|
Budget 2011 – Education
The Chancellor’s Budget speech included a number of announcements to “create a more educated workforce that is the most flexible in Europe”, including a commitment to the funding of 12 new University Technical Colleges and an additional 80,000 work experience places for young people.
There was also an announcement that a further £100 million will be invested in new science facilities, and an increase to the SME rate for R&D tax credits to 200 percent from April 2011 and 225 percent from April 2012, subject to EU State aid approval. The Chancellor confirm that the 10 percent “patent box” will be introduced from 1 April 2013, with the Government’s consultation documents relating to the patent box to be published in May 2011.
Building on the Giving Green Paper published in December 2010 the Chancellor announced a number of measures intended to simplify the administration of Gift Aid, such as an online system for charities to make Gift Aid claims and a new repayment scheme for small donations, as well as encourage and support further charitable giving. The previously announced Tainted Charity Donations rules will be introduced in Finance Bill 2011. This marks the end of almost two years of consultation over the shape and substance of the new rules.
We have summarised below key taxation proposals which could affect education institutions arising from the Budget Report delivered on 23 March 2011. KPMG’s general commentary on the 2011 Budget Report can be found at the following link:
http://www.kpmg.co.uk/budget/
Tainted Charity Donations rules
The Tainted Charity Donations rules remain broadly as set out in the draft clauses published in December 2010. The rules will apply to donations made on or after 1 April 2011 and will apply to treat an otherwise relievable charitable donation as “tainted” where certain conditions are met.
There are three conditions each of which must be met before a donation is considered to be tainted and these can be summarised as follows:
- Condition A – there is a donation and arrangements which would not have been made or entered into independently of one another.
- Condition B – the main purpose, or one of the main purposes, of the arrangements is to obtain a financial advantage directly or indirectly from the charity for the donor (or any person connected with them at the relevant time).
- Condition C – the donor is not an excluded donor.
Following consultation on the draft clauses, the final legislation has been amended to ensure that the new rules will operate as intended and minimise the impact on charities. The period for which the transitional provisions apply has also been shortened so that the existing Substantial Donor legislation will be repealed in full from April 2013 instead of April 2015.
HMRC have also announced that they will continue to consult with the charity sector on the practical impact of the Tainted Charity Donation rules, and it is expected that HMRC guidance on the new rules will be issued in due course.
Back to Top
Gift Aid
The Chancellor announced a number of changes to the Gift Aid regime including:
- An increase in the overall limit for donor benefits in respect of donations of £1,001 or more. The overall cap will be increased to £2,500, subject to the existing five percent limit, and will apply for donations made on or after 6 April 2011 for individuals, and for donations made in accounting periods ending after 1 April 2011 by corporate donors.
- A Gift Aid style repayment for charities in respect of small donations. The new repayment will be claimable from April 2013 without the need to obtain Gift Aid declarations on donations of £10 or less, subject to a cap of £5,000 per year per charity. Charities will need to meet certain conditions in order to qualify to claim this new repayment.
- The introduction in 2012/13 of a new online system for charities to register for and submit Gift Aid claims.
- Giving statutory effect (in Finance Bill 2012) to an existing Extra Statutory Concession under which HMRC currently make certain repayments of tax to charities outside of a tax return.
- The withdrawal of the SA Donate scheme for tax returns for 2011-12 onwards. This is on the basis that this is an underused scheme, vulnerable to fraud and is not cost effective for HMRC to administer.
Back to Top
Tax policy
Following the report from the Office of Tax Simplification published on 3 March 2011, the Government is to abolish 43 tax reliefs. Whilst the list of reliefs to be abolished in Finance Bill 2011 does include reliefs for donors and charities, such as Millennium Gift Aid and transitional relief for charities on distributions, these reliefs are now redundant and their abolition will therefore have no impact.
Further tax reliefs will be abolished after 2012 following a period of consultation.
Back to Top
Corporation Tax
It is common place for education institutions to own non-charitable subsidiary companies; the following announcements made in the Budget will be applicable to such companies and may therefore be of interest.
Rate of corporation tax
The standard rate of corporation tax will decrease to 26 percent from 1 April 2011 which is a further one percent reduction to the announcement at the June Budget 2010. There will be subsequent annual reductions in the standard rate of one percent per annum to 23 percent by 1 April 2014. The small profits rate will be reduced to from 21 percent to 20 percent from 1 April 2011 as previously announced.
Capital allowances
Legislation will be introduced in Finance Bill 2011 to increase the period over which assets can be given Short Life Asset (SLA) treatment. Currently the SLA provisions apply to assets which will be sold or scrapped within 4 years; this will be changed to a period of 8 years. The list of assets qualifying for energy-saving enhanced capital allowances will also be updated during summer 2011.
A consultation document will be published in May 2011 to consider the appropriate capital allowances treatment of expenditure used for FiT (Feed in Tariff) and RHI (Renewable Heat Incentive) generation businesses.
The Business Premises Renovation Allowances scheme will be extended for an additional five years from 2012 and a 100 percent business rate discount will be available to businesses that move into an Enterprise Zone. There may also be enhanced capital allowances for Enterprise Zones, although this is likely to be where there is a strong focus on high value manufacturing and so have limited scope.
Back to Top
VAT
Cost Sharing Exemption
The Government has said that it will continue to consult on the implementation of a VAT exemption for services shared by VAT exempt bodies, including charities. We understand that the formal consultation document will be issued this summer.
VAT registration and deregistration limits
With effect from 1 April 2011, the taxable turnover limit which determines whether a person has to be registered for VAT will be increased from £70,000 to £73,000. Whilst the taxable turnover limit which determines whether a person may apply for deregistration will be increased from £68,000 to £71,000.
Academics
With effect from 1 April 2011, any school that is or becomes an Academy will be allowed to recover VAT incurred on expenditure where that expenditure supports the non-business activities (principally the provision of free education). This refund scheme will not apply to expenditure incurred by Academies prior to this date.
Public Bodies
Public sector bodies carry out statutory activities on which VAT is not chargeable, and on occasions these activities can be in competition with the private sector who would need to charge VAT.
With effect from 2012 the UK VAT law is to be changed to more closely reflect EU law, which states that where the public sector carries out the same kind of activities as the private sector, and the different VAT regimes would lead to a significant distortion of competition, then equal VAT treatment would apply.
Back to Top
Employment Tax
Company car tax rates and Fuel benefit charge
Where employees and directors are provided with a company car, they are subject to the company car benefit charge. The value of this benefit is determined by multiplying the car’s list price by a setpercentage, which is based on the car’s CO2 emissions.
Legislation will be introduced in Finance Bill 2011 to reduce the appropriatepercentages by one percent for all vehicles with carbon emissions between 95g and 220g with effect from April 2013. Zero emissions cars will remain at zero percent and ultra low emissions cars with emissions up to 75g will remain at five percent.
In addition where employees and directors provided with a company car also receive free fuel from their employers, they are subject to the fuel benefit charge. The value of the taxable benefit in relation to fuel is determined by multiplying a set figure (currently £18,000), by the appropriatepercentage for the car, which is based on the car’s CO2 emissions. The level of the set figure or multiplier will be increased from £18,000 to £18,800 with effect from 6 April 2011.
Approved mileage allowance payment rates (AMAPs)
Where employees use their own cars for business mileage they can claim reimbursement from their employers through the approved mileage allowance payments rates. No tax or NIC is due on these reimbursements up to certain limits. There is currently a higher rate limit of 40p per mile for the first 10,000 miles of business use and 25p limit per mile thereafter. Where individuals are paid less than those amounts by their employer, they can claim mileage allowance relief (MAR) for the residual amount.
The higher rate of AMAPs will be increased to 45p per mile with effect from 6 April 2011. The rate will also apply to Mileage allowance relief (MAR).
Volunteer drivers may reclaim the actual cost of motoring expenses from the relevant voluntary organisation as long as they keep records to demonstrate that no taxable profit has been made, but, for administrative ease, they are allowed to use the AMAPs rates if preferred.
Abolition of exemption from benefit charge for late night taxis
The Government has announced that, subject to consultation, they intend to abolish tax relief on the cost of late night taxis for employees who work late, with effect from 6 April 2012. The rules currently stipulate that, subject to certain conditions, employees avoid paying income tax and national insurance on infrequent taxi journeys home taken by employees working after 9pm, where such journeys occur less than 60 times in a year.
Merging of tax and National Insurance Contributions (NIC)
The Government is to consult on merging the operation of income tax and NIC. These plans are expected to take years to implement.
Back to Top
Contacts
If you have any queries regarding any of the announcements in the 2011 Budget Report please contact one of the Public Sector Tax team below or your local KPMG contact.
Corporation Tax
Sandra Cox sandra.cox@kpmg.co.uk 0161 246 4280
Ian Short ian.short@kpmg.co.uk 0161 246 4201
Jasmin Bryan jasmin.bryan@kpmg.co.uk 01293 652 149
Lesley Graham lesley.graham@kpmg.co.uk 0117 905 4057
Jane Grimley jane.grimley@kpmg.co.uk 0141 300 5633
VAT
Rob Hopes rob.hopes@kpmg.co.uk 0161 246 4290
Employment tax
Mick Verney michael.verney@kpmg.co.uk 0115 935 3468
Back to Top
|
