The government published draft legislation week commencing 18 July, for the Finance Bill 2022-23. This includes consultations on changes to; capital gains tax, pensions and R&D tax relief.
Key Points
Capital gains
The divorce of a married couple requires assets to be distributed between the two individuals, often including a share in the value of the family home. Currently such transfers are only free of CGT if they occur within the same tax year of separation. Between that date and the decree nisi the couple are connected persons but not living together, so the CGT no gain/no loss treatment for transfers between married couple/civil partners does not apply.
The proposals will stretch this CGT exempt period to three years for separating couples, and allow any assets which are the subject of a divorce agreement to be transferred on a no gain/no loss basis without time limit.
This will apply for all disposals that occur on and after 6 April 2023, and has been brought about following a recommendation by the Office of Tax Simplification (OTS).
Pensions
Having pension contributions deducted from net pay is not a problem, if the individual is a taxpayer, because he/she gets the same tax relief as if the employer operates a relief at a source scheme. But under auto-enrolment, many low paid employees pay pension contributions although they do not earn enough to pay income tax, so they miss out on the tax relief.
For the tax year 2024/25 onwards, those employees on net-pay schemes will be able to claim a rebate from the government on the tax relief they are due. Why this has not been sorted out earlier is a mystery.
The treatment of regular income paid out of collective money purchase pension schemes, which are being wound, up will also be clarified. This will ensure that those payments are taxed as pensions and not as unauthorised payments. This change will take effect from 6 April 2023.
R&D tax relief
There have been several consultations on strengthening the R&D tax relief scheme to make it less vulnerable to fraud. The Finance Bill proposals go further and suggests that small companies who want to claim R&D tax relief, will have to inform HMRC in advance of their intention to claim within six months of the end of the first period the claim will relate to. A senior officer of the company and the tax adviser will also both have to be named on the claim. These are currently only proposals and we will keep you informed of any developments.
Clarifications
Companies who allow their residential properties to be used for the Homes for Ukraine scheme are to be exempt from ATED and the 15% rate of SDLT on those properties.
Consultations
Two new consultations were announced concerning new powers for HMRC to collect data from businesses, and to digitalise business rates, including linking that data to the wider tax system. We will provide further details once any measures are finalised.
Need Any Help?
If you have any questions regarding the proposed changes detailed above, please get in touch today: hello@dixcartuk.com
