Expert Perspectives On The Budget - 2013 and Beyond


Now that the dust has settled on this year's Budget, Mitchell Charlesworth's experts have been able to analyse the finer points of the Chancellor's announcements, beyond the headline-grabbing news. Below, our experts outline how the Budget will affect you and your business into 2013 and beyond (simply click on the links below to find out more):

  • Corporation Tax Perspective: 'Historic' Reduction in Corporation Tax and Extension of the SEIS are Tax Highlights of the Budget 2013 - Read More

  • VAT Perspective: Budget makes for Bleak Reading on the Indirect Tax Front - Beer Anyone?!
    - Read More

  • Payroll Perspective: Employment Allowance will remove the burden of 'job tax' from 1/3 of employers- Read More

Budget Summary 2013
  • LLP Specialist Perspective: Government Launches Consultation into LLP Tax Arrangements
    - Read More

  • Tax Planning Perspective: GAAR & Offshore Tax Arrangements - Confirmation that Combatting Tax Avoidance is Top Priority for the Government - Read More

  • Inheritance Tax Perspective: Nil Rate Band Freeze means Individuals Must Think Carefully About Their Inheritance Tax Planning - Read More

  • Financial Planning Perspective: Budget 2013 Provides Some Positive Outcomes for Savers and Investors - Read More

  • Tax and Capital Allowances Perspective: Reminder About Annual Investment Allowance and Car Allowances in 2013 and Beyond - Read More

  • Corporate Finance Perspective: Extension of SEIS Should Tempt Successful Entrepreneurs to Invest - Read More

  • Corporate Recovery and Insolvency Perspective: Business Rates Rise Plus Real Time Information (RTI) Could Lead to More Business Failures - Read More

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Tim Adcock

Tim Adcock -
Tax Partner

  • 'Historic' Reduction in Corporation Tax and Extension of the SEIS are Tax Highlights of the Budget 2013:

The Budget was fairly quiet in terms of underlying tax measures. The headline provision for UK businesses was perhaps the historic reduction in corporation tax to 20% from April 2015 with the small company and main company rates effectively merged at that date.

The consistent drop in corporation tax rates in recent years now makes the UK very competitive in this area which should help attract businesses to these shores.

Other positive measures include the extension of the capital gains tax advantages of the Seed Enterprise Investment Scheme and further encouragement for employee share ownership arrangements. As a counter to this HMRC continue to crack down on tax avoidance and evasion with new legislation to be issued in various areas including stamp duty land tax, certain partnership arrangements and loss buying transactions. As has now become normal practice, there is a long lead time set out for many of the provisions announced in the Budget with a view to legislation in Finance Bill 2014.

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Gemma Gower

Gemma Gower - VAT Manager

  • Budget Makes for Bleak Reading on the Indirect Tax Front - Beer Anyone?!

The Budget makes for pretty bleak reading on the indirect tax front - apart from the scrapping of the proposed hike in fuel Duty, and the reduction in Duty rates for beer - In the North West, we are likely to be worse off, in overall terms.

We consider that the food, drink and tourism sector will be affected most by the indirect tax announcements in yesterdays' Budget, as the Duty rates for spirits, wine, cider and perry will increase by 2% above the RPI, from 25 March 2013.  This will add 2p to a litre of cider, 10p to a bottle of wine and 38p to a bottle of spirits.

Thankfully, its not all doom and gloom, as the proposed Duty hikes do not apply to Beer, which will see a reduction of 1p per pint.  This is encouraging news for businesses in the brewing industry along with pub owners and real ale drinkers alike.  The Government hope that the reduction in duty will be passed on to consumers, and create a much needed boost to jobs in Britain's pubs.  Anyone for a celebratory pint? Click here for further detailed Indirect Tax analysis from this year's Budget.

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Ken Davies

Ken Davies - Payroll Director

  • 'Employment Allowance' will remove the burden of 'job tax' from up to 1/3 of all employers:

One of the headline changes for businesses from this year's Budget was the announcement of a new £2,000 'Employment Allowance' which will remove the burden of 'job tax' from up to 1/3 of all employers. Specifically, from April 2014 the Government will introduce an allowance of £2000 per year for all businesses and charities to be offset against their employer Class 1 NIC liability.

The employment allowance is aimed at small businesses, charities and community sports clubs and is designed to encourage these businesses to employ staff.  The measure should give small firms and one-man businesses a much-needed confidence boost and, according to the Chancellor: "for those start-up companies thinking about taking on their first employee - a huge barrier will be removed."

Under this measure, companies could now employ a full time employee (paying up to £22,000 a year) or four members of staff earning the minimum wage. The measure will be delivered through the normal payroll process. If you do decide to start employing staff, you are urged to contact Mitchell Charlesworth's Payroll department to find out how we can manage your payroll process for you.

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Mike Buxton

Mike Buxton - Manager

  • Government launches consultation into Limited Liability Partnership's (LLP's) Tax Arrangements:
The announcement of a crackdown on the tax arrangements of LLPs is particularly pertinent for Solicitor and Accountant firms with this company structure. Under the current tax system, Members in an LLP are treated as self-employed and therefore pay lower National Insurance Contributions (NICs). The Chancellor has outlined that he plans to "tackle the distinguishing of employment relationships" within LLPs whereby employees are labelled as Members to gain an NIC break. HMRC also plans to consult in order to counter the practice of allocating profits to Partners in all types of partnership in order to gain a tax advantage.

Furthermore, the Government has outlined its intention to target those companies who gain an advantage from making a company a Corporate Member in an LLP arrangement. This has been a commonly used tax arrangement. Companies with an LLP arrangement or planning to enter into a new LLP arrangement are particularly urged to contact Mitchell Charlesworth's tax department for advice.

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David Antonia

David Antonia - Tax Partner

  • GAAR and Offshore Tax Evasion - HMRC reaffirms that one of its top priorities is to tackle tax avoidance:

The Government reaffirmed its intentions to clampdown on offshore tax evasion and to press ahead with the General Anti-Abuse Rule (GAAR) in the Finance Bill 2013. HMRC has made it a top priority to tackle tax avoidance and the GAAR is an additional weapon to do just that.

The target of the GAAR remains 'tax arrangements' which are abusive. HMRC have outlined the 'double reasonableness test' which states that a tax arrangement is abusive if entering into it, or carrying it out "cannot reasonably be regarded as a reasonable course of action".

With regards to tax avoidance, the Chancellor announced that agreements have now been reached with Jersey, Guernsey and the Isle of Man for the disclosure of a wide range of financial information which will significantly enhance HMRC's ability to clamp down on those who choose to hide their money offshore.

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Andrea Green

Andrea Green - Tax Associate

  • Nil Rate Band of Inheritance Tax Freeze means individuals need to consider their inheritance tax planning very carefully:
The Government had already announced that it intended to freeze the nil rate band of inheritance tax at £325,000 until the 5th April 2015. In the latest Budget, George Osborne extended this freeze until 5th April 2018. Importantly, as a result of basic inflationary growth in the value of assets in an estate, inheritance tax liabilities will rise. As such, individuals should consider their inheritance tax planning very carefully, such as making lifetime gifts to reduce liability. You are urged to contact Mitchell Charlesworth's tax experts to discuss the most efficient method of tax planning for you and your estate.

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Neil Martin

Neil Martin - Director of Financial
Planning

  • Budget 2013 Provides Some Positive Outcomes for Savers and Investors:

With regards to Pensions and Investments, the Chancellor announced in the Budget that the overall annual Individual Savings Accounts (ISAs) savings limit will be increased to £11,520 from April 2013. Savers are strongly urged to take advantage of this increase and are urged to contact Mitchell Charlesworth's Wealth Management Division for any specific advice they require.

Another positive outcome from this year's Budget for investors was the announcement that the Government plans to abolish stamp duty on shares traded on the Alternative Investment Market (AIM) and the ICAP Securities and Derivitives Exchange (ISDX) Growth Market from April 2014.

In relation to these points, the Government has also announced it will consult on whether investment in these markets can be held directly in stocks and shares ISAs. It is hoped that these changes will encourage individuals to invest in growing businesses.

Concerning pensions, the Chancellor confirmed that the annual allowance will be reduced from £50,000 to £40,000 in 2014/15. The annual allowance is the annual limit for giving tax relief on pension contributions. Importantly, one can still make contributions in excess of this limit but this may warrant an income tax charge.

With regards to the lifetime allowance (the total amount of tax relieved pension savings an individual can have over their lifetime), this will be reduced from £1.5 million to £1.25 million in 2014/15. You are urged to speak to a member of Mitchell Charlesworth's Pensions and Investments department to find out how we can help you save as tax-efficiently as possible.

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Ros Clarke

Ros Clarke - Tax Manager

  • Reminder about the Significant Rise in the Annual Investment Allowance (AIA):

Whilst the increase in the Annual Investment Allowance (AIA) has already been in place since 1st January 2013, it is definitely worth reminding businesses that they can receive a 100% deduction for the cost of plant and machinery purchased up to an annual limit of £250,000. This is a ten-fold increase from the £25,000 limit that was previously in place.

Please note that rules for accounting periods that straddle the 1st January 2013 are rather complex so you are urged to contact Mitchell Charlesworth's tax department for further details. Importantly, you may wish to defer your expenditure until after the end of your current accounting period in order to take advantage of the full £250,000 AIA.

  • Government outlines which cars will be eligible for 100% First Year Allowance:

Cars are another popular area that qualify for capital allowances and Mitchell Charlesworth receive many enquiries about this area of tax every year. As a brief outline, a 100% first year allowance (FYA) is available if a car's emissions do not exceed 110gm/km. As outlined in the Budget, this will fall to 95gm/km for the two years from 1st April 2013. From April 1st 2015, the limit will fall to 75gm/km for 100% FYA.

From 1st April 2013, 30 cars will be eligible for the 100% First Year Allowance - which is a significant drop from 150 currently. Should you be planning any car purchases in the coming year, you are urged to think about the capital allowances available and plan your expenditure accordingly.

In addition the upper limit for the main pool with 18% writing down allowances will reduce to 130 gm/kmCO2 from 160. There are many fleet cars that will now go into the special rate pool with a reduced writing down allowance of 8%. For leased cars an additional charge will now be levied when the emissions exceed 130 compared to currently 160. This only applies to new leases.

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Brian McCann

Brian McCann - Corporate Finance Partner

  • Extension of the SEIS should continue to tempt experienced successful Entrepreneurs:
The market for selling SME businesses has been improving over recent months with a growing number of buyers finding the confidence to look seriously at acquisition opportunities. This is particularly true in sectors where consolidation is accelerating - these sectors range from telecoms through digital marketing to pharmacies. Whilst valuations remain below their peak levels from pre-recession days the continued availability of Entrepreneurs Relief means that most vendors are paying tax on their capital gains at the rate of 10% and this is helping to give impetus to the market.

The extension of the Seed EIS scheme means that Entrepreneurs will again be able to reduce their income tax charges by 50% of any gain (up to a maximum of £100,000)  which they re-invest in an EIS qualifying business and also to reduce their chargeable gain by the same amount. This should continue to tempt experienced successful Entrepreneurs to reinvest some of their time and money into younger businesses.
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Jeremy Oddie

Jeremy Oddie - Partner, Corporate Recovery and Insolvency

  • Business Rates Rise, combined with the Real Time Information PAYE changes may lead to an increase in business failures:

Unfortunately for many businesses the Chancellor did not raise the topic of 'Business Rates' in this year's Budget. As such, from next month all businesses will feel the squeeze from a rise in business rates which have risen 13% in the last three years. This rise in rates, combined with the introduction of Real Time Information (RTI) in the same month, is likely to push several businesses who are currently 'treading water' to the brink of business failure. This is particularly relevant to companies based in the retail industry.

By way of further explanation, as well as business rates (overheads) increasing a business' cost base, from the 6th April, the increased transparency brought about by RTI means that liabilities will be determined by the 19th of each month for the prior month (i.e. 6th April - 5th May liability will be known by HMRC no later than 19/5) and payments will be due immediately.

This will have a significant impact on cashflow requirements for businesses, which may lead those struggling to keep their heads above water, to instigate insolvency proceedings.

Crucially, if your business is struggling, you must urgently review your cost base to identify areas where savings can be made. Furthermore, you are strongly urged to contact Mitchell Charlesworth's Corporate Recovery department who will be able to identify the best possible solutions for your company. Importantly, insolvency is always the final choice and there are often many solutions available before this option needs to be taken.

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