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Emergency Budget June 2010

Emergency Budget June 2010. GARY ASHFORD DIRECTOR HEAD OF TAX RISK, DISPUTES &INVESTIGATIONS. “A Budget for the good of the country”. “Where the rubber really hits the road”. The end of the road…. Emergency Budget June 2010. The end of the road….. The old fiscal rules

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Emergency Budget June 2010

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  1. Emergency Budget June 2010 GARY ASHFORDDIRECTORHEAD OF TAX RISK, DISPUTES &INVESTIGATIONS

  2. “A Budget for the good of the country”

  3. “Where the rubber really hits the road”

  4. The end of the road…..

  5. Emergency Budget June 2010 • The end of the road….. • The old fiscal rules • Golden rule missed by £485 bn

  6. Emergency Budget June 2010 • Coalition principles • Tax system – simpler, greener, fairer

  7. Emergency Budget June 2010 • Coalition team (spot Cameron!)

  8. Emergency Budget June 2010 • The UNAVOIDABLE budget to: • pay for the past • plan for the future “Tough but fair”

  9. Regrettable Quotes • David Cameron – Asked what his favourite joke was replied “Nick Clegg”

  10. Regrettable Quotes • Nick Clegg – Conservatives align themselves with a “bunch of nutters”

  11. Emergency Budget June 2010 • Growth March 2010 OBR June 2010 • 2009-10 +1.25% +1.2% • 2010-11 +3.25% +2.3% • 2011 onwards +3.5% +2.8%

  12. Emergency Budget June 2010 • UK’s economic 10 year performance

  13. Emergency Budget June 2010 • Government borrowing estimates

  14. Emergency Budget June 2010 • How to rebalance the economy? • 77% cuts • 23% tax increases

  15. Emergency Budget June 2010 • Tax take

  16. Emergency Budget June 2010 • Government spending

  17. Regrettable Quotes • “[The Green Belt] It’s a Labour achievement and we intend to build on it” – John Prescott, 2002

  18. Emergency Budget June 2010 • Cuts in Public Spending - General • Freeze in civil list payments • 2 year public sector pay freeze (earnings over £21k p.a.) • Below £21k - £250 p.a. increase • Increase in state pension age accelerated • Switching to CPI for price indexation of all benefits

  19. Emergency Budget June 2010 • Cuts in Public Spending - Welfare • Tax credits reduce where income > £40k p.a. • Child benefit frozen for 3 years • Resetting of housing benefit • Overall saving £11bn p.a. by 2014

  20. Emergency Budget June 2010 • Euro • No entry in this Parliament • Treasury “Euro Preparation Unit” scrapped

  21. Emergency Budget June 2010 • Sale of Public Assets • Student loan book • Tote • NATS • High Speed One

  22. Emergency Budget June 2010 • Chamber Budget Submission - cuts • Public sector wage bill freeze for two years • Reform of public sector pensions • Zero spending review and no ring-fenced budgets • Avoid cuts to capital investment

  23. Regrettable Quotes • “Our enemies are innovative and resourceful, and so are we. They never stop thinking about ways to harm our country, and neither do we” – George W Bush, 2004

  24. Emergency Budget June 2010 • Corporation Tax • Main rate down 1% every year from April 2011 • 2011 – 27% • 2012 – 26% • 2013 – 25% • 2014 – 24% • 5th lowest in the G20, behind Canada, Russia, Saudi Arabia and Turkey.

  25. Emergency Budget June 2010 • Corporation Tax • Small companies rate down from 21% to 20%, reversing a planned increase • Effective April 2011 • “This will benefit 850,000 companies”

  26. Emergency Budget June 2010 • Capital Allowances • Main pool writing down allowance reduced 2% to 18% • Special rate pool writing down allowance reduced 2% to 8% • Hybrid rates for accounting periods spanning April 2012

  27. Emergency Budget June 2010 • Capital Allowances • Annual Investment Allowance reduced from £100,000 to £25,000 • A delay in the reduction to April 2012 to encourage investment

  28. Emergency Budget June 2010 • Capital Allowances • 100% writing down allowance for expenditure on zero-emission goods vehicles

  29. Emergency Budget June 2010 • Research and Development • Repeats 2009 Pre-Budget Report proposal • Intellectual property no longer has to be owned by company undertaking R&D • Any expense incurred in accounting period ending on or after 9 December 2009 • Dyson review

  30. Regrettable Quotes • “I think there is a world market for maybe five computers” - Thomas Watson, Chairman of IBM, 1943

  31. Emergency Budget June 2010 • National Insurance Contributions • Employee rates will rise as announced by 1% • Employer contributions will be payable at a level £21 higher than indexation would reach • Effective April 2011 • Exact figures will be provided when September’s RPI is known

  32. Emergency Budget June 2010 • National Insurance Holiday • Targeted at regions outside of London, South East and the East • New qualifying businesses will not have to pay the first £5,000 of Class 1 employer NIC • For the first 10 employees

  33. Emergency Budget June 2010 • National Insurance Holiday • Each holiday will last the first 52 weeks of employee’s employment, within a three year qualifying period • Maximum of £50,000 relief available • Scheme due to start no later than September, new businesses set up from 22 June will benefit

  34. Emergency Budget June 2010 • Banking Levy • To encourage banks to move to less risky funding profiles • Set at 0.07% and expected to raise over £2 billion annually • Agreement on joint implementation with French and German governments

  35. Regrettable Quotes • “We don’t like their sound, and guitar music is on its way out” – Decca Recording rejecting The Beatles, 1962

  36. Emergency Budget June 2010 • Income Tax - Personal Allowances • Increased by £1,000 to £7,475 • Higher rate taxpayers will not benefit from increase in personal allowance • The exact figures will not be confirmed until September’s RPI is known • Effective from 6 April 2011

  37. Emergency Budget June 2010 • Capital Gains Tax • 18% up to basic rate band (£37,400) • 28% thereafter • Tax on Trust Capital Gains will be 28% • Gains calculated after deducting losses • Annual exemption remains at £10,100

  38. Emergency Budget June 2010 • Capital Gains Tax - Entrepreneurs Relief • Qualifying Gains – trading business or shares in trading company • Lifetime relief 6 April – 22 June 2010 is £2M • Lifetime relief from 23 June 2010 will be £5M • If relief of £1M or £2M previously used there is now an additional £4M or £3M

  39. March 2010 – Broadband Landline Duty of 50p per month for each landline phone to fund the roll out of “superfast broadband” Due to be introduced from 1 October 2010 ABOLISHED

  40. Regrettable Quotes • “We lost because we didn’t win” – Ronaldo

  41. March 2010 - Reminders Furnished holiday lettings rules withdrawn from 6 April 2010 ABOLISHED Old rules now potentially apply to EU properties as well as UK

  42. Emergency Budget June 2010 • Furnished holiday lettings • Available on commercial basis for 140 days, let for 70 • Offset losses against total income • Capital allowances claims • Capital gains tax advantages • Inheritance tax advantages

  43. Emergency Budget June 2010 • Individual Savings Accounts • Annual investment limits previously increased to £10,200, of which £5,100 can be in cash • Limits will now be increased in line with the Retail Prices Index from the 2011-12 tax year onwards

  44. Emergency Budget June 2010 Annuity? • Requirement to purchase an Annuity by the age of 75 will cease from April 2011 • Consultation to follow on the exact changes • Also effective for IHT (35% tax charge on interim v 82%)

  45. Emergency Budget June 2010 Higher Rate Pension Tax Relief • Previous changes to be consulted on • No changes to anti-forestalling regime - yet • Possible reduction in annual allowance to £30,000 from £45,000 as alternative

  46. Regrettable Quotes • “Stocks have reached what looks like a permanently high plateau” – Irving Fisher, Professor of Economics, Yale University, 1929

  47. Emergency Budget June 2010 • VAT • Standard rate of VAT increased from 17.5% to 20% from 4 January 2011 • Flat rate scheme percentages increased to reflect rise • “Increased in one step, rather than staggered, to minimise costs”

  48. Emergency Budget June 2010 • VAT • HMRC believe that the 2 recent VAT changes have prepared businesses for the compliance costs of familiarisation, accounting and system changes and that these should not exceed £300m • 20% VAT rate consistent with EU average (20.06%)

  49. Emergency Budget June 2010 • VAT - Anti-forestalling legislation • For VAT invoices issued before 4 January 2011 for goods and services provided on or after that date • Outside of normal commercial practice • To a connected person • You provide or arrange funding of the payment • HMRC will operate a ‘light touch’ in dealing with genuine errors

  50. Emergency Budget June 2010 Insurance Premium Tax • Standard Rate increased from 5% to 6% • Applies to most general insurance,property,motor and medical but not life insurance. • Higher rate increased from 17.5% to 20% • Applies to travel insurance and certain insurance relating to motor vehicles and some consumer goods • Effective in respect of premiums paid on and after 4 January 2011

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