October 30th, 2012 / Insight posted in

2012 Pre-budget TMT update

With Spring in the air, the end of the current tax year is less than a month away and the Chancellor’s Budget is coming up on 21st March. This may, therefore, be the ideal time to take a look at some potential tax savings that could be made.

As with any Budget, there are plenty of calls from various interested parties for particular reliefs or policies to be followed, along with the usual rumours of possible changes. In the current climate it is probably unrealistic to expect too many giveaways. Many proposed changes have already been made known through consultations and draft legislation.

Paul Spindler, Tax Partner in our Technology Team, has detailed those changes most likely to have impact on the TNT sector, below:

  • Seed Enterprise Investment Scheme (SEIS) – a new, potentially very generous relief for investment in small, early stage companies, with 50% Income Tax credit and CGT exemption on other assets where the proceeds are reinvested through the SEIS
  • R&D reliefs are planned to be extended so that the amount a small or medium sized business can claim as a tax deduction is 225% of the actual allowable cost. The rule which limits the amount you can reclaim to your PAYE and NIC bills has been abolished but replaced with a €7.5m cap. In 2009/10 there were 7,500 companies making R&D claims, a great number of boutiques have been set up since then which claim a percentage of the amount they recover
  • The UK corporation tax rate is set to reduce to 25% from 1 April 2012 (with the small companies rate still at 20%)
  • There have been a lot of press reports about minor and local government politicians operating through limited companies to ‘avoid’ tax. It is possible that there will be a review of how this area is taxed; this would also follow on from previous attempts to deal with IR35
  • Legislation on the Patent box is due to be published; there has already been consultation on the operation of this new tax regime, which is due to come into effect from 1 April 2013. The concept is to provide a 10% rate on profits generated from the exploitation of Patents
  • HMRC will be targeting individuals and companies that trade through e-market places (i.e. Amazon, eBay etc). They are particularly concerned that people are trading without reporting the income
  • Pension relief is likely to be targeted, the advice is if you are looking at making a contribution in this tax year then make it before budget day!

If you would like to discuss this, or any other business related issue, please contact Paul Spindler, Tax Partner in our Technology Team on pspindler@mks.co.uk or 020 7566 4000.