On 6 December 2011, HM Treasury published draft legislation for Finance Bill 2012 for consultation. Budget day will be on 21 March 2012.
Most of the published material had been the subject of previous announcements, but it may be helpful to summarise developments which might affect employee share schemes, participants in them and the entities which operate them.
- HMRC has responded to the consultation on tax avoidance schemes. Although draft legislation to implement the proposed measures on high risk tax avoidance schemes will not be included in Finance Bill 2012, the Government has undertaken to continue discussing the issues with interested parties (such as professional advisers and the TUC) and will provide an update in the 2012 Budget.
Under the consultation, the most "contrived and aggressive" tax avoidance schemes would be added to an HMRC list, users would have to disclose the use of listed schemes and an additional tax charge would be imposed to counter the cash flow advantage to the taxpayer of retaining the disputed tax until the matter is resolved.
- The Government also announced that it will introduce a new scheme (Seed Enterprise Investment Scheme (SEIS)) from April 2012 to encourage investment in new start-up companies.
SEIS will provide an enhanced version of the existing Enterprise Investment Scheme:
- Income tax relief of 50% for individuals who invest in shares in qualifying companies, with an annual investment limit of £100,000.
- Capital gains tax exemption on gains realised on disposals of assets in 2012-13 and invested through SEIS in that year.
There is to be a cumulative investment limit of £150,000 for the company, whose total assets, before investment, must be below £200,000.
The 50% rate of relief is more generous than many expected, since an earlier proposal was for 40% tax relief. In contrast, the investment limits may seem rather less generous than anticipated. The Government also confirmed that the 50% rate of relief would be available irrespective of the investor's marginal income tax rate.
- For the tax year 2012-13, the capital gains tax annual exempt amount will be frozen at the 2011/12 level (£10,600 for individuals and personal representatives and £5,300 for trustees). The government has also confirmed that legislation will be introduced in Finance Bill 2012 to increase the annual exempt amount in future years automatically in line with the consumer price index.
The income tax personal allowance for 2012-13 will be increased from £7,415 in 2011-12 to £8,105. The basic rate limit will be reduced from £35,000 to £34,370. The additional rate threshold will remain at £150,000.
For 2012-13, the employee/primary Class 1 NICs upper earnings limit will remain at £817 per week and the employer/secondary threshold will be increased from £136 to £144 per week. There are no changes to the rates of NICs.
The ISA overall limit will be increased from £10,680 to £11,280 and the cash limit will be increased from £5,340 to £5,640).
Merry Christmas and Happy New Year!
