Insight - February 2012
Capital Allowances – Annual investment Allowance
The Annual Investment Allowance (AIA) will reduce from £100,000 to £25,000 with effect from April 2012. This will affect businesses (both companies and unincorporated businesses) investing more than £25,000 a year in plant or machinery from April 2012.
The AIA enables businesses to claim full tax relief on most plant and machinery expenditure in the year it is incurred. Qualifying capital expenditure above this limit will continue to receive tax relief through capital allowances, whether in the main pool or the special rate pool.
Businesses planning significant capital expenditure in 2012 may wish to consider the possibility of accelerating the acquisitions to take place prior to April 2012.
If you would like further information on implications for your business, please get in touch with your usual Henderson Loggie contact, or email enquiries@hendersonloggie.co.uk
Paper VAT Returns – Obsolete from April 2012
If you are not already filing your VAT returns online, then you need to prepare to switch to online filing. Do not leave this until the last minute.
Since April 2010 most VAT-registered businesses have been required to submit their VAT Returns online and pay any VAT due electronically. HM Revenue & Customs (HMRC) is extending this requirement to virtually all VAT-registered businesses from 1 April 2012.
Online filing of VAT returns will become compulsory from 1 April 2012 in relation to accounting periods starting on or after that date, for businesses with a VAT exclusive turnover below £100,000. The only exceptions are for insolvent businesses or businesses run by people who are practising members of a religious group whose beliefs are incompatible with the use of computers.
HMRC planned to advise all taxpayers affected by this change of their new responsibilities and how to meet them during February 2012. Therefore, if this applies to your business, you should have received, or should shortly receive a letter from HMRC.
It will no longer be possible to pay the VAT due by cheque. Payment will have to be made by electronic means, which includes direct debit, CHAPS, BACS, personalised bank giro payment slip paid in at a bank, debit card or credit card over the internet.
In a helpful development, HMRC has now instructed its bank to accept tax payments by the faster payment service. This means the VAT due will take less than a day to clear.
If you would like further information on implications for your business, please get in touch with your usual Henderson Loggie contact, or email enquiries@hendersonloggie.co.uk
Dissolution of Companies and ESC C16
The Extra Statutory Concession C16 will cease to have effect on 1 March 2012. In its place, a new Statutory Instrument will govern the treatment of distributions made by a company in anticipation of its dissolution.
Although the Statutory Instrument essentially enacts into legislation the Extra Statutory Concession (ESC), there are significant changes.
Distributions made under ESC C16 are treated as capital, and subject to Capital Gains Tax (CGT) in the hands of the recipient.
Distributions under the Statutory Instrument, from 1 March 2012 onwards, will be subject to CGT if below £25,000. Any distributions in excess of that limit will be subject to Income Tax as dividends.
Going forward, therefore, the way to preserve CGT treatment will be to enter a formal liquidation. Although this is often portrayed as being rather expensive, it may well be worthwhile, depending on the levels of distribution expected.
If you would like further information, please get in touch with your usual Henderson Loggie contact, or email enquiries@hendersonloggie.co.uk
First Time Buyers – Stamp Duty Land Tax Relief
On 24 March 2012 the relief for first time buyers from Stamp Duty Land Tax (SDLT) will end.
Legislation introduced by the 2010 Finance Bill entitled first time buyers to relief from SDLT for purchases of residential property with a value of up to £250,000. The relief was however limited to 2 years and will not be available for purchases completing on or after 25 March 2012.
If you are a first time buyer and are considering purchasing a property within the next month, you could make a potential saving of between £1,250 and £2,500 (based on a purchase price of between £125,001 and £250,000) if you complete no later than 24 March 2012. To qualify for relief, the following conditions must apply:
- Any individual / individuals jointly purchase a major interest in land which is wholly residential;
- Consideration / price is more than £125,000 but not more than £250,000;
- The individual (or all of them) intends to occupy the property as his / her or their only or main residence;
- The individual / individuals has or have not previously purchased such an interest or its equivalent anywhere in the world (for joint purchasers, note that both individuals must be first time buyers);
- The purchase completes (price is paid) on or after 25 March 2010 and before 25 March 2012.
If you would like further information, please get in touch with your usual Henderson Loggie contact, or email enquiries@hendersonloggie.co.uk
Contracting Out
From 6 April 2012 the Government intends to stop “contracting out” through defined contribution pension plans.
Anyone currently contracted out will be automatically brought back into the Second State Pension (S2P). From the 2012/13 tax year, the Government will stop paying National Insurance rebates to contracted out personal pension schemes and instead individuals will build up an entitlement under S2P. The change will not affect your entitlement to basic State Pension.
All National Insurance rebates that have already been paid to your pension plan will remain invested, and how you can use your protected rights benefits will change. From 6 April, you will have the same options for your protected rights benefits as for the rest of your pension benefits, giving you much more freedom to choose the type of benefits you want and where you want to invest. You will no longer be required to set up your pension benefits on a joint life basis if you are married or in a civil partnership – which is currently compulsory for protected rights benefits. This does however mean that you would need to carefully consider the needs of any dependants when you come to secure your pension benefits.
Protected rights funds can be substantial particularly for those who have been contracted out since 1988. Therefore, careful consideration should be given as to how these are invested and how the benefits are paid when setting up a retirement income from them.
If you would like further information, please get in touch with your usual Henderson Loggie Financial Services contact, or email enquiries@hendersonloggie.co.uk
Please remember when investing your capital or the income produced is not guaranteed and can fall as well rise. Any references to tax and legislation is based on our understanding of law and HM Revenue & Customs practice at the date of publication. Tax and legislation are liable to change. Tax relief may be altered and the value to the investor depends on their financial circumstances. The purpose of this article is to provide technical and generic guidance and should not be interpreted as a personal recommendation or advice.
Henderson Loggie Financial Services Ltd is authorised and regulated by the Financial Services Authority.
