UK Budget Summary March 2011

 

 
Business & Taxation
Corporation tax
main rate – The Government will reduce the main rate of corporation tax from 28 per cent to 26 per cent from April 2011. The rate will then be reduced by a further 1 per cent in each of the following three years, and as a result will be 23 per cent by 2014.
 
small profits rate – As announced in the June Budget 2010, from 1 April 2011 the small profits rate of corporation tax will fall from 21 per cent to 20 per cent.
 
So a reduction in Business Taxation…if you run an incorporated property business then you should benefit from these changes. 
 
drop existing proposals for specific regulations which would have cost business over £350 million a year;
introduce a moratorium exempting micro-business and start-ups from new domestic regulation for three years from the 1st April 2011;
 
More help for all businesses in managing their businesses and reducing the barriers of entry for small and start-ups…again good news for all bsuiness-owners.
 
Research and Development (R&D) tax credits
 
Following consultation on the effectiveness of the schemes, the Government will increase the SME scheme rate of relief to 200 per cent from April 2011 and 225 per cent from April 2012, subject to EU State aid approval. It will simplify the schemes, including removing the Pay As You Earn (PAYE)/NICs cap on the amount of payable credit that can be claimed, removing the minimum expenditure rules and allowing relief through the large company scheme for subcontracted activity which forms part of a wider R&D project.
This is an often unexploited tax benefit…so Juswant, if you own a business or have clients who own businesses who do or have done the following:
 
product development; R&D budget/department; Created new product(s); created a new process; changed a process for a customer and/or product variation; manufacturing; printing;  
 
…then you may qualify for these credits…Matt, my Tax advisor, specialises in this area and is keen to help you with these tax credit claims…why not request an introduction today! 
 
Housing & Property Planning
 
Government will introduce a number of measures to streamline the planning applications and related consents regimes removing bureaucracy from the system and speeding it up. This will include a 12 month guarantee for the processing of all planning applications, including any appeals;
 
So, hopefully more improved legislation for planning and land development, although local autonomy will need to be assessed as and when any changes in legislation come into play…Planning Officers have often interpreted new legislation to suit local planning policy…so the proof of such puddings will be in their ultimate digestion! 
 
Government will consult on proposals to make it easier to convert commercial premises to residential.
This could be quite an innovative change in the Planning legislation…I am sure you've seen all the empty commercial buildings dotted around your locale…some recent innovative schemes where empty office buildings have been converted into town/city-centre dwellings may become more common, and change of use may be easier to come by. This could be more prevalent at the low-entry levels, such as shops with accommodation above, may be more appealing. Again the consultation and eventual White Paper will see if these proposals have any teeth. 
 
Stamp Duty Land Tax (SDLT)
 
The Government will introduce changes to the SDLT rules for bulk purchases of residential properties. If the buyer chooses, the rate of SDLT on purchases of multiple residential properties will be determined by the mean value of the dwellings purchased (subject to a minimum rate of 1 per cent), rather than their aggregate value as is currently the case. [The Government suggests that…] This will reduce a barrier to investment in residential property, promoting private rented housing supply.
 
Good for builders selling multiple units, good for Landlords offering portfolios, and good for investors buying either, and ultimately, good for housing supply and tenants…the devil may well be in the detail…but on the surface this looks to be a good proposal.
 
The Government will announce the outcome of its review of the stamp duty land tax relief for first time buyers in autumn 2011
 
This could go either way…extend, end or tweak…a bit of a “wait-and-see”… 
 
The Government will introduce legislation, with effect from 24 March 2011, to address three SDLT avoidance risks. The changes cover avoidance techniques that use the subsales rules, the Alternative Finance reliefs and the rules for exchanges of land. These techniques have been used to attempt to avoid tax on both residential and non-residential property transactions, including on high value property transactions.
This is quite a complex/technical change relating to what constitutes sub-sales and how “Financial Institutions” are defined in relation to such exchanges of land. This could end some types of sophisticated purchases…I would advise individuals consult specialist SDLT experts to understand how this may or may not affect any such complex purchasing vehicles.  
 
Market Stimulation for First-Time Buyers
 
the Government will provide £250 million to support first time buyers to purchase a new-build property. The FirstBuy programme will assist over 10,000 households with equity investments jointly funded with house-builders;
 
Could kick-start the market…afterall it is first-time buyers who ultimately fuel the housing market…no doubt there will be strict rules for qualification for any such assistance. 
 
Local Housing Allowance (LHA)
 
As announced in the June 2010 Budget, LHA rates will be set at the 30th percentile of local market rents and LHA rates will be capped at £250 per week for a one bedroom property, £290 per week for a two bedroom property, £340 per week for a three bedroom property and £400 per week for four bedrooms or more. As announced by DWP in November 2010, these measures will now come into effect from April 2011 for new claimants, and January 2012 for existing claimants.
 
So, this one is all about timing, and should come as no surprise given previous announcements. Paul Galbraith, one of the UK's leading property experts on LHA will be attending April's Leeds Property Networking event…
 
Furnished holiday lettings (FHL)
 
From April 2011, new tax rules for FHL will take effect, so that loss relief may only be offset against income from the same FHL business. Letting and availability thresholds will be increased from April 2012.
 Only relevant if you have FHL properties… 
 
Future Abolishing of Reliefs [Relevant to property…]
the Government intends that the following reliefs will be abolished after 2012 in future Finance Bills or other legislative vehicles, with a final date set out after the consultation:
capital allowances – flat conversion allowances;
disadvantaged area relief (Stamp Duty);
transfers to registered social landlords;
disadvantaged area relief (SDLT);
So, watch-out…these could be abolished or formally announced to be abolished as early as the 2012 Budget, so if you rely on any of these reliefs, now is the time to start planning for their abolition. For up-to-the-minute advice, why not let Matt and his team of Tax advisors assist you in your tax planning – let me know and I'll introduce you.  
 
Personal & Indirect Taxation 
 
Fuel Duty
Government has immediately cut fuel duty by 1 pence per litre. The fuel duty escalator will be replaced with a fair fuel stabiliser that increases tax on North Sea oil production when oil prices are high. The April 2011 inflation-only increase will be delayed to January 2012. The April 2012 increase will be delayed to August 2012. The Government will increase the Supplementary Charge on oil and gas production to 32 per cent from 24 March 2011;
 
Personal Allowances… 
 
From April, the personal allowance for under 65s increases by £1,000 to £7,475. This Budget announces that the personal allowance for under 65s will increase by a further £630 to £8,105 in 2012-13, with an equivalent £630 reduction in the basic rate limit to leave the higher rate threshold unchanged.
 …so, on a personal note Mr Osbourne want's us to pay slightly less personal tax! Shame VAT remains at 20%…
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