Other measures announced

Charities, Gift Aid and SA Donate

The existing rule whereby the benefit received by individuals and companies as a result of making donations to charities and community amateur sports clubs in excess of £10,000 is to remain at 5% of the value of the gift, but the monetary cap on the value of such benefits is to increase from 1 April 2011 (companies) and 6 April 2011 (individuals) from £500 to £2,500.

The option to have self assessment repayments donated to charity under the SA Donate scheme is to be withdrawn in respect of:

  • tax returns for the tax year 2011/12 onwards
  • tax returns for years up to and including 2010/11 where the repayment is made on or after 6 April 2012.

The Government is to consult on a scheme to encourage donation of pre-eminent works of art or historical objects to the nation in return for a tax reduction.

From April 2013, a new scheme will allow charities to claim Gift Aid on up to £5,000 of small donations without the need for Gift Aid declarations.

‘Tainted’ charitable donations

The law will be changed to deny tax relief on charitable donations where one of the main purposes of the donation is to receive an advantage for the donor or a connected person directly or indirectly from the charity. These donations will be known as ‘tainted donations’ and there is no monetary limit on the amount of the donation which may be caught by these rules.

The rules will affect charity donations made on or after 1 April 2011 and replace the existing ‘substantial donor’ rules.

New data-gathering powers for HMRC

The Finance Bill 2011 will include measures to ‘modernise’ HMRC’s information powers by introducing a single set of general rules.

Notably, HMRC will be able to specify the format in which data is to be provided so that it may be more easily processed. The Government claims that the latest reforms will:

  • allow HMRC to use bulk information powers to gather specific pieces of information about a group of taxpayers, for use in risk analysis
  • introduce specialist ‘unnamed taxpayer’ powers that are narrowly defined in law to be used in very specific circumstances during a compliance check, such as when it is not clear who the taxpayer is
  • allow HMRC to apply to the tribunal for increased daily penalties where data is not supplied
  • cover data about certain foreign taxes
  • provide a penalty if a person is aware of an inaccuracy when providing information or documents and to correct a minor error in the legislation.

These changes are expected to be introduced from 6 April 2012 and will lead to a significant increase in HMRC’s powers.

Security for PAYE & NICs

Legislation in Finance Bill 2011 will introduce a power to allow HMRC to make regulations enabling them to require a security from employers for PAYE that is seriously at risk. The measure will also introduce a criminal offence for non-payment of a security.

Once the new power is in place, HMRC will use existing powers to make equivalent provision in respect of NICs.

Disguised remuneration

New measures will ensure that income tax and NICs on employment income are not avoided or deferred through the use of trusts or other intermediaries, including Employee Benefit Trusts (EBTs) and Employer Financed Retirement Benefit Schemes (EFRBS).

The legislation will have effect on or after 6 April 2011 and applies to rewards which are earmarked for an individual employee or otherwise made available on or after that date.

In addition, anti-forestalling provisions apply to the payment of sums (including loans) and the provision of readily convertible assets for the purposes of securing the payment of sums (including loans) where the sum is paid or the asset is provided between 9 December 2010 and 5 April 2011 where, if paid or provided on or after 6 April 2011, they would be caught by the legislation.

Mutual Assistance Recovery Directive (MARD)

Legislation will be introduced in Finance Bill 2011 to enable the UK to implement the MARD agreed by EU Finance Ministers during 2010. Under this Directive EU Member States can provide each other with assistance in the recovery of tax debts and duties, which includes service of documents and exchanging information in connection with the recovery of claims.

This measure fulfils the UK’s EU obligations by implementing the directive which provides reciprocal arrangements for recovering and enforcing tax debts and for the exchange of information across the EU.

The Directive becomes fully applicable on 1 January 2012 and the UK legislation transposing the Directive and setting out the detailed rules will come into force on that date.

Online tax calculator

The Government will build an online personal tax calculator by 2012 to allow individuals to estimate how much income tax and NICs they pay.

Move from RPI to CPI

From April 2012 the default indexation assumption for all direct taxes including income tax, NICs, inheritance tax, capital gains tax and ISAs, will move from the Retail Price Index (RPI) to the Consumer Price Index (CPI).

Simplifying the tax system

Ahead of the 2011 Budget, the Office of Tax Simplification (OTS) published its final recommendations for reforming the UK’s tax system.

The OTS, which was tasked with conducting a review of the UK’s tax relief system, has identified 47 reliefs which it says should be abolished and 17 which need to be simplified. It proposes that a further 37 reliefs should be examined in greater detail.

The report recommends the abolition of tax-free luncheon vouchers and relief on late night taxis. Others identified for removal include trade union subscriptions and the business premises renovation allowance.

Among those it suggests simplifying are: Entrepreneurs’ Relief; principal private residence relief; real estate investment trusts; and the enterprise investment scheme. The OTS also called for a wholesale review of inheritance tax and capital gains tax.

In the Budget, the Chancellor agreed to abolish 43 ‘complex reliefs’ but the most significant announcement for the long-term was the Government’s intention to consult on the possibility of ‘merging’ national insurance and income tax in future years.

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