SAVINGS AND INVESTMENTS
Individual Savings Accounts (ISAs)
The ISA limit will be raised to £10,200, of which up to £5,100 can be saved in cash (the current limits are £7,200 and £3,600 respectively).
The new limits will apply:
- for people aged 50 and over, with effect from 6 October 2009; and
- for all investors, with effect from 6 April 2010.
The ISA Regulations will be amended by statutory instrument to reflect the changes.
Dividends from Foreign Companies
Where an individual receives a dividend from a non-UK resident company, he is currently entitled to a tax credit only if his shareholding in the company is less than 10% of its issued share capital. The tax credit operates in a similar manner to tax credits attached to dividends from UK companies; it can reduce a tax liability but it cannot be repaid. From 22 April 2009, individuals with shareholdings of 10% or more in receipt of dividends from non-UK resident companies will also be entitled to a tax credit, but only if the source country is a ‘qualifying territory’. A territory is a ‘qualifying territory’ if it has a double taxation agreement with the UK with a non-discrimination article.
The legislation will include anti-avoidance measures to deter abuse. These will include a targeted anti-avoidance rule to deny a tax credit if the dividend is, in fact, from a non-qualifying territory but is re-routed via a qualifying territory.
Improvements to the Venture Capital Schemes
For employment of money invested, a more relaxed time limit of 2 years, or 2 years from the commencement of the qualifying activity, will be introduced. The new limit will apply, broadly, from 22 April 2009 and will affect the enterprise investment scheme (EIS), corporate venturing scheme, and the venture.
Further measures affect only the EIS:
- the requirement to use money from the issue of shares of the same class issued on the same day as EIS shares within the same time limit will be removed with effect in relation to shares issued on or after 22 April 2009;
- restrictions on the carry-back of relief to the previous year will be removed (subject to the overall cap on subscriptions of £500,000) for 2009/10 and subsequent years;
- an anomaly preventing relief from CGT under the share-for-share exchange rules will be removed in relation to new holdings issued on or after 22 April 2009.
Save As You Earn (SAYE) Simplification
With effect from 29 April 2009 legislation will be introduced to transfer the process of specifying bonus rates and early leaver interest rates on SAYE savings and of authorising savings providers from HM Treasury to HMRC. HMRC will also be able to specify by notice of withdrawal or variation that prior bonus rates will be valid even where the new rates have come into effect and will modernise the advisory process with the banks and building societies. Distributions from Offshore Funds From 22 April 2009, individuals in receipt of dividends from corporate offshore funds will be entitled to a tax credit. This will not, however, be the case where the offshore fund holds more than 60% of its assets in interest-bearing (or economically similar) form. In such a case, a distribution will be treated in the hands of a UK individual investor as a payment of yearly interest. This means that no tax credit will be available and that the tax rates applying to the distribution will be those that apply to interest.
This change will not affect the taxation of UK investors in offshore funds that are transparent for the purposes of tax on income; in these cases the investor is taxed on his share of the underlying fund income and by reference to the type of income received by the fund.