Summer Budget seminar presentation

The Summer Budget 2015

Murray GrahamPartner


• George Osborne “Britain deserves a pay rise”

• Eliminating the deficit and boosting productivity

• Continuing spending cuts

The Summer Budget 2015The economy and public finances

• Growth forecasts on track (?)

• Extra jobs

• Deficit and debt reductions


• Impact upon local businesses

• Good news or bad news?


Colin FishTax Partner

Personal tax changes

Personal allowances

2015/16 £10,600

2016/17£11,000£10,800

2017/18£11,200£11,000

Personal allowance indexation• Personal allowance to increase in line with

equivalent of 30 hours per week at the national minimum wage

• Takes effect once personal allowance has reached £12,500

• Government has objective to achieve this by the end of this Parliament

Higher rate threshold

2015/16 £42,385

2016/17£43,000£42,700

2017/18£43,600£43,300

Domicile tax changes

UK born individuals

• From April 2017 can no longer claimnon-dom status if they are resident and are born in the UK to UK domiciled parents

Abolishing non-UK domicile status for long domicile residents

• From April 2017 anyone resident in the UK for more than 15 of the past 20 years will be deemed to be domiciled in the UK

• Will be deemed to be UK resident for income and capital gains tax purposes

• Also will apply for inheritance tax (was 17 out of 20 years)

UK property owned by non- UK domiciled individuals

• Inheritance tax falls on UK assets for those not domiciled in the UK

• This could be avoided through holding the property in a non-resident company

• Inheritance tax will now fall on all UK property regardless of the structure in which it is held

• Other IHT changes also (offshore trusts etc)

Savings and investments

Reminders of previous announcements

• Personal Savings Allowance of £1,000 of savings income for basic rate taxpayers (less for higher rate taxpayers) – comes in April 2016

• ISA eligibility for P2P lending from April 2016• ISAs more flexible so funds can be

withdrawn and replaced – from April 2016

Pensions

Reminders

• Taxation of pensions on death – the 45% rate of tax applying to lump sums paid from the pension of someone who dies over age 75 will reduce to the marginal rate of the recipient – from April 2016

• The Lifetime Allowance is to fall to £1m from the current £1.25m from April 2016

Pensions – reduced allowance for top earners

• Applies to those earning more than £150,000• Will apply from April 2016• Limit is currently £40,000 per year• Will fall on a tapered basis to a minimum of

£10,000 per year• £1 restriction for every £2 over £150,000

income

Pensions – reduced allowance for top earners

• £10,000 limit at £210,000 income• Pension input periods/salary exchange

avoidance• Income level is calculated after adding back

pension contributions (employee and employer)• Anti-avoidance looking at three years’ income• Annual allowance charge on employer

contributions (can be paid by pension fund)

Consultation on pension tax relief

• Looks at questions such as:– Whether there should be different

treatments for different types of scheme– Whether a simpler system would be

better– Views on automatic-enrolment

Liz HillVAT consultant

Agenda

• VAT Budget announcements• Vehicle excise duty• Energy saving materials• Multi One Stop Shop (MOSS)• Pre-registration input tax• New build dwellings

VAT Budget announcements

• VAT rates locked at 5% and 20%• Law to prevent items being removed from

0% and 5% list• IPT to rise 1/11/15 to 9.5% but with

transitional rules• Tobacco and fuel duty levy to stay the

same

Vehicle excise duty• From 1/4/17 newly registered vehicles pay

based on emissions for first year• 1st year

– Between £10 (50 g/CO2/km) - £2,000(over 255 g/CO2/km)

• 2nd year– £140 flat rate

• £0 applying to nil emissions

Energy saving materials• Relates to:

– Solar and PV panels– Wind and water turbines– Draught insulation for doors, windows walls etc– Ground and air source heat pumps– Micro combined heat and power units– Wood fuelled boilers

• Supply and installation (together) charged at 5%

Energy saving materials

• CJEU case using 5% reduced rate incorrect

• 20% due on all but social housing cases• May try to ‘re-label’ under different area of

reduced rate 5% law• HMRC to make announcement

Energy saving materials• Suppliers may need to adjust profit margin• Buyers may want to buy sooner rather

than later• HMRC may invoke anti-forestalling

regulations• Public letters sent to HMRC by industry

MOSS• From 1 Jan 2015

– Suppliers selling B2C– E-services– To customers based in other EU

member states• Must register for VAT in country where

customer located irrespective of turnover

MOSS• E-services include:

– Broadcasting and telecomms– Sale of apps– Sale of e-books– Videos on demand– Online gaming– Anti-virus software– Online auctions– Online automated training

MOSS

• Turnover of €1 creates liability to register• Must obtain and retain evidence of customer

location for 10 years• MOSS allows VAT registration in one member state

and submission of a return to cover all member states

• Payment made to local tax authority, which distributes as per your info on return

• No VAT can be reclaimed on purchases• Different to UK VAT registration

Pre-Reg input tax• VAT on expenses incurred prior to

registration• Goods: four years• Services: six months• New guidance issued by HMRC restricting

claims

New build dwellings

• Recent case: Roy Shields• New dwelling close to livery yard• Planning restriction meant ‘new dwelling’ criteria

not met• Contractor charge = 20% VAT• Builder/clients – check you have right planning

in place


Colin FishTax Partner

Taxation of landlords

Colin Fish

Partner

Rent a room relief

• Current limit - £4,250• Limit is being increased to £7,500 from

April 2016• Applies where a room is rented out at an

individual’s residence

Wear and tear allowance

• Wear and tear allowance is being abolished from April 2016

• Wear and tear allowance gives tax relief of 10% of the rent received

• Only applies to fully furnished properties• Renewals basis withdrawn two years ago –

issue for landlords with unfurnished properties replacing white goods etc

Wear and tear allowance• Proposal is to replace wear and tear

allowance with a relief for all landlords whereby tax relief is available for the actual cost of the furnishing

• Furnished holiday lets will continue to be eligible for capital allowances

Tax relief for interest• Currently interest can be deducted from

rental income in full• Includes mortgage fees etc• From April 2017 this will be restricted• Special rules where there are rental losses• Full relief will continue for those with

furnished holiday lettings

Tax relief for interestTax year Proportion of interest

on which full tax relief available

2017/18 75%

2018/19 50%

2019/20 25%

2020/21 0%

Tax relief for interest£100k house with £80k loan at 5%

Current rules Post 2020

Rent £5,000 £5,000

Interest £4,000 £4,000

Tax £400 £1,200

Net position £600 (£200)

Inheritance tax

Inheritance tax

• Current nil rate band is £325,000• Will continue to be frozen at this level until

2021• Rules relating to pilot trust/multiple trusts

are being changed• Simplifications to the calculation of the ten

year charge

Inheritance tax – main residence nil rate band

• Gives an additional nil rate band• Applies where a property is passed on

death to a direct descendant (children, grandchildren including step children and adopted children)

• Any unused nil rate band can be passed to a spouse or civil partner


• Also available where someone downsizes or ceases to own a home after 8 July 2015

• Tapered withdrawal of the additional nil rate band for estates with a value of over £2m

• Value of the additional nil rate band is the lower of the net value of the interest in the residential property or the maximum amount of the band


Tax year Maximum additional nil rate band

2017/18 £100,000

2018/19 £125,000

2019/20 £150,000

2020/21 £175,000

Business tax

Dividends

• Dividend tax credit abolished from April 2016• A new Dividend Tax Allowance of £5,000 per

year being introduced• New rates of tax will be:

– Basic rate taxpayers – 7.5% (0% currently)– Higher rate taxpayers – 32.5% (25%

currently)– Additional rate taxpayers – 38.1% (30.55%

currently)

Dividends

Effective rate of tax on higher rate salary is c.49%

Level of income Effective rate of taxignoring £5k exemption

Basic rate 26%

Higher rate 46% (40%)

Additional rate 50%

Corporation tax Tax year

commencingCorporation tax rate

1 April 2016 20%

1 April 2017 19%

1 April 2018 19%

1 April 2019 19%

1 April 2020 18%

Tax relief for write off of goodwill by companies

• Currently if the trade and assets of a business are purchased by a company, the company can claim tax relief for the write off of the goodwill

• This will no longer be allowed for acquisitions made on or after 8 July 2015

• Not much detail on changes at this stage

Annual Investment Allowance

• Currently £500,000 (since April 2014)• Was planned to dropped to £25,000 on

1 January 2016• Rate will now instead move to £200,000 on

a permanent basis from 1 January 2016

Quick round up of other points

• Modernising the taxation of corporate debt• Simplifying the ‘link company’ arrangements

for consortium relief• CFC loss restriction• Disposal of stock between connected

parties• VCT/SEIS/EIS changes to meet State Aid

rules