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UK Budget 2013 Corporate Tax Rate to Reduce as per Schedule,
Increase in VAT Thresholds,
Changes to NICs: Nair & Co.
(Sunnyvale, CA)- Some of the significant highlights of the UK
Budget 2013 (presented by Chancellor George
Osborne) are discussed below -
Reduction in Corporate Tax Rate; Unification of the Small
Profits Rate
UK plans to make its tax system most competitive in the G20 by
reducing the main rate of corporation tax
by an additional 1% in April 2015, so it reaches 20%.
In the process, the Government will unify the small profits rate
and the main rate so there is a single rate
of corporation tax, simplifying the tax system.
The corporate tax rates will be 23% from April 2013 and 21% from
April 2014 and 20% from April 2015.
Corporation Tax Rates for Financial Years Starting on April
1
Years 2012 2013 2014 2015
Small Profits Rate 20% 20% 20% 20%
Main rate of Corporation
Tax
24% 23% 21% 20%
The Government will introduce an allowance of 2,000 per year for
all businesses and charities to be
offset against their employer National Insurance contributions
(NICs) bill from April 2014.
Other Significant Changes Corporate Tax
The Government will introduce a new Above the Line (ATL) credit
for R&D investment of large companies
from April 2013 (As announced in Autumn Statement 2011).
The ATL credit is designed to make R&D relief more visible
to those making investment decisions and
provide greater cash flow support to companies with no
corporation tax liability.
The headline rate of the ATL credit will be 10%, which is
increased from the 9.1%proposed in Budget
2012. Companies with no corporation tax liability will be able
to claim a payable credit. The introduction
of the ATL credit follows an increase in the rate of the small
and medium-sized enterprises (SMEs) R&D
tax credit from 175% to 225%in Budget 2011, which continues to
provide targeted support for early-stage
companies and start-ups investing in R&D in the UK.
The Seed Enterprise Investment Scheme, launched in Budget 2012,
offers 50% income tax relief on
investments made into small, early-stage companies.
The Government has decided to provide a limited extension of the
capital gains tax holiday to continue to
encourage investors to take up the new scheme.
Any investors making capital gains in 2013-14 will receive a 50%
capital gains tax relief when they reinvest
those gains into seed companies in either 2013-14 or
2014-15.
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The Government will strengthen obligations to ensure the correct
income tax and NICs are paid by
offshore employment intermediaries.
Annual Investment Allowance (AIA) As announced in Autumn
Statement 2012, the Government will
increase the AIA limit from 25,000 to 250,000 for two years for
all qualifying investments in plant and
machinery made on or after January 1, 2013.
Corporation tax deductions for employee share acquisitions -
Existing legislation has been amended toclarify a companys
entitlement to corporation tax deductions for accounting expenses
in connection with
share options or awards granted to employees. This measure will
take effect since March 20, 2013.
Changes to the Individual Tax Regime
Income tax rates The basic and higher rates of income tax for
2013-14 will remain at their 2012-13
levels. The additional rate of income tax will be reduced from
50% to 45% from 2013-14 (applicable to
income over 150,000).
UK makes the first 10,000 of income free from income tax (a year
ahead of schedule)
The personal allowance will be increased by 560 to 10,000 from
April 2014.
The income tax personal allowance will increase by 1,335 to
9,440 in April 2013.
From April 2013, the basic rate limit will be 32,010. The
National Insurance upper earnings/profits limit
will also be reduced to align it with the higher rate threshold.
Thus, the effective tax rates will be
Income Tax rates and taxable bands
Rate 2012-13 2013-14 2014-15
Personal Allowance 8,105 9,440 10.000
Basic Rate: 20% 0 - 34,370 0 - 32,010 0 - 31,865
Higher Rate: 40% 34,371 150,000 32,011 -150,000 31,865-
150,000
Additional Rate: 50% Over 150,000 N/A N/A
45% from April 6, 2013 N/A Over 150,000 Over 150,000
The UK to introduce a new Tax-Free Childcare Scheme.
The Government will support working families with 20% of their
childcare costs up to 1,200 per child per
year.
This new system will be phased in from autumn 2015.
The Government will introduce a new employee shareholder status
that will give staff a stake in their
firms future success and give firms greater choice about the
contracts they can offer to individuals.
Employee shareholders will have different employee rights and
shares worth a minimum of 2,000 in the
firm they work for.
The UK will exempt gains on up to 50,000 of shares acquired by
employee shareholders from capital
gains tax.
The first 2,000 of share value that anyone receives under the
new status will be free from income tax
and NICs.
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Residence
As announced on December 6, 2011, the Government will introduce
a statutory definition of tax residence
and abolish ordinary residence for most tax purposes from April
6, 2013.
Overseas workday relief will be made available to any
non-domiciled individual who arrives in the UK
following a period where they have been non-resident for at
least three tax years.
Taxation of Limited Liability Partnerships (LLPs)
The UK may (under consultation) remove the presumption of
self-employment for LLP partners, to tackle
the disguising of employment relationships through LLPs and
counter the artificial allocation of profits to
partners (in both LLPs and other partnerships) to achieve a tax
advantage.
VAT
From April 1, 2013, the VAT registration threshold will be
increased from 77,000 to 79,000 and the
deregistration threshold from 75,000 to 77,000.
The Government will legislate to change the rules for the
taxation of intra-EU business to consumer
supplies of telecommunications, broadcasting and e-services.
From January 1, 2015, these services will be taxed in the member
state in which the consumer is located,
ensuring these are taxed fairly which will help to protect the
revenue.
To support these changes, the Government will also legislate for
the introduction of a Mini One Stop
Shop from January 1, 2015. This will give businesses the option
of regi stering in just the UK and
accounting for VAT due in other member states using a single
return.
For more information on this topic email [email protected]
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