Autumn Statement Breakfast Forum John Newell, Tax Consultant 20 December 2011 Advice > Support > Grow www.rousepartners.co.uk
1. Enterprise Investment Scheme (EIS) Advice > Support > Grow www.rousepartners.co.uk
Enterprise Investment Scheme (EIS) • EIS was first introduced in 1994 • In the years to April 2009 £7.5bn of subscriptions • £2.0bn has been raised in the last 3 years • Offers both income and capital gains tax relief to investors Advice > Support > Grow www.rousepartners.co.uk
Enterprise Investment Scheme (EIS) • From 5 April 2011 30% income tax relief on subscriptions up to £500,000 • From 5 April 2012 applies to annual subscriptions up to £1,000,000 • The amount companies will be able to raise goes up from £2m to £10m. • Employee limit raised from 50 to 250. Advice > Support > Grow www.rousepartners.co.uk
Enterprise Investment Scheme (EIS) • Income tax relief on subscription • Able to defer gains into shares • No gain (other than deferred gain) on disposal • Share will qualify for BPR (no IHT after 2 years) Advice > Support > Grow www.rousepartners.co.uk
Enterprise Investment Scheme (EIS) • Subscriber shares qualify for income tax loss relief if investment fails • For 50% tax payer loss on £100,000 investment is limited to £35,000 Advice > Support > Grow www.rousepartners.co.uk
Enterprise Investment Scheme (EIS) • New Seed Enterprise Investment Scheme • Aimed at start up companies • Investors get 50% tax relief (tax credit) on subscriptions up to £100,000 • Each company can raise £150,000 • CGT relief in 2012/13 only • Investor could get £100,000 for effective cost of £22,000 Advice > Support > Grow www.rousepartners.co.uk
2. Research and development (R&D) Advice > Support > Grow www.rousepartners.co.uk
Research and development (R&D) • SME scheme rates currently at 200% of qualifying R&D expenditure • Set to become 225% from April 2012 (subject to approval) • From 1 April 2012 loss relief not limited to PAYE in year. • Announcements and consultation have begun on an “above the line” deduction. • Similar to “Patent Box” aimed at large business Advice > Support > Grow www.rousepartners.co.uk
3. Annual Investment Allowance Advice > Support > Grow www.rousepartners.co.uk
Annual Investment Allowance • From 1 April 2012 AIA to reduce from £100,000 per annum to £25,000 per annum. • Periods of account that straddle this date will receive a pro rata allowance. • For example company with June year end will get an AIA of £81,250 in the year to June 2012 Advice > Support > Grow www.rousepartners.co.uk
Annual Investment Allowance • Watch for timing of expenditure • The £81,250 applies as follows: - • £75,000 for purchases up to 31 March 2012 • £6,250 for purchases after 31 March 2012 • Look to accelerate purchases before 31 March Advice > Support > Grow www.rousepartners.co.uk
4. Pensions Advice > Support > Grow www.rousepartners.co.uk
Are pensions still tax efficient? 12,500 BRTR 9,375 CFLS (3,125) Tax 10,000 (3,750) HRTR 4,375 5,625 (2,500) Advice > Support > Grow www.rousepartners.co.uk
Capital allowances Commercial Property update – Proposed new legislation April 2012 Paul Thornberry, PTC Capital Allowances Consultants Advice > Support > Grow www.rousepartners.co.uk
Businesses disposing of, or acquiring property containing fixtures Why change? • To ensure that expenditure on a fixture can only the written – off once against taxable profits over its economic life; • Effective 1 st April 2012 for corporation tax payers and 6 th April 2012 for income tax payers; Advice > Support > Grow www.rousepartners.co.uk
Current Regime • The fixtures legislation is contained in Chapter 14 of Part 2 of the Capital Allowances Act • Capital allowances take the place of commercial depreciation, which is not deductable for tax purposes; • Currently legislation contains limits on the allowances that can be taken – the lower of original cost or the last disposal value brought into account by previous owner of fixture; • No time limit laid down to govern when seller and purchaser need to agree the part of a sale price attributable to the fixtures; • This has led to „late‟ claims by current owners at a time when a single sale value for the fixtures can no longer be agreed and brought into account by both parties. • HMRC wants tax parity Advice > Support > Grow www.rousepartners.co.uk
Proposals • No time limit on pooling expenditure incurred before April 2012; claims possible on „historic‟ expenditure at anytime before a sale of the property; • Expenditure post April 2012 there will be mandatory requirement to pool the expenditure at any time after acquisition but before sale; • Vendor and purchaser need a record of agreement – joint tax election to fix value of fixtures within two year period of sale; • General Pool writing down allowances will fall from 20% to 18% and special rate pool will fall to from 10% to 8 % post April 2012. Advice > Support > Grow www.rousepartners.co.uk
Case Studies Hotels Public Houses Commercial Offices Care Homes Leisure Retail Advice > Support > Grow www.rousepartners.co.uk
Office building, Central London £46,860,000 purchase price. Purchased December 2002. £12,040,687 machinery & plant allowances identified. Tax saving in year 1 = £1,204,069*. Total tax saving = £4,816,028*. * Assumes 40% tax rate Advice > Support > Grow www.rousepartners.co.uk
Office building, North London £1,675,000 purchase price. Purchased March 2004. £307,129 machinery & plant allowances identified. Tax saving in year 1 = £23,035*. Total tax saving = £92,139*. * Assumes 30% tax rate Advice > Support > Grow www.rousepartners.co.uk
Office refurbishment, London £1m refurbishment expenditure. £695,252 machinery & plant allowances identified. Tax saving in year 1 = £69,525*. Total tax saving = £278,100*. * Assumes 40% tax rate Advice > Support > Grow www.rousepartners.co.uk
Hotel, Rotherham £4.9m construction cost. Construction completed 2008. £1.8m machinery & plant allowances identified. Tax saving in year 1 = £126,000*. Total tax saving = £504,000*. * Assumes 28% tax rate Advice > Support > Grow www.rousepartners.co.uk
Hotel, London £1.5m refurbishment expenditure. Construction completed 2006. £557,371 machinery & plant allowances identified. £296,742 revenue expenditure identified. Tax saving in year 1 = £122,104*. Total tax saving = £239,152*. * Assumes 28% tax rate Advice > Support > Grow www.rousepartners.co.uk
Office / Industrial, West Sussex £2,862,500 purchase price. Purchased April 2002. £716,071 machinery & plant allowances identified. Tax saving in year 1 = £85,929*. Total tax saving = £214,821*. * Assumes 30% tax rate & FYA Advice > Support > Grow www.rousepartners.co.uk
Distribution Warehouse, Milton Keynes £23.8m purchase price. Purchased December 2008. £6,307,421 machinery & plant allowances identified. Tax saving in year 1 = £630,742*. Total tax saving= £2,522,968*. * Assumes 28% tax rate Advice > Support > Grow www.rousepartners.co.uk
Public House Portfolio, Sussex £3.5m purchase price (8 houses). Purchased between 2000 & 2007. £710,365 machinery & plant allowances identified. Tax saving in year 1 = £49,726*. Total tax saving = £198,902*. * Assumes 28% tax rate Advice > Support > Grow www.rousepartners.co.uk
Care Home, Devon £712,480 purchase price. Purchased March 2006. £188,847 machinery & plant allowances identified. Tax saving in year 1 = £14,164*. Total tax saving = £56,654*. * Assumes 30% tax rate Advice > Support > Grow www.rousepartners.co.uk
Eight Retail Units, Kent £995,000 purchase price. Purchased December 2001. £138,642 machinery & plant allowances identified. Tax saving in year 1 = £10,398*. Total tax saving = £41,593*. * Assumes 30% tax rate Advice > Support > Grow www.rousepartners.co.uk
Petrol Station, West Sussex £1.25m construction expenditure. Construction completed 2008. £553,201 General Pool P&M allowances identified. £127,946 Integral Features P&M allowances identified. £14,082 revenue expenditure identified. £29,211 Land Remediation Relief identified. Tax saving in year 1 = £50,773*. Total tax saving = £202,843*. * Assumes 28% tax rate Advice > Support > Grow www.rousepartners.co.uk
Why PTC? Experience • Partners have 30 years specialist experience • „Big Four‟ capital allowances experience • Single transactions from £50k to in excess of £100m and multi property portfolios Service • Integrated Tax and Surveying skills • Client facing Partners • „Cradle to Grave‟ service from early advice to claim agreement • Tailored fee agreements to offer maximum value • Service levels + competitive fees = high value service Advice > Support > Grow www.rousepartners.co.uk
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