• At-a-glance
• Administration of Tax
• Personal Taxation
• Employment Taxation
• Business Tax
• Corporation Tax
• Capital Gains
• Savings and Investments
  
• Inheritance Tax
  
• Charities
  
• Trusts
• Anti-avoidance
• Value Added Tax
• Stamp Taxes
• Insurance Premium Tax
• Environmental Taxes
• Excise Duties
• Landline Duty

SAVINGS AND INVESTMENTS

Venture Capital Schemes

Changes will be made to the rules on enterprise investment schemes (EIS) and venture capital trusts (VCT) to comply with a European Commission ruling on state aid.

In the next Parliament legislation will be introduced to:

• exclude any ‘enterprise in difficulty’ from qualifying for investment under the rules for EIS or VCT;
  
• remove the condition that the qualifying trade must be carried on wholly or mainly in the UK and instead the requirement will be that the company issuing the shares must have a permanent establishment in the UK.
  

The term ‘enterprise in difficulty’ takes its meaning from the European Commission’s Rescue and Restructuring Guidelines.

Changes that will apply only to VCTs:

• the ordinary share capital of the VCT will be traded on any EU-regulated market (rather than only in the UK as at present);
  
• the definition of eligible shares will include shares which may carry certain preferential rights to dividends;
  
• 70% of the VCT’s qualifying holdings must be in eligible shares (an increase from the 30% currently required).

These changes will take effect on the day the relevant legislation receives Royal Assent.

Enterprise Management Incentives

To ensure that the enterprise management incentive (EMI) share option scheme complies with EU state aid guidelines, legislation will be introduced in the next Parliament to remove the need for the company to operate wholly or mainly in the UK. Instead, the company granting the EMI options will only need to have a permanent establishment in the UK. In the case of a parent company, at least one company in the group that is carrying on a qualifying trade must have a permanent establishment in the UK.

A company has a permanent establishment in the UK if it has a fixed place of business in the UK through which the business of the company is wholly or partly carried on, or it has an agent in the UK who exercises authority to do business on behalf of the company.

This will have effect in respect of EMI share options granted on or after the date that the legislation receives Royal Assent.

Indexing of Individual Savings Account Limits

The increase in the annual subscription limits for individual savings accounts (ISAs) was previously announced in the 2009 Budget. From 2010/11, all savers can invest up to £10,200 per tax year in an ISA (of which £5,100 can be saved in cash). These subscription limits will rise further from April 2011, as legislation will be introduced via statutory instrument to increase the limits in line with the retail prices index (RPI). If RPI is negative, the limits will remain unchanged. HMRC are to announce the limits at least 4 months before the start of each tax year.

Pension Scheme Lifetime Allowance and Annual Allowance

The lifetime limit on the value of investments held by an individual in registered pension schemes is to be frozen at the 2010/11 level of £1.8m until 5 April 2016. The only exception is where an individual has pension scheme investments valued at more than the lifetime limit and has existing transitional protection in place. The annual allowance will remain at the 2010/11 level of £255,000 over the same period. 

Changes to Pension Taxation

The following changes to the taxation of pension schemes are to be introduced in the next Parliament:

• the National Employment Savings Trust (NEST) will be allowed to register as a pension scheme with HMRC, allowing the members and their employers to benefit from tax relief on contributions and investment growth;
  
• under Pensions Act 2008 employers will have a duty to ensure all their employees are active members of a pension scheme, with automatic enrolment planned for 2012, and will be legally obliged to make contributions to a pension scheme on behalf of their employees and pay interest on any contributions paid late; currently any interest on late paid employer pension contributions is taxable on the employee, however this income tax charge is to be removed by the proposed legislation;
  
• rules on borrowing by registered pension schemes (currently there is a charge if this exceeds 50% of the fund value) will be relaxed to exclude any sums borrowed in order to establish and operate the scheme.
  

The proposed legislation will also include the facility for HMRC to correct via statutory instrument any unintended tax disadvantages arising from the introduction of NEST.

These changes will be effective from the date the legislation receives Royal Assent.

Life Insurance Policies: Deficiency Relief

With effect from 6 April 2010, life insurance deficiency relief will be made available to reduce tax due on income subject to the additional rate and dividend additional rate of income tax. In addition, deficiency relief triggered by the surrender of a policy on or after 6 April 2010 may be restricted where the main purpose of an individual being a party to arrangements is to secure a tax reduction greater than the income tax due on earlier chargeable events that led to the relief. This provision will apply to arrangements made on or after 22 April 2009 that culminate in the surrender of the policy on or after 6 April 2010.

Financial Services Compensation Scheme

The Finance Bill will introduce legislation to provide the power to make regulations to ensure that, where the Financial Services Compensation Scheme intervenes to protect policyholders with insurance or annuity contracts, the tax treatment will broadly be the same as if it had not intervened. This will prevent an intervention under the scheme from having unintended consequences such as the loss of tax-advantaged status. This measure will take effect from the date of Royal Assent to the Finance Act.

Restriction of Tax Relief for Pension Contributions

As previously announced in last year’s Budget and Pre-Budget Report, for 2011/12 onwards tax relief on pension contributions for individuals with income over £150,000 will be gradually tapered. Those individuals with income over £180,000 will receive only basic rate relief on their contributions. The restriction of tax relief will be achieved by means of an income tax charge via the self-assessment tax return. As well as affecting individuals whose total income (computed before deduction or relief for pension contributions and charitable donations) is £150,000 or over, the restriction will also affect those whose income (similarly computed) is £130,000 or over but whose income together with the value of any employer pension contributions is £150,000 or over.

For 2009/10 and 2010/11 anti-forestalling measures are in place to prevent individuals increasing their pension contributions before the new rules take effect.