week

Please contact us if you would like any help with payroll issues.

Internet link: HMRC statutory payment rates

Chancellors 2011 Autumn Statement 29 November 2011

Posted on November 30, 2011 by Henry Cooper

On Tuesday 29th November the Office for Budget Responsibility (OBR) published its updated forecast for the UK economy. Chancellor George Osborne responded to that forecast in a statement to the House of Commons later on that day.

In the period since the Budget in March a number of consultation papers and discussion documents have been published by HMRC. Draft legislation relating to many of these areas will be published on 6 December 2011. Some of these proposals are summarised here. We will provide an update for you if significant changes are announced on 6 December.

This summary also provides a reminder of other key developments which are to take place from April 2012.

The Chancellor’s statement

The Chancellor emphasised that the OBR does not predict a recession in Britain but they have revised down their short term growth prospects for the country. He also made clear that the OBR central forecast assumes ‘the euro finds a way through the current crisis’.

General measures

The Autumn Statement sets out the actions the Government will take in two main areas:

protecting the economy and
building a stronger economy for the future.

In order to maintain economic stability and meet its fiscal rules, the Government will, for example:

set plans for public spending in 2015/16 and 2016/17 in line with the spending reductions over the Spending Review 2010 period

Raise the State Pension age to 67 between April 2026 and April 2028
set public sector pay awards at an average of 1% for each of the two years after the current pay freeze comes to an end.

The growth plans include the publication of a National Infrastructure Plan 2011. The plan sets out a pipeline of over 500 infrastructure projects including:

introducing a new approach to financing infrastructure, by obtaining £20 billion of private investment from pension funds

investing over £1 billion to tackle areas of congestion and improve the national road network
investing more than £1.4 billion in railway infrastructure and commuter links
investing £100 million to create up to ten ‘super-connected cities’ across the UK, with 80-100 megabits per second broadband and city-wide high-speed mobile coverage.

Comment

The proposal to raise the state pension age is expected to save around £60 billion in today’s prices between 2026/27 and 2035/36.

The aim of the National Infrastructure Plan is to kick start the economy by accelerating infrastructure projects with a view to job retention/creation. Time will tell how successful the new strategy is.

NON-TAX MEASURES FOR SMEs

Credit easing

In order to free up lending to business, the Government is launching a package of measures worth up to £21 billion to ease the flow of credit to businesses. This includes up to £20 billion for the National Loan Guarantee Scheme and £1 billion for the Business Finance Partnership.

Comment

The hope is that credit easing will encourage bank lending and enhance the demand for credit by reducing the price of loans for eligible businesses.

Small business rate relief holiday

The Government will extend the current small business rate relief holiday for a further six months from 1 October 2012 and also give businesses the opportunity to defer 60% of the increase in their 2012/13 business rate bills.

Employment regulations

In an attempt to make it easier to ‘hire and fire’, the Government intends to:

look for ways to provide a quicker and cheaper alternative to a tribunal hearing in simple cases by introducing a ‘Rapid Resolution’ scheme
complete a call for evidence on the impact of reducing the collective redundancy process for redundancies of 100 or more staff from the current 90 days to 60, 45 or 30 days.

The Government will begin a call for evidence on two proposals for reform of UK employment law. They will:

seek views on the introduction of compensated no-fault dismissal for micro-businesses with fewer than 10 employees
look at how it could move to a simpler, quicker and clearer dismissal process, potentially including working with ACAS to make changes to their code or by introducing supplementary guidance for small businesses.

Youth Contract

A number of measures under the heading of a ‘Youth Contract’ will be introduced, including Government funding of:

wage incentives for 160,000 young people to make it easier for private sector employers to take them on

at least 40,000 incentive payments for small firms to take on young apprentices.

Planning reform

The Government has announced a series of changes to the planning regime. Changes will include:

introducing a 13-week maximum timescale for the majority of non-planning consents
building more flexibility into the new major infrastructure planning process, particularly in the pre-application phase
reviewing the planning appeals procedures to make them faster and more transparent
consulting on proposals to allow existing agricultural buildings to be used for other business purposes such as offices, leisure and retail space.

Comment

These changes are designed to speed up building projects. ‘Red tape’ has been cited as a major reason for UK infrastructure development being more expensive than in other European countries.

Housing

In an attempt to increase house building, stabilise the housing market and enable more people to own their own home, the Government will:

introduce a new build indemnity scheme under which home buyers will be able to purchase new build houses and flats with a 5% deposit, with house builders and the Government helping to provide security for the loan
reinvigorate the ‘Right to Buy’ to help social tenants buy their home
launch a new £400m ‘Get Britain Building’ investment fund, which will support firms in need of development finance
support new development, which could include modern garden cities and urban and village extensions.

PERSONAL TAX

The personal allowance for 2012/13

For those aged under 65 the personal allowance will be increased by £630 to £8,105. This increase is greater than the minimum required and is part of the plan of the Coalition Government to ultimately raise the allowance to £10,000.

The personal allowance is reduced by £1 for every £2 of adjusted net income over £100,000. Next year the allowance ceases at adjusted net income in excess of £116,210.

Comment

Planning should be considered where adjusted net income is expected to exceed £100,000. This figure is calculated after giving a deduction against income for pension contributions and gift aid payments. Consider whether these could be made to protect some or all of the personal allowance.

Tax band and rates 2012/13

The basic rate of tax is currently 20%. The band of income taxable at this rate is being reduced to £34,370 so that the threshold at which the 40% band applies will remain at £42,475.

The 50% band currently applies where taxable income exceeds £150,000.

If dividend income is part of total income this is taxed at 10% where it falls within the basic rate band, 32.5% where liable at the higher rate of tax and 42.5% where liable to the additional rate of tax.

Tax credits

The child element of Child Tax Credit will rise by £135 per year in 2012/13 which is in line with the inflation increase but the additional increase above inflation of £110 which was planned has been dropped.

The disability elements of tax credits will be uprated by the increase in the Consumer Price Index of 5.2% but there is to be no uprating of the couple and lone parent elements of Working Tax Credit.

Integration of the operation of income tax and NIC

Following an invitation for people to express views on a proposed integration of the operation of income tax and NIC the Government has decided to continue with the review. The Government will establish a number of working groups with stakeholders to explore options for integration. Depending on the results of the working groups, further rounds of consultation will proceed after Budget 2012. It is unlikely that there will be any substantive change in reality before 2017.

Junior ISAs

Provisions to allow these accounts were introduced this tax year. At present there is not a wide availability of these accounts although some building societies have launched products. The key features of the accounts are:

the accounts are available to any child who does not qualify for a Child Trust Fund
all returns will be tax free
funds placed in the account will be owned by the child and would be locked in until the child reaches adulthood although they can manage the account from the age of 16 years
investments will be available in cash or stocks and shares
annual contributions will be capped at £3,600
there will be no Government contributions into the account.

Comment

These accounts provide a way of increasing the tax free income available to a family in addition to the use of adult ISAs for the parents.

Child Trust Funds

These ceased to be available for children born on or after 1 January 2011 although existing accounts remain in place and can be added to by parents and family members. The maximum annual contribution has been increased to £3,600 to keep in line with the Junior ISA. No further Government contributions will be made to any account.

Furnished holiday lettings

From 6 April 2012 the tests which determine whether a property can qualify for treatment as a furnished holiday let will change. The number of days for which the property is available for letting increases from 140 days to 210 days and the number of days actually let increases from 70 to 105 days.

If an individual can show there was a genuine intention to meet the letting conditions but has been unable to do so they will be able to make an election to continue to treat the property as a furnished holiday let. This will protect the special tax treatment that such properties receive.

Statutory Residence Test

The Government published a consultation document in summer 2011 on the introduction of a Statutory Residence Test (SRT) which would come into effect in April 2012. The SRT is based on three parts and an individual would consider each part in turn. If a definite answer on their residence status is found on the first part then there is no need to proceed further. Similarly if the second part gives a definitive answer there is no need to move to the third part. That final test then provides a definitive answer.

The parts and the conditions are as follows:

Part A – satisfy any one of three conditions and the individual is conclusively non-resident in the year:
an individual with no UK residence in the three previous tax years spends less than 45 days in the UK
an individual who has been UK resident in one of the three previous tax years spends less than ten days in the UK
an individual goes to work abroad in a full time employment or self- employment and spends less than 90 days in the UK and has less than 20 working days in the UK.
If no definite answer under Part A then proceed to Part B
Part B – satisfy any one of three conditions and the individual is conclusively resident for the year:
an individual spends 183 days or more in the UK
an individual has their only home in the UK or if they have more than one home all are in the UK
an individual works full time in the UK for a continuous period of at least nine months and not more than 25% of duties are outside the UK.
If no definite answer under Part B then proceed to Part C
Part C – here the rules combine the time spent in the UK and a number of connection factors which are deemed to link an individual to the UK. Five connection factors have been identified:
spouse and/or minor children are resident in the UK at any time in the year
the individual has accessible accommodation in the UK and uses it in the year
the individual spends at least 40 working days in the UK
in either of the two previous tax years the individual spent at least 90 days in the UK
the individual spent more time in the UK than in any other single country in the tax year.
Part C then provides for a combination of factors and time which will make an individual resident in the UK.

A day will count as being in the UK if the individual is physically present in the UK at midnight unless they satisfy specific rules for those in transit through the UK.

There are a number of issues which have been raised in the consultation process on which clarification has been sought and it is hoped that these will be clarified in the draft legislation. It is intended that the new rules will apply from 6 April 2012. From that point they will supersede all existing case law and practice. However residence status for years up to 2011/12 is determined using the present rules.

Comment

The proposed rules do seem to work to give a definitive answer to the question ‘Am I resident in the UK?’ The answer may not be the one that you want but it should then be possible to identify the factors which need to change in order to achieve the desired result.

Individuals planning a move into or out of the UK after 6 April 2012 should be taking the new rules into account in their planning. They should also note that they are going to need to keep comprehensive records not just of their time in the UK but also, where relevant, their working days in the UK and the time they spend in each other country that they may visit.

Changes for non-domiciled individuals

Following changes in 2008 all UK resident individuals are taxable on overseas income and gains overseas arising in the tax year. Individuals who are not domiciled in the UK or who are not ordinarily resident can make a claim to be taxed only on sums actually remitted to the UK in the year. These rules, known as the ‘remittance basis rules’ are complex but can mean a significant tax saving.

There are currently two downsides to making a remittance basis claim:

the individual automatically loses their personal allowance for income tax and their annual exempt amount for CGT unless the remittances amount to almost all of the overseas income and gains arising
an individual who has been resident in the UK for at least seven out of the preceding nine UK tax years must pay a remittance basis charge of £30,000 in addition to the tax actually due.

Two significant changes are planned in the remittance basis rules from 6 April 2012:

the remittance basis charge will be increased to £50,000 where an individual has been resident in the UK for 12 out of the preceding 14 tax years
if an individual remits funds to invest in a UK business then that remittance will be tax free if the remittance basis is claimed (although the remittance basis charge will still be payable). A consultation paper has proposed a wide definition of business and indicates that the business vehicle can be a company or an unincorporated business. When the investment is realised it will be necessary for the individual to either reinvest the funds immediately in another qualifying venture or remove the funds from the UK within 14 days otherwise they will be treated as a remittance for that year.

Some administrative changes in the remittance basis rules will also be introduced.

BUSINESS TAX

Corporation tax rates

In accordance with the plans announced in March the main rate of corporation tax will fall from 26% to 25% from 1 April 2012. The small company rate is 20% and there has been no announcement of the rate for next year.

Enterprise Investment Scheme (EIS)

Changes announced in the March Budget are due to come into effect on 6 April 2012. These are:

the maximum amount that an individual can invest in total in a tax year rises from £500,000 to £1m.
the maximum funds that a company can receive under EIS rises from £2m to £10m
the size of a company that can benefit from EIS (subject to meeting all the qualifications) is increased to £15m gross assets and fewer than 250 employees.

A number of other changes were announced in the Autumn Statement:

the rules which identify individuals who are deemed to be connected to the company are to be relaxed in some circumstances
the £1m per company limit that currently applies for Venture Capital Trusts will be removed
anti-avoidance rules will be introduced to exclude companies set up for the purpose of obtaining the relief, and to exclude the purchase of shares in another company
investment in Feed-in-Tariffs will be excluded.

Seed Enterprise Investment Scheme (SEIS)

This is a new relief which will be introduced from 6 April 2012. It will provide income tax relief at 50% in respect of investment in a small company whose total assets before the investment are less than £200,000. The relief will be limited to investments of up to £150,000 in each company and a maximum of £100,000 investment for an individual. In addition an individual who makes a capital gain in 2012/13 and reinvests some or all of the gain in a SEIS company in the same year will obtain exemption from CGT for the sum invested.

Comment

This relief will encourage business angels or perhaps family members to invest in small enterprises and obtain a tax refund of half their investment. The details of the conditions which the recipient company will have to meet are not yet known.

Annual Investment Allowance (AIA)

The AIA is a capital allowance available for many businesses on most purchases of plant and machinery, long-life assets and integral features. Relief is given on the full cost up to a current maximum allowance of £100,000 for a full year. This allowance is to be reduced to £25,000 with effect from 1 April 2012 for companies and 6 April 2012 for unincorporated businesses.

Where a business has an accounting period that straddles the date of change the allowances have to be apportioned on a time basis. For example a company with an accounting period ending on 30 September 2012 will have an allowance of £62,500 (£100,000 x ½ + £25,000 x ½). However it should be noted that for expenditure incurred after the 1/6 April, the maximum allowance that can be attributed to that expenditure is a fraction of £25,000. The fraction will be the amount of the £25,000 that is included in the calculation of the overall AIA for the accounting period.

Comment

Planning the timing of purchases of significant items of plant becomes very important over the next year to ensure that the maximum available AIA can be secured.

Suppose the company with the 30 September year end wishes to buy new plant costing £35,000. If they buy it in February 2012 they will be able to claim an AIA on the full £35,000 but if they buy it in June 2012 they will only be able to claim an AIA of £12,500. They would actually then be better off if they waited until October when they would have a full £25,000 available.

Writing down allowances

Writing down allowances are to be reduced from April next year. The normal rate of 20% will be reduced to 18% and the lower rate of 10% which applies to integral features and long-life assets will reduce to 8%. It will be necessary to calculate hybrid rates where the accounting period straddles 1/6 April which will give a rate between 20% and 18% (or between 10% and 8%) for that period.

Capital allowances in Enterprise Zones

Over the past year the Government has designated a number of very specific areas as Enterprise Zones. Businesses in these areas enjoy certain reliefs, for example, a relief from business rates. The Chancellor has announced that 100% capital allowances will now be available for the Zones in the Black Country, Humber, Liverpool, North East, Sheffield, and the Tees Valley.

Compulsory pooling

The Government is considering whether to introduce a requirement that businesses should pool their expenditure on fixtures within a short period after acquisition in order to qualify for capital allowances.

Research and development expenditure (R&D)

There are currently a number of restrictions which effectively limit the scope of this relief and it is planned to remove these for expenditure incurred on or after 1 April 2012. The proposals include:

removing the rule limiting a company’s payable R&D credit to the amount of PAYE and NIC it pays
removing the £10,000 minimum expenditure condition
changing the rules governing the provision of relief for work done by subcontractors under the large company scheme
increasing the additional deduction for R&D expenditure by SMEs by a further 25% making the total deduction 225% of actual expenditure.

The Chancellor has announced a consultation next year on the introduction of an ‘above the line’ tax credit in 2013 for larger companies.

Controlled Foreign Companies (CFCs)

The CFC regime can apply to a UK company which has a subsidiary operating in a country with a low rate of corporation tax. The rules have been in place for 25 years but are seen as complex and in some cases disadvantageous to business. Some interim changes were made in 2011 but a major overhaul is planned for 2012. The aims of the new rules will be:

to target and impose a CFC charge on artificially diverted UK profits, so that UK activity and profits are taxed fairly
to exempt foreign profits where there is no artificial diversion of UK profits
to not tax profits arising from genuine economic activities undertaken offshore.

General Anti-avoidance Rule (GAAR)

The Government commissioned an independent report from a leading tax lawyer on whether or not it would be appropriate to introduce a GAAR into the UK tax system. This is a route that has been used in a number of other countries.

The reviewer has just presented his report to the Government and recommends that a moderate rule targeted at abusive arrangements would be beneficial to the UK tax system. Such a GAAR would apply for income tax, CGT, corporation tax and NIC. It would not apply to ‘responsible tax planning’.

It is now likely that the Government will undertake a consultation process in this matter but legislation is not likely until 2013 at the earliest.

High risk tax avoidance schemes

Certain types of tax avoidance schemes are currently subject to a disclosure regime which requires the scheme promoter to disclose details of the scheme to HMRC and for the users of the scheme to indicate their involvement on their tax return. Such schemes are usually challenged by HMRC but this procedure can take many years with Tribunal and Court hearings being required. If the scheme is blocked the scheme users have to pay the tax due but HMRC is concerned that the delay can still give them a significant cash-flow advantage.

HMRC is currently consulting on a proposal to introduce an additional charge on scheme users where the scheme fails. A user will be able to prevent this charge by paying the disputed tax to HMRC ahead of the challenge.

Tax treatment of asset-backed pension contributions

Rules are to be introduced from 29 November 2011 to limit tax relief for employers who enter into arrangements to make asset-backed contributions into their pension schemes. The new rules will ensure that the tax relief obtained more accurately reflects the actual costs to the employer.

EMPLOYMENT TAX

Employer-provided cars

From 6 April 2012 the CO₂ emissions bands used to work out the taxable benefit for an employee who has use of an employer-provided car will be shifted downwards by 5gm/km. This will have the effect of increasing the charge for each vehicle.

In addition, the current graduated table of employer-provided car bands will extend down to a 10% band and will apply to cars with CO₂ emissions between 76 and 99gm/km. As a result ‘qualifying low emission cars’ will no longer exist as a separate category.

In summary the new rules from 6 April 2012 will be:

no emissions 0%
75gm/km or less 5%
99gm/km or less 10%
100gm/km 11%
graduated increases of 1% per 5gm/km up to a maximum, including diesel supplement, of 35%

Real Time Information (RTI)

HMRC have produced draft legislation to introduce probably the most significant change in the PAYE system since its introduction in 1944. Under the RTI scheme, employers will electronically provide monthly information to HMRC related to wages and salaries paid to employees. Once the scheme is ‘bedded in’ employers will no longer have to complete year end returns such as the P35 and P14. The new system will also see the end of the use of the P45 when an employee leaves an employment.

Volunteer employers are to pilot the new scheme from 6 April 2012. The intention is that it will apply to employers on a phased basis from 6 April 2013 so that all employers are operating the system by October 2013.

Comment

This really is a major change but the success or otherwise of the scheme will depend on the ability of the HMRC computer system to cope. History suggests that this could be the problem.

CAPITAL TAXES

CGT rates

The current rates of CGT are 18% to the extent that any income tax basic rate band is available and 28% thereafter. The rate for disposals qualifying for Entrepreneurs’ Relief (ER) is 10% with a lifetime limit of £10m for each individual.

No announcement has been made of the rates for next year.

Comment

The ER limit is very generous and owners of businesses should ensure that they meet all the conditions necessary to secure the relief throughout the twelve months up to the date of a disposal.

CGT annual exemption

The CGT annual exemption has been frozen at £10,600 for 2012/13.

Inheritance tax (IHT) nil rate band

The IHT nil rate band remains frozen at £325,000 until 6 April 2015.

Reduced rate of IHT for the charitable

The Government will introduce a reduced rate of IHT for an estate where a minimum level of legacy has been left by the deceased to charity. The actual legacy to charity remains exempt from IHT and it is the rate of tax on the balance of the estate that would be reduced to 36% from 40%.

The intention is that the reduced rate will apply where charitable bequests satisfy a 10% test. A comparison will be made between:

the total value of charitable legacies for IHT purposes and
the value of the net estate as reduced by:
any available nil rate band
the value of assets passing to the surviving spouse or civil partner and
other IHT reliefs and exemptions for example Business Property Relief.

If the first figure is at least 10% of the second then the balance of the estate will qualify for the reduced IHT rate of 36%.

The changes will apply to estates where the individual dies on or after 6 April 2012.

Comment

Because the benefit of the reduced IHT rate will be dependent on whether or not the amount of the charitable legacy is sufficient for the estate to pass the 10% test there will be a ‘cliff edge’ effect. Where the amount of the charitable legacy is close to the critical 10% point, a small difference to the amount of the legacy could have a much larger impact on the estate’s IHT liability. There are no plans to apply any taper or other mechanism to mitigate this.

OTHER TAXES

VAT – Low value consignment relief (LVCR)

LVCR is an administrative simplification to reduce the costs for businesses, Royal Mail and other carriers and consumers all of whom would otherwise be involved in the collection and/or payment of small amounts of VAT on large numbers of low value packages coming into the UK from outside the EU. It is the main reason that suppliers of DVDs and CDs often use a base in the Channel Islands from which to ship their products.

The amount at which LVCR was to apply was reduced from £18 to £15 from 1 November 2011.

The Government recently announced that the relief is to be abolished from 1 April 2012 for goods imported as part of a distance selling transaction from the Channel Islands.

VAT cost sharing exemption

The Government is to introduce an EU VAT exemption for organisations that wish to share costs between themselves on a non-profit basis. The exemption can be used, amongst others, by organisations such as charities, universities and higher education colleges and housing associations wanting to make efficiency savings by working together to achieve economies of scale.

Under current UK legislation a VAT cost can arise creating a barrier to the sharing of services. The exemption once implemented would also, in certain circumstances, remove this VAT barrier.

Stamp Duty Land Tax (SDLT) holiday for first time buyers

Currently first-time buyers do not have to pay SDLT on house purchases where the cost is no more than £250,000. This relief is due to expire at midnight on 24th March 2012.

Air Passenger Duty (APD)

The Government intends to proceed with the introduction of APD to flights taken aboard business jets from 1 April 2013.

Disclaimer – for information of users

This summary is published for the information of clients. It provides only an overview of the Autumn Statement and previous announcements. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.