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Government consults on income tax relief

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20th Jul 2012
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The government has asked for views on its proposal to cap income tax relief from April 2013 in an effort to stop wealthy individuals from using tax breaks to avoid tax.

As announced in the 2012 Budget, the cap will be set at £50,000 or 25% of an individual’s income - whichever is greater. The aim is to stop individuals from reducing their income tax bills to zero by using these income tax reliefs “to excess”, the Treasury consultation says.

The consultation will end on 5 October and the government will publish draft legislation in the autumn.

As previously announced, the government has dropped plans to limit tax relief on charitable giving after protests from charities.

The consultation has asked for comments on the implementation and delivery of the cap - including how an individual’s income will be defined and calculated for the purposes of the cap; when the cap will apply; and how reliefs will be ordered.

The cap will apply to 10 types of relief:

  1. Trade loss relief against general income
  2. Early trade losses relief – available for losses made by an individual carrying on a trade, profession or vocation
  3. Post-cessation trade relief – available to an individual in the first four years of the trade, profession or vocation
  4. Property loss relief against general income – available for qualifying payments or qualifying events within seven years of the permanent cessation of the trade.
  5. Post-cessation property relief – available for property business losses arising from capital allowances or agricultural expenses
  6. Employment loss relief – available for qualifying payments or qualifying events within seven years of the permanent cessation of the UK property business
  7. Former employees deduction for liabilities – available in certain circumstances where losses or liabilities arise from employment
  8. Share loss relief – available for payments made by former employees for which they are entitled to claim a deduction from their general income in the year in which the payment is made
  9. Losses on deeply discounted securities – available for what would otherwise be a capital loss on the disposal (or deemed disposal) of certain qualifying shares
  10. Qualifying loan interest – available only for losses on gilt strips and on listed securities held since at least 26 March 2003 and available for interest paid on certain loans. These include loans to buy an interest in certain types of company, or to buy an interest in a partnership, and loans taken out by personal representatives to pay inheritance tax
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Replies (7)

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By johnjenkins
23rd Jul 2012 09:41

Me feels

another U turn coming along. Has anyone read DC's new autobiography, "50 shades of bullshit"?

Thanks (3)
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By justsotax
23rd Jul 2012 11:20

...i can picture it now....

...'read about the steamy exploits of a high powered exec fumbling in the dark for something long and hard (his backbone maybe?!)....'

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By mikewhit
23rd Jul 2012 13:02

Did I get a point in buzzword bingo - "wealthy"

"in an effort to stop wealthy individuals from using tax breaks to avoid tax."

Thanks (1)
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By justsotax
23rd Jul 2012 13:20

...you can't help but imagine the meetings....

....'The aim is to stop individuals from reducing their income tax bills to zero by using these income tax reliefs'

 

So DC and GO discuss limiting the amount of expenses a business can claim....fuel - no you can't have that....marketing.....no you can't have that.....  and onto MP's allowances....ah well that is different you see....

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x
By rockallj
23rd Jul 2012 13:42

And what about the ordinary Joe/Jane......?

And what about the ordinary Joe/Jane with "normal income" and perhaps a loss making business, or qualifying interest for say, the purchase of a partnership/co. shares?  It will have a massive impact

Not particular unusual scenarios are they?

This will have a massive impact on ordinary folk whilst the richer will find other ways and means.

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By ShirleyM
23rd Jul 2012 14:43

@rockallj

It's the same old story.

New legislation is introduced to punish the 'naughty' ones that dodge taxes, but it affects everyone (even those who didn't use the loopholes) and the 'naughty ones' just find another way around the legislation.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
23rd Jul 2012 16:02

@mikewhit

Curses! Foiled again... You win more than a point, Mike. As previously posted, I promised a £15 M&S voucher to any member who caught us out using the offending hack-phrase.

So, you'll be able to have a drink/T-shirt/Dinner in for 2 on us as you smugly reflect on your contribution to semantic accuracy on AccountingWEB.

Enjoy it!

(I'll PM you to make the arrangements)

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