Newsletter April 2012

Now that the dust has settled on George Osborne's announcements last month we have highlighted a few issues that are worthy of additional comment. These include: HMRC cap on certain tax reliefs, changes to age related tax allowances and Stamp Duty Land Tax changes. We have also included a short article that explains the benefit of a protective application for Tax Credits.

Our next newsletter will be published 3 May 2012.

HMRC to cap certain tax reliefs

In an attempt to ensure that higher rate tax payers make a reasonable contribution to UK tax revenues new legislation is to be introduced from 6 April 2013 that limits access to certain, tax reliefs. Taxpayers will be denied relief(s) if the claim exceeds 25% of their income or £50,000, whichever is the greater.

This will not affect tax reliefs which are already capped such as Enterprise Investment Scheme and pension reliefs, but may affect "open-ended" reliefs such as interest relief on qualifying loans and gift aid relief. The Chancellor has said that he will consult to make sure that charities are not negatively affected by such a move.

Ironically, this may mean that tax planning opportunities available to 50% rate tax payers in 2012-13, may produce more tax savings than if applied, and capped, in 2013-14 when the top rate of tax is reduced to 45%.

50% tax rate payers therefore have one more fiscal year, 2012-13, to take advantage of certain, unlimited reliefs...

Is your birthday after 5 April 1948?

If the answer is yes you will not qualify for the higher value personal allowances presently available to the over 65s and over 75s.

From 6 April 2013 Age Related Personal Allowances are being phased out. Here's how the changes will work in practice:

1. If your birthday is after 5 April 1948 you will not qualify for Age Related allowances.
2. If your birthday is after 5 April 1938 but before 6 April 1948 you will continue to qualify for the Age Related Personal Allowance (65 to 74 age group) of £10,500 until this allowance equals, or is exceeded by, the Personal Allowance. For 2013-14 the basic Personal Allowance is due to rise to £9,205.
3. If your birthday is before 6 April 1938 you will continue to qualify for the Age Related Personal Allowance (75 and over) of £10,660 until this allowance equals, or is exceeded by, the Personal Allowance. As mentioned in 2 above for 2013-14 the basic Personal Allowance is due to rise to £9,205.

There is no doubt that eventually all taxpayers over the age of 65 will be disadvantaged by these changes.

HMRC to stamp on residential property transactions

How much Stamp Duty Land Tax will you pay when you buy residential property in the UK following the Budget?

Firstly the extension of the nil rate band to £250,000 for first time buyers ceased 24 March 2012.

The current Stamp Duty Land Tax (SDLT) rates are:

Residential property purchased outside disadvantaged areas

Zero charge – £0 to £125,000
1% charge – £125,001 to £250,000
3% charge – £250,001 to £500,000
4% charge – £500,001 to £1,000,000
5% charge – £1,000,001 to £2,000,000
7% charge – Over £2,000,000
15% charge – on properties over £2m held in a "corporate envelope" (see below)

The 7% and 15% charges were introduced in the Budget last month. The 7% charge applies to property purchases completed on or after 22 March 2012.

The 15% charge has been introduced to counter a tax device that aimed to avoid SDLT charges on high value residential property purchases. The scheme involved purchasing through offshore companies, so-called "corporate enveloping", in certain circumstances the new rate also catches UK companies. The 15% charge will apply from 21 March 2012. In his Budget speech George Osborne made it clear he would close any variants of the scheme that were created in the future; if necessary the Government would introduce retrospective legislation.

Residential property purchased in a disadvantaged area

If a property you are purchasing is inside one of the 2,000 disadvantaged areas you may qualify for Disadvantaged Areas Relief. The only change to the SDLT rates listed above is to the nil rate band. If a property is located inside a disadvantaged area the nil rate band applies to property transactions up to £150,000. The 1% charge is adjusted accordingly, and applies to the band £150,001 to £250,000.

If you want to see if a property you are about to purchase qualifies for Disadvantaged Areas Relief you can use HMRC's search tool at http://www.hmrc.gov.uk/so/dar/dar-search.htm

Tax Credits apply now to secure benefits

In order to qualify for a full year's Tax Credit claim for 2012-13 your application needs to be made before 6 May 2012. This is because HMRC will not back date an application for more than one month. Prior to 6 April 2012 it was possible to backdate applications and notification of changes for three months.

Based on your past income levels you may be of the opinion that an application would produce no cash benefit. However, your circumstances may change. For example if you are self-employed you may suffer a downturn in trade that you cannot foresee or you may be able to claim for a significant investment in plant or equipment and reduce your taxable profits accordingly.

Applying before 5 May 2012 will secure your rights to Tax Credits for 2012-13. Even if the initial assessment reveals that no Tax Credit payments are due to you, should your circumstances change you can ask for the assessment to be re-evaluated.

Please call if you would like assistance in making a claim.

Tax Diary April/May 2012

1 April 2012 - Due date for corporation tax due for the year ended 30 June 2011.

19 April 2012 - PAYE and NIC deductions due for month ended 5 April 2012. (If you pay your tax electronically the due date is 22 April 2012)

19 April 2012 - Filing deadline for the CIS300 monthly return for the month ended 5 April 2012.

19 April 2012 - CIS tax deducted for the month ended 5 April 2012 is payable by today.

1 May 2012 - Due date for corporation tax due for the year ended 31 July 2011.

19 May 2012 - PAYE and NIC deductions due for month ended 5 May 2012. (If you pay your tax electronically the due date is 22 May 2012)

19 May 2012 - Filing deadline for the CIS300 monthly return for the month ended 5 May 2012.

19 May 2012 - CIS tax deducted for the month ended 5 May 2012 is payable by today.

19 May 2012 - The payroll forms P35 and P14s must be filed by this date - employers late in filing these forms may receive a penalty.

31 May 2012 - Ensure all employees have been given their P60s.

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