Finance Bill 2013

The Government has published the 1st draft of the 2013 Finance Bill says RSM Tenon. This contains the legislation required to bring about the changes announced in the Budget and last week’s Autumn Statement. There is little in the way of new announcements, however, many of the changes appear to be aimed at higher rate taxpayers, including:

Top rate of income tax – this will be reduced from 50% to 45% from 6 April 2013 – now is the time a good opportunity to consider the timing of your income whilst you have some flexibility, taking care to be sure when payment dates are triggered.

Personal allowances – these have been confirmed for 2013/14

Pension contributions - In the Autumn Statement last week it was announced that the tax relief on pension contributions will be further restricted from April 2014. The Bill also confirms that tax relief will be capped for individuals on trading losses offset against other income and interest on certain loans, including those to invest in a company or buy into a partnership.

Statutory residence test – this will be introduced from 6 April 2013. These proposals have been well documented as it was originally intended to be introduced in April 2012. This will bring an end to any subjectivity around an individual’s tax residency status, although disappointingly there are a lot of anti-avoidance clauses which suggests that the progress may not be as significant as hoped. This is an historic landmark for tax in the UK, as for the first time we have definitive legislation on this critical area. Historically whether someone has been resident has been decided by application of practice and an evolution of decided cases that have been interpreted in different ways. As ever, there will be matters of interpretation that will evolve but it represents a significant advance from where we are today.

High value properties - A new annual charge will be introduced for high value properties (>£2m) owned by companies or partnerships to further discourage ownership of property through envelope structures. Various reliefs have been introduced for the annual property charge including the 15% Stamp Duty Land Tax charge for property developers and those exploiting property as a source. Whilst these are still significant charges the scope is not as far reaching as originally thought when first announced in the Budget. Further consultation will take place on the proposed Capital Gains Tax charge on disposal of high value property owned by companies but the expectation is that this charge will apply from April 2013.