The Chancellor of the Exchequer presented his 2009 Budget to Parliament on 22 April. The information below is a summary of some of the announcements made during this Budget that may have an impact on your business or on your employees'.
We hope that some of the information contained in the briefing will be of some interest to you, but you may find some of the issues covered do not relate to your particular circumstances. We hope that at least some of the information is of some use to you.
If you have any questions about the content of this briefing, or if you require clarification of any of the issues mentioned, please contact Simon Wright, Audit & Compliance Manager at activpayroll.
Simon can be contacted on 0131-473 2325, or you can e-mail him at
Personal Tax and Individuals
The Chancellor, has announced the following changes to tax rates and allowances for taxpayers with income over £100,000:
from 2010-11, there will be an additional higher rate of 50 per cent for taxable income above £150,000;
from 2010-11 the basic personal allowance for income tax will be gradually reduced to nil for individuals with "adjusted net incomes" above £100,000;
from 2010-11 there will be increases to the trust rate and dividend trust rate to match those for income tax; and
the measure includes new powers to vary the income tax rates for the charges that apply to registered pension schemes.
Current law and proposed revisions
For 2009-10, there are two main rates of income tax. The 20 per cent basic rate of income tax applies to taxable income up to £37,400. The 40 per cent higher rate applies to taxable income above £37,400. From April 2010, a 50 per cent additional rate of tax will apply to taxable income above £150,000.
From 2010-11 there will be three rates of tax for dividends. Dividends otherwise taxable at the 20 per cent basic rate will continue to be taxable at the 10 per cent dividend ordinary rate and dividends otherwise taxable at the 40 per cent higher rate will continue to be taxable at the 32.5 per cent dividend upper rate. Dividends otherwise taxable at the new 50 per cent additional rate will be taxable at a new 42.5 per cent dividend additional rate.
From 2010-11, the dividend trust rate will be increased from 32.5 per cent to 42.5 per cent and the trust rate will be increased from 40 per cent to 50 per cent.
The basic personal allowance provides an amount of tax free income. All individuals entitled to the basic personal allowance receive the same amount. From 2010-11, the basic personal allowance will be subject to a single income limit of £100,000. Where an individual's adjusted net income (see below) is below or equal to the £100,000 limit, they will continue to be entitled to the full amount of the basic personal allowance.
From 2010-11, where an individual's adjusted net income is above the income limit of £100,000, the amount of the allowance will be reduced by £1 for every £2 above the income limit. The personal allowance will be reduced to nil from this income limit instead of the two-stage reduction announced at the Pre-Budget Report.
"Adjusted net income" is the measure of an individual's income that is used for the calculation of the existing income-related reductions to personal allowances for those aged between 65 and 74, and for those aged 75 and over. Adjusted net income is calculated in a series of steps.
The starting point is "net income" which is the total of the individual's income subject to income tax less specified deductions, the most important of which are trading losses and payments made gross to pension schemes. This net income is then reduced by the grossed-up amount of the individual's Gift Aid contributions and the grossed-up amount of the individual's pension contributions which have received tax relief at source. The final step is to add back any relief for payments to trade unions or police organizations deducted in arriving at the individual's net income. The result is the individual's adjusted net income.
The tax rates for charges applying to registered pension schemes are generally linked to the highest rate of income tax. There are existing powers to vary the rates for some of these charges by Statutory Instrument. This measure includes powers to vary the rates for the remaining charges, again through secondary legislation, taking into account the new additional higher rate of income tax.
Taxation of foreign dividends
Who is likely to be affected?
Individuals in receipt of dividends from non-UK resident companies.
General description of the measure
Legislation will be introduced in Finance Bill 2009 to make changes to the system of taxation for individuals who own foreign shares.
Individuals in receipt of dividends from UK resident companies are entitled under current law to a non-payable dividend tax credit. Since 6 April 2008, individuals with shareholdings of less than 10 per cent in non-UK resident companies have also been entitled to a non-payable tax credit.
From 22 April 2009, individuals with shareholdings of 10 per cent or more in receipt of dividends from non-UK resident companies will become entitled to a non-payable tax credit, subject to certain conditions.
Current law and proposed revisions
Dividends received by individual shareholders are currently taxed at rates of 10 per cent for basic rate and 32.5 per cent for higher rate taxpayers.
When dividends from UK resident companies are charged to tax, shareholders are entitled to a non-payable tax credit of one ninth of the distribution under the provisions of section 397(1) of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA). Because tax is charged on the gross dividend received, including the tax credit, this lowers the effective rate on these dividends at the personal level to 0 per cent and 25 per cent.
Section 397A of ITTOIA, introduced by the Finance Act 2008, extended the non-payable tax credit of one ninth of the distribution to individuals in receipt of dividends from non-UK resident companies, if they own less than a 10 per cent shareholding in the distributing non-UK resident company and the company is not an offshore fund.
Legislation in Finance Bill 2009 will amend section 397A of ITTOIA to extend further eligibility for the non-payable tax credit to individuals in receipt of dividends from non-UK resident companies where the individual owns a 10 per cent or greater shareholding in the distributing non-UK resident company. The tax credit will only be available if the source country is a "qualifying territory". A territory is a "qualifying territory" if there is a double taxation agreement with the UK, with a non-discrimination article. Regulations will permit HM Treasury to vary the list of qualifying and non-qualifying territories.
The legislation will include anti-avoidance measures, including a targeted anti-avoidance rule to counter the use of conduit structures designed to secure the tax credit for dividend income originating other than in a qualifying territory, to ensure that these new rules are not subject to abuse.
Tax Relief on Personal Pension Contributions
The Chancellor has announced that, starting in 2011-12, tax relief on pension contributions will be restricted to basic rate for individuals with an annual income of £150,000 or higher.
In anticipation of this change, there will be special rules which will apply from Budget Day (22 April 2009) to prevent people from making large additional contributions to their pensions before then in order to benefit from higher rates of tax relief while it is still available.
These changes do not affect the vast majority of individuals. They affect only those who have a total annual income of £150,000 or higher in the current tax year or in either of the preceding two tax years.
These anti-forestalling provisions will have effect for affected contributions paid under money purchase schemes on or after 22 April 2009. This anti-forestalling provisions will also have effect in respect of affected increases in the rights of individual members under defined benefits pension schemes arrangements (often referred to as final salary schemes) on or after 22 April 2009.
Current law and proposed revisions
An individual receives relief at their marginal income tax rate on their pension savings. Although there are no limits to how much can be saved in registered pension schemes, the maximum tax relief available in any one year for pension savings is limited to 100 per cent of a person's earnings and by what is called the annual allowance. The annual allowance for the 2009-10 tax year is £245,000 and for the 2010-11 tax year will be £255,000. Tax relief is recovered in respect of any pension savings over that allowance.
Finance Bill 2009 will introduce a new and additional special annual allowance and associated tax charge. This new allowance and tax charge will not apply to the vast majority of individuals:
anyone with income of less than £150,000 for the tax year, and for both of the preceding two tax years (‘the relevant tax years') will not be affected; and
for people with income of £150,000 or more in any of the relevant tax years, those who continue as normal with their existing pattern of regular pension savings and who do not make any additional pension savings will not be affected.
Those individuals who do increase their pension savings on or after 22 April 2009 over and above their normal pattern of regular pension savings will be affected only if their total pension savings in that year are over £20,000.
The tax charge will not apply to any normal, regular ongoing pension savings that were in place before 22 April 2009, whatever their value. It applies only to additional savings over and above this.
Normal, regular ongoing pension savings are defined as follows. For people contributing to a money purchase arrangement, normal, regular ongoing savings are the continuation of those contributions paid under agreements made prior to 22 April 2009 that are paid quarterly or more frequently and at a rate that does not increase.
For people in defined benefit schemes, normal, regular ongoing savings include any increases in pension benefits which arise under the existing pension scheme rules as at 22 April 2009. These include any increased benefits due as a result of normal pay rises and progression.
Any additional contributions to money purchase arrangements made between 6 April 2009 and 21 April 2009 which are over and above the normal pattern of regular contributions, will not be subject to the special annual allowance tax charge. The total value of additional contributions in this period will reduce the amount of special annual allowance available for 2009-10.
For defined benefit schemes the value of any changes over and above the normal increase in pension benefits as a result of changes to scheme rules, between 6 April 2009 and 21 April 2009, are not subject to the special annual allowance tax charge. The value of the change in this period will reduce the amount of special annual allowance available for 2009-10.
Where regular pension savings exceed £20,000, the new tax charge applies to any pension savings made on or after 22 April 2009 in excess of regular savings. Where regular pension savings are below £20,000, the tax charge applies to any excess over £20,000. The charge has the effect of restricting tax relief on the additional pension savings to basic rate.
The special annual allowance and associated tax charge apply to total contributions, regardless of whether these are made by the individual, their employer or by a third party and to any benefits accruing in a defined benefits scheme. The tax charge will be collected through the self assessment tax return.
The new special annual allowance and associated tax charge run alongside the existing annual allowance and its associated tax charge. It is possible for an individual to be liable to tax under both tax charges. Where this occurs the amount chargeable to the special annual allowance charge will be reduced by the excess over the existing annual allowance.
High income individuals affected by these changes may be able to claim a refund of contributions paid after 6 April 2009, depending on the nature of the pension arrangements. The refund will cancel the relevant amount of special annual allowance tax charge. The refund will be chargeable to tax on the scheme administrator at 40 per cent through the existing Accounting for Tax online process to reverse the tax reliefs that have been given on the contribution.
The Disclosure of Tax Avoidance Schemes (DOTAS) regime will be amended. The Descriptions Regulations (SI 2006/1543) will be amended to include a new description: arrangements where one of the main benefits of an individual entering the arrangement might be expected to be that the individual will not be subject to the special annual adjustment charge, which charge they would have been subject to had they not entered into those arrangements. The Information Regulations (SI 2004/1864) will be amended so that information will be required for any such schemes where the ‘relevant date' that triggers a disclosure (normally the date the scheme is made available for implementation) falls after the 22 April 2009.
Business Payment Support Service
The Business Payment Support Service (BPSS) was launched following the 2008 Pre-Budget Report in November last year. It is designed to help viable businesses that, because of the economic conditions, are having difficulty in meeting payments due to HM Revenue and Customs (including Value Added Tax (VAT), Income Tax (IT), National Insurance Contributions (NICs), Corporation Tax (CT), and Pay As You Earn (PAYE).
In such circumstances, wherever possible, HM Revenue and Customs will agree to spread any payments due over a time which meets the individual business' circumstances. The service has proved very useful to businesses suffering temporary financial difficulties and by 19 April 2009 over 110,000 agreements had been reached with businesses worth almost £2 billion.
What changes have been made to the Business Payment Support Service?
Many businesses have told HMRC that while they made a profit last year (and are due to pay CT or IT on that profit) the indications are that they will be making a loss in the current year. Normally if a business makes a loss they can ask for a repayment to be made to them of any CT or IT which they have paid on last year's profit. To do this though they need to wait until the end of their accounting year to be sure about the size of the loss they have made.
Businesses have told HMRC that if they could show they are likely to make a loss in the current year they would like them not to collect the tax due on last year's profits until they knew how big the loss is going to be.
While HMRC have stated that they cannot agree not to collect the tax due on last year's profits, what they will now do is to take into account the fact that a business is likely to make a loss for the year when deciding how much time they can give a business to pay any IT or CT due on its profits from last year.
How will this work?
When you ring the BPSS on 0845 302 1435 you will be asked for details of the amounts you owe and when you will be able to pay those amounts. The HMRC adviser will try and agree a time to pay arrangement with you which reflects your circumstances. If your circumstances are such that:
you are genuinely unable to pay immediately or enter into a reasonable time to pay arrangement
the tax you owe is CT or IT on the previous year's profits and
you are likely to make a trading loss in the current year
you should tell the adviser this. They may ask you some further questions about your circumstances and will arrange for someone to ring you or your accountant back to discuss why you think you are likely to make a loss.
If the officer who rings you back agrees that you are likely to make a loss which will reduce the previous year's tax on your business profits, then provided your business is viable, HMRC will allow you an extended period which takes this into account.
What information will they need?
The HMRC adviser will only ask for the information they need to make a decision. To help them deal with your call as efficiently as possible, please have the following information to hand:
your tax reference number
details of the tax you are or will have difficulty in paying
basic details of your income and outgoings; and
a telephone number on which HMRC can contact you or your accountant to discuss any loss.
What else will HMRC need from you?
If they agree to take the losses into account when agreeing the time to pay period, HMRC will ask you to undertake to send in your return for the current year on time.
Extension of Trading Loss Carry Back for Business
Current law and proposed revisions
Under current rules, businesses already have a number of mechanisms to ensure tax from profitable years is repaid through set-off against losses that arise in subsequent periods.
Firstly, businesses can offset unlimited trading losses against profits in the preceding year and reclaim tax previously paid. Secondly, start-up unincorporated businesses in the early years of operation can carry trading losses back for three years. Thirdly, any business ceasing to trade can also carry trading losses back for three years. Lastly, ongoing trading losses can be offset against profits in future years.
Finance Bill 2009 will extend the period for which trading losses can be carried back against previous profits. This extension will apply to trading losses made by companies in accounting periods ending between 24 November 2008 and 23 November 2010 and to trading losses made in tax years 2008-09 and 2009-10 by unincorporated businesses.
Trade loss carry back will be extended from the current one year entitlement to a period of three years, with losses being carried back against later years first.
The amount of trading losses that can be carried back to the preceding year remains unlimited. After carry back to the preceding year, a maximum of £50,000 of unused losses will be available for carry back to the earlier two years. This £50,000 limit applies separately to the unused losses of each 12 month period or tax year within the duration of the extension. For companies this means a cap of £50,000 on the extended carry back of losses incurred in accounting periods ending in the 12 months to 23 November 2009 and a separate £50,000 cap on the extended carry-back of losses incurred in accounting periods ending in the 12 months to 23 November 2010. For unincorporated businesses, a separate £50,000 cap will apply to the extended carry-back of losses made in each of the tax years 2008-09 and 2009-10.
Taxation of Foreign Profits
The foreign profits package will be introduced in Finance Bill 2009 after a long period of consultation and consists of four elements:
dividends and other distributions received from foreign companies will largely be exempt from corporation tax (CT) and UK distributions will be exempt to the same extent;
finance expense payable by UK members of a group of companies will be subject to a cap equal to the consolidated gross finance expense of that group;
the CFC (superior and non-local) holding company exemptions and Acceptable Distribution Policy (ADP) exemption will be removed; and
the Treasury Consents rules (that requires approval from HM Treasury before certain transactions are undertaken) will be repealed and replaced by a post-transaction information-reporting requirement.
Current law and proposed revisions
Dividends
Foreign dividends and other distributions received are currently chargeable to CT, with credit given for any foreign tax withheld from a dividend and (for shareholdings of 10 per cent or more) for foreign tax charged on the profits out of which the dividend is paid (underlying tax). Currently UK distributions received are generally exempt from CT.
The new legislation will treat foreign and UK distributions in the same way. Distributions will generally be exempt if they fall into an exempt class and anti-avoidance provisions do not apply. The vast majority of distributions are expected to be exempt from CT. In addition to the changes announced in the 2008 Pre-Budget Report, exemption for dividends or other distributions arising from holdings of ten per cent or more will be extended to all companies.
Debt cap
Interest is generally deductible in computing taxable profits, with various pieces of anti-avoidance legislation restricting relief in some circumstances.
The new legislation caps the tax deduction for finance expense payable by UK members of a group of companies to the consolidated gross finance expense of that group. Draft legislation was published on 9 December 2008. Following consultation a number of changes are proposed.
These include:
the way in which the net finance expense is calculated;
the calculation of the consolidated gross finance expense; and
introducing or amending a number of exclusions to deal with, for example, financial services, finance expense in respect of short term debt, group treasury companies and relatively small amounts of net finance expense
Controlled Foreign Companies (CFC)
The CFC regime currently provides an exemption from apportionment (and therefore from the resulting UK tax charge) for profits of a foreign company that qualifies as a holding company under the exempt activities test. The regime also exempts from apportionment profits of a foreign company that pays a dividend of at least 90 per cent of those profits within 18 months of the end of the accounting period concerned (the ADP exemption).
The changes to the CFC regime will remove the exemption for superior and non-local holding companies (subject to a two year transitional period) and the ADP exemption. The exemption for local holding companies will be retained.
Treasury Consents
The existing legislation requires companies to obtain approval from HM Treasury before undertaking certain transactions involving subsidiary companies resident outside the UK. The legislation includes a criminal sanction for non-compliance. For movements of capital between residents of EU Member States, the existing legislation imposes a reporting requirement.
The changes announced today will repeal the existing legislation. In its place the Government intends to introduce a modernized post-transaction reporting requirement that applies to transactions with a value of £100 million or more subject to a number of exclusions. These include several based on the existing ‘general consents' rules and an exclusion for trading transactions. Companies must make a report within six months of the transaction.
Loan Relationships and derivative contracts: anti-avoidance
The draft legislation published on 9 December 2008 included provision for loan relationships and derivative contracts forming part of arrangements that have a tax avoidance purpose. The case for further legislation in this area will be kept under review, but the measure will not form part of Finance Bill 2009.
Capital Allowances: Plant And Machinery: Temporary First-Year Allowances
Current law and proposed revisions
Capital allowances allow business to deduct the costs of capital assets, such as plant and machinery, against their taxable income. They take the place of commercial depreciation, which is not allowed for tax.
General plant and machinery
Since 1 April 2008 (corporation tax) or 6 April 2008 (income tax) most businesses, regardless of size, have been able to claim the new Annual Investment Allowance (AIA) on the first £50,000 spent on plant or machinery (subject to certain exclusions). Businesses have been able to claim the AIA in respect of special rate expenditure such as long-life assets, and integral features, as well as on general plant and machinery.
Where businesses spend more than £50,000 in any chargeable period, any additional expenditure will be dealt with in the normal capital allowances regime, entering either the main pool or "special rate" pool, where it will attract writing-down allowances (WDAs) at the appropriate rate.
The main rate of plant and machinery WDA is currently 20 per cent per annum on a reducing balance basis. For "special rate" expenditure the rate of plant and machinery WDA is currently 10 per cent per annum on a reducing balance basis.
Businesses incurring expenditure in excess of the AIA cap that would normally be allocated to the main pool and qualify for a 20 per cent WDA in the 12 month period beginning on 1 April 2009 and 6 April 2009 will now be able to claim a 40 per cent FYA instead.
Exclusions
As with previous and existing first-year allowances there are exceptions where the expenditure will not qualify for the temporary first-year allowance, the main exceptions include "special rate" expenditure (including long-life assets and integral features), expenditure on cars, and on assets for leasing.
Compliance Proposals
Offshore Disclosure
The Chancellor has announced a New Disclosure Opportunity for UK residents with unpaid tax connected to an offshore account. The NDO will run from the autumn 2009 for a limited period to give the offshore account holders one final opportunity to disclose, and put their affairs in order.
Individuals taking up this opportunity will be expected to pay the duties they owe, interest and a penalty. The level of penalty will be publicized before the scheme opens and for those eligible to take part it is likely to be lower than the level they can expect to pay under normal rulers.
Close monitoring of serious tax defaulters
The Chancellor has announced that those who incur a penalty for deliberate evasion in respect of tax of £5,000 or more will be required to submit returns for up to the following 5 years showing more detailed business accounts information and detailing the nature and value of any balancing adjustments within the accounts.
Publishing names of serious tax defaulters on HMRC Internet
The Chancellor has announced that the names and details of serious tax defaulters will be published in certain circumstances.
Avoidance of living accommodation benefit charge
This measure ensures that all employees pay the correct tax and national insurance where a new lease is entered into for living accommodation provided by reason of their employment.
Chapter 5 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003 sets out the tax position when living accommodation is provided by reason of the employment.
Where an employee is provided with accommodation there is a tax charge on the benefit to the employee of that accommodation. Where rent is paid by the person at whose cost the accommodation is provided the charge is based on the actual rent paid (less any amount made good by the employee), where that is more than the annual value. However, some arrangements are being entered into that involve upfront payments, which are described as a lease premium, and payment of a very small rent in order to try to avoid paying tax.
The legislation will ensure that where a lease premium is paid for a lease of 10 years or less, the same tax treatment will follow as if the lease premium were actual rent paid. The taxable amount in any tax year will be treated as the amount of the lease premium spread over the duration of the lease plus the amount of any rent paid by the person at whose cost the accommodation is provided less any amount made good by the employee. The new rules will not apply to leases entered into in relation to a property used mainly for a business purpose by the employer and partly for the domestic use of an employee.
Review Of HMRC Powers, Deterrents And Safeguards: Penalties For Late Filing Of Returns And Late Payment Of Tax
Current law and proposed revisions
The measure will repeal a large number of different penalty and surcharge provisions which are specific to each of the taxes covered, and replace these with more aligned penalty regimes for late filing of returns and late payment of tax and NICs.
The filing and payment obligations covered by this measure include those where the obligation to file or pay is annual or occasional and in addition, taxes and deductions collected through the PAYE system and CIS. The measure includes penalty models for each category with many common features, but with necessary modifications.
The key elements of the new penalty models are:
Penalties for late filing where the obligation to file the return is annual or occasional.(e.g. income tax Self Assessment, CT, IHT) include:
£100 penalty immediately after the due date for filing (whether or not the tax has been paid);
daily penalties of £10 per day (annual obligations only) for returns that are more than three months late, running for a maximum of 90 days;
penalties of 5 per cent of tax due for the return period for prolonged failures (over 6 months and again at 12 months); and
higher penalties of 70 per cent of the tax due where a person fails to submit a return for over 12 months and has deliberately withheld information necessary for HMRC to assess the tax due (100 per cent penalty if deliberate with concealment).
Penalties for late payment where the obligation to make payment is annual or occasional (e.g. income tax Self Assessment, CT, IHT) include:
penalties of 5 per cent of the amount of tax unpaid, generally one month after the payment due date (or at the filing date of the relevant return for CT and IHT);
further penalties of 5 per cent of any amounts of tax still unpaid at 6 and 12 months; and
suspension of late payment penalties where the taxpayer agrees a time to pay arrangement (where a tax debt is paid over time) with HMRC.
Penalties for late filing of CIS returns include:
a fixed penalty of £100 for failure to submit any return by the filing date;
an additional fixed penalty of £200 if any return is outstanding more than 3 months after the filing date;
penalties of 5 per cent of deductions due for the return period for prolonged failures (over 6 months and again at 12 months); and
higher penalties of 70 per cent of the deductions due where a person fails to submit a return for over 12 months and has deliberately withheld information necessary for HMRC to assess the tax due (100 per cent penalty if deliberate with concealment).
Penalties for late payment of taxes and deductions collected through the PAYE system:
the amount of the penalty will depend on the number of defaults in any 12 month period. The first time the taxpayer defaults, they will not receive a penalty;
a second late payment and any subsequent failures in the default period will attract a penalty of 2 per cent of the tax unpaid rising to 5 per cent of tax unpaid;
further penalties of 5 per cent of any amounts of tax still unpaid at 6 and 12 months; and
late payment penalties will not be charged during an agreed time to pay arrangement with HMRC unless the taxpayer defaults or misuses the arrangement.
The measure includes a right of appeal against all penalties using a common formulation of reasonable excuse. Taxpayers will not have to pay penalties before they can appeal.
It provides a statutory basis for removing late payment penalties where taxpayers have agreed a time to pay arrangement with HMRC. The removal of penalties whilst in a time to pay arrangement was first announced in the 2008 Pre-Budget Report. The use of this provision was brought forward to provide more help for taxpayers struggling to meet their payment obligations and has been applied on a case-by-case basis to penalties under existing legislation with effect from 24 November 2008. The measure will enable HMRC to re-impose penalties in some circumstances where the taxpayer has defaulted on the time to pay agreement.
Review Of HMRC Powers, Deterrents And Safeguards: Payments, Repayments And Debt
General description of the measure
Three separate changes to the current law will be introduced in Finance Bill 2009 to:
introduce voluntary managed payment plans (MPPs). These would allow taxpayers to spread their income tax or corporation tax payments equally over a period straddling the normal due dates;
allow HMRC to collect small debts it is owed through the Pay As You Earn (PAYE) system; and
provide a third party information power requiring companies and businesses to supply HMRC with contact details for people who are in debt to HMRC with whom the Department has lost contact.
These changes have been subject to recent consultation as part of the ongoing work of the Review of HMRC's Powers, Deterrents and Safeguards and Tax Administration to provide a modern framework of law and practice for HMRC.
Current law and proposed revisions
The first change, the introduction of MPPs, would help payers of income tax and corporation tax with their cash flow, by allowing them to spread their payments over a number of installments before and after the normal due date. The plans will be voluntary and taxpayers will be protected from the normal interest and penalties consequences of paying late.
The second change would give HMRC the power to collect tax debts through the PAYE system, allowing debtors with a source of income within PAYE to spread their payments and reducing HMRC's costs. The existing safeguards, limiting the amount that can be collected in this way through the PAYE system and protecting the level of the taxpayer's income, would be preserved.
The third change would require companies or other third parties carrying on a business to disclose the address and contact details of tax debtors to HMRC.
VAT Changes
VAT changes to modernize cross border trading will be introduced over a 3 year period from 1 January 2010 and will include;
Changes to the place of supply rules for cross border supplies of services.
Completion of quarterly EC Sales Lists.
A new electronic VAT refund procedure for cross border supplies of services.
The temporary rate of 15per cent will cease on 31 December 2009, and the standard rate of VAT will return to 17.5 per cent from 1 January 2010. Legislation will be introduced to counter schemes which purport to apply the temporary rate after 31 December 2009.
Cash ISA limit
The existing ISA regulations stipulate that the overall annual subscription limit for an ISA is £7,200 of which up to £3,600 can be saved in a cash ISA with one provider. The remainder can be invested in stocks and shares with either the same or another provider.
From 6 October 2009, the ISA limit will increase to £10,200, up to £5,100 of which can be saved in cash for people aged 50 or over. From 6 October, those aged 50 and over will therefore be able to deposit £10,200 into their 2009-10 ISA, up to £5,100 of which can be in cash.
From 6 April 2010, the ISA limit will increase to £10,200, up to £5,100 of which can be saved in cash for all ISA investors. From 6 April 2010, all savers will therefore be able to deposit £10,200 into their 2010-11 ISA, up to £5,100 of which can be saved in cash.
The ISA regulations will be amended by Statutory Instrument to reflect these changes. From 6 October 2009 the ISA limits for people aged 50 and over will be raised to £10,200, up to £5,100 of which can be saved in cash in the tax year ending on 5 April 2010. The ISA limits will be raised for all ISA investors to the same level from 6 April 2010.
