Last week the Chancellor delivered his Autumn Statement and other than the IR35 news regarding 'controlling persons', there were a number of announcements that will be of interest to contractors.
Public procurement and tax avoidance
As part of the measures to tackle tax avoidance, the Cabinet Office and HMRC will consult on the use of procurement process and the proposed definition of key concepts, with a view to the new arrangements coming into effect from 1st April 2013.
The suggestion seems to be that the Government want to implement a certification process that ensures that companies abide by their rules. Those Government suppliers that are found to have tax practices not to the Government's liking could be bypassed when procurement contracts are handed out.
General anti-abuse rule (GAAR)
As announced in Budget 2012, legislation will be introduced to target abusive tax avoidance schemes.
Draft Finance Bill 2013 contains updated legislation that includes a number of amendments to the original proposal, such as clarification regarding the circumstances that should be taken into account when determining whether arrangements are abusive.
The Finance Bill also includes details of the GAAR advisory panel. The panel is designed to act as a safeguard against the inappropriate use of GAAR by HMRC. Rather than providing clarity and fairness to taxpayers the legislation confirms that HMRC will not be bound by the panel's view and will only be required to consider the panel's view.
Rather than taking effect from April of next year, implementation of the new rule is expected in July 2013 when it receives Royal Assent.
Statutory residence test
Legislation will be introduced in Finance Bill 2013 to put the rules which determine an individual’s tax residence on a statutory basis. The new statutory residence test will come into force from the start of the 2013-14 tax year.
The legislation will also provide for a tax year to be split into a UK part and an overseas part in certain circumstances and contain new rules for the taxation of certain income and gains arising during a period of temporary non-residence.
The test represents a fundamental change to UK residency rules and should reduce uncertainty for individuals and employers.
HMRC will shortly publish draft guidance to assist individuals on the application of the statutory residence test.
Higher rate threshold
The point at which an individual starts to pay income tax at the higher rate of 40% will be increased by 1% in 2014-15 and 2015-16 to £41,865 and £42,285 respectively.
Personal allowance
For the tax year 2013-14 the personal allowance will increase to £9,440 and the basic rate tax limit will be lowered to £32,010.
Pension savings – tax relief
From April 2014:
- the annual allowance for pensions tax relieved savings will be reduced from £50,000 to £40,000; and
- the lifetime allowance for pensions tax relieved savings will be reduced from £1.5 million to £1.25 million.
Corporation tax
The main rate of corporation tax will fall to 21% as from April 2014.
The small profit rate effective from April 2013 will be announced in next year's Budget.
Capital gains tax – annual exemption
The annual exempt amount will increase in 2014-15 and 2015-16 to £11,000 and £11,100 respectively.
Inheritance tax – nil band
The nil rate band will increase to £329,000 from April 2015.
Digital Services
Over the next three years, HMRC will significantly expand the range of digital services to include:
- 20 million taxpayers will receive a Personal Tax Statement, showing how their tax is calculated and spent by government, and
- A more joined-up digital experience for taxpayers, providing an overview of their HMRC 'account', links to all their online transactions and a facility for accessing tailored help and asking HMRC questions.
Finally, a note for your diary. Budget 2013 will be held on Wednesday 20th March.
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