The inheritance tax (IHT) nil rate band will remain at the current level of £325,000 for the tax years 2010-11 to 2014-15. The limit will have effect for chargeable IHT events made on or after 6 April 2010 and before 6 April 2015. The 2009 Pre-Budget Report announced that Finance Bill 2010 will stop the increase to £350,000 fixed by the Finance Act 2007 for 2010-2011 but this measure extends the freeze until the end of the tax year 2014-15.

For chargeable events above the value of the nil rate band, IHT is charged at 40% on death and 20% on lifetime transfers to most trusts. For more information about how IHT applies, Practice note, Inheritance tax: overview. For current and previous IHT rates, exemptions, reliefs and deadlines for returns and payments, see Practice note, Tax data: inheritance tax.

(See 2010 Budget - BN 31 - Inheritance tax: nil rate band.)

The government plans to examine (over summer 2010) how inheritance tax can be brought within HMRC's "Disclosure of Tax Avoidance Schemes" (DOTAS) regime. In particular, they will explore the possibility of developing "hallmarks" in the context of inheritance tax.

For more information on DOTAS, see Disclosure of tax avoidance schemes (DOTAS): extension of scheme.

(See HM Revenue & Customs: The Budget 2010: Enforcement and Compliance: Other measures: Anti-Avoidance under heading "Anti-Avoidance - Include Inheritance Tax in Disclosure Regime".)

The Budget held no surprises as far as income tax rates and personal allowances for 2010-11 are concerned. As announced in the 2009 Pre-Budget Report, personal allowances are to be frozen at their 2009-10 level (£6,475 for individuals under 65), as are the rate bands for basic (20%) and higher (40%) rate tax. Finance Bill 2010 will introduce an additional rate of 50% on income in excess of £150,000 and provisions reducing personal allowances at the rate of £1 of personal allowance for every £2 of income above £100,000.

Many people are taking steps to pre-empt the introduction of the 50% tax rate and loss of personal allowances (see Ask the team: Techniques for mitigating high earners' income tax at 50%.

(See 2010 Budget - BN 01 - Income tax rates, rate limits and personal allowances for 2010-11.)

The government has also announced that it will provide for the introduction of an additional five per cent rate of SDLT for residential property over £1 million in the Finance Bill 2010. The new higher rate will apply to residential purchases where the effective date is on or after 6 April 2011. Currently, the highest rate of SDLT applicable to residential property is 4% where the chargeable consideration exceeds £500,000. All other SDLT rates and thresholds remain unchanged (see Practice note, SDLT and stamp duty rates (for land): General rates of SDLT and 2010 Budget - PN02 - Rates and allowances in 2010-11).

For general information about SDLT, see Practice note, Stamp duty land tax.

(See 2010 Budget - BN 24 - Stamp duty land tax: rates and thresholds.)

The government has announced that it will provide for a two-year stamp duty land tax relief for first-time buyers of residential property in the Finance Bill 2010. The relief will be available where the effective date falls on or after 25 March 2010 and before 25 March 2012. Where the relief is available, the nil rate freehold is effectively doubled so that residential purchases up to £250,000 will not be subject to SDLT. The relief applies where the chargeable consideration on a threshold purchase or assignment of a lease does not exceed £250,000 and on the grant of a lease where the premium does not exceed £250,000 (the relief does not apply to rent). The relief is limited to individuals who satisfy all of the following conditions:

If the property is purchased jointly, all the purchasers must satisfy the above conditions.

These extra conditions only apply where the consideration exceeds £125,000. The nil rate of SDLT on residential purchases not exceeding £125,000 continues to apply as before.

For more information on SDLT and residential property, see the following practice notes:

(See 2010 Budget - BN 25 - Stamp duty land tax: first time buyers and Stamp Duty Land Tax (SDLT) First Time Buyers: Question and Answer Briefing and Technical Note.)

For a summary of all key property announcements, tax and non-tax, see PLC Property, Legal update, 2010 Budget: implications for property.

The government has announced that it will introduce legislation in the Finance Bill 2010 to disapply the SDLT partnerships rules from a "notional land transaction".

Where the existing SDLT anti-avoidance rules (as to which, see Practice note, Stamp duty land tax: Scheme transactions: an anti-avoidance measure) apply, they impose a SDLT charge on a notional land transaction. Currently, the SDLT partnerships rules apply to notional land transactions. The measure is directed at SDLT avoidance schemes in which the SDLT partnership rules are being exploited by contriving a partnership relationship between the vendor and the purchaser so that the chargeable consideration, and therefore the SDLT due, is greatly reduced.

For general information on SDLT and partnerships, see Practice note, SDLT and partnerships.

(See 2010 Budget - BN 26 - Stamp duty land tax partnerships.)

The capital gains tax annual exempt amount for the tax year 2010-11 has been set at £10,100 unless Parliament determines otherwise (the same as for 2009-10: see Legal update, CGT annual exempt amount for 2009-10 set at £10,100). This amount is available to individuals and personal representatives, among others. (For an overview of the UK rules applying to the taxation of chargeable gains, see Practice note, Tax on chargeable gains: general principles.)

(See The Capital Gains Tax (Annual Exempt Amount) Order 2010 (SI 2010/923).)

The Chancellor has announced that, with effect from 2010-11, the lifetime limit for the purposes of entrepreneurs' relief is to double from £1 million to £2 million. This means that the taxpayer will suffer capital gains tax (CGT) at an effective rate of 10% on the first £2 million of lifetime gains (CGT at 18% being charged on 5/9 of the gain) made on the sale of a business or of shares in a personal company (one in which the taxpayer holds at least 5% of the ordinary share capital and controls at least 5% of the votes for a period of at least 12 months preceding the sale). For more information on the operation of entrepreneurs' relief, see Practice note, Entrepreneurs' relief.

The increased limit will apply in relation to disposals on or after 6 April 2010. To the extent that any gains realised by the taxpayer before 6 April 2010 exceed the current £1 million lifetime limit of entrepreneurs' relief, CGT will remain payable at the full rate on the excess, but only the £1 million of relief claimed will be set against the increased limit for future years.

(See 2010 Budget - BN 27 - Capital Gains Tax: Increase in lifetime limit on entrepreneurs' relief.)

Legislation providing for the withdrawal of the furnished holiday lettings (FHL) rules will be introduced in the Finance Bill 2010. The FHL rules will be withdrawn from 6 April 2010 for income tax and capital gains tax purposes and from 1 April 2010 for corporation tax purposes. HMRC published draft legislation and related documents alongside the Pre-Budget Report 2009 and invited comments from the those affected, accountants and the general public. This confirmation follows the government's consideration of the feedback received.

For details of the proposed legislation, see 2009 Pre-Budget Report: key private client tax announcements: Withdrawal of furnished holiday lettings tax treatment from April 2010.

(See HM Revenue & Customs: The Budget 2010: Businesses and Impact Assessment of Withdrawing the Furnished Holiday Lettings rules.)

The Chancellor has announced that for 2011-12 and each subsequent tax year, the annual amount that an individual may contribute to an Individual savings account (ISA) will rise in line with the Retail Price Index (RPI) or, if there is a fall in the RPI, remain at the same level as for the previous tax year. The legislation needed to increase the limit from £7,200 to £10,200 for 2010-11 is already in force (SI 2009/1550.

(See 2010 Budget - BN 28 - Indexing Individual Savings Account limits from 2011.)

The government has announced that legislation will be included in the Finance Bill 2010 to replace the existing transactions in securities (TiS) legislation with clearer legislation.

The government intends to introduce legislation in the next Parliament to provide income tax relief for particular payments to special guardians and certain carers looking after children placed under a residence order (that is, certain kinship carers). The exemption (which will be similar to the current tax exemption for payments to those who have adopted a child) will only apply to qualifying payments to qualifying carers and will have effect for payments received on or after 6 April 2010.

Qualifying payments are payments made in relation to a special guardianship order or residence order:

Qualifying carers are those who care for a child or children placed with them under a special guardianship order or a residence order (where the carer is not the child's parent or step-parent). Kinship carers looking after a child who has not been placed under a residence order are not qualifying carers for the purpose of this exemption but will be entitled to the new income tax relief for shared lives carers, announced in the 2009 Pre-Budget Report (see 2009 Pre-Budget Report: key private client tax announcements: Measures to assist shared lives carers).

Currently, there are special income tax rules for foster carers, those who have adopted a child and shared lives carers. The decision to tax carers who take on legal parental responsibility for a child in a similar way to those who have adopted a child follows informal consultation about the new income tax relief for shared lives carers.

(See 2010 Budget - BN 37 - Special guardianship orders and residence orders.)

The March 2010 Budget included an announcement by HM Treasury that there would be "consultation in summer 2010 on taxing ... returns from geared growth, following the increased use of tax-motivated arrangements involving employment-related securities" . . . "to ensure that income from employment is taxed correctly".

This appears to refer to arrangements such as growth share plans and shared growth/joint ownership and carried interest arrangements, which are intended to secure that employees pay capital gains tax (at 18%) rather than income tax (at 40 or 50%) on gains on shares (and other securities) or interests in them. There has been increased interest in these arrangements in anticipation of the increase in the highest rate of income tax on 6 April 2010. Any changes to their tax treatment may not include concessions for securities and interests already acquired by employees. The consultation and the threat of changed tax treatment will be of interest to employers and advisers who use "geared growth" arrangements.

(See 2010 Budget - Chapter 5, Budget Report - paragraph 5.63 and PN 03 - Protecting tax revenues: Employment-related securities and geared growth (at page 39).)

The government will introduce legislation in the Finance Bill 2010 to extend UK tax reliefs for charities and community amateur sports clubs to equivalent organisations in the European Union and the European Economic Area countries of Norway and Iceland. The legislation will also align the definition of a charity across all charity tax reliefs and exemptions administered by HMRC, limit the scope for fraudulent claims to charity tax reliefs, remove inconsistencies in the current rules and make some changes to procedures.

The announcement follows the European Court of Justice (ECJ) decision in Persche v Finanzamt Lüdenscheid [2009] EUECJ C-381/07, which held that denying tax reliefs available to charities in an EU member state to equivalent organisations in other member states restricted the free movement of capital (see Legal update, Tax breaks for charitable gifts must not infringe EC law). This principle was also applied in the Belgian court's decision that relief should be allowed on a testamentary gift by a Belgian resident to an English charity (see Legal update, Court rules tax on gift to British charity infringed EC law).

To be eligible for charity tax reliefs under the new rules, an organisation must be:

HMRC will consult informally with charities on changes to procedures in the coming months. The new rules will mainly take effect later in the tax year 2010/2011, but rules restricting payment of charitable funds outside the UK and rules on payroll giving will have effect from 24 March 2010, and some rules affecting gift aid will apply from 6 April 2010. HMRC will consider claims to tax relief on or after the date of the ECJ decision (27 January 2009) on a case-by-case basis. It will publish a list of organisations that it has confirmed qualify for relief on its website.

The Budget press notices indicate that HMRC is publishing draft guidance on some of the new rules and a Q&A briefing. The Q&A briefing was published with the other Budget documents, but the draft guidance was not.

(See 2010 Budget - BN 32 - Extending UK charity tax reliefs to certain organisations in Europe, PN 03 - Protecting tax revenues, Impact assessment of extending charity tax reliefs to certain organisations in Europe and HMRC: Extending UK charity tax reliefs to certain organisations in Europe: Questions and answers.)

The government is to work with charities and other interested sectors to consider how best to implement the exemption for services provided within cost sharing groups whose members carry out exempt or non business activities. The exemption is contained in Article 132(1)(f) EC Directive 2006/112.

(See 2010 Budget - Businesses - VAT - Cost sharing exemption.)

The requirement in section 646 of the Income Tax (Trading and Other Income) Act 2005 for a settlor of a settlor-interested trust to pay over to the trustees repayments of tax in respect of an allowance or relief in relation to trust income will be extended to cover all repayments of tax received by the settlor in relation to trust income. The change is aimed at making the settlor's income tax position neutral in relation to such trusts, so that he is no better or worse off than if he held the income-producing assets in his own name.

The extended rule will apply repayments relating to income tax chargeable on or after 6 April 2010. The government intends to legislate this measure in a Finance Bill as soon as possible in the next Parliament.

For information on the way settlor-interested trusts are taxed, see Practice note, Taxation of UK trusts: overview: Income tax: how settlor-interested trusts are taxed.

(See 2010 Budget - BN 30 - Income tax adjustments between settlors and trustees.)

The March 2010 Budget included an announcement that the government will be taking action to tackle tax avoidance arrangements using employee benefit trusts (EBTs) and similar vehicles. The government will consider introducing legislation to counter arrangements which have the purpose of "avoiding, deferring or reducing liabilities to income tax and national insurance contributions or avoiding restrictions on pensions tax relief". If legislation is introduced, the March 2010 Budget Report notes that will take effect from April 2011.

This announcement is not surprising, as HM Revenue and Customs had already announced an intention to pursue companies which are using EBTs and family benefit trusts to avoid tax on benefits provided to employees (or their dependants). (Family benefit trusts are similar to EBTs, but provide benefits only to dependants of employees, rather than employees themselves.) For more details, see Legal update, HMRC avoidance spotlight on family benefit trusts and Legal update, Taxpayer and HMRC withdrew their High Court appeals in Sempra Metals case on family benefit trusts.

(See March 2010 Budget - PN 03 - Protecting Tax Revenues: Future action on the use of trusts and other vehicles to reward employees and March 2010 Budget - Chapter 5, Budget Report- paragraph 5.63.)

With effect from 6 April 2010, the definition of relevant person in section 809M of the Income Tax Act 2007 will be amended to clarify that it includes a subsidiary of a non-UK resident company which would be a close company if it was resident in the UK.

The concept of relevant person was introduced as part of the statutory rules on the remittance basis brought in by the Finance Act 2008. This clarification of the definition is intended to remove a perceived potential for abuse.

For more information on the remittance basis, see Practice note, Residence, ordinary residence and domicile: UK tax implications.

(See 2010 Budget - BN 38 - The remittance basis: relevant person.)

The Finance Bill 2010 will introduce legislation providing for higher penalties to be imposed if a taxpayer fails to make a full disclosure of income tax and capital gains tax liabilities connected to a jurisdiction that does not automatically share tax information with the UK. The new rules would take effect for tax periods beginning on or after 1 April 2011.

The mechanics of the existing penalty regimes (that is, for inaccuracy in a tax return, for failure to notify and for failure to make a return) will not be changed. However, the percentage level of penalty imposed under those regimes will be increased depending on the jurisdiction involved. For example, penalties will be increased by a factor of 1.5 for jurisdictions that provide information to the UK only on request and a factor of 2 for jurisdictions that share no information with the UK (so penalties of up to 200% of the unpaid tax in the worst cases).

This announcement follows HMRC's consultation "Tackling offshore tax evasion", launched in the 2009 Pre-Budget Report (see, PLC - 2009 Pre-Budget Report: key business tax announcements: Consultation on tackling offshore tax evasion). HMRC has also published a response to this consultation. The measures to be introduced are more simple than those envisaged in the original consultation document. No action has been taken in the Budget on the other main aspect of the consultation: the proposed requirement to notify HMRC of new overseas bank accounts. This proposal was less well-received by those who responded to the consultation.

This development is part of HMRC's wider initiative "Modernising Powers, Deterrents and Safeguards", as to which, see PLC Tax, Penalties, compliance and powers reforms: legislation tracker.

(See 2010 Budget - BN 68 - Review of HMRC Powers, Deterrents and Safeguards: Tackling Offshore Tax Evasion.)

The main rate of corporation tax for the year commencing 1 April 2011 will remain at 28% for companies and groups whose profit for the accounting period exceeds £1.5 million (apart from companies with ring-fenced profits from oil extraction in the UK and UK continental shelf; for which it will remain at 30%). As announced in the 2009 Pre-Budget Report, the rate for companies paying tax at the small companies rate (those with profits of less than £300,000) will remain at 21% for the tax year 2010-11, except for ring-fenced profits: these continue to be taxable at 19%. Rates for marginal relief will similarly remain unchanged.

(See 2010 Budget - BN 03 - Corporation tax main rates and 2010 Budget - BN 04 - Corporation tax small profits rate.)

The disclosure of tax avoidance schemes (DOTAS) regime is a disclosure regime which requires promoters, and in some cases, users of certain tax planning arrangements to disclose details of the arrangements to HMRC. For further detail about the disclosure regime applicable to direct taxes, see Practice note, Direct tax disclosure regime. A similar regime applies in relation to National Insurance contributions (NICs) (see Practice note, National insurance contributions disclosure regime).

The government has announced a series of changes to the DOTAS regime. These changes were heralded in an HMRC discussion document published as part of the 2009 Pre-Budget Report (see Legal update, 2009 Pre-Budget Report: key business tax announcements: Disclosure of tax avoidance schemes (DOTAS): consultation document on extension of scheme. The changes comprise:

The government has also published a consultation response document. It appears that there have been a number of objections to the proposed extension of hallmarks, mainly commenting that the initial draft legislation was too widely drawn. HMRC states that it will re-draft the provisions and further consult with stakeholders. Over the summer, the government will also look at how inheritance tax could be brought within the DOTAS regime, including developing IHT "hallmarks".

The changes will come into effect on days to be appointed but expected by HMRC to be on a common date in autumn 2010.

For an analysis of the incentives aspects of DOTAS, see Legal update, March 2010 Budget: extension of disclosure of tax avoidance schemes: incentives aspects.

(See 2010 Budget - BN 64 - Disclosure of tax avoidance schemes, Consultation response document and Impact Assessment.)

Enabling legislation will be introduced in the Finance Bill 2010 to allow HMRC to require financial security from employers where amounts due under PAYE as you earn (PAYE) and national insurance contributions (NICs) are "seriously at risk". (It would appear that HMRC will consider amounts to be seriously at risk where there has been a history of serious non-compliance in terms of paying late or not paying at all.) The detail (including the amount of the security and the right to appeal the request for security) will be set out in secondary legislation, which will be published in draft for public consultation.

In addition, a new criminal offence of failing to provide security will be introduced (punishable by a fine of up to £5,000).

It is intended that the new measures will take effect from 6 April 2011.

As part of the 2008 Pre-Budget Report, HMRC published a "next stage" consultation paper seeking views on a number of proposals, including the greater use of financial securities across all taxes but in particular for PAYE (see Legal update, Modernising Powers, Deterrents and Safeguards: Next stage: Financial security and tax clearance certificates). Despite HMRC indicating in its response paper published in April 2009 (see, HMRC: Response document ), that it would "continue to develop its thinking on [the greater use of financial securities] with a view to further consultation", there has been no further consultation on the issue.

(See 2010 Budget - BN 70 - Review of HMRC powers, deterrents and safeguards: security for payment of PAYE and Enforcement and compliance: Arrears of Tax: PAYE - Holding Securities.)