Tina Riches, national tax partner at Smith & Williamson, the accountancy and investment management group offers her initial comments
Annual Investment Allowance gives double relief but essential to check the timing of the claim period:
The Chancellor announced that Annual Investment Allowances (AIA) will be doubled to £500k and extended to 31 December 2015. This measure is welcome as it should further encourage capital investment by UK companies, although GREAT care is needed to ensure that the qualifying expenditure is timed properly so that reliefs are NOT lost.
R&D tax credits increased but currently there is under-use of this tax relief:
The Chancellor announced that the payable tax credit for SMEs will be increased from 11% to 14.5%. This is good news for companies and should provide further financial support for those who incur qualifying R&D expenditure. It should also be noted that qualifying R&D expenditure is not just limited to the pharmaceutical and scientific industries – in my view this tax credit is widely under-used. There are many businesses outside the pharma and scientific sectors who make valuable successful R&D claims.
Personal allowance up again:
On the personal tax front, the personal allowance will now increase to £10,500 from April 2015. The higher rate threshold has been increased, for the first time in this parliament to £41,865 from April 2014 with a further 1% increase announced to £42,285 from April 2015. The headline being that everyone earning less than £100,000 per annum will pay less tax to differing degrees.
Long arm of HMRC to dip into bank accounts:
HMRC is to be given powers to take money from the bank accounts of those who they think owe tax and who have chosen not to pay. This has been proposed before and did not see the light of day due to the huge concerns around HMRC’s systems and whether their record of amounts owed were correct and also whether the person really could afford to pay the tax. Given the current problems with HMRC occasionally pursuing incorrect PAYE debts this does not seem the right time to be bringing in such a measure. It would need to be very carefully designed with adequate safeguards.
Accelerated payment in tax avoidance cases:
It is proposed that taxpayers involved in tax avoidance schemes disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) rules and those which HMRC challenge under the General Anti-Abuse Rule (GAAR), introduced in 2013, will need to pay any tax and NIC up front, to be held by HMRC, while the dispute is resolved. It will be vital to ensure that there are adequate safeguards to ensure that such tax is only held in appropriate cases and that taxpayers carrying out normal transactions who are challenged by a more rigorous HMRC is not unduly penalised by the measure.
Boosting funds available to HMRC to tackle non-compliance by taxpayers:
We can expect greater HMRC scrutiny in the months and years ahead. Judging from the statement today, this will focus heavily on the individual.
Pensioners to benefit from cuts in tax on savings: likely to be of greatest help to middle and lower income pensioners
There is good news for pensioners, especially those on lower and medium incomes who will benefit from pensioners bonds, reducing to zero the starting savings rate (from 10%) and widening the band on which this applies, and increased flexibility in how they can take their pension. They may also benefit from cheaper bingo and a penny off a pint of beer.
Tax dispensation for international sports people: power to exempt the income of people taking part in top level sports events
Great news for sports enthusiasts. Non-resident international sports people can often pay more in tax than they win at a particular UK sports event. As a result some high profile sports people have dropped out of competitions at short notice and the Government have had to grant special exemptions. The new rules will make doing this much easier. Given that top level sports are played at a global level, having a fresh approach to the taxation of internationally mobile individuals would make sense. More tax receipts can be raised from the business activity around participation of top sports people in UK events than the tax on their individual income.
Seed Enterprise Investment Scheme made permanent:
The extension of the Seed Enterprise Investment Scheme (SEIS) is very welcome. The scheme is designed to help small, young companies raise equity finance is already encouraging growth. Removing the time limit from SEIS and making the capital gains tax (CGT) relief for reinvesting gains in SEIS shares permanent is excellent news for those involved in the economic recovery.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
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