9 OCTOBER 2007 PRE BUDGET REPORT

PRE BUDGET REPORT

This was the first Pre Budget report from Alistair Darling issued 9 October 2007.

Major changes to capital gains tax were announced from 6 April 2008:

A flat rate of capital gains tax of 18% on all disposals.
The new rate of capital gains tax will apply to all assets both business and non business.
Taper relief to be withdrawn.
The indexation allowance for assets held before 6 April 1998 to be withdrawn.
Further simplifications applying to assets held on 31 March 1982 and share identification rules.

Inheritance Tax

The introduction of transferable ‘nil’ rate bands to allow a claim to be made to transfer any unused Inheritance Tax nil rate band to the estate of the surviving spouse or civil partner who dies on or after 9 October 2007.

Combined allowance for 2007/08 is £600,000.

Husband and Wife Companies and Partnerships

The Government has confirmed that it intends to bring in legislation to reverse the decision in the Arctic Systems case.

The new rules will take effect from 6 April 2008 and will apply when income is distributed as dividends from a company or as partnership profits.

There will be a consultation process to ensure the new rules are clear.

Taxation of UK Resident but Non UK Domiciled Individuals

Introduction of an annual fee of £30,000 for those who have been resident for more than 7 years and who wish to retain the remittance basis of taxation.
Individuals will be taxed on worldwide income and gains otherwise.
Entitlement to UK personal allowances removed.
Further alterations to tighten up the rules for the remittance basis of taxation.
Restrictions on the remittance basis of taxation for Irish income are to be removed.
The test for UK residents will, from 6 April 2008, now include the days of arrival in and departure from the UK.

Corporation Tax – Simplification

The Government intends to consult on a number of areas including:

Group aspects of Corporation Tax on chargeable gains.
Associated Company rules.
CTSA filing and payment for Groups.
Transfer pricing rules.

Main rate of corporation tax cut from 30p to 28p from April 2008.

Income Tax Self Assessment

From 2009/10 individuals will not have to make payments on account if the income tax bill for the previous year was less than £1,000.

Development Land

The controversial policy to tax land for development was scrapped in yesterday’s pre budget report.

We will be addressing some of these issues, especially the Capital Gains Tax reforms, in our forthcoming seminars in November (dates to be confirmed). Factsheets on the Capital Gains Tax and Inheritance Tax changes are also available on the website under the Monthly Tax Tips and Hot Topics section.

Updated 10.10.07

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9 OCTOBER 2007 PRE BUDGET REPORT

Tel: 01769 57 24 04