Headline:
Budget 2007: Key tax measures at a glance
Description:
"No return to boom and bust" is on the agenda according to the Chancellor, but with 81 Budget Notes there have been some major changes announced to simplify income tax, tinker with corporation tax and overhaul the capital allowances system for long and short life assets.
Major new announcements, with links into tax features
Income tax
Major simplification measures include:
10% starting rate band to be abolished from 2008
basic tax rate cut from 22% to 20% by 2008
Top rate band of income tax to rise to £43,000 by 2009
Confirmation of the Carter proposal that the SA enquiry window will be aligned with the filing date.
National insurance
Upper earnings limit raised by £75 by 2008 and aligned with higher rate threshold by 2009
Company tax
Tax-motivated incorporation:
The small company corporation tax rate will be raised in stages commencing with a 20% rate in 2007, 21% in 2008 and 22% by 2009.
Dividends: "The government will continue to monitor the level and extent to which labour income is extracted by dividends" 5.113
Managed service companies (MSCs)
Proposed provisions to apply to scheme promoters in order to target the legislation more specifically
PAYE to be applied to all payments received by individuals on or after 6 April 2007, as announced in PBR. NI will be due from date to be specified when Finance Bill receives Royal Assent
Approach to the proposed transfer of debts legislation to be modified and take effect from January 2008
Travel expenses to be restricted for those engaged via MSCs as previously announced.
Mainstream corporation tax
The mainstream rate of corporation tax will be cut from April 2008 to 28%.
Capital allowances
Major modernisation of capital allowances:
Allowances on long life assets to increase from 6% to 10% from 2008
Intregal fixtures to become as long life assets and subject to 10% allowance from 2008, subject to consultation
Phased removal of IBAs and ABAs by 2011, but balancing adjustments will be withdrawn from today.
An annual investment allowance of £50k p.a. to encourage small business to invest to grow from 2008, following consultation, to replace first year allowances (FYA)
50% FYA to remain in place for 2007/08
Reducing the short life writing down allowance from 25%to 20%
From 2008/09 a payable tax credit for losses incurred on "green technologies" - subject to consultation on proposed design and scope
The business premises renovation allowance announced in 2005 will apply to all expenditure incurred on or after 11th April 2007 to encourage renovation and conversion of vacant business properties.
Research and development
2008/09 (subject to state aid approval) the enhanced deduction for small companies to increase from 150% to 175%
Payable credit to remain broadly the same
Large company deduction increases from 125% to 135%
Capital gains tax
The annual exemption to be raised to £9,200
Inheritance tax
The threshold is to be raised from 3285,000 to £350,000 in 2010/11.
Pre-owned asset tax
New legislation is proposed to allow a late election for IHT treatment to apply instead of the pre-owned asset regime. This means that if you have missed making an election under the pre-owned asset rules you can apply for IHT treatment instead.
Stamp duty land tax (SDLT)
Payment of SDLT will no longer be due when a land return is submitted, but on the return's due date instead. The measure will apply to transactions taking place on or after the date that the Finance Bill receives Royal Assent
Proposals not to link SDLT rates in certain exchanges of property between connect persons - the rate will apply to each of the properties instead
A general SDLT relief for disposal of surplus school land
Relief from SDLT for new zero carbon homes to apply from 1st October 2007.
Relief from SDLT for companies who under go certain reconstructions and acquisitions when overall share ownership remains unchanged. A company which purchases its own shares will no longer be regarded as a shareholder for the purposes of the overall ownership test. This would seem to apply to few transactions in practice.
Investments
Change in recognition of stock exchanges and definition of "listed" for tax purposes.
Increasing ISAs limit to £3,600 in April 2008
A non-repayable tax credit to apply to foreign dividends
Foreign property ownership
Changes to legislation in 2008 to ensure that individuals purchasing property overseas via a company will not suffer a benefits charage as "shadow directors".
Transitional rules to ensure that individuals will not be caught prior to changes
Trusts
Certain changes to amnend trust reform measures.
VAT
Changes to turnover thresholds for registration
Rate reductions to 5% for a variety of environmentally sustainable improvements and nicotine patches
Amendments following ECJ judgements
Penalties for incorrect returns
New provisions set for 2008 in line with the consultation proposals in "Powers, deterrents and safeguards" to penalise according to the amount of tax understated and taxpayer behaviour.
Anti-avoidance measures
Measures to target specific schemes that HMRC have become aware of from DOTAS reporting - capital loss and gain buying, repros, sale of lessor companies etc.
Levies
Landfill tax will rise by £8 each year.
Aggregate levy to rise for the first time
Climate change levy to increase
Employment
National minimum wage to increase
£2000 training help for training certain new employees
Cars
Fuel duty increases, by increasing top bands, deferred until October
Road tax from £220 to £400 on gas guzzling cars
Extending bio-fuels incentives/"green" motoring.
Planning taxes and reliefs
No announcements made in connection with the planning gain supplement
A new consultations on tax relief for brownfield land regeneration and remediation of waste sites
Business property
Empty commercial property will no longer receive reduced business rates
Socialising
Duty frozen on spirits, but raises 1p on beer, 5p on a bottle of still wine.
Consultation announced on gift aid
New fund to encourage local organisations
Welfare
Increase in rate of Working and child tax credits, so that NMW will be effectively worth £7.70 p/hr
Increase lone parents "in-work" bonus
VAT reduction for older people's improvements
New shared equity scheme to promote home ownership
Child benefit - to be raised by 15% (£17.45 to £20) by 2010
Tax credits will wipe out tax liabilities for working couples with children and an income of up to £440 per week
Raising age allowances and married allowances for pensions
Pension credit guarantee top increase
Insurance premium tax
A review of the tax is announced
Red tape removal
A new "risk based" approach to employment tribunals to streamline the process for employers
source: accountingweb
Major new announcements, with links into tax features
Income tax
Major simplification measures include:
10% starting rate band to be abolished from 2008
basic tax rate cut from 22% to 20% by 2008
Top rate band of income tax to rise to £43,000 by 2009
Confirmation of the Carter proposal that the SA enquiry window will be aligned with the filing date.
National insurance
Upper earnings limit raised by £75 by 2008 and aligned with higher rate threshold by 2009
Company tax
Tax-motivated incorporation:
The small company corporation tax rate will be raised in stages commencing with a 20% rate in 2007, 21% in 2008 and 22% by 2009.
Dividends: "The government will continue to monitor the level and extent to which labour income is extracted by dividends" 5.113
Managed service companies (MSCs)
Proposed provisions to apply to scheme promoters in order to target the legislation more specifically
PAYE to be applied to all payments received by individuals on or after 6 April 2007, as announced in PBR. NI will be due from date to be specified when Finance Bill receives Royal Assent
Approach to the proposed transfer of debts legislation to be modified and take effect from January 2008
Travel expenses to be restricted for those engaged via MSCs as previously announced.
Mainstream corporation tax
The mainstream rate of corporation tax will be cut from April 2008 to 28%.
Capital allowances
Major modernisation of capital allowances:
Allowances on long life assets to increase from 6% to 10% from 2008
Intregal fixtures to become as long life assets and subject to 10% allowance from 2008, subject to consultation
Phased removal of IBAs and ABAs by 2011, but balancing adjustments will be withdrawn from today.
An annual investment allowance of £50k p.a. to encourage small business to invest to grow from 2008, following consultation, to replace first year allowances (FYA)
50% FYA to remain in place for 2007/08
Reducing the short life writing down allowance from 25%to 20%
From 2008/09 a payable tax credit for losses incurred on "green technologies" - subject to consultation on proposed design and scope
The business premises renovation allowance announced in 2005 will apply to all expenditure incurred on or after 11th April 2007 to encourage renovation and conversion of vacant business properties.
Research and development
2008/09 (subject to state aid approval) the enhanced deduction for small companies to increase from 150% to 175%
Payable credit to remain broadly the same
Large company deduction increases from 125% to 135%
Capital gains tax
The annual exemption to be raised to £9,200
Inheritance tax
The threshold is to be raised from 3285,000 to £350,000 in 2010/11.
Pre-owned asset tax
New legislation is proposed to allow a late election for IHT treatment to apply instead of the pre-owned asset regime. This means that if you have missed making an election under the pre-owned asset rules you can apply for IHT treatment instead.
Stamp duty land tax (SDLT)
Payment of SDLT will no longer be due when a land return is submitted, but on the return's due date instead. The measure will apply to transactions taking place on or after the date that the Finance Bill receives Royal Assent
Proposals not to link SDLT rates in certain exchanges of property between connect persons - the rate will apply to each of the properties instead
A general SDLT relief for disposal of surplus school land
Relief from SDLT for new zero carbon homes to apply from 1st October 2007.
Relief from SDLT for companies who under go certain reconstructions and acquisitions when overall share ownership remains unchanged. A company which purchases its own shares will no longer be regarded as a shareholder for the purposes of the overall ownership test. This would seem to apply to few transactions in practice.
Investments
Change in recognition of stock exchanges and definition of "listed" for tax purposes.
Increasing ISAs limit to £3,600 in April 2008
A non-repayable tax credit to apply to foreign dividends
Foreign property ownership
Changes to legislation in 2008 to ensure that individuals purchasing property overseas via a company will not suffer a benefits charage as "shadow directors".
Transitional rules to ensure that individuals will not be caught prior to changes
Trusts
Certain changes to amnend trust reform measures.
VAT
Changes to turnover thresholds for registration
Rate reductions to 5% for a variety of environmentally sustainable improvements and nicotine patches
Amendments following ECJ judgements
Penalties for incorrect returns
New provisions set for 2008 in line with the consultation proposals in "Powers, deterrents and safeguards" to penalise according to the amount of tax understated and taxpayer behaviour.
Anti-avoidance measures
Measures to target specific schemes that HMRC have become aware of from DOTAS reporting - capital loss and gain buying, repros, sale of lessor companies etc.
Levies
Landfill tax will rise by £8 each year.
Aggregate levy to rise for the first time
Climate change levy to increase
Employment
National minimum wage to increase
£2000 training help for training certain new employees
Cars
Fuel duty increases, by increasing top bands, deferred until October
Road tax from £220 to £400 on gas guzzling cars
Extending bio-fuels incentives/"green" motoring.
Planning taxes and reliefs
No announcements made in connection with the planning gain supplement
A new consultations on tax relief for brownfield land regeneration and remediation of waste sites
Business property
Empty commercial property will no longer receive reduced business rates
Socialising
Duty frozen on spirits, but raises 1p on beer, 5p on a bottle of still wine.
Consultation announced on gift aid
New fund to encourage local organisations
Welfare
Increase in rate of Working and child tax credits, so that NMW will be effectively worth £7.70 p/hr
Increase lone parents "in-work" bonus
VAT reduction for older people's improvements
New shared equity scheme to promote home ownership
Child benefit - to be raised by 15% (£17.45 to £20) by 2010
Tax credits will wipe out tax liabilities for working couples with children and an income of up to £440 per week
Raising age allowances and married allowances for pensions
Pension credit guarantee top increase
Insurance premium tax
A review of the tax is announced
Red tape removal
A new "risk based" approach to employment tribunals to streamline the process for employers
source: accountingweb
Date:
22.03.2007
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