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Budget 2013 policy decisions

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20 March 2013

Carbon Reduction Commitment: exclude schools – 

The Government will exclude English state schools from the Carbon Reduction Commitment from April 2014. The cost of this measure in 2014-15 will be funded by a reduction in Resource DEL expenditure for relevant departments. (1)

Government response to OTS tax-advantaged employee share schemes review

As announced on 11 December 2012, the Government will introduce a package of simplification measures in response to the OTS’s review of the tax-advantaged share schemes. (Finance Bill 2013 and Finance Bill 2014) (2)

Carbon price floor: Northern Ireland exemption – The Government will exempt electricity generators in Northern Ireland from the carbon price floor from 1 April 2013. (Finance Bill 2013) (3)

Capital Gains Tax (CGT): residential property – The Government will apply CGT at 28 per cent to gains accruing on or after 6 April 2013 on disposals made by certain non-natural persons of UK residential property valued at over £2 million that has been subject to the Annual Tax on Enveloped Dwellings. (Finance Bill 2013) (5)

Universal Credit – The Government will legislate to ensure that Universal Credit will be exempt from income tax. (Finance Bill 2013) (6)

World wide debt cap rules – As announced on 11 December 2012, with effect from that date, changes to the debt cap rules will revise the way in which the group treasury company election operates. (Finance Bill 2013) (7)

Tax treatment of building societies’ capital instruments – Following consultation, regulations have been made so that the tax treatment of new Basel III compliant building society capital instruments ‘Core Capital Deferred Shares’ will be the same as equivalent share capital from 1 March 2013. (8)

CGT: employee shareholder status – As announced on 8 October 2012 and confirmed at Autumn Statement 2012, the Government will exempt from CGT gains on up to £50,000 of shares received by individuals adopting the new employee shareholder employment status. The CGT exemption will apply to shares received from 1 September 2013, when the new status comes into force. (Finance Bill 2013) (e) (9)

Entrepreneurs’ Relief: Enterprise Management Incentives (EMI) shares – As announced at Budget 2012, the Government will extend Entrepreneurs’ Relief to cover gains made on shares acquired through the exercise of EMI options, to apply to qualifying share disposals from 6 April 2013. (Finance Bill 2013) (10)

VED: HGVs – From 1 April 2014, the Government will reduce and re-structure VED rates for HGVs within the HGV Road User Levy scheme, as set out in Overview of tax legislation and rates. (Finance Bill 2014) (11)

Transfer of assets abroad and gains on assets held by foreign companies – As announced on 5 December 2011, the Government will amend anti-avoidance legislation designed to protect the UK tax base. New exemptions from the regimes will have retrospective effect from 6 April 2012 but, exceptionally, in respect of the chargeable gains changes, a taxpayer may elect for the new rules to apply from 6 April 2013. Other changes to the transfer of assets abroad regime will take effect from 6 April 2013. (Finance Bill 2013) (12)

Income tax: reliefs cap – As announced at Budget 2012, the Government will cap previously unlimited income tax reliefs at the greater of £50,000 or 25 per cent of an individual’s income. Charitable reliefs, share loss relief applying to Enterprise Investment Scheme or Seed Enterprise Investment Scheme (SEIS) and overlap relief will be exempt from this cap. (Finance Bill 2013) (u) (13)

Carbon price floor: technical changes – As announced at Autumn Statement 2012, technical changes to the carbon price floor will be made to reduce administrative burdens. (Finance Bill 2013) (14)

Disincorporation relief – The Government will introduce a disincorporation relief for five years from April 2013. The relief will allow a company to transfer goodwill and an interest in land to its shareholders so that no corporation tax charge arises on the company on the transfer. The relief will be available to businesses with total qualifying assets not exceeding £100,000. (Finance Bill 2013) (15)

VED: disabled drivers exemption – From 8 April 2013 the Government will extend the current VED exemption for disabled drivers to individuals receiving the enhanced mobility 84 Budget 2013 PIP. The Government will also introduce a new 50 per cent VED discount for individuals receiving the standard mobility PIP. (Finance Bill 2013) (16)

Pension Credit pass-through – As announced by the DWP in December 2012, the standard minimum income guarantee in Pension Credit will rise by 1.9 per cent in April 2013 to match the cash increase in the basic State Pension. This will mean that no single pensioner need live on less than £145.40 a week, and no pensioner couple on less than £222.05 a week. The threshold for the Savings Credit will increase to £115.30 for single pensioners and £183.90 for pensioner couples. The net effect of these two measures is broadly cost neutral. (17)

Single-tier State Pension – The Government will introduce the single-tier State Pension from April 2016-17. As announced in the White Paper in January 2013, the State Second Pension will close and contracting-out of National Insurance will be abolished. The current value of the contracting-out rebate is 3.4 per cent for employers and 1.4 per cent for employees on earnings between the lower earnings limit and the upper accruals point. (18, 19, 20, 21)

IHT: nil-rate band – As announced on 11 February, the Government will partly fund reforms to the funding of social care by extending the freeze on the IHT nil-rate band of £325,000 until 2017-18. (Finance Bill 2014) (22)

Social care funding reform – Drawing on the Dilnot Commission’s recommendations, the Government will introduce a £72,000 cap on reasonable care costs and extend the means test from April 2016. (23)

Childcare additional funding - The Government will also increase childcare support within Universal Credit, to improve work incentives and ensure that it is worthwhile to work up to full-time hours for low and middle income parents. An additional £200 million of support for childcare will be provided, which is equivalent to covering 85 per cent of childcare costs for households qualifying for the Universal Credit childcare element where the lone parent or both earners in a couple pay income tax. The details of how to provide this support will be determined as part of the consultation on the Tax-free Childcare scheme, to ensure the two schemes operate effectively together. The new element of support in Universal Credit will be funded from within social security budgets at the time. (24)

National Insurance: £2,000 Employment Allowance – The Government will introduce an allowance of £2,000 per year for all businesses and charities to be offset against their employer NICs bill from April 2014. (25)

Corporation tax: main rate – The Government will reduce the main rate of corporation tax to 21 per cent from April 2014, as announced at Autumn Statement 2012. (Finance Bill 2013) Budget 2013 announces an additional 1 percentage point reduction to 20 per cent from April 2015. (Finance Bill 2013) (a) (26)

Capital spending plans – The Government has increased capital spending plans by £3 billion a year from 2015-16. The Government will take a long-term approach to capital as part of the 2015-16 Spending Round, setting plans out to 2020-21 for the most economically valuable areas of capital expenditure. (27)

Extension to affordable homes guarantee programme – The Government will double the existing affordable homes guarantee programme, providing up to a further £225 million to support a further 15,000 affordable homes in England. (28)

Right to Buy: increase cap in London – From 25 March 2013 the maximum Right to Buy discount cash cap will be raised from £75,000 to £100,000 in London. (29)

Schedule 19 – The Government will abolish the stamp duty reserve tax charge in Schedule 19 Finance Act 1999 on surrenders of units in collective investment schemes from 1 April 2014. (Finance Bill 2014) (30)

Stamp tax on shares: growth markets – Following consultation, the Government will abolish stamp tax on shares in companies quoted on growth markets such as the Alternative Investment Market and the ISDX Growth Market. (Finance Bill 2014) (31)

SEIS: CGT relief – The Government will legislate to provide a 50 per cent relief against CGT chargeable on gains realised in 2013-14 which are reinvested in the SEIS in 2013-14 or 2014-15. (Finance Bill 2013) (32)

Employee shareholder status – To ensure that the first £2,000 of share value received by those adopting the new employee shareholder status is free from income tax and NICs, the Government will legislate to deem that employee shareholders have paid £2,000 for shares they receive from 1 September 2013, when the new status comes into force. (Finance Bill 2013) (33)

Research and Development (R&D) tax credit: ‘Above the Line’ (ATL) – As announced at Autumn Statement 2011, the Government will introduce an ATL credit for large company R&D expenditure incurred on or after 1 April 2013. Budget 2013 increases the ATL credit to a rate of 10 per cent before tax. Companies with no corporation tax liability will be able to claim a payable credit. The ATL credit will be introduced alongside the existing super-deduction in April 2013, and will fully replace the super-deduction in April 2016. (Finance Bill 2013) (34)

Employee ownership: additional support – The Government will provide £50 million annual funding from 2014-15 to support employee ownership. This will include the introduction of a CGT exemption on qualifying disposals of a controlling interest in a business into an employee-owned structure from April 2014. (Finance Bill 2014) (35)

Industrial Strategy – The Government will provide £1.6 billion to support a range of sectors as part of the Industrial Strategy. From this fund the Government, in partnership with industry, will create an Aerospace Technology Institute. This will provide £2.1 billion of R&D support to the aerospace sector over seven years, with government and industry contributing equal shares. Funding for other sectors will be announced later in 2013. (36)

Growth Vouchers – The Government will provide £30 million for an SME Growth Vouchers programme in England to test a variety of approaches to help SMEs overcome barriers to achieving growth. (37)

Sickness absence – The Government will abolish the Percentage Threshold Scheme and recycle funding into creating the health and work assessment and advisory service for those at danger of long-term sickness absence. The Government will also introduce a targeted tax relief so that amounts up to a cap of £500 paid by employers on health-related interventions recommended by the service are not treated as a taxable benefit in kind. The Government will consult on implementation later in 2013. (38) (39)

Bank Levy rate – As announced at Autumn Statement 2012, the Government will legislate in Finance Bill 2013 to set the full rate of the Bank Levy at 0.130 per cent from 1 January 2013. From 1 January 2014, the Government will legislate in Finance Bill 2013 to set the full rate of the Bank Levy at 0.142 per cent. (Finance Bill 2013) (40)

Income tax: personal allowance in 2014-15 – The Government will increase the income tax personal allowance to £10,000 in 2014-15. The basic rate limit will decrease to £31,865 in line with the Autumn Statement 2012 decision to increase the higher rate threshold by 1 per cent to £41,865. (Finance Bill 2014) (41) The personal allowance will then be increased by CPI from 2015-16.

Individual Protection – The Government will offer an individual protection regime, in addition to a fixed protection regime, for individuals with pension rights above £1.25 million when the standard LTA is reduced from £1.5 million to £1.25 million for 2014-15 and subsequent years. The Government will consult on the detail in spring 2013 and legislation will be included in Finance Bill 2014. (Finance Bill 2014) (42)

Fuel duty – The 1.89 pence per litre fuel duty increase that was due to take effect on 1 September 2013 will be cancelled. (43)

Alcohol duty rates – The general beer duty rate will be reduced by 2 per cent from 25 March 2013. Duty rates on low strength beer will be reduced by 6 per cent and on high strength beer by 0.75 per cent in total from 25 March 2013. All beer duty rates will then increase by the Retail Prices Index (RPI) thereafter. As announced at the March Budget 2010, wine, spirits, and cider duty rates will increase by 2 per cent above RPI from 25 March 2013. (Finance Bill 2013) (44)

International agreements to improve tax compliance – The Government will include legislation in Finance Bill 2013 to implement the UK-US Agreement to Improve International Tax Compliance and to Implement FATCA. (Finance Bill 2013) Final Regulations will be issued shortly. The Isle of Man, Guernsey and Jersey have agreed to enter into similar automatic exchange agreements with the UK. HMRC has set up disclosure facilities with the Isle of Man, Guernsey and Jersey to allow investors to come forward and regularise their past tax affairs in advance of information being automatically exchanged. (45)

Offshore employment intermediaries – The Government will consult on strengthening obligations to ensure the correct income tax and NICs are paid by offshore employment intermediaries. This is a result of the review announced at Autumn Statement 2012. (Finance Bill 2014) (46)

Review of two areas of partnership tax rules where tax is being lost – Following on from the announcement made at Autumn Statement 2012 to review partnerships as a high risk area of the tax code, this measure confirms consultation on legislation to counter the use of limited liability partnerships to disguise employment relationships and the artificial allocation of profit/loss to secure tax advantages. (Finance Bill 2014) (47)

Corporate ‘loss buying’ – The Government will introduce targeted anti-abuse rules, with immediate effect, to prevent companies entering into arrangements with unconnected third parties where the potential to create corporate losses are bought and then relieved against profits unconnected from the activity from which they arose. (Finance Bill 2013) (48)

Close company loans to participators – The Government will close three loopholes used to attempt to avoid the tax charge on loans from close companies to individuals with a share or interest in the company. This measure will have effect from 20 March 2013. (Finance Bill 2013) (49)

IHT: limiting the deduction of liabilities – The Government will legislate to close an IHT loophole that allows a deduction from the value of an estate for an outstanding debt regardless of whether or not the debts are paid after death, or how the borrowed funds have been used. (Finance Bill 2013) (50)

General Anti-Abuse Rule (GAAR) – As announced at Budget 2012, the Government will introduce a GAAR in this year’s Finance Bill to tackle abusive tax avoidance schemes. (Finance Bill 2013) (51)

SDLT: avoidance – The Government will introduce legislation in Finance Bill 2013 to put beyond doubt that certain SDLT avoidance schemes that abuse the transfer of rights rules do not work. These changes will have retrospective effect to 21 March 2012. (Finance Bill 2013) (52)

Improving ‘Coding Out’ – The Government will consult on reforming HMRC’s ability to collect debts via a tax debtor’s tax code, known as ‘Coding Out’. The current limit of £3,000 per year for all tax debtors will be replaced with a graduated scale introducing higher limits for those with higher earnings – or up to £17,000 limit for those earning £90,000 or more. HMRC’s information technology (IT) system will also be upgraded to allow splitting of debts across years for ‘Coding Out’. (53)

Enhanced information powers for tax avoidance schemes – Following on from the announcement made at Autumn Statement 2012, the Government will consult, after Budget 2013, on new powers to take tougher action against high risk promoters of tax avoidance schemes, including new information and penalty powers, and the possible use of ‘naming and shaming’. (54)

Penalties in avoidance cases – This measure announces a consultation on a penalties-based approach to taxpayers who fail to settle with HMRC in circumstances where an avoidance scheme has been defeated in another party’s litigation through the courts. (Finance Bill 2014) (55)

Capital allowances: Ultra Low Emission Vehicles - The Government will extend the FYA for a further three years until 31 March 2018. From April 2015, the carbon dioxide emissions threshold will be reduced from 95 grams/kilometre to 75 grams/kilometre. (Finance Bill 2015) (56)

Company car tax: ULEVs - The appropriate percentage of the list price subject to tax for the 0-50 g/km CO2 band will be 5 per cent in 2015-16, and 7 per cent in 2016-17. The appropriate percentage of the list price subject to tax for the 51-75 g/km CO2 band will be 9 per cent in 2015-16 and 11 per cent in 2016-17. In 2017-18 there will be a 3 percentage point differential between the 0-50 and 51-75 g/km CO2 bands, and between the 51-75 and 76-94 g/km CO2 band. In 2018-19 and 2019-20 there will be a 2 percentage point differential between the 0-50 and 51-75 g/km CO2 bands and between the 51-75 and 76-94 g/km CO2 bands. (Finance Bill 2013 and future finance bills) (57)

VED rates and bands – From 1 April 2013 VED rates will increase in line with RPI, apart from VED rates for heavy goods vehicles (HGVs) which will be frozen in 2013-14. (Finance Bill 2013). The Government has no plans to make significant reforms to the structure of VED for cars and vans in this Parliament. (58)

Aggregates levy – The aggregates levy rate will remain at £2.00 per tonne in 2013-2014. (59)

Enhanced capital allowances: energy-saving and water-efficient technologies – The list of designated energy-saving and water-efficient technologies qualifying for enhanced capital allowances will be updated during summer 2013, subject to state aids approval. (60)

Capital allowances for energy-saving plant and machinery in Northern Ireland – Legislation will be introduced in Finance Bill 2013 to ensure that expenditure on plant and machinery in Northern Ireland that qualifies for both first-year allowances for energy-saving technologies and the renewable heat incentive is treated in the same way as the rest of the UK. Further details will be published in Overview of tax legislation and rates. The legislation will also apply to any future Feed-In Tariff scheme that may be introduced in Northern Ireland. (Finance Bill 2013) (61)

Reduction in departmental spending in 2013-14 and 2014-15 – Resource DEL will be reduced by £1.1 billion in 2013-14 and £1.2 billion in 2014-15. This is equivalent to a 1 per cent reduction for most departments. The schools and health budgets remain unchanged. Local Government and police allocations that have been set out for 2013-14 will not be changed. HM Revenue and Customs will also be excluded, to ensure that they are able to focus on delivering the additional revenue targets set out at Autumn Statement 2012. The budget of the Department for International Development (DFID) will be reduced by £135 million in 2013-14 and £165 million in 2014-15 to reflect the downward revisions to nominal Gross National Income set out in the OBR forecast. There is also a reprofiling of funding for broadband programmes to support local delivery. The Government will reduce the Special Reserve provision to reflect progress made by the Afghans in taking on responsibility for their security. This funding is held over and above the Ministry of Defence budget. (62) (63) (64)

Equitable Life with-profits annuitants – The Government will make flat rate lump sum payments to living with-profits annuitants aged over 60 who bought their annuity from Equitable Life Assurance Society before 1 September 1992. Payments will start in 2014 or earlier if possible. (65)

Table 2.1: Budget 2013 policy decisions

     £ million      
 Head 2013-14 2014-15 2015-16 2016-17 2017-18
Previously announced (smaller measures)            
1 Carbon Reduction Commitment: exclude schools Tax  0 0 -65 -65 -65
2 Government response to OTS review of share schemes Tax -40 -45 -50 -55 -55
3 Carbon price floor: Northern Ireland exemption  Tax -20 -25 -40 -45 -45
4 Annual charge and SDLT 15% rate: reliefs for commercial businesses  Tax -30 -40 -40 -40 -45
5 Capital Gains Tax on disposals of high value residential property: extension to UK non-natural persons  Tax +25  0  0 +5 +5
6 Universal Credit: exempt from income tax Tax 0 0  -35 -35 -30
Debt Cap: tightening of rules Tax  +50 +60 +50 +35 +30
Building Societies: capital instruments Tax +20 +20 +20 +20 +30
Employee shareholder status: CGT changes Tax 0 0 * +5 +30
10 Enterprise Management Incentive: qualification for CGT entrepreneurs’ relief Tax -10 -15 -20 -25 -25
11 Lorry road user levy and offsetting VED reduction Tax  0 +25 +25 +25 +25
12 Income tax: transfer of assets abroad Tax 0 0 -10 -10 -10
13 Cap on reliefs: exemption for EIS share loss relief and overlap relief Tax 0 -20 -10 -10 -10
14 Carbon price floor: non rate changes Tax +5 +5 +5 +5 +5
15 Disincorporation relief Tax  -10  -5  -5 -5 -5
16 Vehicle Excise Duty: PIP disability exemption Tax -10 -10 -10 -5 0
17 Pension Credit pass through Spend +5 +5 +5 +5 *
Previously announced (Mid Term Review)
Single Tier: introduce from 2016-17:
18 Contracting out NICs: public sector employers Tax 0 0 0 +3,325 +3,285
19 Contracting out NICs: public sector employees Tax 0 0 0 +1,365 +1,350
20 Contracting out NICs: private sector employers Tax  0 0 0 +570 +565
21 Contracting out NICs: private sector employees Tax 0 0 0 +235 +235
Other Mid Term Review:
22 Inheritance tax: threshold freeze for 3 years from 2015-16 Tax 0 0 +20 +80 +170
23 Social Care funding reform: introduce Dilnot cap from 2016-17 Spend 0 0 0 -1,000 -1,000
24 Childcare additional funding2 Spend 0 0 -400 -750 -750
Growth and Enterprise
25 National Insurance: £2,000 Employment Allowance Tax 0 -1,255 -1,370 -1,595 -1,725
26 Corporation tax: reduce main rate to 20% from 2015-16  Tax  0 -5 -400 -785 -865
27 Capital Spending: maintain 2014-15 level Spend 0 0 -3,000 -3,000 -3,000
28 Affordable housing Spend  0 -125 0 0 0
29 Right to Buy changes Spend -5 +45 +40 +50 +50
30 Stamp duty: abolish schedule 19 charge Tax 0 -145 -145 -150 -160
31 Abolishing stamp duty on AIM and other junior shares Tax +5 -170 -170 -170 -175
32 Seed Enterprise Investment Scheme: extend CGT holiday to 2013-14 Tax 0 -5 * 0 0
33 Employee shareholder status: income tax Tax 0 -15 -45 -65 -75
34 R&D Tax Credits: increase Above the Line credit to 10% Spend -20 -80 -85 -90 -95
35 Employee ownership: additional support Spend 0 -50 -50 -50 -50
36 Industrial Strategy Spend -125 -160 -180 -180 -180
37 Growth vouchers Spend -10 -25 0 0 0
38 Tax relief: health interventions Tax 0 -10 -10 -10 -10
39 Health interventions Spend 0 +10 +10 +10 +15
40 Bank Levy (including offsetting CT changes) Tax 0 +195 +250 +245 +250
Personal Tax
41 Personal allowance: increase by an additional £560 to £10,000 in 2014-15  Tax 0 -1,075 -1,045 -1,060 -1,210
42 Pensions tax relief: individual protection  Tax 0 +100 +80 +50 0
Duties
43 Fuel Duty: cancel September 2013 increase Tax -480 -810 -835 -870 -900
44 Alcohol: 1p off pint of beer and abolish escalator in 2014-15 Tax -170 -215 -210 -205 -205
Avoidance and Debt +395 +1,025 +1,395 +1,075 +1,020
 45 Tax repatriation from Jersey, Guernsey and Isle of Man  Tax  +80  +240  +325  +235  +170
 46 Offshore employment intermediaries  Tax  0  +80  +85  +85  +90
 47 Partnerships  Tax  0  +125  +365  +300  +285
 48 Corporation Tax: losses  Tax  +260  +305  +270  +205  +190
 49 Loans from close companies to participators  Tax  0  +65  +75  +70  +60
 50 IHT: limiting deduction of liabilities  Tax  +5  +20  +15  +15  +15
 51 General Anti-Abuse Rule: non revenue protection  Tax  0  +60  +50  +40  +85
 52 Stamp Duty Land Tax: subsales  Tax  +45  +35  +30  +25  +25
 53 Debt: improving coding out  Tax  0  0  +45  +40  +45
 54 Avoidance schemes: enhanced information powers  Tax  0  +5  +35  +35  +35
 55 Penalties in avoidance cases  Tax  0  +55  +60  +5  +10
 Motoring and Environment            
 56 Capital allowances: Ultra Low Emission Vehicles  Tax  0  0  -5  -25  -35
 57 Company car tax: ULEVs  Tax  0  0  -10  -15  -15
 58 VED: freeze rates for HGVs in 2013-14  Tax  -10  -10  -10  -10  -10
 59 Aggregates levy: freeze in 2013-14  Tax  -10  -15  -15  -15  -15
 60 Capital allowances: energy and water efficient technologies  Tax  +5  +15  +25  +30  +20
 61 Capital allowances: energy saving plant & machinery in Northern Ireland  Tax  0  +5  +5  +10  +10
 Changes to spending forecasts            
 62 Spending total adjustment Spend  +1,325  +1,085  0  0  0
 63 Official Development Assistance: adjusting to meet 0.7% GNI target Spend  +135  +165  +200  +250  +305
 64 Special Reserve Spend   +300  0  0  0  0
 65 Equitable life Spend  0  -45  0  0  0
 TOTAL POLICY DECISIONS    +1,315  -1,650  -2,850  +1,740  +1,305
 Total spending policy decisions    +1,605  +1,055  0 0  0
 Total tax policy decisions    -290  -2,705  -2,850  +1,740  +1,305
 Total tax policy decisions excluding impact on Government departments    -290  -2,705  -2,850  -1,585  -1,980
 Financial transactions3:            
 Help to Buy extension    -1,150  -1,430  -1,550  0  0
 Build to Rent extension    -150  -445  -360  0  0

* Negligible.
- Spending measures do not affect borrowing in 2015-16, 2016-17 and 2017-18 as they fall within the Total Managed Expenditure assumption.
1 Costings reflect the OBR’s latest economic and fiscal determinants.
2 Additional funding for childcare will start in Autumn 2015. The Government is allocating £750m per annum for this support.
3 Financial transactions impact on PSND and not PSNB so do not feed through to the bottom line.


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Article Published/Sorted/Amended on Scopulus 2013-03-20 15:34:42 in Tax Articles

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