The 2014 Budget contained much that had already been announced. Where the Budget changed pre-announced measures this is indicated by NEW
Income tax personal allowances 2014-15
Under 65 £10,000 (NEW
£10,500 for 2015 – 2016)
65 – 74 £10,500 (to be phased out)
75+ £10,650 (to be phased out)
20% band £1 – £31,875 (NEW
£31,875 for 2015 – 2016)
40% band £31,875 – £150,000 (Also 2015 – 2016)
From 2015-16 a spouse or civil partner may elect to transfer £1,000 of their personal allowance to their spouse or civil partner, provided neither of them is a higher or additional rate tax payer.
National Insurance contributions
Employers’ rate Class 1: 13.8%. Employee’s rate: 12% (above Upper Earnings Limit 2%) Self-employed Class 2 rate: £2.65. Class 4 9% (above Upper Profits Limit 2%). NEW
No NIc will be payable for those under 21.
CGT annual exempt amount
The CGT annual exempt amount will be £11,000 for 2014-15 and £11,100 for 2015-16.
21% for 2014 and 20% by 2015. Small profits rate 20%, which will be abolished for 2015-16.
The rates of the bank levy will increase to 0.156% (for short-term liabilities) and 0.078% (for long-term equity and liabilities)to offset the reduction incorporati9n tax, Amounts of levy arising as a result of the rate change will be payable with the first instalment payment due after Royal Assent to the Finance Bill 2014 or, if there are no such instalments, 30 days after Royal Assent.
Capital gains tax relief on disposal of a controlling interest
CGT relief will apply where a person disposes of an interest in a trading company to an “employee-ownership trust”, which results in the trust holding a controlling interest in the company. The trust must meet an “all-employee benefit requirement” and not allow: (1) any of the trust property to be applied other than for the benefit of all eligible employees (except certain excluded participators) on the same terms except by reference to an employee’s remuneration, length of service or hours worked; (2) the trustees to apply the trust fund by creating another trust, or transferring it to another settlement, or (3) the trustees to make any loans to beneficiaries.
Bonuses up to £3,600 exempt from income tax
From 1 October 2014 bonuses of up to £3,600 per employee will be exempt from income tax where certain conditions are met. Bonuses must be paid to employees of companies that are controlled by trusts meeting an all-employee benefit requirement and must not consist of regular salary or wages, and must be awarded under a scheme that meets both a participation requirement and an equality requirement. There will be no corresponding exemption for NICs.
Employee share schemes
Changes are introduced to facilitate a move from the pre-approval process to self-certification of tax-advantaged share schemes, together with online filing for all share schemes. Non-tax advantaged share schemes, such as rollover provisions for restricted securities, extending the time limit for “making good” tax liability and changing the taxation of securities and options held by internationally mobile employees will be relaxed.
Stamp duty reserve tax (SDRT) is abolished from 30 March 2014 on surrenders of units in UK unit trusts and shares in (OEICs). This will also extend to shares traded on growth markets (including AIM).
Company cars and vans
An employee will fall within the car benefits charge where a car provided to him by his employer is taxable as earnings from employment. This will arise if an employee leases a vehicle from his employer but pays less than the market value. From 2014-15 onwards, all cars and vans provided to employees will incur a benefit charge. Payments made by the employee will reduce the level of the charge.
With effect from 2014-15, individuals who have company cars and vans made available to them and who are required to reimburse the company for any private use must do so within the tax year. Failure to make the payment within the tax year will result in the loss of the deduction when calculating the car benefit charge.
Dual employment contracts and non-domiciliaries
With effect from April 2014 UK tax will be levied on the full amount of employment income where the division of duties and remuneration between a UK and an overseas employment contract is ‘artificial’ and tax is not payable on the overseas contract at a rate broadly comparable to UK tax rates.
A UK agency that contracts with the UK end client will be made responsible for accounting for tax and NICs under PAYE using real time information (RTI). Special arrangements will be introduced for oil and gas workers on the UK continental shelf. A certification process is introduced from 6 APRIL 2014 for offshore employers and for UK end clients to delegate responsibility for operating PAYE to a certified employer.
A worker supplied by an agency will be treated as employed by that agency if he is involved in the provision of his services to an end client who has the right to supervise and direct the work.
Employer-funded health treatment: tax exemption
A maximum of £500 per employee in any tax year, for the cost of recommended medical treatment to assist employees to return to work following a period of absence due to injury or ill-health. The exemption applies whether the cost of treatment is met directly by the employer or reimbursed to the employee and is not pursuant to a salary sacrifice or flexible benefit arrangement. A similar exemption will apply for class 1A national insurance contribution purposes.
Employment-related beneficial and notional loans: exemption threshold increased to £10,000
The employment-related loans exemption threshold is raised from £5,000 to £10,000 with effect from 6 April 2014, applicable to loans whenever taken out.
From a date to be specified, the percentage of the qualifying expenditure on the production of a film that must be UK expenditure will be reduced from 25% to 10%. The distinction between low budget films (currently those with core expenditure of no more £20 million) and other films will be removed. All films will qualify for relief on surrenderable losses at the rate of 25% for the first £20 million and 20% on the remainder of the loss, in all cases not exceeding 80% of the total qualifying production core expenditure.
UK management of authorised investment funds
Authorised investment funds (AIFs), including close-ended entities, that are authorised or registered (or have a registered office) in a foreign state and are subject to tax on income in a foreign state will not be treated as resident in the UK for tax purposes (provided that they are not UK-incorporated).
Venture capital trusts
Venture capital trust (VCT) income tax relief on a subscription for shares in a VCT will be restricted where the investor sells shares in that VCT (or its predecessor or successor as defined) and either of the following two conditions is met and the subscription and sale are within a six month of each other and the subscription was conditional on a buyback of the shares or the buyback was conditional on the subscription. The restriction will apply to shares issued on or after 6 April 2014 but will not apply to dividend re-investment plans.
The new CGT, income tax and inheritance tax reliefs to encourage the use of employee ownership structures will apply from 6 April 2014.
A thorough revision of the regime for deferred contribution pension schemes is proposed and details will be contained in a special Pensions Act and the new rules will take effect in 2015. It is indicated that pensioners will be able to take income from their schemes without restriction, the 55% unauthorised payments charge will be abolished and withdrawals will be taxed at the pensioner’s marginal rate of income tax. Annuities will no longer have to be taken.
Leasing oil and gas assets from offshore associates
The deduction for intra-group leasing payments for large offshore oil and gas assets (known as “bareboat charters”) for companies operating in the UK continental shelf is capped from 1 April 2014. The cap will be calculated by reference to the historic capital cost of the leased asset and will consist of a proxy for capital expenditure at a rate of 4% per calendar year plus an amount representing the possible finance costs of newer assets, which will be set at 5% on borrowing of half the cost. A new “ring fence” is introduced for the composite activity that is the subject of the measure referred to above.
Mineral extraction allowances
From 1 April 2014 the treatment of assets for mineral extraction allowances will be aligned with that for assets eligible for plant and machinery allowances, where profits are not taxed in the UK. If a company elects to exempt the profits of its foreign permanent establishments (PE), the foreign PE business is treated as a separate activity whose profits and gains are not chargeable to tax. Capital allowances are available in respect of capital expenditure on the provision of plant and machinery for the purposes of qualifying activities. However, activities are only qualifying activities to the extent that profits or gains from the activity are chargeable to UK tax.
Annual Investment allowance
This is increased to £500K and will be continued at this level until the end of 2015.
VAT: changes to the place of supply rules
The place of supply for intra-EU business to consumer supplies of telecommunications, broadcasting and e-services (BTE services) will, with effect from 1 January 2015, be subject to VAT in the member state in which the consumer belongs, rather than in the member state where the supplier belongs.
Tax-free childcare scheme
A tax-free childcare scheme under which working families will be able to claim 20% of childcare costs for children under 12 will be introduced from autumn 2015. Claims will be capped at £2,000 per child per year. The scheme will only be available to families in which all parents work (perhaps subject to some exceptions, such as carers of disabled children) and do not receive tax credits or the forthcoming universal credit, and no parent alone earns £150,000 or more.
Stamp Duty Land Tax (SDLT)
The 15% rate applicable for transfers to non-natural persons (previously applicable to properties exceeding £2M) will now apply to properties exceeding £500K.
For further information, please contact Richard Sowler at email@example.com
or by telephone on 07624 235000.