Out-Law News 2 min. read
22 Mar 2012, 9:25 am
“The reduction in the top rate of tax will no doubt be widely welcomed, not least by individuals relocating to the UK and their employers, who have been struggling with the high cost of equalisation packages and difficulties in attracting overseas talent” said Chris Thomas, a tax expert at Pinsent Masons, the law firm behind Out-Law.com.
Alongside the cut to the highest rate of income tax rate an annual cap on income tax reliefs claimed by individuals was announced by George Osborne. Legislation will be introduced in Finance Bill 2013 to apply a cap on income tax reliefs claimed by individuals from 6 April 2013. The cap will apply only to reliefs which are currently unlimited. For anyone seeking to claim more than £50,000 in reliefs, a cap will be set at 25 per cent of income (or £50,000, whichever is greater). Draft legislation will be published for consultation later this year. The Government has said in its Budget report that it will "explore with philanthropists to ensure that this measure will not impact significantly on charities that depend on large donations".
“We await the details of this measure when the draft legislation is published. However, it is important to remember that many of the key reliefs (such as pension contributions and EIS/VCT reliefs) are already subject to caps and therefore outside the scope of these changes. The main impact would appear to be on gift relief to charities, which would be a surprising target – unless of course this is carved out of the cap” said Chris Thomas.
The Government will also consult on the introduction of a CGT charge on residential property owned by non resident, non natural persons, which is likely to impact many wealthy people who hold UK residential properties in this way. Legislation will be introduced in Finance Bill 2013 with the measure coming into effect in April 2013.
“Many very wealthy people hold UK residential properties in companies for reasons other than tax, such as confidentiality and security, it will be interesting to see whether these individuals decide it is preferable to pay CGT and potentially an annual charge to retain these non tax benefits” commented Janet Hoskin, another tax expert at Pinsent Masons.
This CGT charge is in addition to the higher SDLT charges proposed in today's Budget for high value residential property purchased by companies. The Government also will consult on the introduction of an annual charge on properties over £2 million owned by certain non-natural persons, such as companies. Legislation will be introduced in Finance Bill 2013 with the measure coming into effect in April 2013.
The Chancellor acknowledged in his Budget speech that the additional rate raised "at most a fraction of what we were told – and may raise nothing at all....It is as simple as that.
And thanks to the other new taxes on the rich I’ve announced today, we’ll be getting five times more money each and every year from the wealthiest in our society."
“The 50% income tax rate has been trailed since its introduction as a temporary rate and therefore it is not a particular surprise it has collected little tax given the flexibility most of the higher income earners have over the timing of the receipt of income” said Janet Hoskin.