The Chancellor announced that the Government will consult on the possible introduction of simplified rules for small businesses (turnover up to £77,000) to calculate their profits for income tax. It is proposed to introduce ‘cash accounting’ from April 2013 – ignoring income and expenses until they are received or paid.
A more radical suggestion is the possible introduction of ‘fixed expenses’ – allowing small businesses a flat rate deduction, rather than requiring them to calculate their actual expenditure. This will also be the subject of a consultation.
As usual, the Budget included a number of ‘loophole-closing’ measures. Most of these related to specific schemes which are designed for very high earners. There will also be further consultation on the possible introduction of a ‘General Anti-Avoidance Rule’ which could be used to defeat schemes which were within the letter but contrary to the spirit of the law.
Gains of foreign residents
Owners who are not UK resident have generally not been chargeable to CGT in the UK, even on the disposal of assets in the UK. The Chancellor proposes to change this from April 2013: foreign residents other than individuals (for example, companies and trusts) will become liable to tax on gains on disposal of UK residential property and on shares and interests in such property. Consultation will presumably focus on how such a measure could be enforced, given that the chargeable people will be located abroad.
Machine games duty
Following a number of legal disputes about the VAT treatment of gaming machines – which have resulted in large tax repayments to many operators – the Government is changing the rules. From 1 February 2013, gaming machines will be subject to a new Machine Games Duty and will be exempt from VAT.
The Chancellor also announced that measures would be implemented to charge online gaming where the customer belongs rather than where the business is situated, so that UK gaming should give rise to UK tax revenue.
Uncapped tax reliefs
The Chancellor recognised that tax reliefs are offered to taxpayers in order to encourage certain types of behaviour – relief for trading losses encourages entrepreneurial risk-taking, and Gift Aid rewards philanthropy. However, the unlimited use of such reliefs can result in high earning individuals extinguishing the whole of their tax liability. It is proposed to introduce a limit for people claiming more than £50,000 of a relief where there is no other statutory restriction – the maximum would be set at 25% of their total income. This is intended to apply from 2013/14. It will not include reliefs where there is already a statutory limit such as pension contributions, or investment in EIS companies and VCTs.
|If you want to claim these reliefs, 2012/13 could be the last year without a restriction|