UK Budget 2011

Income tax and National Insurance Contributions

Income tax rates and thresholds (including personal allowance) – All income tax

rates for 2011-12 will remain at their 2010-11 levels. As announced at the June Budget 2010,

the income tax personal allowance for those aged under 65 will increase by £1,000 in cash

terms to £7,475 in 2011-12. There will also be a £2,400 cash decrease in the basic rate limit,

taking it to £35,000. This means that the income tax higher rate threshold, which equals the

sum of the personal allowance and basic rate limit, will be £42,475. (Finance Bill 2011)

NICs rates and thresholds – Under inherited plans for 2011-12, the main and

additional rates of NICs will increase by one per cent. The primary threshold will increase by

£24 per week above the Retail Prices Index (RPI), or £29 in cash terms, to £139 per week. As

announced at the June Budget 2010, the secondary threshold for employer NICs will increase by

£21 per week above RPI indexation, or £26 in cash terms, to £136 per week. The upper earnings

and proﬁts limits for NICs will be reduced by £1,400 so that they remain aligned to the higher

rate threshold.

In 2012-13, the personal allowance is assumed to increase for those aged under 65 by

£630 in cash terms, taking it to £8,105. There will be a corresponding £630 decrease in the

basic rate limit, taking it to £34,370. The higher rate threshold will therefore remain unchanged

in 2012-13 at £42,475. The personal allowance will increase from 2013-14 by at least the

equivalent of the RPI, until the Government’s goal of increasing the personal allowance to

£10,000 is achieved. (Future Finance Bills)

Income tax and NICs reform – The Government will consult in 2011 on the options,

stages and timing of reforms to integrate the operation of income tax and NICs.

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) – The

Government will reform the EIS and VCT, raising the rate of EIS income tax relief to 30 per cent

from April 2011. From April 2012 the Government will increase the annual EIS investment limit

for individuals to £1 million, increase the qualifying company limits to 250 employees and gross

assets of £15 million (EIS and VCT), and increase the annual investment limit for qualifying

companies to £10 million (EIS and VCT). The Government will consult on options to provide

further support for seed investment, simpliﬁcation of the EIS rules by removing some restrictions

on qualifying shares and types of investor and refocusing both EIS and VCTs to ensure they

are targeted at genuine risk capital investments. Feed in tariffs businesses will be added to the

excluded activities list. All changes are subject to EU State aid clearance.

Future of the Community Investment Tax Relief (CITR) – The Government will

renotify CITR to the European Commission and consult in advance of renotiﬁcation on how the

scheme can be made more effective.

Review of non-domicile taxation – Following the announcement in the June Budget

2010, the Government will consult in June 2011 on the detail of reforms to the taxation of

resident non-domiciled individuals.

Statutory residence test – The Government will consult in June 2011 on the

introduction of a statutory tax residence test for individuals to give greater clarity and certainty

for taxpayers.

Furnished holiday lettings (FHL) – From April 2011, new tax rules for FHL will take

effect, so that loss relief may only be offset against income from the same FHL business. Letting

and availability thresholds will be increased from April 2012.

Taxation of savings

ISA limits – From April 2012, the CPI will be used as the default indexation assumption

for ISA limits.

Junior ISAs – The Government announced in October 2010 that it will introduce new

tax-advantaged accounts for saving for children, called Junior ISAs. All UK resident children aged

under 18 who do not have a Child Trust Fund will be eligible for Junior ISAs, and the accounts

are expected to be available from autumn 2011. Draft Regulations setting out further detail will

be published in the week commencing 28 March 2011, alongside the introduction of Finance

Bill 2011. The Government is also working with charities and others to identify how children in

care can be supported through Junior ISAs.

2.50 Qualifying Time Deposits (QTD) – The Government will change the way in which the

tax due on income from QTD accounts is collected, by bringing these accounts within the Tax

Deduction Scheme for Interest from 2012-13.

Taxation of pensions

Restricting pensions tax relief – On 14 October 2010 the Government announced

that, from April 2011, the annual allowance for tax-privileged pension saving will be £50,000

and that, from April 2012, the lifetime allowance will be £1.5 million. On 3 March 2010, in

response to an informal consultation, the Government announced that individuals with annual

allowance charges over £2,000 will be able to meet these from their pension beneﬁt, with

schemes paying the tax at the point the charge arises.

Pensions annuitisation – The June Budget 2010 announced that the effective

requirement to annuitise by age 75 would be removed from April 2011. Draft clauses were

published on 9 December 2010 following consultation on the details of the change during

summer 2010.

Pensions taxation: enabling retirement savings programme – As announced

at the June Budget 2010 the Government will remove an unintended tax charge that would

arise for the National Employment Savings Trust, and prevent other unintended pensions tax

consequences that might arise due to the interaction of existing tax rules with the introduction

of automatic enrolment duties from 2012.

Reduction in the contracting out rebate – As announced by the Secretary of State

for Work and Pensions in February, the level of the contracted out rebate for Deﬁned Beneﬁt

pension schemes will be set at 4.8 per cent from April 2012.

Capital gains tax

Capital gains tax: annual exempt amount – The annual exempt amount for capital

gains tax will increase in line with statutory indexation to £10,600, with effect from 6 April

2011. The Government will simplify the process for setting the exempt amount for years where

indexation does not require an increase. From April 2012 the CPI will be used as the default

indexation assumption for capital gains tax annual exempt amounts.

Entrepreneurs’ relief – From 6 April 2011, the Government will increase to £10 million

the lifetime limit on capital gains qualifying for entrepreneurs’ relief.

Single payment scheme and capital gains tax roll-over relief – Following changes

to the underlying EU legislation, the Government will restore entitlements under the EU Single

Payment Scheme to the list of assets that qualify for capital gains tax roll-over relief.

Inheritance tax

Inheritance tax: thresholds – The inheritance tax nil rate band is frozen until April

2015, after which point the CPI will be used as the default indexation assumption.

Tax credits and beneﬁts

New Enterprise Allowance – As announced on 5 January 2011 by DWP, the New

Enterprise Allowance scheme will be extended to provide support nationwide to individuals

entering self-employment who have been unemployed for more than six months. Under the

scheme, claimants will be able to access mentoring support, loans and an Allowance payment

for up to six months.

Support for Mortgage Interest (SMI) – The waiting period for new working-age

SMI claimants will remain at 13 weeks for one year from January 2012. The limit on eligible

mortgage capital for working age SMI claimants will remain at £200,000 for one year from

January 2012.

Housing Beneﬁt: amendment to ten per cent reduction for Jobseeker’s

Allowance (JSA) claimants – As announced by DWP as part of the Welfare Reform Bill 2011,

Government will not take forward the planned 10 per cent reduction in Housing Beneﬁt for

long-term JSA claimants.

Housing Beneﬁt: transitional arrangements for Local Housing Allowance (LHA)

claimants – As announced in the June 2010 Budget, LHA rates will be set at the 30th percentile

of local market rents and LHA rates will be capped at £250 per week for a one bedroom

property, £290 per week for a two bedroom property, £340 per week for a three bedroom

property and £400 per week for four bedrooms or more. As announced by DWP in November

2010, these measures will now come into effect from April 2011 for new claimants, and January

2012 for existing claimants.

Disability Living Allowance (DLA) – As announced by DWP at the introduction of the

Welfare Reform Bill 2011, the Government will no longer remove the mobility component of

DLA for people in residential care in October 2012. Mobility provision for people in residential

care will be reviewed as part of the wider reform of DLA to be introduced from 2013-14.

Corporate taxes

Corporation tax

Corporation tax: main rate – The Government will reduce the main rate of corporation

tax from 28 per cent to 26 per cent from April 2011. The rate will then be reduced by a further

1 per cent in each of the following three years, and as a result will be 23 per cent by 2014.

Corporation tax: small proﬁts rate – As announced in the June Budget 2010, from

1 April 2011 the small proﬁts rate of corporation tax will fall from 21 per cent to 20 per cent.

Taxation of foreign branches – As announced in the June Budget 2010, the

Government will legislate for the reform of the taxation of foreign branches. This will provide an

opt-in exemption from corporation tax on the proﬁts of foreign branches of UK companies. The

new regime will be available for accounting periods beginning on or after the date Finance Bill

2011 receives Royal Assent.

Interim improvements to Controlled Foreign Company (CFC) rules – The

Government will introduce a package of improvements to the current CFC rules for accounting

periods beginning on or after 1 January 2011 to make the rules easier to operate. The proposals

reﬂect the outcome of consultation and include extending the three-year temporary exemption

so that it is also available to previously UK-headed groups if they return to the UK.

Full CFC reform – New CFC rules will be introduced in 2012. The new rules will include

a ﬁnance company partial exemption that in broad terms will result in an effective UK tax rate

of one quarter of the main rate on proﬁts derived from overseas group ﬁnancing arrangements

(equivalent to 5.75 per cent by 2014). A consultation document with details on the new CFC

rules will be published in May 2011.

Patent Box – As announced on 29 November 2010, the Government conﬁrms that it will

introduce a reduced 10 per cent rate of corporation tax for proﬁts arising from patents, effective

from 1 April 2013. A consultation document will be published in May 2011.

Capital allowances: writing down allowances – As announced in the June Budget

2010, writing down allowances will be reduced to 18 per cent from April 2012.

Capital allowances: annual investment allowance – As announced in the June

Budget 2010, the Annual Investment Allowance will be reduced to £25,000 from April 2012.

Capital allowances for Enterprise Zones – The Government will consider, in a limited

number of cases, the scope for introducing enhanced capital allowances to support Enterprise

Zones in assisted areas, where there is a strong focus on high value manufacturing.

Capital allowances: feed-in tariffs and Renewable Heat Incentives – The

Government will consult in May 2011 on the appropriate capital allowances treatment of

expenditure on plant and machinery that attracts tariffs under the feed-in tariffs or Renewable

Heating Incentives schemes.

Update of enhanced capital allowance scheme for energy saving technologies –

The list of designated energy saving technologies qualifying for enhanced capital allowances will

be updated during summer 2011, subject to agreement with the European Commission.

Capital allowances: short life assets – The disposal time limit on the capital allowances

short life assets election will be extended from four to eight years.

Business premises renovation allowance – The Government will extend the Business

Premises Renovation Allowance for a further ﬁve years from 2012.)

Research and Development (R&D) tax credits – Following consultation on the

effectiveness of the schemes, the Government will increase the SME scheme rate of relief to 200

per cent from April 2011 and 225 per cent from April 2012, subject to EU State aid approval.

It will simplify the schemes, including removing the Pay As You Earn (PAYE)/NICs cap on the

amount of payable credit that can be claimed, removing the minimum expenditure rules and

allowing relief through the large company scheme for subcontracted activity which forms part of

a wider R&D project. The Government will publish a response to the consultation in May 2011,

which will include a consultation on the detail of proposed changes. Vaccines Research Relief

will be reduced to 20 per cent for SMEs from April 2011 and not available to SMEs from April

2012.

Film tax relief: EU State aid renotiﬁcation – The Government will renotify ﬁlm tax

relief to the European Commission.

Corporate capital gains simpliﬁcation: capital losses – This measure was announced

on 9 December 2010, and will have effect in relation to the deduction of a ‘pre-entry’ capital

loss on and after the date that Finance Bill 2011 receives Royal Assent. It will make it easier for a

group to integrate an acquired business into its existing operations without losing relief for any

capital losses incurred by the acquired business. The changes are also intended to reduce the

overlap with an anti-avoidance rule that prevents capital loss buying.

Corporate capital gains simpliﬁcation: value shifting – This measure, announced on

9 December 2010, provides a shorter and clearer value shifting rule, and restricts the scope of

the rule to instances where companies have entered into tax-motivated arrangements intended

to secure a reduction in a charge to corporation tax on chargeable gains. It also eliminates the

need for companies to retain records of depreciatory transactions beyond six years.

Corporate capital gains simpliﬁcation: degrouping charges – This measure was

announced on 9 December 2010, and will have effect where companies leave a group on and

after the date that Finance Bill 2011 receives Royal Assent. It will remove a potential degrouping

charge where a gain on the disposal of the company is otherwise exempt from tax. It will also

reduce the potential for double taxation.

Associated companies – The Government conﬁrmed in the June Budget 2010 that it

will proceed with the reform of the associated company rules for the small proﬁts rate. From

1 April 2011 the rules will be simpliﬁed to ensure that companies can only be associated,

through an attribution of rights between connected individuals, when substantial commercial

interdependence exists between the companies concerned.

Business rates

Business rate discount in Enterprise Zones – The Government will offer up to 100 per

cent discount on business rates to businesses located in Enterprise Zones for ﬁve years.

Small business rate relief holiday: extension – The small business rate relief holiday

will be extended by one year from 1 October 2011.

Taxation of the ﬁnancial services sector

Bank Levy – The Government announced its intention to introduce the Bank Levy in

the June Budget 2010. The levy came into effect on 1 January 2011. On 8 February 2011,

the Government announced an increase in the levy rates. The full levy rates are 0.05 per cent

from 1 January 2011 until 28 February 2011, 0.1 per cent from 1 March 2011 until 30 April

2011, 0.075 per cent from 1 May 2011 until 31 December 2011 and 0.078 per cent thereafter.

New bank capital instruments – The Government will set up an industry working

group from April 2011 to explore any tax issues associated with the development of new bank

capital instruments in light of the Basel III proposals and, if necessary, will legislate in 2012.

Tax transparent fund – The Government will legislate to introduce a tax transparent

fund vehicle from 2012. The Government will consult in June 2011 on the regulatory and tax

aspects of the regime.

Undertakings for Collective Investments in Transferable Securities (UCITS)

IV – Following the consultation on transposing the UCITS IV Directive, the Government will

introduce legislation to enable UCITS funds to be managed from the UK without adverse tax

consequences. Regulations will also be introduced to amend the Genuine Diversity of Ownership

conditions for Master/Feeder structures.

Offshore Funds amendments – As announced on 28 February 2011, the Government is

consulting on amendments to certain elements of the offshore funds regime.

Protection life insurance – The Government will introduce legislation to remove

protection business from the ‘income minus expenses (I-E)’ life tax system designed to tax

investment type business and align it with the tax treatment of other trading entities. The

change will be effective from 1 January 2013.

Solvency II and the taxation of life insurance companies – The Government will

legislate on the new post-Solvency II life insurance tax regime. The new regime will deal with

essential adjustments arising from Solvency II and at the same time deliver signiﬁcant changes

to create a simpler and more stable tax basis better aligned with the taxation of companies

generally.

General insurance Claims Equalisation Reserves (CERs) – The Government will look

to industry to give a robust justiﬁcation for continuing the CERs tax relief. Dependent on this,

the Government intends to legislate to retain the tax relief. The case for CERs will be reviewed

again in the light of future insurance accounting developments currently expected in 2014.

Stop loss and quota share insurance – The Government will consult with industry

on proposals to amend the timing of the tax deduction for Lloyd’s member-level stop-loss

premiums.

Islamic ﬁnance – The Government will make regulations to introduce direct tax rules

for sharia-compliant variable loan arrangements and derivatives in 2011, following informal

consultation with industry representatives.

Tax consequences of the Financial Services and Markets Act (FSMA) 2000

(Regulated Activities)(Amendment) Order 2010 – The FSMA 2000 (Regulated Activities)

(Amendment) Order 2010 which came into force on 24 February 2010 unintentionally created

a number of potential adverse consequences for the tax and regulatory treatment of some types

of debt securities. The Government will legislate to ensure that no unintended tax consequences

arise for the potentially affected debt securities between 24 February 2010 and the date on

which the remedying amendments came into force.

Modernisation of investment trust companies – The Government will legislate to

enable the implementation of a modernised regime for investment trust companies.

Life insurance apportionment rules – The Government will introduce legislation to

amend the current apportionment rules to modify their operation in certain circumstances.

Stamp Duty Reserve Tax (SDRT): changes to “Schedule 19” – The Government

will legislate to widen the current deﬁnition of when an investment in an underlying collective

investment scheme is classed as an ‘exempt investment’ under the SDRT Schedule 19 rules.

Oil and gas taxes

The rate of the Supplementary Charge levied on proﬁts from UK oil and gas production will increase to 32 per cent from midnight on 24 March 2011.

As part of the fair fuel stabiliser, if in future years the oil price falls below a set trigger

price on a sustained basis, the Government commits to reduce the Supplementary Charge back

towards 20 per cent on a staged and affordable basis while prices remain low. The Government

considers that a trigger price of $75 per barrel would be appropriate, and will set a ﬁnal level

and mechanism after seeking the views of oil companies and motoring groups. Recognising

the importance of continued investment in the North Sea, including in marginal gas ﬁelds, the

Government will also consider with the industry the case for introducing a new category of ﬁeld

that would qualify for ﬁeld allowance.

Oil and gas decommissioning tax relief – The Government will introduce legislation

to restrict tax relief for decommissioning expenditure to the 20 per cent rate of Supplementary

Charge. There will be no restrictions to decommissioning relief below this level for the lifetime of

this Parliament. The Government commits to work with the industry with the aim of announcing

further, longer term, certainty on decommissioning at Budget 2012.

Oil and gas technical measures – The Government will introduce legislation to clarify

the scope of the Intangible Fixed Asset Regime as it applies to oil and gas companies operating

in the UK and on the UK Continental Shelf.

Oil and gas minor measures – As announced when draft legislation was published in

December 2010, the Government will introduce legislation to make minor changes to the tax

regime for oil and gas companies that operate in the UK or on the UK continental shelf.

Other corporate taxes

Distributions working party – Legislation was introduced in Finance (No.3) Act 2010

covering the tax treatment of company distributions received in a narrow set of circumstances.

An industry working group will assist HM Revenue & Customs (HMRC) in identifying and

resolving the areas of difﬁculty. Issues will be addressed by publishing comprehensive guidance

or enacting legislation. If legislation is required, the Government will consult on draft clauses in

the autumn.

Amendments to the tax treatment of ﬁnancing costs and income – The

consultation on the debt cap has identiﬁed practical issues with the application of the rules,

such as the de minimis amount, that need to be addressed. Following further consultation in

June 2011, the Government will introduce legislation to allow businesses to more easily apply

the debt cap rules. (Finance Bill 2012)

Amendments to the loan relationship and derivative contract disregard

regulations – The Government will introduce secondary legislation in 2011 to implement

changes to the Disregard Regulations. These changes will align tax treatment with the economic

position for companies which use loan relationships and derivative contracts to reduce their

exposure to foreign exchange ﬂuctuations in certain circumstances.

Leasing into tonnage tax – Draft legislation was published on 9 December 2010 to

equalise, with effect from 1 January 2011, the rates of writing down allowances for capital

allowance purposes for ships leased into UK Tonnage Tax with assets held outside Tonnage Tax.

Tax and accounting leases: changes to accounting standards – As announced on

9 December 2010, the Government will introduce legislation to ensure that the rules governing

the treatment of leases for tax purposes continue to apply as now in the event of the adoption

of a new accounting standard.

Organisation for Economic Cooperation and Development (OECD) Transfer

Pricing Guidelines – As announced on 9 December 2010, the Government will introduce

legislation, effective from 1 April 2011, which will update the deﬁnition of “transfer pricing guidelines” to refer to the most recent version of the OECD Transfer Pricing Guidelines

Indirect taxes

Gambling duties

Gaming duty revalorisation – Gaming duty bands will increase in line with the RPI for

accounting periods starting on or after 1 April 2011.

Amusement machine licence duty (AMLD) revalorisation – All rates of amusement

machine licence duty will be increased in line with the RPI from 4pm on 25 March 2011.

(Finance Bill 2011)

AMLD reform – paving legislation – As announced in December 2010, the

Government will reform the taxation of gaming machines and introduce a machine games

duty. The Government intends to consult on the design of the new tax in May 2011. Subject to

legislation in Finance Bill 2012, implementation will follow in early 2013. (Finance Bill 2011 for

paving legislation, Finance Bill 2012 for other changes)

Lottery taxation – As announced in the June Budget 2010, the Government has

reviewed the taxation of the National Lottery. It has concluded that no change will be made.

Approved Mileage Allowance Payments (AMAPs) rates from 2011-12 – From

6 April 2011, the AMAPs rates will rise to 45 pence per mile for the ﬁrst 10,000 miles and 25

pence per mile thereafter. In addition to claiming AMAPs rates, an allowance for passenger

payments currently in place for business employees, at 5 pence per passenger per mile, will be

extended to volunteers.

Company car tax rate 2013-14 – From April 2013, the appropriate percentages for all

vehicles with carbon dioxide emissions between 95g and 220g per kilometre will be increased by

1 percentage point. This results in a freeze in rates for cars emitting less than 95g per kilometre.

Fuel beneﬁt charge 2011-12 – From 6 April 2011, the fuel beneﬁt charge multiplier

used to calculate the tax payable on free fuel for company cars will increase by indexation only

from £18,000 to £18,800.

Van fuel beneﬁt charge 2011-12 and van beneﬁt charge 2011-12 – The

Government announces a freeze in the level of van fuel beneﬁt charge at £550 for 2011-12. The

van beneﬁt charge will also be frozen at £3,000 in 2011-12.

Aviation tax: rates – Air Passenger Duty (APD) rates will be frozen for 2011-12. The RPI

increase assumed in the forecast will be deferred and implemented alongside the April 2012 RPI

increase.

Aviation tax: consultation and business jets – At the June Budget 2010, the

Government announced it would explore changes to the aviation tax system and that major

changes would be subject to consultation. A consultation on the structure of APD, launched on

23 March 2011, includes plans to extend the duty to ﬂights taken aboard business jets.

Carbon taxes

Carbon price ﬂoor – The Government announces a ﬂoor price for carbon in the power

sector from 1 April 2013 to target a price for carbon of £30 per tonne of carbon dioxide in

2020. The ﬂoor will start at around £16 per tonne of carbon dioxide and the carbon price

support rates for 2013-14 will be equivalent to £4.94 per tonne. The Government intends to

introduce relief for carbon capture and storage and combined heat and power (CHP), and

remove an existing exemption in the climate change levy for electricity CHP plants supply

indirectly to an energy consumer. Anti-avoidance provisions will be introduced to prevent

forestalling with effect from 23 March 2011.

Climate change levy rates – Climate change levy rates will increase in line with the RPI

in 2012-13.

Reform of Climate Change Agreements (CCAs) – CCAs will be extended to 2023.

The climate change levy discount on electricity for CCA participants will be increased from 65 per

cent to 80 per cent from April 2013. A consultation on proposals to simplify the agreements will

be published by summer 2011.

Climate change levy exemption: certain forms of transport – The climate change

levy exemption for taxable commodities used in rail freight will be suspended from 1 April 2011

pending EU State aid re-approval. The exemption will be re-instated upon receipt of the further

approval, with retrospective effect if the approval allows.

Climate change levy exemption: recycling processes – The climate change levy

exemption for taxable commodities used in steel and aluminium recycling will be suspended

from 1 April 2011 if EU State aid re-approval has not been received by then. The exemption

will be re-instated upon receipt of the further approval, with retrospective effect if the approval

allows.

Climate change levy exemption: gas in Northern Ireland – The climate change levy

exemption for supplies of gas in Northern Ireland will be replaced with a lower rate. This change

is necessary to ensure compliance with EU State aid rules. From 1 April 2011 to 31 March 2012

the rate will be £0.00059 per kilowatt hour. From 1 April 2012 the rate will be £0.00062 per

kilowatt hour.

Carbon Reduction Commitment – Allowances will be priced at £12 per tonne of

carbon dioxide. The Government will publish draft regulations to implement allowance sales

later in 2011.

Funding for Carbon Capture and Storage (CCS) demonstration programme –

The Government remains committed to providing public funding for CCS demonstration plants.

However, consistent with its objectives for tax simpliﬁcation, it will not proceed with the CCS

levy. It will instead fund its commitments to CCS demonstration from general taxation.

Landﬁll taxes

Landﬁll tax rates – The Government is legislating for an increase in the standard rate of

landﬁll tax by £8 per tonne to £64 per tonne on 1 April 2012, as announced in the June 2010

Budget, and will continue to freeze the lower rate of landﬁll tax at £2.50 per tonne in 2012-13.

Landﬁll communities fund: value of the fund – The value of the landﬁll

communities fund will rise in line with inﬂation in 2011-12 to £78.1 million. Future decisions on

the value of the fund will take into account the success of environmental bodies in reducing the

level of unspent funds that they hold.

Property taxes

Stamp Duty Land Tax (SDLT): reform of the rules for bulk purchases – The

Government will introduce changes to the SDLT rules for bulk purchases of residential properties.

If the buyer chooses, the rate of SDLT on purchases of multiple residential properties will be

determined by the mean value of the dwellings purchased (subject to a minimum rate of 1 per

cent), rather than their aggregate value as is currently the case.

SDLT: relief for ﬁrst-time buyers – The Government will announce in the autumn the

outcome of its review of the SDLT relief for ﬁrst-time buyers.

Real Estate Investment Trusts (REITs) – Subject to informal consultation, the

Government will legislate in Finance Bill 2012 to support good business practices and remove

barriers to entry, and investment in, the REITs regime, including removing the REITs 2 per cent

conversion charge

VAT measures

VAT: low value consignment relief (LVCR) – The Government will reduce the LVCR

threshold from £18 to £15 from November 2011. The Government will also explore options

with the European Commission to limit the scope of the relief so that it can no longer be

exploited for a purpose it was not intended for, and will revisit the level of the LVCR in Budget

2012 if discussions with the European Commission do not produce a workable solution to the

problem of exploitation of the relief.

VAT: revalorisation of registration and deregistration thresholds – From 1

April 2011, the VAT registration threshold will be increased from £70,000 to £73,000 and the

deregistration threshold from £68,000 to £71,000.

VAT: revalorisation of fuel scale charges – The VAT fuel scale charges will be

revalorised with effect from 1 May 2011. The VAT fuel scale charges scheme is a simpliﬁed

means of taxing the private use of business fuel.

VAT: diplomatic privilege – The Government will introduce indirect tax reliefs to

replace existing extra statutory concessions which need to be withdrawn for diplomatic missions,

international bodies, NATO visiting forces, and introduce a relief for European Research

Infrastructure Consortia.

VAT: grouping extra statutory concession – Subject to consultation, the Government

will legislate for an existing extra statutory concession in order to maintain its effect. The

concession ensures that VAT groups and businesses with overseas branches are treated equally

in respect of services bought in from third parties.

Tackling VAT fraud on imported road vehicles – The Government will introduce

a new online notiﬁcation system for road vehicles brought into the UK from 2013 in order to

combat fraud in this area. This will be a joint HMRC and Driver and Vehicle Licensing Agency

(DVLA) initiative

VAT: online registration and online ﬁling – Following the Minister for the Cabinet

Ofﬁce’s statement of 23 November 2010 on the “Digital Agenda”, subject to consultation on

the detail, the Government will mandate online VAT registration, de-registration and variations,

and make other changes, including removal of the UK VAT registration threshold for nonestablished businesses, with effect from 1 August 2012. The Government will also put forward

regulations which, subject to consultation, will require all remaining VAT customers to ﬁle their

VAT returns online and pay electronically from 1 April 2012.

VAT: business samples – As announced on 9 December 2010, UK VAT legislation will

be amended to reﬂect a judgment of the Court of Justice of the EU which extended the relief

available to businesses providing samples for marketing purposes. Previously VAT relief applied

only to the ﬁrst sample in a series of identical samples given to any one individual.

VAT: status of public bodies – The Government will amend UK law to ensure clear

transposition of EU legislation relating to the VAT treatment of public bodies when carrying out

their statutory duties and when in competition with the private sector

VAT: refund scheme for academies – As set out in the draft Finance Bill 2011 clauses

published in autumn 2010, the Government is introducing a new VAT refund scheme with effect

from 1 April 2011 to ensure that funding for academies’ non-business VAT costs is consistent

with that for local authority maintained schools.

VAT: cost sharing – The Government will continue to consult on implementation of a

VAT exemption for services shared by VAT-exempt bodies, including charities.

Anti-avoidance

Corporate gains: degrouping charges – The Government will introduce legislation,

with effect from 23 March 2011 to amend the degrouping charge rules to ensure that they

operate as intended. This change may affect companies that cease to be a member of a group

on or after today.

Sale of lessor companies – The Government will introduce legislation with effect

from 23 March 2011 amends the sale of lessors anti-avoidance legislation to ensure it remains

effective and withdraws the option to elect for alternative treatment.

Loan relationships avoidance: derecognition – As announced on 6 December 2010,

the Government will introduce legislation to prevent avoidance of corporation tax by addressing

schemes where a company derecognises certain amounts involving loans and derivatives in its

accounts. Following publication of draft clauses, the legislation has been amended to require

a company to recognise differences between the accounting and fair value of a derivative as

a credit for the period in which tax avoidance arrangements are entered into. This change will

have effect from 23 March 2011.

SDLT – The Government will introduce legislation, with effect from 24 March 2011,

to address three SDLT avoidance risks. The changes cover avoidance techniques that use

the subsales rules, the Alternative Finance reliefs and the rules for exchanges of land. These

techniques have been used to attempt to avoid tax on both residential and non-residential

property transactions, including on high value property transactions.