The UK Finance Minister, known as the Chancellor of the Exchequer, made his Autumn Statement on 3rd December, setting out tax changes and the Government’s strategy. Here are some points.
Income Tax
The personal tax free allowance that is the amount a person can earn and not pay any tax, increases from GBP 10000 now to GBP 10600 from April 2015. The Chancellor stated that it was intention to further increase this so that a person working full time at the national Minimum wage would not pay any tax. At the current rates that would be GBP 12500.
Social Costs
Companies will not have to pay any Social Costs for employees aged under 21 from April 2015.
Benefits in Kind
The will be no tax of Trivial Benefits, that is those which less than GBP 50, from April 2015, and they will not need to be reported, reducing the compliance burden on companies.
Tax Avoidance
There has been some discussion in the UK concerning certain multinational businesses “artificially” transferring profits arising from sales made in the UK through other countries (for example Luxembourg and Ireland) where they seem to be able to enjoy considerably lower rates of Company taxes. The Chancellor has been widely expected to take some action against this, and he has introduced a “diverted profits tax” , of 25% on profits diverted outside the UK. This will apply from April 2015.
Research & Development
The amount of qualifying R&D expenditure which an SME can claim against its taxes increases from 225% to 230% with effect from April 2015.
Banks
Many UK banks received considerable public funds to keep them alive, and made large tax losses. The Chancellor has decided that it is not reasonable to other tax payers to allow the banks to use all the brought forward losses from earlier years to set off against current taxable profits, thereby reducing the amount of tax they pay to zero. He has therefore decided that only half of any years’ profits by a bank can be set off against earlier losses, and that half will be subject to full UK taxation.
Residential Homes Owned By Companies
It has become common for an increasing number of non UK citizens to own houses in the UK through limited companies (non-natural persons) rather than personally, as this offers them considerable tax advantages, both during the period of ownership and particularly if the property is sold.
The Chancellor has decided to reduce the tax advantages by making an annual charge, increasing with value, commencing with houses valued at over GBP 2 million in April 2015, and then GBP 1 million in April 2016.
Houses which are owned by companies but rented out on a commercial basis are not affected by these proposals.
Inheritance Tax
The assets of someone who has died are subject to Inheritance Tax when passed on, subject to a quite large tax free amount.
Members of the UK armed forces killed on active service, or whose death is caused by in injury on active service, are exempt from Inheritance Tax. This exemption is extended to include emergency service personnel and humanitarian aid workers killed or injured in similar circumstances, and is back dated to 19th March 2014.
