Tag Archives: Budget 2012

Property-Based Inheritance Tax Avoidance Schemes Are Now Blocked

21 Mar
Inheritance Tax (IHT) rules around excluded property is being amended.
 
This is to prevent UK domiciled individuals using the rules around excluded property under an offshore trusts to avoid Inheritance Tax while retaining a benefit in the property.
 
The legislation will amend current IHT excluded property and settled property provisions. The changes are designed to primarily replicate the tax treatment that a UK domiciled individual would suffer if the trust was a UK trust rather than an offshore trust. So, the outcome ensures any potential reduction in the value of a person’s estate as a result of these schemes remains liable to inheritance tax.

These provisions will apply to any new schemes entered on or after 21 March 2012.

The secret to effective IHT planning is to keep the planning conceptually simple, non-contentious and fall within the terms and spirit of the legislation. Where schemes circumvent the rules, it is fair to expect that these schemes are expected to be caught by these changes in legislation. Since the early 1990’s HMRC, Treasury and the Government have been very clear on their outlook. Sometimes, the cost of these schemes and the associated legal battles more than outweigh the tax savings potential.

Always plan carefully

Any questions – my email is welshmoneywiz@virginmedia.com

 

The Ying & Yang of Income Tax Allowances

21 Mar

Hundreds of thousands of basic rate taxpayers will fall into the 40% income tax bracket when the government lowers the threshold next year.

The Budget small print shows the higher rate threshold will be reduced by £1,025, from £42,475 to £41,450, from April next year, capturing, experts suggest, as many as 300,000 extra people.

 The Good News

  • the top rate of tax will be cut to 45% from April 2013
  • the personal allowance will increase to £9,205

The Bad News

  • basic rate threshold will reduce to £32,245

 

Personal Allowance Increase

21 Mar
 

From April 2013, the basic personal allowance will increase to £9,205. This is a massive increase of £1,100.

The Chancellor stopped short of announcing any planned increases for 2014, where there are claims that the personal basic allowance may raise to £10,000. This is targeted to be achieved by 2015, as announced in 2011.

VCTs & EISs – Clampdown If Just Targeting Tax Relief

21 Mar

George Osborne confirmed the government will roll out a new disqualifying purpose test to exclude companies set up for the sole purpose of accessing tax relief.

 The purpose of VCTs and EIS’ is to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies, as opposed to taking advantage of the generous tax breaks on offer.

The consultation will come as a blow to some feed-in-tariff VCT and EIS providers. The Government will also introduce a new disqualifying purpose test to exclude companies set up for the purpose of accessing relief, exclude acquisition of shares by a qualifying company in another company, and exclude investment in some Feed-in Tariff businesses.

The good news :-

VCTs

  • from April 2012 the investment universe for VCTs (Venture Capital Trusts) will be widened. 
  • £1.0 Million investment limit per company rule has been lifted
  • VCTs will have the option to invest larger (actually unrestricted amounts) into a small business

EISs

  • EIS tax relief allowance to be doubled to £200,000.

 

Budget 2012 :- Income Tax Relief Capped

21 Mar

For those who contribute to pensions, the government is introducing a cap on income tax relief for anyone claiming more than £50,000 a year.

For those seeking to claim more than £50,000 of tax reliefs, a cap will be introduced at 25% of income. The plan is to prevent the business activity of setting-up loss making businesses purely to claim tax relief i.e. offset trading losses against trading profits. George Osborne confirmed that the limit will include, amongst others :-

  • Loss reliefs against total income
  • Qualifying loan interest
  • Gift Aid and Charitable gifts of land and shares

The government said it would seek to ensure the cap did not impact on charities that rely on large donations and there would be measures to protect philanthropic giving.

The good news is the chancellor has not cut pensions tax relief.