Other areas of interest
Addressing imbalances in the tax system
Remote gambling
The government will amend the tax treatment of freeplays in Remote Gaming Duty to bring it into line with the tax treatment of free bets in General Betting Duty.
Asset managers
The government has finalised the rules that determine when asset managers can pay capital gains tax rather than income tax on their performance related returns (‘carried interest’). These new rules ensure that carried interest will be taxed as a capital gain only when the fund undertakes long term investment activity.
Employee Shareholder Status
The government believes that Employee Shareholder Status (ESS) provides vital flexibility for early stage firms, and that it is right that employee shareholders receive tax benefits on shares awarded in exchange for relinquishing certain employment rights. However, the government wants to ensure that the benefits for individuals are proportionate and fair. Budget 2016 introduces an individual lifetime limit of £100,000 on gains eligible for Capital Gains Tax (CGT) exemption through ESS. This limit will apply to arrangements entered into on or after 17 March 2016, and will not apply to arrangements already in place. This change will enable employee shareholders to realise a significant growth in the value of their shares without paying any CGT, whilst helping to ensure that the status is not misused.
Loans to participators
The loans to participators rules aim to prevent owners of close companies avoiding Income Tax and National Insurance contributions by remunerating themselves through loans or advances that are not repaid, rather than taking dividends or salary. The government will increase the loans to participators tax rate from 25% to 32.5%, keeping it aligned with the higher rate of tax charged on dividend income. The new rate will apply to loans made or benefits conferred by close companies on or after 6 April 2016.
Alcohol and tobacco
The duty rates on beer, spirits and most ciders will be frozen this year. The duty rates on most wines and higher strength sparkling cider will increase by RPI from 21 March 2016.
As announced at Budget 2014, duty rates on all tobacco products will increase by 2% above RPI inflation. Duty on hand-rolling tobacco will also increase by an additional 3% above this rate, to 5% above RPI. These changes will come into effect from 6pm on 16 March 2016.
Following the earlier consultation, the government will introduce a Minimum Excise Tax on cigarettes.
Capital gains tax
Budget 2016 announces that, from 6 April 2016, the higher rate of Capital Gains Tax (CGT) will be reduced from 28% to 20%, and the basic rate will be reduced from 18% to 10%. There will be an 8 percentage point surcharge on these new rates for carried interest and for gains on residential property. This will ensure that CGT provides an incentive to invest in companies over property. Private Residence Relief will continue to ensure that an individual’s main home is not subject to CGT. In addition, entrepreneurs’ relief will be extended to long term investors in unlisted companies. This will provide a 10% rate of CGT for gains on newly issued shares in unlisted companies purchased on or after 17 March 2016, provided they are held for a minimum of three years from 6 April 2016, and subject to a separate lifetime limit of £10 million of gains.
CIPP Policy News Journal
25/04/2016, Page 181 of 453
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