KPMG s Budget. Thursday 21 March 2013

Transcription

1 KPMG s Budget Breakfast Seminar Thursday 21 March 2013

2 Agenda Introduction People Agenda Business Taxes Indirect Tax Chris Wilson Caroline Laffey Adrian Wills Gareth Blower Any Questions? 1

3 Sin taxes Gaming duty to be increased in line with inflation Tobacco duty to increase by 2% above inflation from 6pm on 20 March 2013 Alcohol duty to also increase by 2% above inflation from 25 March 2013 but beer duty has been cut by 1p! Fuel duty increase proposed for 1 September 2013 to be cancelled Vehicle Excise Duty to increase in line with inflation from 1 April 2013, except for heavy goods vehicles, buses and other selected vehicles where the duty will be frozen for 2013/14 Air Passenger Duty to increase in line with inflation from 1 April 2013 Climate Change levy to increase in line with inflation from 1 April

4 Housing Build to Rent The Build to Rent fund announced at Autumn Statement 2012 will increase from 200 million to 1 billion Extension to affordable homes guarantee programme The existing affordable homes guarantee programme will double to provide a further 15,000 affordable homes in England Social enterprise investment relief New tax relief to encourage private investment in social enterprise proposed for the Finance Bill Consultation on the details of the relief by summer

5 Caroline Laffey People Agenda

6 The Press The Times, 20 September 2012 The avoidance schemes costs UK billions in lost revenue. HMRC to name and shame millionaire tax avoiders. Tax dodging accountants should be struck off. BBC News, 21 November 2012 The Telegraph, 23 July 2012 The Telegraph, 23 July

7 The Press Chancellor George Osborne has pledged more than 150 million for HMRC teams that tackle tax avoidance by multinationals l Telegraph December

8 The Tax Debate 7

9 Reputational Risk I pay what I have to and not a penny more Jimmy Carr s Twitter Climbdown I appreciate as a comedian, people will expect me to 'make light' of this situation, but I'm not going to in this statement. As this is obviously a serious matter. I met with a financial advisor and he said to me 'Do you want to pay less tax? It's totally legal'. I said 'Yes'. I now realise I've made a terrible error of judgement. Although I ve been advised the K2 Tax scheme is entirely legal, and has been fully disclosed to HMRC (Her Majesty's Revenue and Customs). I'm no longer involved in it and will in future conduct my financial affairs much more responsibly. Apologies to everyone. Jimmy Carr 8

10 The Spectrum of Tax Planning Benign tax planning Tax evasion Legal Illegal 9

11 Public Perception Tax Avoision the arrangement of one s financial affairs so as to avoid or minimize tax liability in such a way that it is not clear whether this constitutes lawful avoidance of tax or illegal tax evasion 10

12 Tax Transparency - Responding to the challenge Need for internal visibility How does your company manage public transparency of it s tax affairs and media interest? Do you have a strategy? If not, do you think you need one? Jim Harra, Director General, Business Tax, HMRC 11

13 Top Rate of Income Tax 50p 45p 12

14 Rates and Allowances 2013/ /15 Personal allowance 9,440 10,000 Income tax Higher rate: 40% Additional rate: 45% Over 32,010 Over 150,000 Over 31,865 Over 150,000 Inheritance tax threshold 325, ,000 Capital gains tax annual exemption 10,900 10,900 Capital gains tax rate 18% / 28% 18% / 28% Entrepreneurs relief lifetime limit 10 million 10 million Pension savings tax relief Lifetime allowance 1.5 million 1.25 million Annual allowance 50, ,

15 Restriction on Uncapped Income Tax Reliefs The cap From 6 April 2013 a cap on some unlimited reliefs from income tax will be introduced Restriction of such reliefs is the higher of 50,000 or 25% of income The reliefs not affected Charitable reliefs Pension contributions EIS/VCT/SEIS Capital losses and trading/rental t losses carried forward Computational reliefs e.g. capital allowances (except where computational reliefs create or augment a loss which itself may be capped) The key reliefs affected Trade loss relief against general income Qualifying loan interest Loss relief on unquoted shares 14

16 Real Time Information RTI being introduced from April 2013 HMRC announced a relaxation of the rules regarding small employers less than 50 employees until 5 October 2013, may send information to HMRC no later than the end of the tax month. small employers will only have to report monthly rather than every payday Penalties late filing penalties will be based on the size of the PAYE scheme based on the number of employees each scheme will be subject to only one late filing penalty per month regardless of the number of defaults Allowed one penalty free default per year 15

17 Company Vehicles Fuel benefit 6 April 2013 multiplier increase to 21, (from 20,200) 200) 6 April 2013 van fuel charge 564 Company cars Increased tax on cars as rates and thresholds change April 2013, 1% increase for cars with CO2 emissions over 95g April 2015, 2 new CO2 bands 0-50g 5% 51-75g 9% April 2015, remaining bands up 2% April 2015, 35% cap increases to 37% April 2016, further 2% rise for all bands April 2016, removal of 3% Diesel supplement VAT: changes to fuel scale charges VAT fuel scale charges will change with effect from 1 May

18 Loans & National Insurance Loans Increase in the exempt threshold for employment-related loans from 5,000 to 10, with effect from 6 April 2014 NIC Employment Allowance Introduction of an allowance of 2,000 per year for all businesses and charities against their employer Class 1 secondary NICs bill from April 2014 Claimed as part of the normal payroll process through RTI NIC Contracting Out From April 2016 employees who contribute to Defined Benefit pension schemes will no longer be contracted out for NIC Employer and employee NIC contributions will increase 17

19 Childcare Childcare New Scheme to be introduced in Autumn 2015 Available to all parents where both work over 16 hours a week and earn less than 150,000 per tax year (also available for lone parent families) Initially for children under 5 with phased increase to children under 12 Administered via online account For every 80p put in by the individual, HMRC will add a further 20p up to a maximum of 6,000 per child. Total tax relief available 1,200 per annum Current Employer Supported Childcare will still be available for participating employees but will be closed to new joiners Consultation document to follow 18

20 Office holders Office holders will be brought under the IR35 regime Illustration of effective rate of tax on extracting profits from a company 40% taxpayer Bonus Dividends 2012/13 49% 43% 2013/14 49% 42% 2014/15 49% 41% 2015/16 49% 40% 50% taxpayer 2012/13 58% 52% 45% taxpayer 2013/14 53% 47% 2014/15 53% 46% 2015/16 53% 44% 19

21 Tax Avoidance Offshore Employment Companies Consultation regarding the use of offshore employment intermediaries HMRC are to publish a consultation in May and legislate in Finance Bill 2014 Partnerships Review of partnerships Self-employment status for LLP members to be reviewed; and Manipulation of profit/losses e.g. introduction of company as a partner Process of consultation Inheritance tax Limiting deductions for certain liabilities where Debt not repaid to the creditor Incurred to acquire assets which are not liable to IHT High value residential property Residential Property over 2m held in a company or other corporate vehicle 15% Stamp Duty Land Tax Annual tax charge between 15,000 to 140,000 based on value of property CGT at 28% on disposals 20

22 Shares Seed Enterprise Investment Scheme Maximum investment in small start up company of 100k Capital Gain in 2013/14 100k 100k reinvestment gets you:- 50k income tax relief 50k gain at 28% - 14k CGT saved Net cost of investment = 36k Employee Shareholder h Statust From September 2013 Swap employment rights for free shares First 2k free from tax and NIC and gain exempt from CGT Employee Owned Companies Disposals of controlling shareholding to employee controlled vehicles to be free from CGT Consultation - Effective April

23 Adrian Wills Business Taxes

24 Basics HMRC discussion document 14 February 2013 Tax and Procurement followed up by a summary of consultation responses on 20 March 2013 Requirement to self certify for occasions of non compliance in any tender issued by central government for above threshold contracts from 1 April

25 Key components Threshold > 5m contract advertised in OJEU on or after 1 April 2013 Occasions of non compliance - where a tax return is found to be incorrect as a consequence of HMRC challenge under: The GAAR (more later) The Halifax abuse principle Where a tax return is incorrect further to a matter which was or should have been covered by the Disclosure of Tax Avoidance Scheme rules (again, more later) Tax affairs giving rise to a criminal conviction or a penalty for civil fraud or evasion Period covered consider occasions of non compliance in the preceding 6 years, but only from 1 April 2013 and in respect of tax returns submitted on or after 1 October 2012 Non compliance by who? The economic operator who will fulfil the contract 24

26 But which contracting body? The current view is central government means the government departments, the NHS and NDPBs HCA..? local authorities..? But the consultation document stated that other public bodies may be encouraged to apply these rules 25

27 Tax rates and allowances 30% 25% 20% 15% 10% 5% 0% CT main rate CT small rate CAs main pool CAs special rate pool Corporation tax rate reducing to 20% from 1 April 2015 (so converging with the small companies rate of CT) No change to capital allowance rates 26

28 Who are the winners? Employers benefitting from the 2,000 NIC employment allowance Investors on the AIM market by the removal of Stamp Duty on shares quoted on AIM from 2014 Consultation to provide tax incentives for Shale Gas exploration Consultation on tax support to the visual effects industry Increase in the R&D Expenditure Credit to 10% Clarity on tax treatment for decommissioning in Oil and Gas sector Manufacturers and companies purchasing low emission vehicles 27

29 Who are the losers? Banks paying the Bank Levy Close companies providing loans to participators Businesses supplying consumers in the telecoms, broadcasting and e-services due to change of supply rules for VAT from 1 January

30 Continued focus on corporate tax avoidance More targeted anti-avoidance rules, looking at loss buying and even capital allowance pool buying A consultation on the taxation of corporate debt Beefing up of the Disclosure of Tax Avoidance Scheme rules General anti-abuse rule (GAAR) Global l initiative iti to modernise transfer pricing i 29

31 Disclosure of Tax Avoidance Schemes Condoc published 23 July 2012 Lifting the Lid on Tax Avoidance Schemes Badged as attacking Cowboy tax advisers but affects all promoters Extends scope and reach of DTAS New and innovative All tax avoidance What is avoidance? Hallmarks will significantly increase number of disclosures and increase compliance burdens An extensive regime versus high h penalties Proportionality and appropriateness 30

32 General Anti-Abuse Rule Arrangements Having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage was the main purpose, or one of the main purposes of the arrangements Abusive arrangements The entering into or the carrying out of which cannot reasonably be regarded as a reasonable course of action, having regard to all the circumstances including the relevant tax provisions, the substantive results of the arrangements and any other arrangements of which the arrangements form part Signposts Amounts subject to tax are significantly less than those for economic purposes Deductions/losses for tax significantly greater than for economic purposes Claim for repayment of or crediting of tax that has not been and is unlikely to be paid Consideration is significantly different from market value or contains non-commercial terms Counteraction On a just and reasonable basis by a Court or Tribunal No clearance system 31

33 What wasn t in the Budget Small trading exemption for charities Currently up to 50, of turnover was thought that this could change, but it didn t Feed in tariffs Taxable in a charity could HMRC have done charities a favour? 32

34 Gareth Blower Indirect Tax

35 Housing Help to Buy - mortgage guarantees to help with home purchasers for those with small deposits Help to Buy equity loan From 1 April 2013, equity loans will be made available for the purchase of new build homes up to the value of 600,000 Pay to Stay proposed measures to be put in to place to allow landlords to charge market rents to those social housing households with incomes of more than 60,000 a year Right to Buy From 25 March 2013, the maximum Right to Buy discount cash cap will be raised from 75,000 to 100, in London and the application process simplified for local authorities and prospective tenants. Eligibility time will also reduce for tenants from 5 years to 3 years 34

36 Impact in the Sector Help to Buy If HA s get involved as they did with HomeBuy, the VAT liability of any fees payable may come into question? Taxable income is good provided VAT is charged in addition Exempt income is more likely, but should be determined at the outset Right to Buy If units were acquired from LAs or third parties, sale by the HA will be exempt, but excluded from PE calculation If units were developed by HA, the sale should be zero rated, but still needs to be excluded from PE calculation If units were developed by HA, it may be arguable that VAT incurred on maintenance, repair and improvement works carried out to the properties can be treated t as residual 35

37 Energy-efficiency Energy-saving materials There is scope for 5% VAT on the supply and installation of energy-saving materials The European Commission have challenged this application of the reduced rate HMRC have stood firm on the application for residential properties Relief for relevant charitable purpose to be withdrawn with effect from 1 August 2013 The matter has been referred to the European Court of Justice and should be heard in the next few years If the ECJ accepts the UK s rationale for the reduced rate then it will remain Consider what the impact of a change would be on longer term budgets and business plans 36

38 Any Questions?

39 The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International Cooperative (KPMG International). Produced by Create Graphics.

40 Budget 2013/14 The following information is based on proposals set out by the Chancellor in his Budget of 20 March 2013 but is subject to amendment in the Finance Bill. Income tax Rates % 2013/14 % 2012/13 Basic 20 up to 32, up to 34,370 Higher 40 32,011 to 150, ,371 to 150,000 Additional 45 Above 150, Above 150,000 Non-savings income is taxed as the first slice of income, followed by savings income and then dividends. Dividends falling into the basic rate band are taxed at 10%. The higher rate of tax for dividends is 32.5% (2012/ %) and the additional rate is 37.5% (2012/ %). This is reduced by the dividend tax credit. Savings income falling into the first 2,790 of taxable income (2012/13 2,710) will be taxed at 10%. Reliefs 2013/ /13 Payment on loss of office 30,000 30,000 Enterprise Investment Scheme (a) 1,000,000 1,000,000 Venture Capital Trust (a) 200, ,000 SEED Enterprise Investment Scheme (b) 100, ,000 Note: (a) Relief restricted to 30%. (b) Relief available up to 50%. Allowances 2013/ /13 Personal allowance: Those born after 5 April 1948 (a) 9,440 8,105 Those born between 6 April 1938 and 5 April 1948 (a)(b) 10,500 10,500 Those born before 6 April 1938 (a)(b) 10,660 10,660 Note: (a) Progressively withdrawn for income over 100,000, leading to a marginal tax rate of 60% on income in the band 100,000 to 118,880 (to 116,210 in 2012/13). (b) Age-related element progressively withdrawn for income over 26,100 (2012/13: 25,400). Non-UK domiciled individuals levy to use remittance basis of taxation 2013/ /13 Lived in UK 7 of out 9 years 30,000 30,000 Lived in UK 12 out of 14 years 50,000 50,000 National Insurance Contributions Rates 2013/ /13 Class 1 (earnings related) Lower earnings limit (LEL) (per week) Upper earnings limit (UEL) (per week employees only) Upper accruals point (UAP) Earnings threshold (per week) Primary threshold Secondary threshold Employee rate: Between earnings threshold and UEL 12% 12% Earnings above UEL 2% 2% Employer rate: Above earnings threshold 13.8% 13.8% Class 2 (self-employed flat rate) Per week Small earnings exception (per year) 5,725 5,595 Class 3 (voluntary): per week Class 4 (self-employed) Lower profits limit LPL (per year) 7,755 7,605 Upper profits limit UPL (per year) 41,450 42,475 Rate: Between LPL and UPL 9% 9% Above UPL 2% 2% Reliefs 2013/ /13 Contracted out Class I relief (between LEL and UAP) Employee Salary related/money purchase scheme 1.4% 1.4% Employer rate Salary related scheme 3.4% 3.4% Money Purchase scheme (a) (a) Note: (a) Contracting out for money purchase schemes was abolished on 5 April Individual Savings Accounts (ISA) 2013/ /13 Annual investment limit 11,520 11,280 Maximum cash investment 5,760 5,640 Income and gains on ISA investments are tax free. Inheritance tax 2013/ /13 Nil Up to 325,000 Up to 325,000 40% (a) Above 325,000 Above 325,000 Note: (a) Reduced to 36% from 2012/13 where at least 10% of the net estate is left to a charity. Any unused nil-rate band may be transferred to the deceased s spouse or civil partner. Certain lifetime gifts are subject to inheritance tax. In these cases tax is charged at 20%. On death, any gifts made within the previous seven years will become taxable (at the rates shown in the table above), but the tax payable will be reduced by tapering relief if the donor has survived at least three years. Car and Car Fuel benefits Cars The taxable benefit in respect of a car provided by an employer is calculated by reference to the car s carbon dioxide emission rating, with the scale charge varying between 10% (for vehicles emitting under 95g/km) to a maximum of 35% of the list price. There is a supplementary charge of 3% for diesel cars until April 2016 but not so as to take the total percentage beyond the maximum of 35% mentioned above. The scale charge for ultra low emission vehicles (under 75g/km) is currently 5% and for electric cars the scale charge is 0%. Car fuel The taxable benefit in respect of fuel provided by an employer is the appropriate percentage of 21,100 (2012/13 20,200) where the appropriate percentage is the figure (from 10% to 35%) used to determine the taxable benefit in respect of the provision of the car. Approved Mileage Allowance Payments 2013/ /13 Own cars and vans Up to 10,000 miles (per mile) 45p 45p Over 10,000 miles (per mile) 25p 25p Air Passenger Duty Rates Lowest class (b) Standard rate 1 Apr Apr Apr Apr 2012 Destination bands Band A ( miles (a) ) Band B ( miles (a) ) Band C ( miles (a) ) Band D (over 6000 miles (a) ) Note: (a) Distance from London to capital city of destination country. (b) The lowest class rate does not apply where there is only one class of travel and the seat pitch exceeds 40. Insurance Premium Tax Rates 1 Apr Apr 2012 General rate 6% 6% Higher rate (certain policies) 20% 20% 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 1

41 Budget 2013/14 Stamp Taxes Stamp duty land tax Rate payable on chargeable UK land transactions Non-residential or consideration Residential mixed use Nil 0-125k 0-150k 1% 125, k 150, k 3% 250, k 250, k 4% 500,001-1m 500,001+ 5% 1,000,001-2m n/a 7% Above 2m n/a 15% (a) Above 2m Mixed use is apportioned Note: (a) Not applicable to individuals or where property is used for commercial purposes. In addition rent is taxed at 1% of its Net Present Value, less 125,000 in the case of residential property and 150,000 in the case of nonresidential and mixed-use property. Annual Tax on Enveloped Dwellings From 1 April 2013 ATED will be payable by companies that own high value residential property. ATED will not apply to individuals or to entities which use residential property for a qualifying business purpose. The amount of ATED is worked out using a banding system based on the value of your property. Property value Annual chargeable amount 2 million to 5 million 15,000 5 million to 10 million 35, million to 20 million 70, million and over 140,000 Capital Gains Tax Rates Companies pay corporation tax on capital gains after indexation allowance at their normal rate. Gains and losses on sales of shareholdings of 10% or more in trading companies or trading groups are exempt, subject to certain exclusions. Gains realised by individuals are taxed at a flat rate of 18% (for basic rate taxpayers) or 28% (for higher or additional rate taxpayers). These rates are reduced to an effective rate of 10% where Entrepreneurs Relief is available. Reliefs 2013/ /13 Annual gains exemption for individuals 10,900 10,600 Chattels proceeds exemption 6,000 6,000 Enterprise Investment Scheme (a) 100% 100% SEED Enterprise Investment Scheme (b) 100%/50% 100%/100% Venture Capital Trust (a) 100% 100% Principal private residence (a) 100% 100% Entrepreneurs relief (cumulative lifetime 10m 10m allowance) (a) Note: (a) Subject to conditions. (b) 100% relief on gain on investment. Relief also available on reinvested gains of 50% up to a maximum investment of 100,000 (100% in 2012/13). Pensions Stamp duty/sdrt Transfers of shares 0.5% 2013/ /13 Annual contribution allowance 100% of salary up to 50,000 50,000 Permitted pension contribution (irrespective of salary) 3,600 3,600 Lifetime benefit allowance 1,500,000 1,500,000 Value Added Tax 1 Apr Apr 2012 Standard rate 20% 20% Lower rate 5% 5% Registration limit annual turnover above 79,000 77,000 Simplified arrangements annual turnover below 1,350,000 1,350,000 Corporation Tax 1 Apr Apr 2012 Main rate (a) 23% 24% Small profits rate (c) 20% 20% Where profits (b) 0-300k 0-300k Marginal relief where profits (b) 300k- 1,500k 300k- 1,500k Marginal relief fraction (c) 3/400 1/100 Profit threshold for quarterly instalment payments (b) 1,500k 1,500k Note: (a) Ring fence profits are taxed at 30%. (b) Reduced by reference to number of associated companies. (c) Ring fence profits from UK oil extraction and rights are taxed at 19% with a marginal relief fraction of 11/400. Intangible Assets Companies receive a deduction for expenditure on an accounts basis. Allowances at 4% p.a. are available by election. Patent Box From 1 April 2013 profits from qualifying patent interests are taxed at 10%. This is being phased in over 5 years: Year commencing 1 April Percentage of benefits available 60% 70% 80% 90% 100% Research and Development Relief Additional deduction 1 Apr Apr 2012 SMEs 125% 125% Non-SMEs 30% 30% SMEs which make losses can surrender the deduction in exchange for a payment of up to 12.5% of the loss. Research and Development Expenditure Credit ( RDEC ) Large Companies will be able to claim an RDEC at a rate of 10% for qualifying expenditure incurred after 1 April This will replace the old scheme from 1 April It will be a taxable credit which can ultimately be surrendered for cash for loss making large companies or surrendered against group companies tax liabilities. Capital Allowances 2013/ /13 Plant and machinery Main writing down allowance rate (a) 18% 18% Special rate pool (long life assets and integral features within a building) (a) 8% 8% Energy saving/environmentally beneficial assets 100% 100% 100% Annual investment allowance on expenditure up 250,000 25,000 to (b) Commercial or industrial building in an Enterprise Zone (c) 100% 100% Research and development 100% 100% Business Premises Renovation Allowance 100% 100% Motor cars Low emission less than or equal to 95g/km 100% 100% (2012/13: 110g/km) Emissions less than or equal to 130g/km (a) 18% 18% (2012/13: 160g/km) Emissions greater than 130g/km (a) (2012/13: 160g/km) 8% 8% Note: (a) Reducing balance. (b) Annual Investment Allowance of 250,000 was introduced on 1 January (c) Transitional rules apply from April The budget proposals and other tax changes are summarised on this page. The proposals may, however, be amended significantly before enactment. The content of this communication is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining liability to tax or determining investment strategy in specific circumstances. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 2