The Budget 2015 Update
Really very little specifically on share schemes this year but there’s always something for small companies and/or shareholders to think about.
Changes to Entrepreneurs’ Relief (ER)
Individuals will not be able to claim ER on disposal of assets unless they are disposed of in connection with the disposal of at least a 5% shareholding in the company. This measure is introduced to ensure that shareholders benefiting from ER can only do so if they are making a “meaningful” withdrawal from the business. This is unlikely to affect EMI optionholders (who are subject to their own special rules relating to ER) but employees looking to benefit from ER on the sale of a small shareholding will need to take care to ensure that they still qualify. This applies to disposal as of today’s date.
Venture Capital Trusts, Seed Enterprise Investment Scheme and the Enterprise Investment Scheme
In order to benefit from these investment reliefs, new tests will apply to the investee companies:
- They must usually have been “active” for less than 12 years
- The maximum cap on total investment receives must not exceed £15m (£20m for “knowledge intensive companies”)
- The cap on the number of employees for knowledge intensive companies is increased from 249 to 499 employees.
Note that these changes are subject to State Aid clearance.
Given that EMI operates under the same rules as EIS, this is definitely a space worth watching.
Employee Benefits & Expenses
Announcements were made in last year’s budget that the government would act on the Office of Tax Simplification’s recommendations on employee benefits and expenses. From April this year:
- There will be a statutory exemption for trivial benefits in kind of less than £50
- There will be an annual cap of £300 for officeholders of close companies (and employees who are family members of those officeholders)
- The £8,500 threshold below which employees do not pay income tax on certain benefits in kind (replaced by specific exemptions for carers and ministers of religion)
- Certain reimbursed expenses will be exempted (except in conjunction with salary sacrifice arrangements)
Special Purpose Share Schemes (aka B Share Schemes)
This was announced last year and, as of 6 Aprl 2015, all returns made via such a scheme will be taxed as dividends.
R&D Tax Credits
The rate of above the line credit will increase this April from 10% to 11%, and from 225% to 230% for the SME scheme.
In addition, the government will introduce certain improvements, including introducing voluntary advanced assurance lasting 3 years for smaller business, producing new guidance for smaller companies, and a 2 year publicity strategy to raise awareness generally. Further improvements are anticipated and HMRC are to set out a “roadmap” …
In other news...
- Corporation tax will be set at 20% from this April (this rate is now the joint lowest of all the G20 countries – we rank alongside Russia, Saudi Arabia and Turkey...)
- For the tax avoiders, the Liechtenstein and Crown Dependencies disclosure facilities are to be closed early. A last chance disclosure facility will be available between 2016 and mid-2017 – but there will be 30% penalties on top of any tax owed and interest, and no immunity from criminal prosecution
- For those pushing tax avoidance schemes, tougher measures for promoters, particularly repeat offenders
- A new tax-based penalty to be based specifically on cases tackled by the GAAR
- Anti-avoidance legislation preventing companies from obtaining a tax advantage by turning historic tax losses into in-year deductions (also known as “refreshing”) – applicable for companies whose accounting periods begin on or after 18th March 2015
- The end of the paper tax return, with digital tax accounts promised for all 5 million small businesses and 10 million individuals by early 2016 (though, given the difficulties with just taking share schemes online we aren’t holding our breath on this one)
- The abolition of Class 4 NICs and the reform of Class 2 NICs
- Increased tax-free personal savings allowances (up to £1,000 for basic rate tax payers, £500 for higher rate)
- More flexible (cash) ISAs, so that a saver can withdraw cash and then pay it back without affecting the annual limit
- Increase in IT bands and allowances, with the personal allowance increased to £10,800 this tax year (£11,000 next year)
- Flexibility for individuals to give up their annuity in return for a lump sum or alternative pension arrangements
- The introduction of an orchestra tax relief. No doubt a few aspiring musicians will be blowing their own trumpets over this announcement!