Budget 2013: Tax Summary
The Chancellor presented the 2013 Budget to Parliament on 20th March. The following
is a summary of the main tax points of interest.
Business Taxes
Corporation Tax - rates: as announced in Autumn Statement 2012, the main rate of
corporation tax will be reduced from 23% in April 2013 to 21% in April 2014. However
this will now be reduced further to 20% from April 2015, so that from that date there
will be a unified main rate of 20% for all companies.
Corporation Tax - loss relief anti-avoidance: in certain circumstances trading losses
where there is a transfer of a trade within a new group following the change of ownership
of a company will be disallowed. Also the availability of non-trading debits, non-trading
loan relationships and non-trading losses on intangible fixed assets after the change
of ownership of a shell or dormant company will be restricted.
National Insurance - employment allowance: from April 2014, an annual allowance of
£2,000 will be introduced, after consultation, which all businesses and charities
will be able to offset against their employer Class 1 secondary NI liability.
Capital Allowances - energy-saving and water efficient technologies: the list of
technologies and products which attract 100% capital allowances under the energy-saving
and water efficient enhanced capital allowances scheme will be updated.
Capital Allowances - low emission vehicles: legislation will be included in Finance
Bill 2015 to extend the 100% capital allowance for expenditure on low emission vehicles
for an extra 3 years, up to 31 March 2018.
Taxable Profits - small businesses: as announced at Budget 2012, from 2013-14 eligible
small unincorporated businesses (generally those whose receipts do not exceed the
VAT registration threshold) will be able to work out their taxable profits using
the simpler 'cash basis', rather than the accruals basis.
Close Companies - loans to participators (shareholders): with immediate effect, avoidance
of the s.455 tax charge on loans from close companies will be tackled by clarifying
that loans to various intermediaries are subject to the charge, by bringing other
transfers of value within the scope of the charge, and by ensuring that relief is
only given for genuine repayments.
Income Tax - personal allowance: for 2014-15, the personal allowance limit will be
increased further to £10,000, from £9,440 for 2013-14. As announced at Budget 2011,
once the personal allowance has reached £10,000, it will then increase by Consumer
Prices Index starting from 2015-16.
Income Tax - basic rate threshold: for 2014-15, the basic rate threshold will be
reduced further to £31,865, from £32,010 for 2013-14.
National Insurance - administrative simplification: the Government will consult on
measures to simplify the administrative process for self-employed persons in respect
of Class 2 NI.
Inheritance Tax - nil rate band: as announced in February, the IHT nil-rate band
will remain frozen at £325,000 until April 2018.
Inheritance Tax - spouses and civil partners domiciled overseas: as announced in
Budget 2012, the cap on transfers between UK-domiciled and non-UK domiciled spouses
or civil partners will be increased to £325,000, and a non-UK domiciled spouse or
civil partner will be able to elect to be treated as UK-domiciled for IHT purposes.
Inheritance Tax - limiting the deduction for liabilities: legislation will be introduced
in Finance Bill 2013 to close an avoidance scheme exploiting the current rules on
allowable deductions from the value of the estate for liabilities owed by the deceased
on death.
Pensions - lifetime allowance: as announced at Autumn Statement 2012, the lifetime
allowance will be reduced from £1.5 million to £1.25 million for 2014-15.
Pensions - annual allowance: as announced at Autumn Statement 2012, the annual allowance
will be reduced from £50,000 to £40,000 for 2014-15.
Statutory and Ordinary Residence: as announced at Budget 2011, legislation will be
introduced in Finance Bill 2013 to eliminate the concept of ordinary residence and
introduce a statutory definition of tax residence for individuals. In addition, Overseas
Workday Relief will be placed on a statutory footing.
Employment
Employee shareholder status: as announced at Autumn Statement 2012, the Government
will introduce a new employee shareholder status giving individual employees a stake
in their employer's business. Legislation will be introduced in Finance Bill 2013
exempting from CGT any capital gains on the disposal of employee shareholder shares
up to a maximum of £50,000. Provisions will also be included to reduce the income
tax and NI due on the acquisition of employee shareholder shares (by introducing
a deemed payment of £2,000 for the shares). Businesses will also benefit from being
able to claim relief against the acquisition of the shares by the employee shareholders
where appropriate.
Review of tax advantages employee share schemes: as announced in December 2012, legislation
will be introduced in Finance Bill 2013 implementing a number of the recommendations
made by the Office of Tax Simplification ("OTS") in its review of tax advantaged
employee share schemes. Legislation will be introduced in Finance Bill 2014 replacing
the current system of HMRC approval of tax advantaged share schemes with self-certification
by businesses.
Review of unapproved employee share schemes: the Government will consult on the recommendations
in the OTS review of unapproved share schemes, and legislation will be introduced
in future finance bills.
Employee ownership - relief: legislation will be introduced in Finance Bill 2014
creating a CGT relief where a controlling business interest is sold into an employee
ownership structure.
Employment-related loans: the statutory threshold for taxable cheap loans which can
be made to employees without giving rise to a tax charge will be increased from £5,000
to £10,000.
Partnerships - anti-avoidance: the Government will consult on measures to tackle
the disguising of employment relationships through LLPs and the manipulation of profit
/ loss allocations by partnerships to secure tax advantages. Legislation will be
in Finance Bill 2014.
Company car tax rates: legislation will be introduced in Finance Bill 2013 to increase
the percentages linked to CO2 emissions used to calculate the cash equivalent of
the benefit of company cars for 2015-16, and again for 2016-17, up to a new maximum
of 37%. New bands for low emission cars will be introduced in 2015-16 and from 2016-17
the 3% diesel supplement will be removed.
Car and van fuel benefit charge: the rate of fuel benefit charge for company cars
and fuel benefit charge and benefit charge for company vans will increase in line
with inflation for 2014-15 (based on the September 2013 RPI figure).
IR35 - as previously announced, the Government will strengthen the existing intermediaries
legislation (IR35) to put beyond doubt whether it applies to office holders for tax
purposes.
Tax Reliefs - expenditure on health-related interventions: legislation will be introduced
in Finance Bill 2014 so that amounts up to £500 paid by employers on health-related
interventions recommended to support employees to return to work are not treated
as taxable benefits in kind.
Offshore employment intermediaries - anti-avoidance: as announced at Autumn Statement
2012, the Government will consult on measures to ensure that offshore employment
intermediaries pay the correct income tax and NI. Legislation will be in Finance
Bill 2014.
VAT
Registration and deregistration thresholds: the taxable turnover threshold over which
VAT registration is required will increase from £77,000 to £79,000; the taxable turnover
threshold under which VAT deregistration is possible will increase from £75,000 to
£77,000; and the registration and deregistration thresholds for acquisitions from
other EU Member States will increase from £77,000 to £79,000.
Changes to zero-rating of exports from UK: the Government will consult on making
certain sales of goods to businesses registered for VAT in the UK but with no business
establishment here zero-rated, where they arrange for the goods to be exported outside
the EU.
Place of supply rules: legislation will be included in Finance Bill 2014 to tax business
to consumer supplies of telecoms, broadcasting and e-services within the EU in the
Member State in which the consumer, rather than the business, is located although
to alleviate this a Mini One Stop Shop will be introduced from 1 January 2015.
Charitable buildings: as announced at Budget 2012, charitable buildings will be withdrawn
from the scope of the VAT reduced rate for the supply and installation of energy-saving
materials, from 1 August 2013.
