Budget 2013
By Richard Mannion, Director of National Tax at Smith & Williamson
We had been told by the media to expect a “boring Budget,” particularly bearing in mind that much of the headline news had been included in the Autumn Statement last December.
The ‘tom-toms’ were certainly quieter this time around than on previous occasions, with less leaking of news - until the Evening Standard got ahead of itself, that is. We did have Liam Fox calling for a capital gains tax (CGT) holiday to kick start the economy, which left us wondering whether as a former cabinet minister he had the chancellor’s ear. Then, the day before the Budget the Treasury announced an extension to the childcare scheme to come in in Autumn 2015 (after the next Election). That sounded expensive and so immediately raised the question of where the cash would come from to pay for it.
In the event there was little in the way of new tax news in the Budget speech, but as always the devil is in the detail. The Overview of Tax Legislation published by HM Treasury itself contains 185 pages of proposals.
Clearly the chancellor had very little cash to give away, but nevertheless there was some good news for entrepreneurs. The headline measure on jobs was the introduction of an employers’ national insurance relief of £2,000 per year from 2014 for all businesses.
This will help smaller
businesses in particular and as a result many will pay no employers’ national insurance at all.
The one-off CGT exemption for a capital gain reinvested in a seed
38 entrepreneurcountry
enterprise investment scheme (SEIS) made in 2012/13 has been extended for 2013/14, but only to the extent of a maximum one-half of the gain. This will give a boost to SEIS, a relief that started slowly but is now beginning to take off.
The Budget papers also confirmed that a number
of matters that had
been subject to consultation were going ahead. Individuals who hold enterprise management incentive (EMI) options will be able to access CGT entrepreneurs’
relief on the
shares they acquire under an EMI option after 6 April 2013, even though they do not hold the usual threshold of 5% of the ordinary shares in the company. In addition, it will no longer be required for the shares to have been held as an employee for at least a year at the disposal date provided that a year has passed since the option was granted and the individual has been an employee throughout. In a new development, relief will also apply to replacement shares following
The Department for Business, Innovation & Skills (BIS) published a consultation in October 2012 on a new employee shareholder employment status. This status will come into force with effect from 1 September 2013. Individuals adopting this new status will give up some of their rights under employment legislation and in return will be exempt from CGT on up to £50,000 of ‘employee shareholder’ shares. The subsequent Autumn Statement included the announcement that the Government was considering exempting the first £2,000 from income tax and NIC. Legislation will be introduced in the Finance Bill 2013 to deem that the employee
a reorganisation of the company and to some share for share exchanges.
This change to include replacement shares is welcome as it was unexpected, with the original draft clauses of the Finance Bill specifically prohibiting those replacement shares from qualifying.
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