The Chancellor delivered his Autumn Statement on 29 November 2011 together with some supporting documents and draft legislation for Finance Bill 2012 (FB 2012). The Autumn Statement was swiftly followed on 6 December by the further draft clauses for FB 2012 and other tax updates.
As expected the draft clauses released on 6 December 2011 incorporated many measures that had already been announced in Budget 2011 and earmarked for introduction in FB 2012. Where applicable, the draft clauses take into account the responses to summer 2011 consultations. The draft legislation is available for technical consultation until 10 February 2012.
The key points are listed below.
Finance Bill 2012 draft clauses
A quick review of points relevant to general practitioners:
Company taxation:
- The rate of corporation tax paid by small companies will remain at 20% in financial year 2012.
- The rate of corporation tax paid by large companies will continue to reduce by 1% each year; dropping to 25% in financial year 2012 and to 24% in financial year 2013.
- SMEs will, subject to all conditions being met, be able to deduct 225% of their qualifying expenditure on research and development that is incurred on or after 1 April 2012. At the same time, the rate of the repayable tax credit for loss making research and development companies will drop to 11%. Amendments will be made to make the scheme more accessible; this includes the removal of the £10,000 minimum expenditure limit and the removal of the PAYE/NIC cap to the repayable tax credit.
Investors in companies:
- Access to the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) will be improved by increased annual investment limits and increased company size thresholds.
- A new “Seed Enterprise Investment Scheme” (SEIS) will be launched in April 2012 for investment in small new start up companies. If all qualifying conditions are met, investors will receive a 50% income tax deduction for the amount of their subscription. For 2012/13 there will also be a “capital gains tax holiday” for any gains re-invested in SEIS shares; the effect being the gain is completely exempted. Again, qualifying conditions will apply.
Capital allowances
- Expenditure on solar panels will be classified as special rate pool expenditure from April 2012.
- Enhanced capital allowances will no longer be available on plant and machinery that attracts tariff payments for generating heat or electricity.
- A purchaser of a property will only be able to claim plant and machinery capital allowances on the fixtures contained within the property if, broadly, those fixtures have first been pooled by the seller prior to disposal and both parties agree the value of the fixtures within 2 years of the date of sale.
- A new 100% allowance will be made available to companies incurring qualifying expenditure on plant and machinery to be used within designated assisted areas within Enterprise Zones. The relevant areas for this purpose are currently the Black Country, Humber, Liverpool, North Eastern, Sheffield, and Tees Valley Enterprise Zones. This will apply to qualifying expenditure incurred between 1 April 2012 and 31 March 2017.
National insurance
- The rates of national insurance contributions will be the same in 2012/13 as in 2011/12. The upper earnings and profits limits will also be frozen at the 2011/12 level. For the full table of rates and thresholds, click here.
Personal tax
- Income tax rates remain the same in 2012/13 as in 2011/12. The basic personal allowance will be increased by £630 and the basic rate band will be reduced by the same amount. This will give all individuals with a personal allowance a £126 income tax saving in 2012/13. For the full table of rates, bands and allowances, click here.
- The maximum investment in an individual saving account (ISA) in 2012/13 will be £11,280, of which £5,640 can be in a cash ISA.
- The new statutory residence test will not be introduced until 6 April 2013, as part of Finance Bill 2013.
- The remittance basis charge will increase to £50,000 from 6 April 2012 for non-domiciled individuals who have been resident in the UK for 12 of the last 14 years. Further changes will also be made to the remittance basis of taxation in Finance Bill 2012.
Capital gains tax
- The 2012/13 rates have not yet been announced but it has been confirmed that the annual exemption will be frozen at £10,600 in 2012/13.
- Extra Statutory Concession C16 will be enacted. From 1 March 2012, distributions made to shareholders on an informal winding up of a company will, subject to conditions, be treated as a capital distribution. There will however be a cap of £25,000 on the amount of distribution that can be treated in this manner.
- There will be a new capital gains tax exemption for all withdrawals from a foreign currency bank account made on or after 6 April 2012.
Tax Credits
- Most elements of tax credits will be frozen at the 2011/12 levels. There will be a small inflationary increase to the child element of child tax credit but this is much less that the increase originally pledged by Government. For the full table of tax credit amounts and the relevant thresholds, click here.
Inheritance tax
- The nil rate band will remain frozen at £325,000 until 2014/15.
- Finance Bill 2012 will introduce a new 36% rate of inheritance tax where at least 10% of the taxable estate is left to charity. This will apply to deaths occurring on or after 6 April 2012.
Philanthropy and charities
- A new scheme will be introduced to allow a tax reduction for people who, during their lifetime, donate works of art or historical objects of pre-eminent importance to the nation.
- As expected, “self-assessment donate” will be withdrawn from 6 April 2012.
VAT
- Subject to very limited exceptions, all VAT registered businesses will be required to file their VAT returns online and pay their VAT liabilities electronically for VAT periods commencing on or after 1 April 2012.
Administration
- Legislation will be introduced to give effect to the agreement between the UK and Switzerland about co-operation in tax matters that was signed on 6 October 2011. It is anticipated that the agreement will take effect from 1 January 2013.
- Legislation will be introduced in FB2012 to allow HMRC to issue a tax agent with a “dishonest conduct notice” if it has determined that they have engaged in dishonest conduct. This notice would be subject to appeal within the usual 30 days. The onus would be on HMRC to show dishonest conduct.
- In follow up of the recent “Agent Strategy” consultation, HMRC will start to pilot and develop procedures to enrol professional agents and allow “self-service” to HMRC’s systems.
