Presentation on theme: "Finance Bill 2009 Mike Truman LLB FCA CTA (Fellow) Editor, Taxation magazine 16 June 2009."— Presentation transcript:
Finance Bill 2009 Mike Truman LLB FCA CTA (Fellow) Editor, Taxation magazine 16 June 2009
These are the slides from my presentation at the AIMS conference on 16 June 2009. They are supplied ‘as is’ with no warranty or liability for any errors. They are supplied to act as notes for those who attended the presentation. Feel free to make copies for reference, but this does NOT extend to using the slides in your own presentations. I have made one change, in response to a question on the day, to slide 18, explaining that there are no special rules for groups. Everything covered in the presentation has appeared at some time during the past few months in Taxation magazine, so if you want commentary like this on a weekly basis, you need to subscribe! I have managed to persuade our marketing department to offer a 10% discount to new subscribers provided you apply before 30 June. Please email firstname.lastname@example.org quoting ‘EX 9214’ and you will get a year’s subscription for £269 rather than the normal £299.
THE BUDGET PROCESS… No longer follows sensible pattern –PBR November –Budget March –With rates etc for following year Still working out the effects of last Brown budget in 2007 And planning rates for 2011/12
2009/10 TAX & NI BANDS PA to increase to £6,475 (7.3%) –Age related allowances £9,490 & £9,640 (5%) Higher rate band increases to £37,400 –From £34,800, an increase of 7.5% But, upper NI limit aligned with tax band –£(37,400 + 6,475) = £43,875 Lower NI threshold increases to £5,715 –Increase of 5.2% –Still out of synch with PA
ORIGINAL PROPOSAL 2010-12 From pre-budget statement in Nov 2008 2010-11 start to lose PAs once GROSS income exceeds 100k/140k –Half lost each time 2011-12 taxed at 45% over £150k NET income
NEW PROPOSAL Everything comes in 2010-11 Lose PAs in one hit, income over £100k, net of trading losses but gross of pensions and PA 45% rate becomes a 50% rate, still starting at £150,000 net income –Div rate 42.5%, trust rate 50%
MARGINAL TAX/NI RATES 2010/11 Band Employed Self-Employed 0-£6,4750% £6,475-£43,87531%28% £43,876-£100,00041% £100,001-£112,95061% £112,951-£150,00041% Over £150,00051% Subject to confirmation of 2010/11 tax bands & allowances. Lower threshold planned to align with PA. Extra 0.5% NI still comes in 2011/12
HELPING YOUR CLIENTS … if they are caught by the marginal rate Pay bonuses bi-annually Make pension contributions Offer a review for prospective clients –All tax deducted under PAYE for marginal rate payers will be wrong!
INCORPORATION Still beneficial at all levels of income –Though not as much as before at lower levels Increasingly beneficial at highest rate –But only if CT is 21% Total tax with 22% CT rate, will be almost exactly 50% –See calculation – but saves NI
TOTAL TAX ON DIVS Profit Less tax at 22% 1000 220 Gross up 100/90 780 87 867 Tax at 42.5%368 Net div after tax499 Net tax50.1%
REDUCED RELIEF FOR PENSION CONTRIBUTIONS Tax relief on pension contributions is currently given at the taxpayer’s marginal rate of tax –Making saving for retirement even more attractive for highest-rate taxpayers from 2011/12 Rate of relief on contributions will be tapered down until it reaches 20% for incomes exceeding £180,000 Rules will apply from 6 April 2011 –With anti-forestalling provisions coming in from 22 April 2009
ANTI-FORESTALLING DOES NOT AFFECT… Anyone earning below £150,000 in the year and the two preceding tax years Anyone earning more than £150k carrying on with regular (1/4ly) pattern of contributions established pre 22.4.09 Anyone whose pension contributions do not exceed £20,000 in the year Normal increases in defined benefit schemes Rules are particularly harsh for the self-employed whose earning patterns may be irregular –May get amended
PENSION NIGHTMARE, 2009/10 Earnings £149,900, one–off pension contribution today of £40,000 Get £200 pay increase Gain £200 x 59% = £118 Lose £20,000 x 20% = £4,000 –No tapering in transition Marginal rate of 1,991%!
NAMING AND SHAMING Quarterly publication of names, addresses, trade, tax etc, period covered Tax lost of more than £25,000 Deliberate/concealed defaults (not careless) No disclosure (not even prompted)
SECOND OFFSHORE “AMNESTY” New disclosure opportunity (NDO) to run from Autumn to 2009 to March 2010 Fixed penalty to be announced –Understood to be 10% if not previously contacted, more if you have Last amnesty awarded a 10% penalty and collected £400m in tax HMRC has widened enquiries to banks headquartered overseas
TRADING LOSSES - COMPANIES Loss carry back period extended to three years for APs ending between 24 November 2008 & 23 November 2010 –Set against total profits on a LIFO basis Amount carried back beyond the 12m point restricted to £50,000 –Which is time-apportioned where the loss-making AP is less than 12 months long Can’t get £50k x 2 both taken back three years Applies separately to each company – no special rules for groups
Loss problem 2006200720082009 Profit Loss 50k - 2007Wipe outUsed (maybe 2005 too) Balance to 50k Used?
TRADING LOSSES – UNINCORPORATED BUSINESSES Where loss making AP ends in 2008/09 & 2009/10 the losses may be carried back further Normal s.64 claim is carry back one year –Extended by two years but only against previous profits of same trade up to a maximum of £50,000 Carry back is to later periods first
BUSINESS CARS New regime is…. –100% FYA for cars with emissions up to 110g/km –20% WDA for cars with 111g/km to 160g/km –10% WDA for cars above 160g/km 10% and 20% pools mean no write off of remaining expenditure on disposal Private use rules remain the same though Leasing cars? –Disallowance of 15% of leasing cost where emissions exceed 160g/km
CARS COMPARISON Yr 1Buy gas guzzler 50k Before 3000 After 5000 Yr 2 Yr 3 WDA Sale, £20k 3000 24000 4500 2050 Yr 3Buy gas guzzler 50k30005000 Total all. Pool 33000 47000 16550 63450
POSSIBLE SOLUTIONS Leasing –Particularly if under 160g/km 100% qualifying cars if possible Hold on to existing cars for longer Buy vans…
SPOT THE DIFFERENCE… Nissan PathfinderNissan Navara Car Van… Or is it…?
VAN DEFINITIONS VATBIKCA 1 TONNEPRIMARILY GOODS
Thanks for listening Visit www.taxation.co.uk tomorrow for a copy of the slides Slides and presentation are a basis for discussion, no liability is accepted for action taken or refrained from as a result of them.