Finance Bill 2012: Draft legislation released

The Government has released the draft legislation for consultation ahead of the Finance Bill 2012.

Last year the Government committed to confirming the majority of Finance Bill measures at least three months prior to introduction, in order to provide more certainty for taxpayers and greater window for scrutiny in advance of the legislative process.

The next Budget is expected in March 2012, when the Finance Bill will make any tax changes announced law.

The draft legislation includes a series of clauses, some of which are outlined below:

Personal tax

• Income tax rates and thresholds such as the personal allowance will be updated, as usual on Budget day;
• Details of the Seed Enterprise Investment Scheme (SEIS), designed to encourage investment in SMEs by offering 50 per cent tax relief, these include the capital gains tax holiday announced in the Autumn Statement;
• Changes to Enterprise Investment Schemes and Venture Capital Trusts in response to consultation;
• Reform of the taxation of non-domiciled individuals following consultation, this will affect those that elect to be taxed on the remittance basis;
• The statutory residence test due to come in next year will be delayed until 2013;
• The inheritance tax nil rate band will rise in line with CPI instead of RPI from 2015-16;
• The annual exempt amount for capital gains tax will also rise in line with CPI instead of RPI, but from 2013;
• Capital gains tax will be removed on withdrawals of funds from bank accounts in a foreign currency from 6 April 2012;
• Tax relief for non-resident footballers and team officials partaking in the Champions League final 2013;
• Income tax will be deducted at source from interest paid on qualifying time deposits made on or after 6 April 2012;
• Since the Autumn Statement, legislation was brought in with immediate effect to ensure that no excessive tax relief can arise for new asset-backed pension contribution arrangements.

Corporate tax

• The main corporation tax rate will reduce to 24 per cent in 2013, and the small profits rate will remain at 20 per cent from 1 April 2012;
• Companies will be able to apply a 10 per cent corporation tax rate to profits attributable to patents and other qualifying intellectual property from 1 April 2013;
• Research and Development tax relief will be improved for small and medium sized enterprises;
• A number of changes to capital allowances, including enhanced capital allowances for certain enterprise zones, changes to capital allowances for fixtures and feed-in tariffs and the renewable heat incentive;
• Some of the conditions associated with the real estate investment trust will be eased;
  Tax transparent funds will be authorised from summer 2012;
• The Bank Levy will be increased to 0.088 per cent from 1 January 2012;
• The tax treatment of regulatory capital instruments continues to be considered, with a view to certainty by 1 January 2013;
• Amendments to the tax treatment of financing costs and income (debt cap);
• Changes to the UK generally accepted accounting practice.

Charities

• A reduction in tax liability based on a percentage of the value of pre-eminent objects that are donated will be introduced;
• The rate of inheritance tax will be reduced from 40 per cent to 36 per cent where 10 per cent or more of an estate is left to charity;
• The Self Assessment Donate scheme will be withdrawn form 6 April 2012.

These are just some of the measures covered. Others include clauses affecting indirect taxes such as duties, anti-avoidance changes and tax administration.

Keep an eye on our website for more information on the draft legislation announced ahead of the Finance Bill 2012, or contact us if you would like to discuss any elements that may affect you.