2012 Budget: key business tax announcements
Our summary of the key business tax announcements in the 21 March 2012 Budget.
In one of the most widely-trailed Budgets of recent years, the Chancellor announced the following key business tax measures on 21 March 2012:
50% rate of income tax to reduce to 45% in April 2013.
A number of measures to combat avoidance of stamp duty land tax on the acquisition of UK residential property, including a new top rate of 7% on purchases over £2 million (15% for purchases by certain entities, including some companies and collective investment vehicles).
A further 1% cut in the main rate of corporation tax, so that the rate will be 24% from April 2012, 23% from April 2013 and 22% from April 2014.
Introduction of a general anti-abuse rule (GAAR).
This piece summarises the key business tax measures in the 2012 Budget. For other PLC Budget coverage, tailored to a range of practice areas and sectors, see PLC 2012 Budget.
References to "Overview" are to the HMRC/HM Treasury Overview of Tax Legislation and Rates published on 21 March 2012. References to "TIIN" are to HMRC/HM Treasury Tax Information and Impact Notes published on 21 March 2012.
General anti-abuse rule
The government has announced that it will consult on the introduction of a general anti-abuse rule (GAAR) in summer 2012, with a view to introducing legislation in the Finance Bill 2013.
The government first announced that it would consider introducing a legislative general anti-avoidance rule in the June 2010 Budget. A study group led by Graham Aaronson QC was duly established, and the group published its final report in November 2011. It recommended the introduction of a targeted GAAR and included illustrative draft legislation and guidance. For further detail, see Legal update, Aaronson recommends targeted GAAR (detailed update) ( www.practicallaw.com/9-511-2130) ).
The government has confirmed that it accepts the recommendations of the Aaronson report, and that it will consult on:
New draft legislation, to be based on the recommendations of the Aaronson Report.
Establishment of the Advisory Panel
The development of full explanatory guidance.
The government has also announced that it will extend the GAAR to stamp duty land tax (SDLT).
Note that "GAAR" was initially an acronym for "general anti-avoidance rule". It is now apparently an acronym for "general anti-abuse rule". Presumably this is intended to demonstrate an intention that the rule should only catch abusive transactions, rather than legitimate tax planning.
(See Overview, paragraph 2.58.)
Property tax avoidance
A range of measures were announced, see SDLT: 7% rate on homes over £2 million and subsequent items.
Capital allowances: anti-avoidance and the manufacturer's exemption
The government has confirmed that previously announced amendments to the capital allowances anti-avoidance rules in Chapter 17 of the Capital Allowances Act 2001 (CAA 2001) will be included in Finance Bill 2012 (see Legal update, Plant and machinery capital allowances anti-avoidance rules: draft Finance Bill 2012 legislation ( www.practicallaw.com/2-517-1514) ).
However, the government has announced one change to the measures included in the draft legislation. On 12 August 2011, HMRC published draft legislation under which, for expenditure incurred on or after that date, section 230 of CAA 2001 (the manufacturer's exception) would no longer provide an exclusion from section 217 of CAA 2001 (which denies the annual investment allowance (AIA) or first-year allowance (FYA) for all relevant transactions within sections 214, 215 or 216 of CAA 2001) (see Legal update, Capital allowances: anti-avoidance "manufacturer's exemption" partly repealed early ( www.practicallaw.com/2-507-2401) ). On 6 December 2011, the government announced that the revocation of the manufacturer's exception in relation to the AIA or FYA would take effect from 12 August 2011, but that it would be reinstated from 1 April 2012 (for corporate tax) or 6 April 2012 (for income tax) unless the transaction has a tax avoidance purpose.
The government has announced that the manufacturer's exception will now also apply to expenditure incurred on or after 12 August 2011 as long as it is not incurred as a result of a relevant transaction that has an avoidance purpose or is part of, or occurs as a result of, a scheme or arrangement that has an avoidance purpose.
The government has confirmed that the Finance Bill 2012 will contain provisions amending the loan relationship connected company impaired debt rules to ensure that they are not circumvented. These provisions were published in draft form on 27 February 2012: see Legal update, Retrospective debt buy-back avoidance measures announced ( www.practicallaw.com/7-518-2256) . (See also Practice note, Loan relationships: Creditor under a distressed debt becomes connected with debtor ( www.practicallaw.com/9-219-4959) and Computation of tax charge ( www.practicallaw.com/9-219-4959) .)
(See Overview, paragraph 1.54.)
Disclosure of tax avoidance schemes (DOTAS): new hallmarks
The government has confirmed that it will consult formally on extending the disclosure of tax avoidance schemes (DOTAS) "hallmarks" (the descriptions of schemes required to be disclosed for income tax, capital gains tax and corporation tax). The formal consultation will take place over the summer, with the intention of publishing draft regulations later in the year.
HMRC launched an informal consultation in June 2011, which considered possible changes for employment income schemes disclosures, offshore tax planning arrangements relying on a lack of complete tax transparency in certain overseas jurisdictions and loss schemes aimed at individuals. For further detail, see Legal update, Informal HMRC consultation on DOTAS hallmarks ( www.practicallaw.com/9-507-1144) and Practice note, Disclosure of tax avoidance schemes under DOTAS: direct tax: Future reform of the DOTAS regime ( www.practicallaw.com/1-107-4933) .
(See Overview, paragraph 1.66.)
Income tax losses
The government has been looking at strengthening the anti-avoidance legislation relating to income tax losses and will publish a response to the consultation (see Legal update, Consultation on combating sideways loss reliefs avoidance ( www.practicallaw.com/5-506-7441) ) after the Budget.
(See Budget Report, paragraph 2.205.)
IR35: office holders and controlling persons
The government has announced that it will introduce a package of measures to tighten and simplify the IR35 rules. (For an explanation of IR35, see Practice note, IR35 ( www.practicallaw.com/9-201-7626) .) In particular, the government will consult on proposals to require office holders and controlling persons who are integral to the running of an organisation, to have PAYE and NICs deducted at source. (We assume this means by the client.) The government has not indicated when the consultation document will be published.
(See Overview, paragraph 2.61.)
Long funding leasing: capital allowances disposal value
The Finance Bill 2012 is to include legislation amending the calculation of the disposal value that is brought into account for capital allowance purposes on (deemed) termination of a long funding lease. For the current rules (section 70E, Capital Allowances Act 2001), see Practice note, Equipment leasing: tax: How capital allowances are given ( www.practicallaw.com/7-107-3737) . This measure is a reaction to disclosures of tax avoidance schemes and has not previously been announced.
At present, the disposal value takes into account "relevant rebates", being, broadly, amounts calculated by reference to the termination value that are payable to the lessee or a connected person. However, HMRC has become aware of schemes under which payments are made for the benefit of the lessee that fall outside the definition of "relevant rebate" and, therefore, outside the calculation of the disposal value. The new measure is intended to ensure that lessees do not obtain capital allowances exceeding their actual net capital expenditure.
Under the proposed changes, the disposal value will take into account all payments in connection with the lease, or any arrangement connected to the lease, that have not otherwise been brought into account for tax purposes and that are payable (directly or indirectly) for the benefit of the lessee or a connected person. "Payments" include the provision of any benefit, the assumption of any liability and any transfer of money's worth. Amounts are to be brought into account regardless of when they are payable. As with "relevant rebates", if a transaction does not take place at arm's length, the appropriate arm's length amount will be substituted. However, this measure does not apply to payments made by the lessee to the lessor under the lease or under a guarantee of any residual amount (as to which, see Practice note, Equipment leasing: tax: Long funding leasing regime: other issues ( www.practicallaw.com/7-107-3737) ).
The changes are to apply to disposal events for long funding leases occurring on or after 21 March 2012.
(See Overview, paragraph 1.63, Plant or machinery leasing - avoidance: draft legislation and TIIN: Plant and Machinery Leasing: Anti-Avoidance.)
Manufactured overseas dividends
The government has confirmed that the draft legislation seeking to close down a scheme under which taxpayers sought offset or repayment of income tax of amounts treated as withheld under the manufactured overseas dividend (MOD) rules, published on 6 December 2011 (see Legal update, Draft Finance Bill 2012 legislation: key business tax measures: Manufactured dividends: anti-avoidance ( www.practicallaw.com/6-515-2146) ), is to be included in the Finance Bill 2012 with no amendments or with only "small, technical" amendments.
(In relation to the MOD rules, see Practice note, Repos: tax: Manufactured dividend ( www.practicallaw.com/2-202-0991) . See also Manufactured payments.)
(See Overview, paragraph 1.69.)
The government has confirmed that it will consult on proposals to simplify the manufactured payments tax rules as part of its rolling review of high risk areas of the tax code (see Legal update, 2011 Budget: key business tax announcements: Anti-avoidance strategy published ( www.practicallaw.com/6-505-3575) ). (In relation to the manufactured payment rules, see Practice note, Repos: tax: Manufactured interest ( www.practicallaw.com/2-202-0991) and Manufactured dividend ( www.practicallaw.com/2-202-0991) .)
This consultation was announced on 15 September 2011 (see Legal update, Manufactured overseas dividend avoidance scheme closed ( www.practicallaw.com/9-508-2251) ) and is to be launched shortly. The government states that if this leads to legislation for inclusion in the Finance Bill 2013, that legislation will not have effect before Royal Assent to the Finance Bill 2013.
(See also Manufactured overseas dividends.)
(See Overview, paragraph 2.59.)
Sale of lessor companies
The Finance Bill 2012 will make changes to rules on the sale of lessor companies to maintain the effectiveness of the legislation in protecting revenues.
These rules seek to prevent profitable groups from extracting the benefit of capital allowances on plant and machinery owned by group companies that carry on leasing activities (for example, by way of group relief) and then selling the leasing companies to loss-making groups when the leasing companies begin to make taxable profits as capital allowances amortise away. Under the rules, a charge for deferred profits arises immediately before the sale, with a matching relief applying immediately after the sale. At present, the relief cannot be carried back to earlier periods (section 385 and 427, Corporation Tax Act 2010).
The Finance Bill 2012 provisions will:
Introduce a new trigger event under which the rules on the sale of lessor companies will apply when a lessor company comes within the charge to tonnage tax (see Practice note, Tonnage tax ( www.practicallaw.com/1-200-9362) ). This is to be effected by new section 394ZA of the Corporation Tax Act 2010, with consequential changes to sections 392 and 394A of that Act. This change is to apply where a lessor company enters the tonnage tax regime on or after 21 March 2012.
Prevent the tax-neutral treatment of a transfer of a trade involving the leasing of plant or machinery into a lessor company that has moved into the tonnage tax regime. Under section 950 of the Corporation Tax Act 2010, tax-neutral treatment is preserved if the transferor and the transferee have the same principal company (or companies). New section 950(3A) is to deem the transferor and the transferee to fail this condition if they would otherwise meet it and new section 394ZA (see above) applies to the transferee. This change is to apply where the transfer occurs on or after 21 March 2012 (regardless of when the transferee entered the tonnage tax regime).
Replace the rule preventing the carry back of relief with provisions preventing any losses being carried back and used against profits specifically brought into charge as a consequence of the rules on the sale of lessor companies. This will apply both to companies acting alone and to companies in partnership and is to apply where there is a change in the ownership of a lessor company on or after 21 March 2012.
Site restoration payments to connected persons
The government has announced new anti-avoidance measures to combat tax avoidance arrangements between connected persons that exploit the tax relief for site restoration payments under section 145 of the Corporation Tax Act 2009 for companies and section 168 of the Income Tax (Trading and Other Income) Act 2005 for unincorporated businesses. The measures will be included in Finance Bill 2012 and have effect for payments made on or after 21 March 2012.
Site restoration payments are made to restore a site to its original state after use in a waste disposal trade. A specific revenue deduction is available for what would otherwise be treated as capital expenditure for site restoration payments, which are made as a condition of a relevant licence, planning permission or obligation. The deduction is usually available in the period of account when the payment is made.
The measure provides that where a person makes a payment directly or indirectly to a connected person, the deduction will be in the period of account when site restoration work is completed. However, no revenue deduction is allowed if there are arrangements to which a person is party and the main purpose, or one of the main purposes of the arrangements, is obtaining a deduction for a site restoration payment.
Corporation tax rates further reduced from 2012-13
Finance Bill 2012 will contain legislation reducing the main rate of corporation tax (CT) to 24% for the financial year commencing 1 April 2012 and to 23% for the financial year commencing 1 April 2013. Legislation in Finance Bill 2013 will reduce the CT main rate to 22% from April 2014. The main rate applies to companies and groups whose annual profits exceed £1.5 million. These changes represent an additional 1% reduction on top of the annual reductions announced in the 2011 Budget (see Legal update, 2011 Budget: key business tax announcements: Corporation tax rates further reduced from 2011-12 ( www.practicallaw.com/6-505-3575) ). The Chancellor hinted in his budget speech that his long term aim is a main corporation tax rate of 20%.
The CT rate for companies with ring-fenced profits from oil extraction in the UK and UK continental shelf will remain at 30% for the financial years commencing 1 April 2012 and 1 April 2013. Finance Bill 2012 will keep the small companies rate of CT (which applies to companies and groups whose annual profits do not exceed £300,000) at 20% for the financial year commencing 1 April 2012. However, for the year commencing 1 April 2013, the small companies rate of CT has yet to be confirmed.
Bank levy: rates and amendments
The government has announced that the rates of the bank levy for chargeable periods falling wholly or partly after 1 January 2013 will be increased to:
0.105% for short-term liabilities.
0.0525% for long-term equity and liabilities.
These increases will be legislated in the Finance Bill 2012, along with the previously announced rates for 2012 (see Practice note, Bank levy: Rate of levy ( www.practicallaw.com/7-503-7740) and Legal update, Draft Finance Bill 2012 legislation: key business tax measures: Bank levy: increased rates ( www.practicallaw.com/6-515-2146) ). The stated reason for the increases is to ensure that the bank levy generates its target revenue of £2.5 billion a year.
The government has also confirmed that the proposed amendments to the bank levy joint venture rules, draft legislation for which was published on 6 December 2011 (see Practice note, Bank levy: Joint ventures ( www.practicallaw.com/7-503-7740) and Legal update, Draft Finance Bill 2012 legislation: key business tax measures: Bank levy: joint ventures ( www.practicallaw.com/6-515-2146) ), are to be included in the Finance Bill 2012 without amendment or with only "small, technical" amendments following consultation.
(For details of the bank levy, see Practice note, Bank levy ( www.practicallaw.com/7-503-7740) .)
Capital allowances: enterprise zones
The government has confirmed that legislation will be introduced in Finance Bill 2012 to provide enhanced (100% first-year) capital allowances (ECAs) for trading companies investing in plant or machinery for use primarily in designated assisted areas within enterprise zones (see Legal update, First-year allowances in enterprise zones: draft Finance Bill 2012 ( www.practicallaw.com/9-517-1228) ). Following consultation, changes have been made to ensure the scheme is state aid compliant. ECAs in all zones will be available from 1 April 2012.
A full list of current enterprise zones and maps will be published on the HM Treasury website shortly.
Certain convertible loans to be outside the definition of equity
With effect from 21 March 2012, the definition of a normal commercial loan (section 162, Corporation Tax Act 2010) is to be amended. Convertible loan notes that carry the right to repayment or conversion into the shares of a wholly unconnected listed company will be classified as normal commercial loans. This type of loan note is found almost exclusively in the financial sector and is a product that is attractive to investors.
Under the legislation as it currently stands, such loans are classified as non-commercial, with the effect that the loan notes count as equity of the issuing company. As the group rules for corporation tax require the parent company to hold, either directly or indirectly, at least 75% of the equity in a subsidiary, this classification means that, unless care is taken to spread the borrowing across a number of group companies, a borrowing company could unintentionally leave the group.
According to the impact statement, this change in the legislation will have no impact on individuals or on tax revenues. However, since the section 162 CTA 2010 definition of normal commercial loan is used for determining whether a loan note is a qualifying corporate bond for the purposes of capital gains (section 117, Taxation of Chargeable Gains Act 1992) the amendment, which will be included in the Finance Bill 2012, will require careful drafting if unintended consequences are to be avoided.
CFCs: full reform
The government has confirmed that legislation will be introduced in Finance Bill 2012, repealing the current legislation on controlled foreign companies ( www.practicallaw.com/7-107-6340) (CFCs) and introducing the new regime for accounting periods of the CFC beginning after 31 December 2012.
On 6 December 2011, HM Treasury and HMRC published draft legislation (see Legal update, CFC reform: government response to June 2011 consultation ( www.practicallaw.com/8-516-9141) ) and have since published further updates dealing with revisions to the draft legislation (see Legal updates, CFC reform: policy update and revised draft legislation (detailed update) ( www.practicallaw.com/6-517-7788) and CFC reform: policy update and revised draft legislation: gateway, TAARs, finance companies and offshore funds (detailed update) ( www.practicallaw.com/9-518-3207) ). The Budget does not announce any new substantive changes.
Changes to UK GAAP
The government has confirmed that the draft legislation intended to ensure that the rules dealing with tax adjustments on a change in accounting policy apply to changes expected to be made to UK GAAP in 2012, published on 6 December 2011 (see Legal update, Draft Finance Bill 2012 legislation: key business tax measures: UK GAAP: changes ( www.practicallaw.com/6-515-2146) ), is to be included in the Finance Bill 2012 with no amendments or with only "small, technical" amendments.
(See Overview, paragraph 1.69.)
Corporation tax: distributions in the form of assets and liabilities
The government has confirmed that the draft legislation on distributions in the form of assets and liabilities, published on 6 December 2011 (see Legal update, Draft Finance Bill 2012 legislation: key business tax measures: Distributions in the form of assets and liabilities ( www.practicallaw.com/6-515-2146) ) is to be included in the Finance Bill 2012 with no amendments or with only "small, technical" amendments.
The legislation ensures that, for the purposes of the distributions legislation in the Corporation Tax Act 2010, the treatment of transfers of assets and liabilities between UK resident companies will be the same as that which applies to transfers between a UK resident and non-UK resident company.
It is intended that the legislation will be effective for transfers made on or after the date the Finance Bill 2012 receives Royal Assent.
(See Overview, paragraph 1.69.)
Debt cap rules
The government has confirmed that the draft legislation amending the debt cap rules, published on 6 December 2011 (see Legal update, Draft Finance Bill 2012 legislation: key business tax measures: Debt cap: various amendments ( www.practicallaw.com/6-515-2146) ), is to be included in the Finance Bill 2012 with no amendments or with only "small, technical" amendments.
For a discussion of the debt cap rules, including the proposed amendments, see Practice note, Limits on tax deductions for interest: the debt cap ( www.practicallaw.com/7-386-4223) .
(See Overview, paragraph 1.69.)
Foreign currency assets and corporate chargeable gains
The government will consult in summer 2012 on whether to allow companies with a non-sterling functional currency to compute their chargeable gains and losses in that functional currency. Any resulting legislation will be included in the Finance Bill 2013. The aim is stated to be to provide simpler and fairer tax treatment, as well as to reduce the administrative burden for the companies affected. However, while any such change would be likely to be simpler and to reduce the administrative burden, it is questionable whether this would actually be fairer as this would depend on the circumstances of a particular case (for example, whether the relevant asset was actually purchased in sterling or the company's functional currency). Therefore, it will be interesting to see the views of business on this proposal.
Finance Bill 2012 will include legislation to implement the patent box, the regime allowing companies to elect to apply a 10% rate of corporation tax from 1 April 2013 to a proportion of profits attributable to patents and certain other qualifying intellectual property, whether paid separately as royalties or embedded in the sales price of products. In its first year of operation, the proportion will be 60%, rising by 10% each year to 100% from April 2017. For more information on the regime and the December 2011 draft legislation, see Legal update, Patent box: draft Finance Bill 2012 clauses and technical note ( www.practicallaw.com/3-516-7168) .
The government has clarified the legislation to achieve the policy aim that worldwide income from inventions covered by a qualifying UK Intellectual Property Office ( www.practicallaw.com/6-106-3324) (IPO) or European Patent Office ( www.practicallaw.com/4-201-0571) (EPO) patent is included (see Legal update, Government consults on patent box: UK and European Patent Office patents included ( www.practicallaw.com/7-506-4432) ).
The heads of expenditure included in the amounts which have to be marked up have been clarified (see Legal update, Patent box: draft Finance Bill 2012 clauses and technical note: Routine return figure ( www.practicallaw.com/3-516-7168) ).
The small claims safe harbour that previously applied to all companies (see Legal update, Patent box: draft Finance Bill 2012 clauses and technical note: Small claims election ( www.practicallaw.com/3-516-7168) ) has been limited to companies making profits with residual profits of no more than £3 million.
Further, as well as IPO and EPO patents, the government intends to extend the regime to other EU member states with similar examination and patentability criteria as the UK. The government will publish a list of qualifying jurisdictions in secondary legislation in 2012.
Regulatory capital instruments
The Finance Bill 2012 will include a power for HMRC to determine the tax treatment of regulatory capital instruments issued in accordance with the Basel III and the EU Capital Requirements Directive IV (CRD IV) (see PLC Financial Services, Practice notes, Basel III: an overview ( www.practicallaw.com/7-504-1959) and Hot topics: CRD IV ( www.practicallaw.com/4-505-2421) ). The government states that regulations to be made under this power will take effect from the commencement of the CRD IV provisions. A TIIN is to be published alongside the draft regulations.
This measure follows a consultation announced as part of the 2011 Budget: see Legal update, 2011 Budget: key business tax announcements: New bank capital instruments ( www.practicallaw.com/6-505-3575) .
(See Overview, paragraph 1.26.)
Tax transparent investment fund
As announced in Budget 2011 (see Legal update, 2011 Budget: key business tax announcements: Tax transparent fund: consultation ( www.practicallaw.com/6-505-3575) ), the Finance Bill 2012 will contain legislation permitting the authorisation of tax transparent funds from summer 2012.
The government will publish draft regulations (to be made under the power in the Finance Bill 2012) after taking into account the responses to its consultation on tax transparent funds (as to which, see Legal update, HM Treasury consults on tax transparent funds: tax implications ( www.practicallaw.com/8-517-2285) ). Regulations will be made to establish the tax treatment of UK investors' holdings in such funds and the stamp taxes treatment of transactions. To clarify the position for all investors in collective investment schemes (CIS), including the new tax transparent funds, the capital gains rules for CIS mergers and reconstructions will be simplified and rewritten in regulations, and changes may be made to what constitutes a disposal.
(See Overview, paragraph 1.28.)
UK/Switzerland tax co-operation agreement: implementation
The draft Finance Bill 2012 provisions to implement the tax co-operation agreement signed by the UK and Switzerland on 6 October 2011 will be amended to reflect the Protocol to the agreement signed on 20 March 2012. Changes include:
A new mechanism for deducting tax on savings income that is subject to a retention under the 2004 agreement between the EU and Switzerland on the taxation of savings income (providing for measures equivalent to those in the EU Savings Directive (Council Directive 2003/48/EC)). A separate "tax finality payment" will be made which, together with the retention, will result in a deduction equivalent to the single withholding rate under the UK/Swiss agreement. It was originally intended that any retention under the EU/Switzerland agreement would have been credited against the withholding tax under the UK/Swiss agreement.
A levy on the assets of individuals who die on or after 1 January 2013 (when the UK/Swiss agreement is expected to come into force).
We will report separately on the contents of the Protocol, much of which appears to result from the European Commission's insistence that member states should not sign agreements that overlap with the EU/Swiss agreement. To follow developments, see Private client tax legislation tracker 2011-12: UK/Switzerland tax co-operation agreement ( www.practicallaw.com/6-508-1880) and Practice note, UK/Switzerland tax co-operation agreement ( www.practicallaw.com/1-509-7850) .
(See Budget Report, para 2.220; Overview, para 1.67: UK/Switzerland Agreement; and TIIN, Tax Agreement between the United Kingdom and Switzerland.)
Legislation will be introduced in the Finance Bill 2013 to bring HMRC's direct tax criminal investigation powers into line with its indirect tax powers. These powers will enable HMRC to seize suspected criminal cash under the Proceeds of Crime Act 2002 and to exercise search and seizure warrants under that Act. For background on HMRC's criminal investigation powers, see Practice note, HMRC criminal investigation powers ( www.practicallaw.com/3-379-0347) .
(See Overview, paragraph 2.66.)
FATCA: information powers
On 8 February 2012, HM Treasury published a joint statement setting out an agreed approach to implementation of the Foreign Account Tax Compliance Act (FATCA), which aims to combat cross-border tax evasion. The statement was issued jointly with the governments of France, Germany, Italy, Spain and the United States (see Legal update, HM Treasury joint statement on intergovernmental approach to FATCA implementation ( www.practicallaw.com/5-517-9467) ). The government has announced that HMRC will consult with affected financial institutions about how to facilitate exchange of information between those institutions and the US Internal Revenue Service, with a view to introducing legislation in the Finance Bill 2013.
(See Overview, paragraph 2.65: information powers.)
Obtaining information from third parties
The government has announced that no or only "small, technical" changes will be made to the draft Finance Bill 2012 legislation published on 6 December 2011 to implement a new power for HMRC to obtain information from third parties. (For background, see Legal update, Obtaining information from third parties: revised draft legislation ( www.practicallaw.com/9-516-9310) .)
(See Overview, paragraph 1.69.)
Power to withdraw notice to file a self-assessment return
HMRC will consult later this year on a new power to be included in the Finance Bill 2013, which will enable HMRC to withdraw a notice to file a self-assessment tax return.
(See Overview, paragraph 2.63.)
Regulatory penalties: simplification abandoned
The government has confirmed that it will not be simplifying regulatory penalties as the cost would outweigh the benefits. It will, however, introduce a new power in the Finance Bill 2013 for inflationary increases in the value of fixed regulatory penalties and will repeal a small number of defunct penalties. (For background, see Legal update, Simplification of regulatory penalties: consultation paper ( www.practicallaw.com/2-506-5641) ).
(See Overview, paragraph 2.62.)
Tax agents: dishonest conduct
The government announced that it will amend the draft Finance Bill 2012 legislation that will empower HMRC to publish the name and details of a tax agent that is liable to a penalty of £5,000 or more for dishonest conduct. The information that may be published includes the details of any third party organisation for which the tax agent works (or worked) if HMRC feels that this information is needed to clarify the tax agent's identity. The amendment will give the third party organisation the right to make representations (presumably to HMRC). No further details are provided and therefore it is not apparent whether the right to make representations will encompass a right to make a statement alongside the publication of its details. (For background, see Legal update, Tax agents: revised draft legislation on deliberate wrongdoing and responses to consultation ( www.practicallaw.com/6-506-8968) .)
(See Overview, paragraph 1.68: Tax agents: dishonest conduct.)
Employment and pensions
EMI options: increase in individual limit and entrepreneurs relief
The chancellor announced an increase in the individual limit on the grant of enterprise management incentives ( www.practicallaw.com/7-107-6533) (EMI) options from £120,000 to £250,000, to be introduced as soon as possible, subject to state aid ( www.practicallaw.com/9-385-1413) approval.
The chancellor also announced the extension of entrepreneurs' relief ( www.practicallaw.com/4-381-1491) to shares acquired on the exercise of EMI options. The change will be included in Finance Bill 2013, subject to state aid approval, and will apply to options exercised on or after 6 April 2012.
For all Budget developments relevant to share schemes, see PLC Share Schemes & Incentives, Legal update, 2012 Budget: tax developments relevant to share schemes ( www.practicallaw.com/4-518-5770) .
Income tax and NICs reform
The 2012 Budget confirmed that the government will issue a consultation shortly on the various options for integrating the operation of income tax and NICs. This proposal was originally announced in the 2011 Budget and the government seems to be committed to the indicative timetable for reform published in November 2011 (see Legal update, Government plans for integration of income tax and NICs and simpler personal taxation ( www.practicallaw.com/6-513-3488) ).
(See Overview, paragraph 2.24.)
In relation to company cars:
The Finance Bill 2012 will provide for the rates of company car tax for cars emitting more than 75g/km of carbon dioxide to be increased by one percentage point of the list price (up to a maximum of 35%) from 6 April 2014. In both April 2015 and April 2016, the rate will increase by two percentage points (up to a maximum of 37%). From April 2015, the rate for zero-emission and low-carbon cars emitting less than 95g/km will be 13%, increasing to 15% in April 2016. The diesel supplement will be removed in April 2016. The 2015 and 2016 changes will be included in a later Finance Bill.
Secondary legislation to be laid shortly to increase the fuel benefit charge multiplier to £20,200 from 6 April 2012. This will increase again by 2% above RPI-based inflation from April 2013. The van multiplier is frozen from April 2012 and will increase by inflation in April 2013. The 2013 changes will be legislated this autumn.
Regulations have been made setting out new flat-rate values to be applied for VAT purposes to the supply of the fuel of a business for private purposes. The new values apply for prescribed accounting periods beginning on or after 1 May 2012.
The government will consult on Finance Bill 2013 provisions to give effect to extra-statutory concessions relating to fuel scale charges and the proposal that the revalorised fuel scale charges will be set out in an annual public notice having the force of law instead of an annual statutory instrument.
The Finance Bill 2013 will extend the 100% first year capital allowance for businesses purchasing low-emission cars to 31 March 2015, except for leased cars. The qualifying threshold will be reduced to 95g/km driven from the same date.
The Finance Bill 2013 will reduce the threshold for the capital allowances main rate to 130g/km and the associated lease rental restriction will be revalorised in line with this change. These changes will apply from April 2013.
(See Overview, paragraphs 1.13, 1.14, 1.49, 2.12, 2.29, 2.30 and 2.49, TIIN: Company car tax rates, TIIN: Company car fuel benefit charge and The Value Added Tax (Consideration for Fuel Provided for Private Use) Order 2012.)
The 2012 Budget confirmed that HMRC will issue a consultation before summer 2012 on changes to the penalty regime for late filing and payment of PAYE to take account of the move towards real time filing of PAYE and NICs data (see Legal update, Regulations to collect real time PAYE and NICs data made ( www.practicallaw.com/6-518-5458) ). Legislation to enact the changes will be included in Finance Bill 2013.
(See Overview, paragraph 2.64.)
The key pensions tax developments in the Budget are:
Further changes to the asset-backed contributions anti-avoidance measures.
No change to the pensions annual allowance or to income tax relief for pensions contributions.
For analysis of all the announcements relevant to pensions, see PLC Pensions, Legal update, Budget 2012: key pensions issues ( www.practicallaw.com/1-518-5564) .
Enhanced capital allowances: energy saving technologies
The government will update the lists of technologies and products covered by the energy-saving and water efficient Enhanced Capital Allowances (ECA) schemes. The revisions will be effected by Treasury Order made during summer 2012, and are subject to State aid approval.
For further information on ECAs, see Practice note, Enhanced capital allowances (ECAs) for investment in environmental technologies ( www.practicallaw.com/8-204-8355) .
First year allowances for gas refuelling equipment
The Finance Bill 2013 will extend the 100% first year allowance for plant and machinery used in gas, biogas and hydrogen refuelling stations for two years beyond the current expiry date, to 31 March 2015 (for background, see Legal update, Budget 2008: Extension of first year allowances for refuelling equipment ( www.practicallaw.com/8-380-9405) ).
(See Overview, paragraph 2.28.)
Withdrawal of capital allowances: feed-in tariffs and the renewable heat incentive
As announced in the 2011 Budget, from April 2012, expenditure on plant and machinery for which tariff payments are received under the renewable energy schemes (feed-in tariffs (FITs) and Renewable Heat Incentives (RHIs)) will no longer be entitled to enhanced capital allowances ( www.practicallaw.com/4-107-5846) . In addition, expenditure on solar panels will be designated as special rate expenditure for capital allowances purposes from April 2012 (qualifying for 8% writing down allowances). These measures were contained in the draft legislation published on 6 December 2011, which is to be included in the Finance Bill 2012 (see Legal update, Consultation on draft Finance Bill 2012 legislation: key environmental measures: Enhanced capital allowance treatment for feed-in tariffs and Renewable Heat Incentive ( www.practicallaw.com/3-516-3349) ).
For background on enhanced capital allowances, see Practice note, Enhanced capital allowances (ECAs) for investment in environmental technologies ( www.practicallaw.com/8-204-8355) .
(See Overview, paragraph 2.104.)
For analysis of all key environment announcements, tax and non-tax, see PLC Environment, Legal update, 2012 Budget: environmental announcements ( www.practicallaw.com/4-518-5421) .
Intellectual property and R&D
Corporation tax reliefs for the creative sector
The government has announced that it will introduce corporation tax reliefs for the production of culturally British video games, television animation programmes and high end television productions.
The previous government announced in March 2010 that it would consult on the introduction of a relief for the video games industry. However, this was abandoned by the new coalition government as part of its first Budget in June 2010. For further detail, see Legal update, June 2010 Budget: key business tax announcements: Video games industry: tax relief dropped ( www.practicallaw.com/5-502-5267) .
Consultation on the design of the relief will take place over summer 2012. The legislation will be in the Finance Bill 2013 and will take effect from 1 April 2013, subject to EU State aid approval. The new regime will be similar to the film tax relief rules, including the rates of relief, see Practice note, Film tax relief ( www.practicallaw.com/7-385-1193) .
Research and development (R&D): above the line tax credit
The government has confirmed that it intends to introduce an "above the line" R&D tax credit from April 2013 with a minimum rate of 9.1% before tax. Loss-making companies will be able to claim a payable credit. The legislation will be in the Finance Bill 2013. The government will consult on the detail shortly but has said that it will ensure that R&D incentives for SMEs are not reduced as a result of this change.
The proposal was first suggested in June 2011 (see Legal update, R&D tax credits: consultation responses and further consultation ( www.practicallaw.com/0-506-4510) and confirmed as part of the November 2011 Autumn Statement (see Legal update, 2011 Autumn Statement: business tax implications: R&D "above the line" tax credit ( www.practicallaw.com/5-513-9508) ).
(See Overview, paragraph 2.26.)
Research and development tax relief and vaccine research relief
The government has confirmed that draft legislation to amend the research and development (R&D) tax credit will form part of the Finance Bill 2012 (to be published on 29 March 2012). The draft legislation will be the same as, or very similar to, the draft legislation published in December 2011.
In relation to SMEs, the legislation will:
Increase the rate of additional deduction to 125%, giving a total deduction of 225%.
Reduce the rate of R&D tax credit to 11% and withdraw the vaccine research relief (to comply with state aid rules).
Remove the rule limiting the amount of R&D tax credit to the amount of a company's PAYE/NICs liability.
Clarify the definition of when a company is a "going concern" to confirm that companies in administration or liquidation are excluded from relief.
For SMEs and large companies, the legislation will:
Remove the minimum expenditure requirement
Expand the definition of "externally provided worker".
(See Overview, paragraph 1.69.)
Oil and gas
Decommissioning relief: restriction and contractual approach
As announced in the 2011 Budget, the Finance Bill 2012 will introduce legislation to restrict to 20% tax relief for supplementary charge purposes for decommissioning expenditure (see Legal update, 2011 Budget: key business tax announcements: Increase in supplementary charge and restriction of decommissioning expenses ( www.practicallaw.com/6-505-3575) ). The government published draft legislation for the Finance Bill 2012 on 6 December 2011 (see Legal update, Draft Finance Bill 2012 legislation: key business tax measures: Oil and gas: supplementary charge ( www.practicallaw.com/6-515-2146) ). For background, see Practice note, Oil Taxation: Supplementary charge ( www.practicallaw.com/2-200-9267) .
The legislation will also broaden the scope of the extended loss carry back rules applicable to companies with ring fence trades (see Practice note, Oil taxation: Discussions about the future of the North Sea tax regime and recent legislative changes ( www.practicallaw.com/2-200-9267) ). Therefore, they will apply to losses arising from mineral extraction allowances for decommissioning expenditure, consistent with the definition of decommissioning expenditure used in the restriction of relief.
The Finance Bill 2013 will contain legislation giving the government power to enter into contracts with companies operating in the UK and UK continental shelf confirming the relief that they will receive when decommissioning assets. The government will consult further on the precise form and details of such contracts in the coming months.
(See Overview, paragraphs 1.32 and 2.38.)
The government will introduce a new £3 billion field allowance for particularly deep fields with sizeable reserves in the West of Shetland region. Qualifying fields will have:
A water depth greater than 1,000 metres.
Minimum reserves of 25 million tonnes.
Maximum reserves of 40 million tonnes, with a straight line taper to no allowance at 55 million tonnes.
The government will also increase the allowance for small fields to £150 million and increase the size of field qualifying for the maximum allowance to 6.25 million tonnes (approximately 45 million barrels), tapering to no allowance at 7 million tonnes (approximately 50 million barrels).
The new West of Shetland allowance and the changes to the small field allowance will have effect after the relevant statutory instrument is made and will apply to fields with development authorisation on or after 21 March 2012.
Finance Bill 2012 will also contain legislation giving the government power to introduce (through secondary legislation and from a date to be appointed) targeted measures to support investment in "brown fields" (those that have already received development approval and are to undergo additional development), and the government will engage with industry on how any such allowance could be structured to unlock investment while protecting revenues.
The government will continue to consider potential changes to the existing allowance for high pressure/high temperature fields and will also continue to work with industry to encourage further investment in the West of Shetland region.
For an overview of the current UK oil and gas taxation regime, see Practice note, Oil taxation ( www.practicallaw.com/2-200-9267) .
Supplementary charge: scope
The Finance Bill 2012 will introduce legislation to ensure the supplementary charge applies to ring fence chargeable gains. The legislation will also confirm that the scope of the supplementary charge matches the scope of ring fence corporation tax. For background, see Practice note, Oil Taxation: Supplementary charge ( www.practicallaw.com/2-200-9267) .
The government published draft legislation for comment on 6 December 2011 (see Legal update, Draft Finance Bill 2012 legislation: key business tax measures: Oil and gas: supplementary charge ( www.practicallaw.com/6-515-2146) ). The Finance Bill 2012 legislation (which will be effective from 6 December 2011) will either not differ from the draft legislation or will only contain small, technical amendments to the draft legislation.
(See Overview, paragraph 1.69.)
Seed Enterprise Investment Relief: changes
The government has announced that it will make changes to the draft Finance Bill 2012 legislation to implement the new Seed Enterprise Investment Relief (SEIS). For details about SEIS and the draft legislation published on 6 December 2011, see Legal update, Reform of venture capital and creation of seed enterprise investment relief: draft Finance Bill 2012: Seed enterprise investment scheme relief ( www.practicallaw.com/1-515-4548) . The changes will:
Allow previous (but not current) employees of the issuing company to qualify for relief.
Allow the issuing company to qualify if it has subsidiaries.
Determine eligibility by reference to the age of any trade rather than to the age of the company. This means that the issuing company's trade must be no more than two years old when the SEIS shares are issued.
Remove the requirement to include a proportion of the gross assets and employees of the issuing company's related entities when calculating the issuing company's gross assets and employees.
Allow directors who have qualified under SEIS to continue to qualify under EIS, subject to time limits.
No changes will be made (or only small, technical changes will be made) to the draft legislation implementing the capital gains tax exemption for gains realised on disposals of assets by individuals in 2012-13 and invested through SEIS in that year. (For details of that draft legislation, see Legal update, SEIS reinvestment relief from CGT: draft legislation ( www.practicallaw.com/2-517-9063) .)
HMRC has published guidance on SEIS, which confirms that HMRC will operate an advance assurance procedure from the date the Finance Bill 2012 receives Royal Assent. However, from 6 April 2012, it will provide advice on how the legislation is likely to apply assuming it is enacted as drafted.
Simplifying tax for small businesses
Following the recommendations of the Office for Tax Simplification, the Chancellor announced that, with effect from April 2013, small businesses (those with a turnover of less than £77,000, the VAT registration threshold) will be able to opt for a simplified cash basis for calculating their taxable profit. This will replace the obligation to account on an accruals basis and value stock and work-in-progress.
The proposals, which will include the use of standard deductions for mileage, an alternative to capital allowances and a reduction in record-keeping requirements, will be put out for consultation shortly. There will also be a consultation on whether there is a demand for some kind of disincorporation relief and the form that it should take.
(See Overview, paragraph 2.32 and HMRC: Making tax easier, quicker and simpler for small business.)
Venture capital schemes: maximum annual investment threshold reduced from £10 million to £5 million and minimum investment requirement removed
The government published revised TIINs in respect of the changes to the enterprise investment scheme ( www.practicallaw.com/9-107-6532) (EIS) and the venture capital trust ( www.practicallaw.com/0-107-7480) (VCT) scheme (as to which, see Legal update, Reform of venture capital and creation of seed enterprise investment relief: draft Finance Bill 2012 ( www.practicallaw.com/1-515-4548) ).
The main substantive changes from the 6 December 2011 draft legislation are:
The maximum annual amount that can be invested in an individual company is reduced from £10 million to £5 million.
The requirement that the investor must subscribe at least £500 has been removed.
It is anticipated that the draft Finance Bill 2012 legislation, to be published on 29 March, will reflect these changes.
Personal tax and investment
50% tax rate to reduce to 45% in April 2013
As widely predicted, the Chancellor confirmed that the 50% rate of tax for taxpayers with income in excess of £150,000 will reduce to 45% from 6 April 2013. There is a corresponding reduction in:
The dividend additional rate: from 42.5% to 37.5% (giving an effective tax rate of 30.6% when account is taken of the dividend tax credit).
The rates applicable to trusts: from 50% to 45% for the main trust rate and from 42.5% to 37.5% for the dividend trust rate.
The Chancellor reported that HMRC's analysis of how much revenue the 50% rate had actually raised (based on self-assessment tax returns for the first year of its application (2010-11)) revealed only around £1 billion and possibly less had been raised (against an expected yield of £2.5 billion). HMRC's analysis also reveals that there was a "considerable behavioural response" to the rate change, which included around £16 to £18 billion of income being brought forward to the 2009-10 tax year. On the basis of this evidence, it would appear that the behavioural response to the government's advanced announcement of the rate reduction will be that a considerable amount of income will be shifted from 2012-13 to 2013-14. The Office for Budget Responsibility estimates the amount to be in the region of £6.25 billion.
(See Overview, Annex B: Rates and allowances, TIIN: Income Tax Rates 2013-14, Income tax rates and Allowances 2012-13 and 2013-14, HMRC: The Exchequer effect of the 50% additional rate of income tax and Office for Budget Responsibility: Economic and Fiscal Outlook – March 2012, Box 4.2.)
CGT: disposals of residential property by non-resident non-natural persons
As part of a package of measures aimed at tackling tax avoidance in connection with UK residential property, the government will extend the scope of capital gains tax to cover gains arising on disposals by non-resident non-natural persons of UK residential property and shares or interests in UK residential property. Legislation will be included in Finance Bill 2013, to take effect from April 2013. The government will consult on the detail of the measure alongside its consultation on the SDLT enveloping annual charge for high value residential properties.
The term "non-natural persons" is not defined for this measure, but the Tax Information and Impact Note on the new SDLT rate for enveloping of high value residential properties indicates that, for the purposes of that measure, the term will include companies, collective investment schemes (including unit trusts), and partnerships in which a non-natural person is a partner (see SDLT: new penal rate for enveloping high value residential property).
Ordinary residence to be abolished as statutory residence test proceeds
The government has announced that ordinary residence will be abolished for tax purposes with effect from 6 April 2013, the same date that the new statutory residence test will take effect. Both measures will be legislated in Finance Bill 2013, with draft legislation to be published following Budget 2012 for consultation.
The government consulted during summer 2011 on both the statutory residence test and reform of ordinary residence. It now appears that the government has decided to proceed with the first of its two proposed options for reform of ordinary residence, which involved retaining the concept only for overseas workday relief under section 26 of the Income Tax (Earnings and Pensions) Act 2003. (For further information on the consultation, see Legal update, Statutory residence test: consultation document published ( www.practicallaw.com/8-506-5153) .) A summary of responses to the government's summer 2011 consultation will be published alongside the draft legislation.
For further detail about the proposed statutory residence test and the reforms to ordinary residence, and to follow their progress to implementation, see Private client tax legislation tracker 2011-12: Statutory residence test ( www.practicallaw.com/6-508-1880) . For information about the current rules, see Practice note, Residence and ordinary residence: definitions for UK tax purposes ( www.practicallaw.com/0-385-8051) .
(Overview, paragraph 2.5 and paragraph 2.6.)
Non-UK domiciled individuals
Legislation to be introduced in the Finance Bill 2012, and to take effect from 6 April 2012, will increase from £30,000 to £50,000 the remittance basis charge for individuals who have been resident in the UK in 12 or more of the last 14 tax years, exempt from tax overseas income and gains remitted for the purpose of making a commercial investment in a qualifying business, and simplify the remittance basis rules relating to nominated income and the taxation of assets remitted to and sold in the UK.
For more information about the reforms to the taxation of non-UK domiciled individuals and to follow these measures towards implementation, see Private client tax legislation tracker 2011-12: Taxation of non-UK domiciled individuals ( www.practicallaw.com/6-508-1880) . For information about the current rules, see Practice note, Residence, ordinary residence and domicile: UK tax implications: Remittance basis of taxation ( www.practicallaw.com/3-385-8059) .
Personal allowance increase to £9,205 from April 2013
As widely anticipated, the Chancellor announced an acceleration in the implementation of the coalition government's plan to increase the personal allowance to £10,000 over the parliament. The personal allowance for under-65s will increase (by £1,100) in 2013-14 to £9,205. At the same time, the basic rate limit will be reduced (by £2,125, to £32,245), bringing the higher rate threshold to £41,450. Although this increase in the personal allowance will be of some benefit to those higher rate taxpayers who enjoy the personal allowance (that is those with income of up to £118,410 in that year), the benefit will be small, at £15 or less (that is, 20% of £2,200 - £2,125).
The Budget also confirms the rise in the personal income tax threshold from £7,475 to £8,105 with effect from 6 April 2012.
(See Overview, Annex B: Rates and allowances, TIIN: Income Tax Personal Allowance for Those Aged Under 65, Basic Rate Limit and Upper Earnings Limit for 2013-14 and Income tax rates and Allowances 2012-13 and 2013-14.)
Unlimited tax reliefs to be capped
In a statement that begged more questions than it answered, the Chancellor announced that income tax reliefs, other than those that have a statutory limit (such as pension contributions or investments in Enterprise Investment Schemes) are to be capped for individuals at £50,000 or 25% of income, whichever is the greater. This capping will have effect for 2013-14 and subsequent tax years.
Draft legislation will be published for consultation later in the year and will be included in the Finance Bill 2013. If such a cap on reliefs is not to act as a disincentive to business expansion, it is to be hoped that there will be significant carve-outs, particularly in relation to trading losses. The following will be included among the reliefs affected:
Loss reliefs against total income (see Practice note, Income tax: use of losses ( www.practicallaw.com/1-385-1247) ).
Qualifying loan interest (see Practice note, Income tax: exemptions and reliefs: Interest relief ( www.practicallaw.com/8-385-1244) ).
Gift aid and charitable gifts of land and shares (see PLC Private Client, Practice note, Gift Aid for individuals, sole traders and partnerships: overview ( www.practicallaw.com/4-382-5817) ).
Other relevant anti-avoidance measures
Other anti-avoidance measures relevant to individuals include:
Property tax measures, including Annual charge for high value residential properties, SDLT: 7% rate on homes over £2 million and SDLT: new penal rate for enveloping high value properties.
Trusts tax measures, see PLC Private Client, Legal update, 2012 Budget: key private client tax announcements: Inheritance tax avoidance using excluded property trusts ( www.practicallaw.com/9-518-5522) and PLC Private Client, Legal update, 2012 Budget: key private client tax announcements: Corporate settlor-interested trusts ( www.practicallaw.com/9-518-5522) .
CGT: annual exempt amount
The CGT annual exempt amount (AEA) is to increase in line with the consumer prices index ( www.practicallaw.com/3-378-7892) from 2013-14 onwards. The CGT AEA level for 2012-13 is to remain at its 2011-12 level (£10,600).
For further information, see Legal update, Draft Finance Bill 2012 legislation: key private client measures: Lifetime planning: Capital gains tax: annual exempt amount ( www.practicallaw.com/9-515-2668) . To follow the progress of this legislation, see Private client tax legislation tracker 2011-12: Lifetime planning: CGT: annual exempt amount ( www.practicallaw.com/6-508-1880) .
CGT: foreign currency bank accounts
Exemption for individuals (both UK domiciled and non-UK domiciled), trustees and personal representatives from capital gains tax arising on withdrawals of money from foreign currency bank accounts. For further information on the draft legislation, see Legal update, Draft Finance Bill 2012 legislation: key private client measures: International individuals: Capital gains tax: foreign currency bank accounts ( www.practicallaw.com/9-515-2668) . To follow the progress of this legislation, see Private client tax legislation tracker 2011-12: International individuals, Capital gains tax: foreign currency bank accounts ( www.practicallaw.com/6-508-1880) .
Changes to personal allowances for the over 65s
At present, individuals qualify for higher personal allowances when they reach 65, but the additional allowances are withdrawn at the rate of £1 for every £2 of income above the income limit (£25,400 for 2012-13) until the allowance equals that of a person under 65.
With effect from 6 April 2013, individuals born after 6 April 1948 will not qualify for higher personal allowances when they reach 65 and individuals born after 6 April 1938 will not qualify for a higher age-related allowance at 75. Those who do qualify for the age-related allowances in 2012-13 (£10, 500 for those aged 65 to 74 at the end of the tax year and £10,660 for those aged 75 and over) will continue to receive the allowance, frozen at its 2012-13 level, until such time as the personal allowance for under 65s (£9,205 for 2013-14) equals or exceeds that amount.
(See Overview, paragraph 2.2 and Income Tax: Changes to the Higher Personal Allowances for People Aged 65 to 74 and Aged 75 and Over.)
Child benefit income tax charge for higher income taxpayers
In response to criticism over the proposed total withdrawal of child benefit, with effect from 7 January 2013, where one spouse or partner in a household has income over the basic rate limit, the Chancellor has proposed an incremental approach. There will be no means-testing in relation to the amount of child benefit paid. Instead, a tax charge, at the rate of 1% of benefit received for every £100 of net income (after pension contributions, charitable contributions and offset of losses) over £50,000 will apply where the individual or the person with whom they are living, receives child benefit. If both partners have net income in excess of £50,000, the charge will apply only to the partner with the higher income. At income levels of £60,000 and above, the entire child benefit will effectively be clawed back. Households may decide instead to elect not to claim the benefit. Such an election can be withdrawn if circumstances change.
Draft legislation will be contained in the Finance Bill 2012 and will operate in relation to all child benefit paid from 7 January 2013 onwards. Solicitors and accountants who advise small companies or trustees will need to ensure that their clients have given proper consideration to the impact of the child benefit charge when considering the timing of bonus or dividend payments or discretionary income distributions.
(See Overview, paragraph 1.12 and TIIN: Child Benefit: Income Tax Charge for Those on Higher Incomes.
Income tax rules on interest
The government will consult on changes to the income tax rules on the taxation of interest and interest-like returns, and the rules on deducting tax at source from such interest. There will be further opportunities to contribute to the development of policy following the consultation period. Any legislation will be included in Finance Bill 2013.
Qualifying time deposits
The government has confirmed that the draft legislation on withholding income tax from qualifying time deposits, published on 6 December 2011 (see Legal update, Draft Finance Bill 2012 legislation: key business tax measures: Withholding from qualifying time deposits ( www.practicallaw.com/6-515-2146) and Practice note, Withholding tax: bank deposits ( www.practicallaw.com/8-201-9956) ), is to be included in the Finance Bill 2012 with no amendments or with only "small, technical" amendments.
(See Overview, paragraph 1.69.)
Review of taxation of unauthorised unit trusts
The government is to consult on changes to the taxation of unauthorised unit trusts (UUTs). (In relation to the taxation of UUTs, see Practice note, Unit trusts and open-ended investment companies: tax: Unauthorised unit trusts ( www.practicallaw.com/2-382-5451) .)
The government launched a consultation in this area on 30 June 2011, seeking suggestions for improving the rules governing the taxation of UUTs with the aim of removing tax avoidance opportunities and reducing administrative complexity (see Legal update, Consultation on preventing avoidance involving unauthorised unit trusts ( www.practicallaw.com/3-506-7550) and Practice note, Unit trusts and open-ended investment companies: tax: Consultation on preventing avoidance involving unauthorised unit trusts ( www.practicallaw.com/2-382-5451) ).
The government will issue a further consultation on these rules in April 2012, which is to contain detailed proposals for change (although further details are unknown at present). Legislation effecting the resulting changes is intended to be included in the Finance Bill 2013.
(See Overview, paragraph 2.60.)
Transfer of assets abroad and attribution of gains rules
Following Budget 2012, the government will consult on draft legislation amending anti-avoidance rules that deal with the transfer of assets abroad (Chapter 2, Part 13, Income Tax Act 2007) and the attribution of gains realised by non-UK tax resident companies that are closely controlled by UK participators (section 13, Taxation of Chargeable Gains Act 1992). The changes will be implemented in Finance Bill 2013 and will have retrospective effect to 6 April 2012 although, exceptionally, a taxpayer may elect for the new rules to apply from 6 April 2013.
The move was originally announced in December 2011 and is likely to be in response to the European Commission's formal request of 16 February 2011 that the UK amend these rules. In the Commission's view, they discriminate by taxing non-UK investments more heavily than UK investments and are, therefore, incompatible with the fundamental EU rights to freedom of establishment and free movement of capital.
For further background and to follow the progress of this legislation, see Private client tax legislation tracker 2011-12: Transfer of assets abroad and attribution of gains rules ( www.practicallaw.com/6-508-1880) .
UK and overseas employment duties under single contract: SP 1/09
The government is to consult after Budget 2012 on draft legislation putting SP 1/09 on a statutory footing. The measure will be implemented in Finance Bill 2013 and will be effective from 6 April 2013. The existing SP 1/09 will remain in force for the tax year 2012-13.
SP 1/09 allows certain employees who carry out duties both in the UK and overseas under a single contract of employment to apportion their employment income rather than operate the burdensome mixed funds rules (see Practice note, Residence, ordinary residence and domicile: UK tax implications: Remittances from mixed funds ( www.practicallaw.com/3-385-8059) ).
The measure was originally due to be included in Finance Bill 2012, but in December 2011 the government announced its postponement until Finance Bill 2013, pointing out that this would allow it to tie the new provisions in with the reforms on residence now due to take effect from April 2013 (see Legal update, Draft Finance Bill 2012 legislation: key private client measures: Taxation of non-UK domiciled individuals ( www.practicallaw.com/9-515-2668) ).
For more information about the government's reforms to the taxation of non-UK domiciled individuals and to follow future developments, see Private client tax legislation tracker 2011-12: Taxation of non-UK domiciled individuals ( www.practicallaw.com/6-508-1880) .
For analysis of the main announcements relevant to private client and charity practitioners, tax and non-tax, see PLC Private Client, Legal update, 2012 Budget: key private client tax announcements ( www.practicallaw.com/9-518-5522) .
SDLT: 7% rate on homes over £2 million
The rate of SDLT ( www.practicallaw.com/2-107-7304) will increase (by 2%) to 7% on UK residential properties where the chargeable consideration ( www.practicallaw.com/0-107-5891) is over £2 million. This new rate of SDLT will apply to transactions with an effective date ( www.practicallaw.com/3-107-6200) (generally, the date of completion) after 21 March 2012. However, transitional provisions will ensure that, broadly speaking, the old rate will continue to apply in respect of contracts entered into before 22 March 2012 but completed on or after that date. The measure will apply to freehold purchases and leasehold assignments where the consideration exceeds £2 million and to the grant of a lease where the premium exceeds £2 million. Note that a new top rate of 15% will apply to purchases over £2 million by certain "non-natural persons", such as companies (see SDLT: new penal rate for enveloping high value residential property).
The 5% SDLT rate will apply to wholly-residential transactions where the chargeable consideration is more than £1 million but not more than £2 million (see Practice note, SDLT and residential property: the 5% top rate ( www.practicallaw.com/8-505-0670) ).
For more information on SDLT and rates generally, see Practice note, Stamp duty land tax ( www.practicallaw.com/0-107-3726) and Practice note, SDLT and stamp duty rates (for land) ( www.practicallaw.com/1-107-3900) .
SDLT: new penal rate for enveloping high value residential property
The government has announced that it will introduce, with immediate effect, an SDLT rate of 15% for UK residential property acquisitions by "non-natural persons" (whether or not acquired together with others) if the consideration is over £2 million. This new rate will apply to transactions with an effective date ( www.practicallaw.com/3-107-6200) after 20 March 2012, but transitional rules will disapply the new rate if the sale contract was completed and signed by all parties to the transaction before 21 March 2012. These measures will be included in the Finance Bill 2012.
A "non-natural person" includes companies, collective investment schemes and partnerships in which a non-natural person is a partner. Property developers and corporate trustees will be excluded from the new rate in certain circumstances. The definition of residential property in section 116 of the Finance Act 2003 will be modified for this purpose; residential accommodation for school pupils and the armed forces will be specifically excluded.
Although an attack on the use of offshore companies holding UK residential property was widely expected, the ferocity of it will have surprised many. High net worth individuals commonly use companies in structures for holding UK property for capital tax, and non-tax, purposes. Clearly, these sorts of arrangements will need to be reviewed once the detailed rules become available. (See also Annual charge for high value residential properties.)
Annual charge for high value residential properties
The government has announced that it will consult on introducing an annual charge on residential properties over £2 million owned by certain "non-natural persons". The measures implementing the annual charge, effective from April 2013, will be in Finance Bill 2013.
This has the feel of being a last minute concession to the Liberal Democrat element of the government, who have by all accounts been pushing for a so-called mansion tax. The undeveloped nature of this policy announcement is, perhaps, reflected in its description as an annual charge in the Budget Report and Overview, paragraph 2.56, and an "SDLT enveloping annual charge" in the Overview, paragraph 2.7. It is difficult to imagine how the annual charge can easily be fitted into the SDLT code, which is concerned with taxing acquisitions of chargeable interests. The government has indicated the following annual charges:
Properties valued between £2 million and £5 million: £15,000.
Properties valued between £5 million and £10 million: £35,000.
Properties valued between £10 million and £20 million: £70,000.
Properties valued above £20 million: £140,000.
SDLT: option sub-sale scheme outlawed
The government has issued draft anti-avoidance legislation, for inclusion in Finance Bill 2012, that outlaws a specific SDLT scheme that relies on the application of the SDLT transfer of rights (sub-sale) rules. A transfer of rights occurs where:
There is a contract for a land transaction entered into between party A and party B that is to be completed by a conveyance.
As a result of a further transaction, which could be a sub-sale, assignment or other transaction, a person other than B (party C) becomes entitled to call for a conveyance to him.
The measures announced are designed to counter a specific avoidance scheme, believed to have been widely marketed, that involves B, at the same time as completing the purchase from A, granting an option to purchase the property to a third party. If the scheme works SDLT is not payable on B's purchase and SDLT does not become payable on the option unless exercised (which is not intended).
The draft legislation makes it clear that an "assignment, subsale or other transaction" does not include the grant or assignment of an option and, therefore, the transfer of rights provisions will not apply to the scheme transactions. The legislation will apply to options granted or assigned on or after 21 March 2012.
The government stresses that this measure is purely clarificatory. The government does not believe that the option scheme works under the existing legislation and will challenge users of it.
The Government has also announced that it will consult on addressing SDLT avoidance through the use of sub-sale relief, but has not given any information on the form this will take or when this will happen.
(See HM Treasury: draft legislation: Stamp duty land tax: sub-sale rules and Overview, paragraph 1.59.)
SDLT: disclosure of tax avoidance schemes
The government has confirmed that draft legislation amending the disclosure of tax avoidance schemes (DOTAS) rules applicable to stamp duty land tax (SDLT) will be included in the Finance Bill 2012.
The legislation, which permits the removal of the grandfathering rules for certain avoidance schemes using the sub-sale rules, and removes the thresholds for making a disclosure, was first published on 6 December 2011 (see Legal update, Draft Finance Bill 2012 legislation: key business tax measures: SDLT: disclosure of tax avoidance schemes ( www.practicallaw.com/6-515-2146) ). It will be included in the Finance Bill 2012 with no amendments or with only "small, technical" amendments.
The draft legislation is an enabling provision under which regulations implementing these changes will be made after Royal Assent to the Finance Bill 2012. For background, see Practice note, SDLT disclosure regime ( www.practicallaw.com/6-201-2437) .
(See Overview, paragraph 1.69.)
SDLT: possible retrospective anti-avoidance legislation
The government has stated that it will "take action to close down future SDLT avoidance schemes, with effect from 21 March 2012, where appropriate". On the face of it, this is a warning to taxpayers that the government will introduce retrospective legislation countering unacceptable future SDLT avoidance.
The evidence (the new 15% SDLT rate for high-value residential property acquired by non-individuals and the legislation countering the sub-sale option scheme, not to mention the consultations on sub-sales and the annual charge) signals the government 's intolerance to SDLT avoidance. This warning, along with the application of the GAAR to SDLT (see General anti-abuse rule), seems to cover all the bases.
(See Budget Report, paragraph 2.199.)
SDLT: simplifying rules on leases
The government has announced that it will consult, from April 2012, through the SDLT working group, on ways of simplifying the rules on abnormal rent increases (see Practice note, SDLT and the grant of a lease: Variations after the first five years: whether there is an abnormal rent increase ( www.practicallaw.com/8-107-4821) ), substantial performance of agreements for lease (see Practice note, SDLT and agreements for lease: Substantial performance rule ( www.practicallaw.com/7-107-4826) ), and leases that continue after a fixed term (see Practice note, SDLT and the grant of a lease: Holding over and lease renewals ( www.practicallaw.com/8-107-4821) ). Any resulting legislation will be included in Finance Bill 2013.
(See Overview, paragraph 2.57.)
Capital allowances: fixtures and business premises renovation allowance
The government has confirmed previous announcements that:
Legislation will be introduced in Finance Bill 2012 amending the rules governing claims for capital allowances on fixtures that are transferred as part of a property where the seller was entitled to claim capital allowances (see Legal update, Capital allowances on fixtures: draft legislation and responses to consultation ( www.practicallaw.com/0-515-3969) ). A technical change will enable plant and machinery allowances to be claimed by a new owner on any fixtures expenditure that has not been relieved under the business premises renovation allowance scheme.
The business premises renovation scheme will be extended for a further five years to April 2017 and that changes will also be made, in secondary legislation, to the scheme to ensure continuing compliance with state aid rules (see Legal update, Business premises renovation allowance: draft legislation published ( www.practicallaw.com/6-516-2008) ).
REITs: previously announced improvements and other possible changes
The Finance Bill 2012 will contain legislation relaxing a number of the requirements of the Real Estate Investment Trust (REIT) tax regime. On 6 December 2011, HMRC published for comment draft legislation for the Finance Bill 2012 that implements the changes (see Legal update, REITs improvements: draft Finance Bill 2012 legislation ( www.practicallaw.com/3-517-1504) ). The Finance Bill 2012 legislation will either not differ from the draft legislation or will only contain small, technical amendments to the draft legislation.
The government will also consult on the role REITs can play in supporting the social housing sector and whether to change the treatment of income received by a REIT when it invests in another REIT. Any legislation will be in Finance Bill 2013.
For more information on REITs, see Practice note, UK REITs: questions and answers ( www.practicallaw.com/7-201-8033) .
(See Overview, paragraphs 1.69 and 2.39.)
Lease premium relief
Subject to an informal consultation, the government has announced that it will introduce legislation (in Finance Bill 2013) to amend a complex element of lease premium relief relating to the deemed income tax and corporation tax treatment of long leases as shorter leases.
For more information on the current tax treatment of lease premiums, see Practice note, Leases: tax: Income and capital taxes ( www.practicallaw.com/7-371-6973) .
(See Overview, paragraph 2.33.)
For PLC Property's Budget analysis see PLC Property, Legal update, 2012 Budget: property implications ( www.practicallaw.com/0-518-5418) .
Self-storage, alterations to listed buildings and other "anomalies"
On 21 March 2012, the government published a consultation document containing draft secondary legislation, on changes which either extend standard-rated ( www.practicallaw.com/7-107-7306) VAT to, or confirm standard-rated treatment of, various "anomalies" in the VAT legislation. In summary, the measures:
Remove VAT exemption ( www.practicallaw.com/1-107-6588) from self-storage facilities to ensure that all supplies of self-storage receive the same standard-rated treatment and to counter avoidance.
Remove the anomaly under which approved alterations to protected buildings ( www.practicallaw.com/3-107-7073) are zero-rated ( www.practicallaw.com/2-107-7530) , while alterations to other buildings, and repairs and maintenance to all buildings are standard-rated.
Clarify the treatment of catering to ensure that all hot takeaway food is standard-rated and to clarify the meaning of "premises".
Tax sports nutrition drinks to ensure that all sports drinks receive the same VAT treatment.
Confirm that standard-rate VAT applies to the rental of hairdressers' chairs.
Ensure that holiday caravans are taxed consistently at the standard rate of VAT.
The consultation, which ends on 4 May 2012, invites comments on the draft legislation. The government intends to consider and publish responses to the consultation before the final versions of the two draft Treasury orders are laid before Parliament in the summer.
Supplies of self-storage facilities
Currently, supplies of self-storage facilities are VAT exempt, subject to the option to tax. To prevent mandatory standard-rating being used for tax avoidance purposes, supplies of self-storage between connected persons (within the meaning of section 1122 of the Corporation Tax Act 2010) will remain exempt. The government sees this additional measure as necessary to prevent the use of anti-avoidance schemes that utilise the proposed mandatory standard-rating of supplies. The example given is the recovery of significant amounts of VAT on construction or acquisition costs by using an option to tax to make much lower value standard-rated supplies to a partially-exempt ( www.practicallaw.com/3-107-6969) connected person. Here, the option is disapplied by existing anti-avoidance legislation, as to which, see Practice note, The option to tax: disapplication ( www.practicallaw.com/6-508-0343) . The government has also warned that it will introduce measures to counter VAT avoidance through value-shifting of supplies (from standard-rated storage to exempt insurance, which are often supplied together) if this becomes an issue.
Approved alterations to protected buildings
The government proposes to remove zero-rating from supplies of building materials and construction services relating to approved alterations to protected buildings and to restrict zero-rating for the first freehold sale or grant of a long lease. The reason is that it considers that the current VAT rules give "a perverse incentive for [alterations] as opposed to repair" because the former supplies are zero-rated while the latter are standard-rated. Owners of protected buildings therefore have a tax advantage over owners of other buildings. The government also considers that there to be considerable confusion surrounding the distinction between alterations, repairs and maintenance, resulting in taxpayer queries and errors. Transitional measures will preserve zero-rating for contracts (transitional contracts) entered into before 21 March 2012 under which supplies will be made up to 20 March 2013.
The government has also published draft anti-avoidance provisions for inclusion in the Finance Bill 2012, that apply to supplies of self-storage facilities and protected buildings alterations. These provisions, which have effect from 21 March 2012, prevent suppliers entering into arrangements on or after date in order to obtain exemption for supplies that will be made on or after the 1 October 2012 implementation date of the new rules. Supplies under such arrangements will attract an anti-forestalling charge equivalent to the standard rate of VAT, which is to be treated as VAT, but will not be payable until 1 October 2012.
The anti-avoidance provisions for alterations to protected buildings will not apply to transitional contracts (see above), nor will they apply to certain supplies by architects, surveyors or consultants or persons acting in a supervisory capacity.
These changes could be controversial since they will bring about significant sums of irrecoverable VAT and cash-flow issues for both suppliers and end-users in an already challenging economy.
For general information about VAT, see Practice note, Value added tax ( www.practicallaw.com/2-107-3725) .
Abolition of low value consignment relief
The Finance Bill 2012 will abolish VAT low value consignment relief completely for goods imported from the Channel Islands with effect from 1 April 2012.
The government published draft legislation implementing this repeal for comment (see Legal update, Abolition of VAT low value consignment relief for Channel Islands imports ( www.practicallaw.com/4-515-6428) ). The Finance Bill 2012 provisions will make either no changes to the draft legislation or only small, technical amendments.
(See Overview, paragraph 1.69.)
Cost sharing exemption: implementation
The Finance Bill 2012 will include measures to implement the VAT cost sharing exemption set out in Article 132(1)(f) of the Principal VAT Directive (2006/112/EC).
On 6 December 2011, the government published for comment draft legislation implementing the exemption (see Legal update, VAT cost sharing exemption: draft legislation and consultation response ( www.practicallaw.com/4-515-4288) ). The Finance Bill 2012 provisions will make either no changes to the draft legislation or only small, technical amendments.
(See Overview, paragraph 1.69.)
Groups: enactment of ESC 3.2.2
Finance Bill 2012 will contain legislation enacting extra-statutory concession (ESC) 3.2.2. The legislated ESC will have effect from Royal Assent to the Bill. ESC 3.2.2 allows VAT reverse charges to be based on the cost of services purchased by group members established overseas and prevents excessive charges arising.
On 6 December 2011, the government published for comment draft legislation enacting ESC 3.2.2 (see Legal update, VAT groups: enactment of ESC 3.2.2 ( www.practicallaw.com/9-515-8670) ). The Finance Bill 2012 provisions will make either no changes to the draft legislation or only small, technical amendments.
(See Overview, paragraph 1.69.)
Online registration and abolition of registration threshold for non-established persons
Finance Bill 2012 will contain legislation introducing an online system for VAT registration with effect from 31 October 2012 and abolish certain VAT forms from the same date. The Finance Bill 2012 will also remove the VAT registration threshold for businesses not established in the UK from 1 December 2012.
On 6 December 2011, the government published for comment draft legislation to implement these changes (see Legal update, VAT: online registration and removal of registration threshold for non-UK businesses ( www.practicallaw.com/9-515-9288) ). The Finance Bill 2012 provisions will make either no changes to the draft legislation or only small, technical amendments.
(See Overview, paragraph 1.69.)
Registration and deregistration thresholds increased
A Treasury order laid before the House of Commons, increases the VAT registration limit for taxable supplies ( www.practicallaw.com/1-107-7366) and for acquisitions from other member states ( www.practicallaw.com/1-107-6833) from £73,000 to £77,000 with effect from 1 April 2012. The order similarly increases the VAT deregistration limit to £77,000 for acquisitions from other member states. However, the VAT deregistration limit for taxable supplies within the UK is only increased to £75,000. The deregistration limits also take effect from 1 April 2012.
For general information about VAT registration and deregistration, see Practice note, Value added tax: Taxable persons and VAT registration ( www.practicallaw.com/2-107-3725) . For information about intra-Community acquisitions, see Practice note, Cross-border transactions and VAT: UK inbound supply of goods ( www.practicallaw.com/8-383-2359) .
Simplifying invoicing rules
Following changes made by the Second Directive on VAT Invoicing (Directive 2010/45/EU) (as to which, see Legal updates, EU Council adopts Directive on simplification of VAT invoicing ( www.practicallaw.com/3-502-8120) and Commission publishes VAT invoicing rules explanatory notes ( www.practicallaw.com/9-508-8979) ), secondary legislation will be introduced to simplify the VAT invoicing rules with effect from 1 January 2013.
(See Overview, paragraph 2.51.)
Supplies by public bodies
Finance Bill 2012 will contain legislation enacting article 13 of the Principal VAT Directive (2006/112/EC) to ensure that EU agreements relating to the VAT treatment of public bodies carrying out their statutory duties in competition with the private sector are clearly transposed into domestic law. The effect of the measure is that public bodies supplying goods or services pursuant to public statute which is unique to them will not be regarded as doing so in the course or furtherance of a business carried on by them unless the exemption would distort competition or the supplies arise from activities described in Annex 1 of the Principal VAT Directive that are engaged in to a degree which is more than merely negligible. The measure will have effect from Royal Assent to the Bill.
On 6 December 2011, the government published for comment draft legislation enacting article 13 of the Principal VAT Directive (see Legal update, Draft Finance Bill 2012 legislation: key business tax measures: Status of public bodies ( www.practicallaw.com/6-515-2146) ). The Finance Bill 2012 provisions will make either no changes to the draft legislation or only small, technical amendments.
(See Overview, paragraph 1.69.)
Offshore taxing rights
Following the introduction of a statutory power in 2009 to declare a UK Exclusive Economic Zone, the government will engage with industry on the taxation regime for offshore non-oil and gas activity outside existing UK territorial waters, with a view to ensuring a level playing field for the individuals and companies involved. No further detail is given, but this may be a reference to offshore wind farms.
(See Budget Report, paragraph 2.134.)
OTS review of reliefs
The Finance Bill 2012 will repeal (wholly or partly) various reliefs recommended for repeal by the Office of Tax Simplification, including the following:
SDLT: disadvantaged areas relief.
Grants for giving up agricultural land.
Certain payments arising from a reduction in pool betting duty.
Stamp duty: relief on certain transactions in shares.
Tax reserve certificates issued by HM Treasury.
Capital allowances: flat conversion allowances,
Stamp duty: relief for certain transactions in land.
Deeply discounted securities: incidental expenses.
Life assurance premium relief.
Life assurance premiums paid by employers under an employee financed retirement benefit scheme.
On 6 December 2011, HM Treasury published its response document to the consultation on the abolition of 36 tax reliefs (see Legal update, Consultation on abolition of tax reliefs ( www.practicallaw.com/2-506-3034) ) as well as draft legislation and some TIINs (see Legal update, Abolition of tax reliefs: draft Finance Bill 2012 legislation and response document ( www.practicallaw.com/5-517-1273) ). The Finance Bill 2012 provisions will make either no changes to the draft legislation or small, technical amendments.
(See Overview, paragraph 1.69.)
Remote gambling taxation
The government will introduce a place of consumption based taxation regime for remote gambling. The current regime is based on place of location of the supplier, meaning that operators providing remote gambling services to UK customers currently fall outside the scope of remote gaming duty.
Under the new regime, operators will pay the tax on gambling profits generated from customers in the UK, regardless of where the operator is located. Conversely, UK operators will no longer be liable for duty on revenues generated from overseas customers. A consultation will be launched shortly and the new measure is scheduled to come into effect in December 2014, although this will be kept under review.
In addition, as announced in December 2011, the government will introduce double taxation relief in the Finance Bill 2012 for remote gaming duty for accounting periods beginning on or after 1 April 2012.