The Government had pledged a review of IR35,
To quote the Treasury Budget document: “The Government has decided to retain IR35 as abolition would put substantial revenue at risk.”
Furnished Holiday Lettings
The rules for furnished holiday lettings (FHL) will be revised, as previously announced.
From April 2011 loss relief may only be offset against income from the same FHL business. UK losses can relieve UK FHL income only and similarly with the EEA losses. From April 2012 to qualify in a year, a property must be available to let for at least 210 days and actually let for 105 days. Businesses meeting the actually let threshold in one year may elect to be treated as having met it in the two following years (“period of grace”), providing certain criteria are met.
In June 2010, the Chancellor announced that there would be a bank levy introduced from 1 January 2011.
The Chancellor announced an increase in this levy to offset the additional 1% reduction in corporation tax rates so that the banks do not benefit from the reduced tax rate.
Research and development (R&D) tax credits
SMEs are able to claim an additional tax deduction for Corporation Tax purposes for qualifying R&D expenditure.
The Chancellor announced an increase in the additional deduction for qualifying R&D expenditure from 1 April 2011 from 75 per cent to 100 per cent of the qualifying expenditure, giving a total deduction of 200 per cent.
From 1 April 2012, the additional deduction will increase by a further 25 per cent giving a total deduction of 225 per cent, and, subject to consultation, the rules of R&D tax relief for SMEs will be simplified.
The June 2010 budget confirmed that the inheritance tax nil rate band will remain frozen at £325,000 until 2014/5.
Budget 2011 announced that from April 2012, a reduced rate of IHT of 36% will be introduced where 10 per cent of more of the net estate is left to charity.
The Government announced the creation of 21 new Enterprise Zones in the Budget. These will offer 100% business rate discounts for 5 years, as well as enhanced capital allowances and superfast broadband.
The first ten of these zones will be in the areas of highest need, including one in the Nottinghamshire and Derbyshire area. The actual locations will be announced later.
From April 2013 charities (and community amateur sports clubs) that receive small donations of £10 or less will be able to apply for a gift aid style repayment without the need to obtain gift aid declarations for those donations. The amount of small donations on which the new repayment can be claimed will be capped at £5,000 per year, per charity.
Also, for donations to charities to be eligible for Gift Aid tax relief, there are limits on the value of benefits that individuals and companies may receive as a result of making those donations. The Chancellor announced an increase in the benefit limit for donations of more than £10,000. The existing rule that the benefit must not exceed 5 per cent of the gift will remain the same, but the overriding annual limit to the value of benefits a donor may receive will be increased from £500 to £2,500.
The Budget abolished 43 tax reliefs in response to the work of the Office for Tax Simplification (OTS).
In addition, the Chancellor announced a consultation on options for integrating the operation of income tax and national insurance contributions. He did clarify that he did not intend this to extend National Insurance to pensions or other income.
Comment: Some of the 43 reliefs were obsolete in any case!
The confirmation that there is no intention to extend National Insurance to other income is good news for those paying themselves mainly in dividends from their limited companies.
This summary is published for the information of clients. It provides only an overview of the main proposals announced by the Chancellor of the Exchequer in his Budget Statement, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.