A copy of the slides from our Budget update seminar in Halesworth on Wednesday 25 March 2015

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POST BUDGET UPDATE
Chinny’s Cue Club
Halesworth
Wednesday, 25 March 2015

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BRIAN BALE
Partner
T: 01986 873163
E: b.bale@lovewell-blake.co.uk

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THE 2015 ELECTION
STARTS HERE!

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George Osborne’s View
 A growing economy
 National debt down as a share of
the economy
 A record number of jobs
 Rising living standards
 The deficit is down
“Britain is now walking tall again”

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• “Here comes the sun (or a least
that’s what he wants you to think)”
• “Extreme plan”
...future…“colossal spending cuts”
• “Rollercoaster ride in public
spending”
The Guardian
Ed Miliband
The Times

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Help for the North,
what about the East?

8. Personal tax changes
#LBBudget15

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Personal allowances
2015/16 £10,600
2016/17 £10,800
2017/18 £11,000

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Higher rate threshold
2015/16 £42,385
2016/17 £42,700
2017/18 £43,300

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The end of the tax return?
• How will it work?
• Everyone will have a digital tax account
• The national insurance contributions and
pension position will be shown in the
account
• Any interest from the banks will also be
shown

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The end of the tax return?
• Taxpayer logs on to check and confirm the
details are complete and correct
• Higher earners can add the additional
information
• Taxpayers can pay as they go (rather than
having an annual large tax bill)

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The end of the tax return?
• The agent of the taxpayer can also be
given access
• The timetable is as follows:
– Early 2016 - £5m small businesses and £10m
individuals to have access
– By 2020 more than £50m individuals and
small businesses will have access

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The end of the tax return?
• Rental income/dividend income etc will
need to be reported
• How accurate will reporting be?
• Paper returns will still be available

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National insurance
• Class 2 national insurance will be
abolished in the next Parliament
• Reform of class 4
• Consultation on the detail and timing later
in year

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Savings and investments

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Help to buy - ISA
• For every £200 a first time buyer saves, the
Government will add £50
• Maximum bonus is £3,000 on £12,000 of
savings
• Available for four years from Autumn 2015
• Initial deposit of £1,000 and then monthly
savings
• One per person (rather than per home)

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Help to buy - ISA
• Bonus is in range £400 to £3,000
• Available for home purchases of up to
£450,000 in London and £250,000 outside
London
• The bonus is paid when the first home is
bought

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Personal Savings Allowance
Income Personal savings
allowance
Up £16,800 No tax on savings income
£16,801 to £42,700 £1,000
From £42,701 to £150,000 £500
Over £150,000 of income NIL

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Personal Savings Allowance
• The banks and building societies will stop
deducting 20% in income tax from non-ISA
savings
• More will be paid through self-assessment for
those with high interest

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Annuities
• From April 2016 people receiving an
annuity can assign the income to a third
party in exchange for a lump sum or
alternative retirement product

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ISAs
• From summer 2015 investments in quoted
bonds from smaller companies can be held in
an ISA
• Also equity securities in crowdfunding
platforms
• Response to consultation on peer-to–peer
loans
• Can withdraw and replace money from a
cash ISA

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Pensions
• The lifetime allowance is to be reduced from
£1.25m to £1m from 6 April 2016
• Indexed with CPI after 2018

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Inheritance tax
• Deed of variation
• Consultation over the next few months
• Increases importance of making sure that
Wills are in the right form

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Other matters
• Farmers averaging – over five years
• Changes to VCTs and EIS
• Personal service companies/umbrella
companies – travel and subsistence

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Capital gains tax

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Entrepreneurs’ Relief
• ER denied on disposal of company that is
not a trading company in its own right
(joint ventures)
• Also denied on the sale of a personal
asset unless 5% of the shares in the
company are sold

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Entrepreneurs’ Relief
• Goodwill on incorporation
• ER kept where deferred into EIS etc

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Residential property –
non-residents
• Capital gains tax of 28% or 18% (or 20% if
held by a company) on sale of residential
property by a non-UK resident
• PPR relief restricted on properties in
countries in which owner is not resident

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Business tax

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Corporation tax
• Reminder of the rates:
–20% from April 2015
• Associated companies rules simplified
• Based on 51% group ownership from 2015
• Relevant for quarterly instalments

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Corporate tax –
capital allowances
• Current AIA is £500,000
• Due to decrease from 31 December 2015 to
£25,000 (new rate to be announced in the
Autumn?)
• Beware restriction for spend as we get nearer
to the end of year
• Seek advice before major acquisitions

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Corporate tax – AIA rates
(companies)
Prior to
1 January
2013
1 January
2013 to
31 March
2014
1 April
2014 to 31
December
2015
From
1 January
2016
£25,000 £250,000 £500,000 £25,000

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Corporate tax –
Restriction for Goodwill
• Restricted relief where acquired from a
related party
–Eg customer lists
–Personal goodwill
• Acquisitions on or after 3 December 2014

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Corporation tax –
R&D tax credit
• Research and development tax credits
• Rate of enhancement from 225% to 230%
from 1 April 2015
• Either the amount of costs deducted can
be enhanced or a tax repayment claimed

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Corporation tax –
R&D tax credit
• Repayment is 14.5% of the loss for SMEs
• Repayment will be 33.4p rather than 32.6p
• Voluntary advance assurance process for
first claims for SMEs
• Further guidance to be issued

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Business rates
• Review being carried out
• Current system does not take account of
state of economy etc
• ‘Bricks and mortar’ businesses at a
disadvantage?
• Results to be announced in Budget 2016

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“Google tax”
• Tax on diverted profits
• 25% rate on profits made in the UK and
diverted abroad
• Expected to raise £1bn over five years
• Higher than corporation tax rate to
encourage companies to register in the UK

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VAT

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Budget 2015
• From 1 April 2015
– VAT registration threshold rises to £82,000
– Deregistration threshold rises to £80,000

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Budget 2015
• Beer duty down 1p per pint from 23/3/15
• Cider and spirits duty down 2% from
23/3/15
• Duty on wine is frozen
• Tobacco duty increase of 16p per packet
of 20
• Fuel duty increase set for September 2015
is cancelled

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Budget 2015
• Palliative care charities and medical
courier charities
– From 1 April 2015
– Section 33 bodies
– Can reclaim VAT on non-business activities
– Submission of regular claims in certain
format to HMRC

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Budget 2015
• Partial exemption calculations
– UK business with foreign branch making
supplies of financial services outside EU
– Income classed as “taxable”
– Boosts partial exemption recovery rate
– From 1 August 2015 such income is
excluded

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Budget 2015
• Airline passenger duty
• Landfill tax
• Climate change levy
– All to increase by retail prices index on
1 April 2016

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Budget 2015
• Aggregates levy remains £2 per tonne
• Rural fuel rebate scheme extended to 17
areas in the UK from 1 April 2015, but not
East Anglia

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Other VAT Changes
• MOSS (mini one stop shop) commenced
1/1/15
– E-services
– sold to private individuals
– Within the EU

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Other VAT Changes
• E-service examples
– Apps
– E-books
– On-line training
– Music and video downloads
– Broadcasting
– Telecommunications

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Other VAT Changes
• 28 member states
• VAT registration due £1+
• MOSS allows registration in one EU country
• One VAT return accounting for all EU sales
• Pay VAT to HMRC, no reclaim of costs
• No accounting for UK sales if under VAT limit

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Autumn Statement 2014
• Search and rescue bodies
– From 1 April 2015
– Section 33 body
– Reclaim of UK VAT non-business costs

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Conservatives
Business Tax
• Corporation tax
–In 2010 (when the Conservatives came
to power) the CT rate was 28%
–Gradual reduction in rates

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Conservatives
Business Tax
• Corporation tax
–With effect from 1 April 2015 main rate
of CT is 20%
–Suggested policy to reduce the CT rate
further
–“Most competitive in the G20”

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Conservatives
Personal Tax
• Income tax
–Personal allowances
• In 2010 PA was £6,475, steady increase
during the current parliament
• For 2015/16 the PA is £10,600

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Conservatives
Personal Tax
• Income tax
–Personal allowances
• PA will potentially be increased to
£12,500 by 2020
• 2010/11 the PA was tapered away for
those earning in excess of £100,000 no
sign it will be re-introduced

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Conservatives
Personal Tax
• Income tax
–Basic rate band
• 40% tax rate at £31,865 (2014/15)
• Potentially raising 40% tax rate threshold
to £50,000 by 2020

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Conservatives
Personal Tax
• Income tax
– Inheritance tax
• Nil rate band is currently £325,000 with
effect from 2009/10
• Raising the threshold to £1m has been
discussed
• Should the family home be within the
charge to IHT

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Liberal Democrats
Business Tax
• Corporation tax
–Introduction of a Bank levy at 8%
–Additional to the existing bank levy
–Clamp down on corporate tax evasion

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Liberal Democrats
Personal Tax
• Income tax
–Personal allowances
• Increase to £11,000 in first year of
government
• Potentially rising to £12,500 by 2020

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Liberal Democrats
Personal Tax
– Capital gains tax
• Current rate of capital gains tax is 18%
or 28% depending upon marginal rate of
income tax
• Pledge to increase higher rate to 35%
• Potentially reduce the annual exemption
currently at £11,000 (2014/15) to £2,500

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Liberal Democrats
Personal Tax
• Income tax
– Mansion tax
• An annual tax on properties worth over £2m
• 0.5% of home affected
• 50% of London houses valued at over £2m
owned by overseas investors
• £2m will rise with inflation

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Labour Party
Business Tax
• Business rates
– Premises rateable value of £50,000 or less
• Rate cut 2015/16
• Rate freeze 2016/17
– Impact 1.5m small business
• Corporation tax
– Reverse the 1% reduction to 20% to be
introduced April 2015

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Labour Party
Personal Tax
• Income tax
–George Osborne abolished 50% rate
2013/14
–Reintroduce 50% top rate for those with
income in excess of £150,000
–Reintroduce 10% starting rate

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Labour Party
Personal Tax
• Mansion tax
–Properties worth over £2m
–Deferral for those earning less than
£42,000 a year
–“simple” system of bands relying on self-
valuation

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Labour Party
Personal Tax
• Pensions tax relief
–Propose to reduce tax relief on pensions
for those earning over £150,000
–Tax relief at 20%

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Labour Party
Personal Tax
• Pensions tax relief
–Reduce the annual allowance from
£40,000 to £30,000
–Reduce the lifetime allowance from
£1.25m to £1m

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UKIP
Business Tax
• Turnover tax
–Consider introducing a flat rate tax
calculated as a percentage of turnover

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UKIP
Personal Tax
• Income tax
– Personal allowance
• Raise to £13,500 by 2020
• Tax rates
– Introduction of 35% rate for those earning
between £42,285 and £55,000
• Inheritance tax
– Abolished!

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Green Party
Business Tax
Personal Tax
• Tax rates
– Introduction of 50% tax rate for those earning
in excess of £100,000
• Wealth tax
– Introduction of 1% to 2% tax on those worth
£3m or more

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SNP
Business Tax
• Corporation tax
– Stepped away from Alex Salmond’s 3% cut
to CT
Personal Tax
• Income tax
– Increase for those earning £100,000 per
annum

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SNP
Personal Tax
• Transaction tax on property
–Replaces stamp duty in Scotland from 1
April 2015
–Original announcement was 10% on
properties valued between £250,000
and £1,000,000
–Revised down to 5% for lower value
properties

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Election tax planning
Capital gains tax
• Entrepreneurs’ Relief Limits Rate
Pensions
• Maximum contribution now / include
unused carry forward allowance

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QUESTIONS?

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