UK Draft Finance Bill 2013 Published

By Editorial 13 December, 2012

The UK government has published draft tax legislation to be included in the Finance Bill 2013, including a reduction in corporation tax to 21% from 2014, as well as tax reliefs described by the Treasury as "among the most generous in the world" for the video games, high-end TV and animation industries.

The draft reflects tax policies announced in the budget in March 2012 and in the recent Autumn Statement "mini budget." Measures include a two-year ten-fold increase in the annual investment allowance for plant and machinery (up to GBP250,000 (USD400,000)), and an "above the line" tax credit for Research and Development (R&D); this means that companies that do not pay corporation tax will be able to deduct the tax from the Pay As You Earn withholding tax and the National Insurance of R&D staff. There will also be an increase in the tax-free personal Allowance, which will rise to GBP9,440.

However, allowances for pension savings will be reduced: from 2014-15, the lifetime allowance will drop from GBP1.5m to GBP1.25m, and the annual allowance from GBP50,000 to GBP40,000. Also, there will be a limit of GBP3,600 on premiums payable for new life insurance policies categorized as "Qualifying Policies." There will also be a cap on tax relief at 25% of earnings for anyone claiming more than GBP50,000 (excluding relief for charitable donations).

Measures relating to property include tax breaks for Real Estate Investment Trusts (REITs). These are companies that own and manage properties on behalf of shareholders, and a REIT can now invest in another REIT without having to pay tax on the resulting rental income and enter into joint ventures with non-REITs.

Properties worth more than GBP2m and owned by companies and collective investment schemes (called "non-natural persons") will be subject to a new Annual Residential Property Tax (ARPT). However, farmhouses worth this amount but occupied by working farmers will be eligible for relief, and there will also be exemptions for large country houses that are regularly open to the public, as well as for "dwellings" owned by charities and held for charitable purposes or which are conditionally exempt from inheritance tax. There are also measures to counter avoidance of Stamp Duty Land Tax (SDLT) through "sub-sale" schemes.

The draft also implements the General Anti-Abuse Rule against tax avoidance, and introduces a Statutory Residency Test.

According to a Treasury statement, the draft legislation meets the government's objective of confirming the majority of tax changes at least three months ahead of publication. The government has also published responses to consultations which took place over the summer, and the draft legislation is open to technical consultation until February 6, 2013.

David Gauke, Exchequer Secretary said: "The measures for which we are publishing draft legislation today are part of the government’s wide reaching reforms to deliver a progressive tax system that is simpler, affordable, fair and encourages growth. They demonstrate our commitment to listening to the views of those affected by changes to the tax system and this simple and transparent approach provides greater stability and certainty to taxpayers and businesses."

Tags: Expatriates | Inheritance Tax | Tax | Investment | Business | Pensions | Real-estate Investment | Property Tax | Tax Avoidance | Real-estate | Budget | Corporation Tax | United Kingdom | Legislation | Tax Rates | Withholding Tax | Stamp Duty | Tax Breaks | Charities | Research And Development |


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