Business
Breakfast
Budget Impact
June 2010
Finance Bill June 2010
Implications
Ian Cattell ACA
Partner – Crombies Chartered Accountants
©2010 Crombies Accountants Limited. All rights reserved.
CONTENTS
The Budgetary Environment
UK Plc – 2009-10 Financial Report
The office for Budgetary Responsibility
Business Tax Proposals
VAT
Corporation Tax
Capital Allowances
Personal Tax Proposals
Income Tax
Capital Gains Tax
The Tax Compliance Environment
Any questions?
©2010 Crombies Accountants Limited. All rights reserved.
General disclaimers
• We are not authorised to give investment advice
• We make general comments only – not specific advice
• Everyone’s financial affairs are different – what is best for the
“man in the pub” may not be best for you
• Tax legislation changes constantly so review your
circumstances regularly
• And Remember – Don’t let the tax implications distort the
commercial and practical considerations
• The Finance Bill is not yet law. The final provisions enacted
in any Finance Act may differ considerably from The
Chancellors initial presentations.
©2010 Crombies Accountants Limited. All rights reserved.
The Budgetary
Environment
The Micawber Principle
"Annual income twenty pounds, annual expenditure nineteen pounds
nineteen and six, result happiness. Annual income twenty pounds,
annual expenditure twenty pounds ought and six, result misery
©2010 Crombies Accountants Limited. All rights reserved.
UK Plc – 2009-10 Financial Report
• Total Government Income £515.3 Billion
• Total Government Expenditure £671.4 Billion
• Net Borrowing £156.1 Billion (11.09% GDP)
• New Coalition government’s stated intentions :
- To reduce deficit in ratio 80%:20% Expenditure cuts : Tax rises
-
To reverse planned National Insurance increases (Tax on jobs)
To increase the Income Tax Personal allowance (Target £10,000 pa)
To reduce rates of corporation tax
To target tax avoidance involving conversion of Income to Capital Gains
• Spending cuts won’t be announced until the Autumn Spending
review.
©2010 Crombies Accountants Limited. All rights reserved.
UK Central Government Deficit
47.7%
36.8%
How the deficit is expected to fall
Amounts raised in Taxation
HM Revenue & Customs – Tax Receipts 2009-10
Budget June 2010
Business Tax Proposals
Jean-Baptiste Colbert
The art of taxation consists in so plucking the goose as to
obtain the largest amount of feathers with the least amount of
hissing.
©2010 Crombies Accountants Limited. All rights reserved.
Business Taxation
CORPORATION TAX
• Point 1
• Point 2
• Rates of Tax
2009/10
2010/11
2011/12
Small Company
On first £300,000
20.0%
20%
20%
Marginal Rate
On Next £1,200,000
32.5%
30%
30%
Higher Rate
Above £1,500,000
30.0%
32.5%
32.5%
• Point 4
• Point 5
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Value Added Tax
• Point 1
• Point 2
• Rates of Tax
2011/12
2009/10
2010/11
Small Company
On first £300,000
20.0%
20%
20%
Marginal Rate
On Next £1,200,000
32.5%
30%
30%
30.0%
32.5%
Higher Rate
Above £1,500,000
32.5%
• Point 4
• Point 5
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The CGT Calculation
Sale Proceeds - (Market Value)
Less - Costs of disposal
Estate Agent, Solicitor, Advertising
Less -
Acquisition Cost - ( Pre 1998 )
Costs of acquisition Solicitor, Valuation, Stamp Duty
Enhancement Expenditure
Unindexed Gain
Indexation Allowance - From acquisition to 5 April 1998
Indexed Gain
200,000
10,000
190,000
50,000
5,000
15,000
70,000
120,000
20,000
100,000
Taper Relief - Including Bonus Year - 25%
Tapered Gain
25,000
75,000
Annual Exemption
Chargeable Gain
7,900
67,100
Tax Payable at 40%
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26,840
When is CGT payable
• CGT arises on the disposal of a chargeable asset (eg
Property). Disposal Includes.
– Sale - at arms length or otherwise
– Gift
– Settlement
• Certain disposals have special treatment
– Transfers between husband and wife – No gain / No loss
– Transfers or Gifts to Connected Persons – Deemed market
value
– Transfers where IHT is potentially payable
• The following are not disposals for CGT purposes
– Mortgage or re-mortgage of property
– Death
©2010 Crombies Accountants Limited. All rights reserved.
Some Simple CGT Planning points
• Consider holding properties jointly so that two annual
exemptions are available on sale
• Husband and Wife – transfer properties into joint names
• Plan the timing of disposals to make use of exemptions and
use losses effectively
• Keep financial records. – This is a legal requirement, but also
crucial for claiming incidental costs.
• Don’t let CGT planning give you an IHT problem - remember
the “Tax Free Uplift” on death
©2010 Crombies Accountants Limited. All rights reserved.
Budget June 2010
Personal Tax Proposals
Albert Einstein
The hardest thing in the world to understand is the income tax.
©2010 Crombies Accountants Limited. All rights reserved.
Capital Allowances
• Point 1
• Point 2
• Rates of Tax
2011/12
2009/10
2010/11
Small Company
On first £300,000
20.0%
20%
20%
Marginal Rate
On Next £1,200,000
32.5%
30%
30%
30.0%
32.5%
Higher Rate
Above £1,500,000
32.5%
• Point 4
• Point 5.
©2010 Crombies Accountants Limited. All rights reserved.
The Tax Compliance
Environment
Mark Twain
The only difference between a tax man and a taxidermist is that the
taxidermist leaves the skin.
©2010 Crombies Accountants Limited. All rights reserved.
HMRC Compliance Environment
• HMRC are targeting in their Published Business Plan an increase of
33% in amounts raised from Inspections & Investigations.
• In 2010/11 this would amount to £4bn. Of which £1.5bn assumed
from small business and personal tax enquiries.
• New Penalty Regime. From April 2010 assumption is that enquiry
amendments will carry a penalty of at least 20%. (Previously Nil)
• Increased use of informal enquiry powers outside of the usual
“Enquiry windows”
• Increased use of “Multi-disciplinary” teams. Cross referencing
between what were previously separate departments.
• Utilization of new information sources – Bank data; Land Registry;
Benefits Agency; Property Letting Agents; Stock Brokers; Solicitors.
• PAYE, CIS, VAT, Stamp Duty Penalties all increased substantially.
©2010 Crombies Accountants Limited. All rights reserved.
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