Some thoughts from our team on the budget

Equitable Life Annuitants

Philippa Hann, financial services litigation specialist, said:

“Clarke Willmott always held the view that to exclude annuitants who purchased their Equitable Life with-profits annuities before 1 September 1992 was an arbitrary and unfair decision. This group of elderly annuitants suffered as much by way of income cuts, upon the failure of Equitable Life, as any other. This group comprise some of the oldest annuitants and the fact that the ex-gratia payments will not be paid until 2014-15 means that some are sadly going to die before they receive a penny by way of recompense for their undoubted loss.”

Investment Risk

Philippa Hann, financial services litigation specialist, said:

“The Bank of England maintaining historically low interest rates will undoubtedly continue to have a knock on effect on savers. In order to beat inflation, which the budget recognises is likely to deviate from its 2% target, the investments they may find themselves recommended may come with potentially increased risk exposure – particularly as stamp duty has been abolished on growth areas (AIM etc).”

Tax Avoidance

Laura Hazell, financial services litigation specialist, said:

“Tough anti-avoidance measures will be introduced with a view to plugging £1 billion of the annual £5 billion tax-gap attributed to tax avoidance. HMRC will now have vastly increased resources and powers. These include police-like criminal asset recovery powers, greater use of charging orders and the ability to retrieve up to £17,000 per year via an individual’s tax code (up from £3,000). The Finance Bill 2013 will introduce the General Anti-Abuse Rule and Targeted Anti-Avoidance Rule which will enable counteraction of tax advantages arising from tax avoidance schemes. ‘Loss buying’ and the use of LLPs to disguise employment relationships and artificial allocations of profit or loss to obtain tax advantages will be tackled by new measures. Retrospective legislation will be introduced to tackle aggressive Stamp Duty Land Tax avoidance schemes. Legislation will be introduced to amend the tax rules relating to the deduction of liabilities owed by a deceased upon their death from their estate. This follows exploitation of the current rules by some tax avoidance schemes. Further, agreements have been entered into with the Isle of Man, Guernsey and Jersey, presumably to address avoidance schemes like K2 which have featured heavily in the press. The government will also consult on whether to ‘name and shame’ promoters of abusive tax avoidance schemes. It seems that now, more than ever, avoidance is coming into line with evasion. Some clarification is required for advisers and individuals alike as to where the line will be drawn between acceptable tax planning which takes account of tax breaks and tax planning which will be deemed to abuse them.”

Tax – Capital Gains

Carol Cummins, Private Client Tax & Advisory Specialist, said:

“This budget strongly supports employee share ownership through employee share scheme incentives. Coming into effect from 2014/15 incentives for wider employee share ownership include the introduction of a £50,000 capital gains tax exemption on qualifying disposals of a controlling interest in a business into an employee owned structure. This is on top of generous entrepreneurs relief and the measures announced in the draft Finance Bill in relation to share schemes.”

Business – Creative Industries

Carol Cummins, Private Client Tax & Advisory Specialist, said:

“Following on from the announcements in the 2012 budget the Creative Industry Tax Credits come into effect from 1 April 2013. The reliefs apply to companies and not to partnerships or LLPs. They give a deduction for normal allowable expenditure together with a further tax deduction for qualifying expenditure integral to pre and post production converting a tax loss into a refundable tax credit. HMRC have set up a Creative Industries Team to receive and assess claims for relief.“