Tax

In general, this year's budget was characterized by the current economic climate, in particular concerning the budget deficit and the public sector borrowing figures. The Chancellor, however, proclaimed to see some positives in the middle distance and had a number of "incentives" to encourage individuals and businesses. Some of the more significant proposed measures are summarised below.

Income Tax

• With effect from 6 April 2010:
  • an individual's taxable income over and above £150,000 will be taxed at 50%; and
  • the basic personal allowance for income tax will be gradually reduced to nil for individuals with an "adjusted net income" above £100,000.

• There will also be new powers to vary the income tax rates for the charges applicable to registered pension schemes.

• With effect from 6 April 2010 non-UK resident individuals will no longer be able to qualify for UK personal allowances and reliefs from income tax solely by virtue of being Commonwealth citizens, on the basis that this is not compliant with the Human Rights Act 1998.

• For reclaims of overpayments of income tax, capital gains tax and corporation tax, made on or after 1 April 2010 and where there is currently no other statutory route, there will be a statutory claim procedure in place. It will no longer be necessary for the overpayment to have been as a result of a mistake made in a tax return and to have been made under an assessment.

• From 6 April 2011, tax relief on pension savings for individuals with taxable income of £150,000 or more will be restricted. Relief will gradually be tapered so that for those earning over £180,000, relief will be restricted to the basic rate of IT. Additional legislation will be introduced to prevent those potentially affected by this restriction from increasing their pension contributions on or after 22 April 2009 to take advantage of the greater tax relief available.

Charities

• One of the thresholds at which an individual donating to a charity becomes a "substantial donor" to that charity will be increased. The relievable gifts threshold of £100,000 over a cumulative period of six years will be increased to £150,000 with effect from 23 April 2009. The annual threshold of £25,000 will remain the same.
  

Stamp Duty Land Tax ("SDLT")

• The SDLT threshold for individuals purchasing residential property will continue to be £175,000 up to and including 31 December 2009. After this date it will revert to £125,000.
  

Venture Capital Schemes

• A number of improvements will be made to the Venture Capital Schemes.
  For the Enterprise Investment Scheme:
  • the time limits concerning the use of money invested will be relaxed (this will also apply to the Corporate Venturing Scheme and the Venture Capital Trust Scheme);
  • the link to other shares of the same class issued at the same time as qualifying shares will be removed;
  • the period in which the relief may be carried back will be extended and it will be possible to carry back the full amount subscribed; and
  • an anomaly in the law will be corrected whereby currently a charge to CGT may occur on a share for share exchange where such a gain would not normally be charged.
    

Trading Loss Carry Back

• For broadly the next two years, the period for which businesses can carry back current trading losses (of up to £50,000) to set against the profits of previous years will be extended from one year to three years.
  

VAT

• The standard rate of VAT will revert from 15% to 17.5% from 1 January 2010.

• The procedure for opting to tax land and buildings will be simplified by reducing the number of taxpayers who require formal permission from HMRC before opting to be taxed. This will be achieved by replacing the existing automatic permission condition ("APC") with a new APC, which should apply to more taxpayers, from 1 May 2009. Two related extra-statutory concessions will be withdrawn, and one regularised, on 30 April 2010.

If you would like more information about any of the above or any other aspect of this year's budget, please contact Glen Atchison or David Scott on 020 7667 5000 or via our website.