Annex B to Chapter 5Tax changes announced before the BudgetThis annex sets out a number of tax changes which were announced before the Budget, the effects of which are taken into account in the forecasts.[See printed copy for table] Inland Revenue taxes5B.1 Transitional relief, up to a maximum of £10,000, is available to individuals and trusts for indexed capital losses realised between 30 November 1993 and 5 April 1995. The measure was announced in April 1994.5B.2 It was announced on 21 April 1994 that balancing charges arising on the disposal of certain ships may be rolled over for a period of up to three years from the date of disposal. The charges will be set against subsequent expenditure on the acquisition of such ships within the period. 5B.3 The construction industry tax scheme will be modified following the move to self assessment. Only where sub-contractors are running genuine business operations will the co ntractor be exempt from the requirement to deduct tax from payments. The rate of deduction will be reduced; and deduction arrangements will be computerised. The changes will not take effect before the start of 1998-99. Customs and Excise taxes5B.4 An extra statutory concession was granted with effect from 21 July 1994 which extended VAT zero-rating to new dwellings created by conversion of non-residential buildings, and enabled builders to reclaim as input tax the VAT charged on certain electrical items incorporated into new dwellings.5B.5 An extra statutory concession was granted with effect from 1 August 1994 to replace the previous VAT exemption for fee paying education, training and research with a new exemption to simplify the relief and clarify the tax borderlines. National insurance contributions5B.6 From August 1994 employers have been liable to pay national insurance contributions on payments to their employees in the form of alcoholic liquors not subject to UK tax, or diamonds a nd other gemstones.[See printed copy for table] Inland Revenue taxes5B.7 From 6 April 1995 tax relief for the married couple's allowance, and allowances linked to it, will be restricted to 15 per cent. The married couple's allowance for those aged under 65 and the allowances linked to it will be £1,720. The married couple's allowance for those aged 65-74 will be £2,995 and for those aged 75 and over £3,035. Tax relief on the first £1,720 of maintenance payments will also be restricted to 1 5 per cent.5B.8 From 6 April 1995 tax relief for mortgage interest payments will be restricted to 15 per cent. This will also reduce public spending on mortgage interest relief for borrowers who are non-taxpayers by £60 million a year. Relief will remain at 25 per cent for those aged 65 and over who take out loans to buy life annuities. 5B.9 Sickness and invalidity benefit will be replaced by incapacity benefit from 13 April 1995. Incapacity benefit will be taxable for new recipients from that date. The element of the benefit which replaces sickness benefit will not be taxed. 5B.10 As announced in the March 1993 Budget, the assessment and collection of personal tax will be reformed from 1996-97 with the introduction of self assessment. The main measures abolish the `preceding year' basis of assessment for the self employed, and tax income as it arises from 1997-98, with a transitional year in 1996-97; align payment dates for assessed income tax from all sources and for capital gains tax; introduce separate assessment for partners; and introduce clear rules for filing tax returns, allowing taxpayers the option of calculating their own tax, and for the payment of tax, and clear sanctions for failing to comply with them. After 1997-98 the measures are expected to produce a yield. The November 1993 FSBR stated that stamp duties on securities, and on transfers of property other than land and buildings, would continue beyond 1993-94. It remains the intention to abolish stamp duties on securities etc in the longer term, but it is assumed that they will continue for the time being, and probably for a time after the introduction of the new system of paperless share trading known as Crest. The revenue forecasts therefore assume continuation of these receipts. Customs and Excise taxes5B.11 VAT will be charged on domestic fuel and power at the standard rate of 17.5 per cent from 1 April 1995, having been introduced at 8 per cent on 1 April 1994.5B.12 The Chancellor said in the November 1993 Budget that road fuel duties would be increased on average by at least 5 per cent in real terms in future Budgets. 5B.13 The Chancellor said in the November 1993 Budget that tobacco duties would be increased on average by at least 3 per cent in real terms in future Budgets. To continue or to go to contents
|