What do you need to know about finance bill 2014?

Friday 28 March 2014

The government has now published finance bill 2014 and contractors will need to prepare for the changes.

Among the main tenets of the proposals is a measure that will require users of tax avoidance schemes previously defeated in another party's legislation to pay disputed tax up front. This will also apply to schemes that fall within the scope of the Disclosure of Tax Avoidance Scheme and the General Anti-Abuse Rule.

In a further bid to crack down on employment tax avoidance, finance bill 2014 will also take action to stop employment intermediaries avoiding obligations. This includes disguising employment as false self-employment.

David Gauke, exchequer secretary to the Treasury, said: "The government’s long-term economic plan is to build a stronger, more competitive economy and a fairer society.

"The tax changes implemented in this bill will help support the next stage of the plan to create a more resilient economy by supporting businesses, working households and savers, and taking action against those who try to dodge their tax obligations."

Many of the measures in the bill were announced by chancellor George Osborne in Budget 2014.

The government claims the measures will help households in the UK work, save and plan. Nationally, this will help to promote growth and ensure Britain has a fair tax system.

To this end, finance bill 2014 also increases tax-free Personal Allowances to £10,000 in 2014-15. This will rise to £10,500 from 2015-16.

The starting rate of income tax will be reduced on savings from 10 per cent to zero per cent. What's more, the band to which this applies will be extended from £2,880 to £5,000. It is expected around 1.5 million people will feel the benefit of this change. Of these, over a million will pay no tax at all on their savings income, due to their total income being below £15,500.

Limited companies and sole contractors could benefit from the lowering of business and household energy costs. Finance bill 2014 will freeze the Carbon Price Support rate at £18 in 2016-17 - a measure that will be maintained to the end of the decade. It is expected this will save business a collective £4 billion by 2018-19.

The Annual Investment Allowance will also be increased to £500,000 until December 31st 2015. This will give 99.8 per cent of all businesses 100 per cent up front relief on their qualifying investments in plant and machinery.

Meanwhile, research-intensive start-ups and early stage companies will see support through an increase in the payable research and development tax credit for loss-making SMEs. Rising by 14.5 per cent, it is expected this will facilitate £1 billion of investment over the next five years.

Elsewhere, a new transferable tax allowance for married couples and civil partners will be created. This will allow those in the same household where neither partner is a high or additional rate taxpayer, and where one has not used their full allowance, to pay tax on up to £1,050 less of their income from 2015-16.

By Victoria McDonnell

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