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News briefing, 22 Nov 2013

Nov 19, 2013, 09:33 AM
Authors : Taxation
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Post date : Nov 22, 2013, 10:39 AM

Capital gains

Thousands of Britons living abroad could be caught up in moves to tax wealthy foreigners who buy and sell property in the UK.
Telegraph; Financial Times

It is unclear from comments made by the deputy prime minister, Nick Clegg, whether or not the measure will be limited to sales of high-value properties but, in any case, the proposal will impose the same tax rules on non-residents as on residents – and may have the effect of putting a brake on soaring UK property prices.

Income tax

The top 1% of taxpayers in the UK pays almost 30% of all income tax, according to research by accountancy group BDO.

The political parties will no doubt use this statistic to further their own viewpoints;  it is either an unfair tax burden on wealth-creators, or proof that the differential between high and low earners is now completely out of kilter. It is worth noting that the figures are only for income tax, not for national insurance.

The chancellor, George Osborne, is prepared to implement a fresh cut in income tax for low-earning workers suggested by Nick Clegg, the deputy prime minister.
Guardian, Telegraph

The problem for the government is funding another cut in the personal allowance. The Conservatives are unlikely to want to raise extra tax from high earners, while the Liberal Democrats will probably resist more spending cuts.

A tax cut which Labour has said is for hedge funds will leave a typical worker £11,000 better off on retirement, government experts have calculated.

FA 1999, Sch 19 imposes a stamp duty reserve tax charge when investors surrender units or shares in UK unit trusts or open-ended investment companies. It was announced at Budget 2013 (see Overview of Tax Legislation and Rates, para 2.27) that this charge will be abolished and, assuming that this saving is passed on, the Government Actuary’s Department estimates that a 22-year old on average wages saving 10% of their salary into a pension plan will have a pension fund £11,200 greater at retirement.


The Free Enterprise Group of MPs from the right of the Conservative party says another rise in the personal tax allowance would be unwelcome and has called for a 15% VAT rate to be levied on all foodstuffs and children's clothes.
Times; Mirror; Independent

15% is the minimum standard rate that an EU country can apply. It would be a confident political party that scrapped the zero VAT rate on food and children’s clothes, particularly with a general election on the horizon. Since the UK’s zero rating of these items is a derogation, once it has been abandoned it could not be reintroduced.

An independent Scotland would face decades of higher taxes than the rest of the UK, the Institute for Fiscal Studies (IFS) has predicted.

Public spending per head is higher in Scotland than in England, and there must be long-term doubts over future oil revenues – but whether or not the IFS report and its like will do much to affect the outcome of a devolution vote remains to be seen. The suspicion is that people will vote with their hearts, rather than their heads.

The prime minister has publicly promised to roll back green taxes, which add more than £110 a year to average energy bills.
Mail, Mail, Sun

The cost of energy bills is causing the government great concern  and the prime minister believes that energy taxes are a main contributor. There is, however, understandable confusion in some of the coverage between the “renewable obligation” to subsidise wind farms and solar panels, and the “energy company obligation” (often, confusingly, referred to by the acronym ECO), which requires energy firms to pay for insulating the homes of vulnerable customers, etc. It appears to be the latter which the prime minister is proposing could be transferred to general taxation. Cutting these taxes will be difficult though because the Conservatives coalition partners, the Lib Dems, are unlikely to agree.

The chancellor has little scope for giveaways as he puts the finishing touches to his autumn statement, the Institute for Fiscal Studies warned, despite the economic recovery that has boosted the Treasury’s coffers.

This will disappoint many in the Conservative party who would like to see pre-general election tax cuts, rather than further spending cuts. Perhaps all will become clear in the autumn statement which is due on 5 December.

Stamp duty

The Council of Mortgage Lenders, a business organisation, has called for an overhaul of the “perverse and distorting” stamp duty land tax (SDLT) system.
Financial Times

SDLT is a prime candidate for reform. Its main problem is a tiered structure: a 1% charge for properties costing between £125,000 and £250,000, 3% from £250,001 to £500,000, 4% £500,001 to £1m, and higher rates thereafter. A charge applies to the whole of a sale’s proceeds, not just the element above the threshold, which causes disproportionate liabilities. A marginal relief at the thresholds could ease matters.

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