Budget 2013


The Finance Act  2013 was enacted on 17 July 2013

You can find the Act on the Parliament website, by clicking this link.

Budget 2013 resources

This is a list of useful links:

The starting point is of course the HMRC site.

Finance Bill 2013 was published on 28 March 2013 and can be read either online  at the Parliament website here or can be downloaded as a pdf file here.  Supporting documents can be found on the Budget Update page. This includes the Explanatory Notes.

According to the HMRC Budget page, consultations will be published on the GOV.UK site. However, that page contains a list of all government consultations, irrespective of subject matter, or government department. If you’re looking for consultations arising out of the Budget, it’s best to start at the Consultations page on the HMRC site. This will then redirect you to the GOV.UK site, but this time, the page will only contain the HMRC Consultations

Further materials can be found on the HM Treasury site. This site also contains a Consultation page, but it is archived. You need to go back to the dreaded GOV.UK site.

The BBC has its own Budget 2013 page.

Main Points and Commentary

These are my own comments on Budget 2013. The list is not exhaustive, as there is only one person who writes the articles for this site.

The topics listed here are:


Business Taxes;

Corporate Tax;

Property – SDLT; and

Tax Avoidance.


Seed Enterprise Investment Scheme  

Two measures:

  • Reinvestment relief extended  to the 2013/14 tax year, but only half the gain will be exempt.
  • Independence test amended – investments in companies that have been set up by company formation agents will not be disqualified.

More detail can be found in this post.

Stamp Taxes – Shares and Securities

  • SDRT on unit trusts and OEICs to be abolished in Finance Bill 2014.
  • SDRT on share transactions for Small Company Growth Markets to be abolished in Finance Bill 2014 – starting from April 2014 – this includes companies quoted on AIM. An encouragement to invest in high risk areas – not for the faint hearted.

More detail can be found in this post.

Business Taxes

Targeted Anti-Avoidance Rule for trade and property business deductions – this relates to all businesses whether corporate, partnership or sole trader. This will appear in Finance Bill 2013.

Consultation on Partnerships

This is to be published sometime in the spring (what spring?). Two proposed areas to be considered are:

  • Whether to remove the presumption that partners in a limited liability partnership (“LLP”) are self-employed. This is to counteract arrangements to save PAYE and NIC, where an employee is effectively disguised as a partner;
  • How partnership profit sharing arrangements  involving a corporate partner  can be manipulated to save tax.

Limits on relief for trade and property losses

These limits concern individuals operating either as a sole trader or in partnership. Broadly, there will be a cap on the amount of relief that can be set against general income from 2013/14 onwards. The cap is equal to 25% of annual income, or £50,000, whichever is  greater.

Please note that the cap does NOT restrict setting business losses against business receipts  – this can be done freely as before. The cap is targeted at restricting the set-off  against other sources of income such as salary and dividend receipts.

HMRC has published a Draft Guidance explaining how it works and how to do the sums.

Corporate Tax 

A number of anti-avoidance measures to close various loopholes. These are:

  • Restrictions on loss relief when a shell company changes ownership;
  • Tightening of the rules on companies claiming trading losses following a change in ownership – closes a loophole which makes it possible to circumvent this rule by effecting a suitable trade transfer within the company’s new group following the change in ownership.
  • Restrictions on group relief – amendment of “gross profits” to include CFC profits – this will potentially increase the monetary threshold before a company can surrender losses and other deductions to fellow group members.
  • Restrictions on capital allowance buying – the current rules are to be tightened by extending them to all business activities, and not just trading concerns. The tax avoidance purpose is no longer needed where excess capital allowances are in the £2m-£50m range.
  • Two targeted anti-avoidance rules aimed at loss buying – a Deduction Transfer TAAR and a Profits Transfer TARR – disallowing claims for deductions after a company undergoes a “qualifying change” such as a change in ownership or control.

More detail on these “loophole-closure” rules can be found in this post.

HMRC has published a Draft Guidance on the “loss loophole” closure rules.

HMRC has also published a Draft Guidance on the TARRs and Capital Allowance Buying. This is an updated version of previous Draft Guidance, which includes the proposed legislation.

Close companies – a series of measures aimed at extracting value from the company without any tax charge. These are:

  • An extension of the rule taxing loans to participators. A loan or advance made via an intermediary will now be caught;
  • Any extraction of value from the company will be taxed – currently the rules cover only loans;
  • An anti-avoidance rule for cases where the loan is rolled over just before the due and payable date.

 HMRC has published a Technical Note “Close Company Loans to Participators (Loophole Closures).”

Corporation tax deductions for employee share schemes

Legislation to clarify that the deduction can only be given once under the rules linking the relief to the employee’s income tax charge. Any expenses  over and above this amount may not be claimed.

Property – SDLT

Subsale relief to be amended this is intended to block two schemes that HMRC doesn’t like. The rules will apply with retrospective effect.

A useful article can be found at Olswang’s Budget Blog here. HMRC has also published a Draft Guidance on how the amended legislation will work, including numerous examples.

A  “non-natural persons” tax to counter envelope schemes to buy high value residential property

This is a tax aimed at wealthy people who buy a home through an offshore company. This is now prohibitively expensive!

More detail can be found in this post.

Tax Avoidance

Introduction of a GAAR (General Anti-avoidance Rule)

This is a general “catch-all” to counter any transaction which HMRC considers to involve abusive tax avoidance, but for which there doesn’t appear to be any specific piece of legislation to attack it with. The taxes covered are:

  • Income tax;
  • Corporation tax (and amounts treated as corporation tax);
  • CGT;
  • Inheritance tax;
  • SDLT;
  • The annual tax on enveloped dwellings (wealthy people who buy their house through an offshore company);  and
  • Petroleum revenue tax.

Consultation on high risk tax promoters – to appear this summer. This is about “tackling the behaviour” of high risk promoters of tax avoidance products.  What does that mean? Sending them to the “naughty step”?

Consultation on offshore employment intermediaries – a consultation on “strengthening obligations to ensure the correct income tax and NICs” are paid by offshore employment intermediaries – in other words, making sure that they pay up. 


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Satwaki Chanda

Satwaki Chanda

Satwaki Chanda is a tax lawyer with a First Class degree in Mathematics. Called to the Bar in 1992, he is the Editor of Tax Notes.
Satwaki Chanda

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