Budget 2013 (Summary)
At-a-glance: Budget 2013
The key points of Chancellor George Osborne's Budget on 20 March 2013.
- Main rate of corporation tax to be reduced by 1% to 23% from 1 April 2013, by 2% to 21% from 1 April 2014, and now by a further 1% to 20% from 1 April 2015.
- Small profits rate remains at 20% until 1 April 2015 with a single rate of corporation tax thereafter, with marginal relief etc falling away.
- No changes announced to thresholds for small profits rate and main rate of corporation tax.
- Foreign profits reforms will ultimately now produce a 5% effective corporation tax rate under the finance company partial exemption.
- No changes announced to capital allowance rates of 18% (main pool) and 8% (special rate pool) with annual investment allowance at £250K for 2 years until 31 December 2015.
- No changes to R&D tax relief for SMEs, but the above the line credit for large businesses will now be 10%.
- Clarification that statutory share option deductions are the only deductible amounts when providing employee shares or share options and that share options must be exercised to obtain this deduction.
- Consultation on options to provide tax support for the visual effects industry, possibly mirroring the new reliefs for video games, animation and high-end TV production.
- Countering of avoidance of loans to participators (s455) charge in relation to intermediaries, non-money advances and bed & breakfasting.
- Targeted and specific anti-avoidance to counter buying of corporation tax losses and capital allowances.
- Bank levy will be increased to 0.142% from 1 January 2014 to counter the corporation tax rate reduction.
- Shale gas field allowance to be introduced as part of a new regime for incentivising shale gas exploration and development.
- Personal allowance will increase to £9,440 from 6 April 2013, largely funded by progressive reductions in the higher rate threshold in recent years. A further increase of £560 to the personal allowance will mean it is £10,000 from 6 April 2014, but with the higher rate threshold increasing by only 1% to £41,865.
- No change announced to basic (20%) or higher (40%) rates of tax, or tapering of personal allowances by £1 per £2 of taxable income on earnings over £100,000.
- 50% rate on taxable income over £150,000 reduced to 45% from 6 April 2013 as previously announced.
- No further changes announced to pension contributions tax relief, £40,000 annual cap and £1.25m lifetime cap, with fixed protection regime, to be introduced from 6 April 2014.
- Introduction of cash basis of accounting for small businesses below VAT threshold.
- HMRC will be enabled to collect greater amounts of unpaid tax through PAYE for higher earners.
- First £2,000 of shares under the ‘shares for employment rights’ proposals to be received free of tax and NIC.
- The threshold for tax-free beneficial loans from employers to employees is doubled to £10,000 from 6 April 2014.
- Tax-free childcare scheme to provide basic rate tax relief for child care costs up to £6,000 per child provided neither parent earns over £150,000 pa.
- A consultation to examine partnership taxation generally, with further specific consultation on removing the presumption of self-employment for LLP partners where there may be disguised employment relationships, and on artificial profit/loss allocations made between partners primarily for tax reasons.
National insurance contributions
- New employment allowance will cancel out the first £2,000 of employer NIC costs for every business and charity as ‘a tax off jobs’ from 1 April 2014.
- No changes announced to rates or thresholds.
Capital gains tax
- Seed enterprise investment scheme to be extended to include capital gains reinvestment relief for gains made 2013/14.
- New CGT relief to be introduced in Finance Bill 2014 on sales of controlling interests in a business to an employee ownership structure.
- No change to headline 18% / 28% rates.
- Entrepreneurs’ relief remains at 10% on lifetime allowance of £10m.
- No change to headline 40% rate and the nil rate band will remain £325,000 until 6 April 2018.
- VAT registration threshold increased to £79,000.
- 20% VAT rate unchanged.
- Stamp duty and stamp duty reserve tax abolished from April 2014 on share transactions for companies listed on growth markets such as AIM and ISDX.
- Schedule 19 stamp duty reserve tax on funds such as OEICs and unit trusts to be abolished in Finance Bill 2014.
- Two SDLT avoidance schemes involving sub-sales are blocked from 21 March 2012.
Other tax announcements
- GAAR will be legislated as expected in Finance Bill 2013.
- Responses to consultation on tax compliance and government procurement published, with agreement that this will only apply to contracts over £5m.
- HMRC offshore evasion strategy published.
- Disclosure and information exchange agreements announced with Guernsey and Jersey, mirroring the new agreement with Isle of Man, to help counter tax avoidance.
- Naming and shaming of promoters of aggressive tax avoidance schemes with targeted disclosure requirements and penalties to be consulted on.