Weekly Tax Update - July 13, 2015

1 General news

Summer Budget 2015 1.1

The Chancellor presented his first budget of the new Parliament on 8 July. A number of consultation documents were also issued last week. We have noted the key ones below.

Smith & Williamson's commentary of the budget can be found on the Smith & Williamson website, www.smith.williamson.co.uk. Our Budget commentary is at:

www.smith.williamson.co.uk/publications/2129-summer-budget-2015-overview

Consultation: Incentives to save and pension tax relief 1.2

Recognising the general increase in longevity, the prevalence of defined contribution schemes, and the current costs to Government of the existing system, a consultation has been issued on suggestions for strengthening the incentive to save and the future of pensions tax relief. The consultation is open until 30 September 2015. The Government is keen to ensure the system for providing for retirement takes account of current and future trends and is sustainable.

The current system operates by exempting from tax initial contributions by individuals and employers, exempting the growth in pension funds and taxing pension withdrawals (exempt-exempt-taxed).

Comments are invited on change that could range from a fundamental reform of the system to less radical changes, as well as options in between.

An example of fundamental reform could be a move to a system which is 'taxed-exempt-exempt', similar to the treatment of ISAs, and providing a government top-up on contributions. An example of less radical change could be retaining the current system and altering the lifetime and annual allowances. While no preferences are expressed, responses on possible future reforms are requested that take into account the following:

simplicity and transparency; personal responsibility; the early success of auto-enrolment; and sustainability. www.gov.uk/government/uploads/system/uploads/attachment_data/file/442159/Strengthening_the_incentive_to_save_consultation__print_.pdf

2 Private client

Consultation: ISAs and crowd funding 2.1

A consultation has been issued exploring the case for permitting some investments made through a crowdfunding platform within ISAs. Responses are requested by 30 September 2015.

The consultation is framed around the principles for ISA products, which are noted as:

a trusted savings brand; protection for the consumer; supporting a sustainable tax system; and simplicity of administration www.gov.uk/government/consultations/isa-qualifying-investments-consultation-on-whether-to-include-investment-based-crowdfunding/isa-qualifying-investments-consultation-on-whether-to-include-investment-based-crowdfunding

3 PAYE and employment

Consultation: Tax treatment of sporting testimonials 3.1

HMRC has issued a consultation, open until 2 September 2015 on the tax treatment of sporting testimonials. It considers the possibility of introducing an exemption or a de minimis amount not subject to tax, and making changes to the tax treatment of testimonial committees, which organise testimonial matches and which are generally independent of the sports club that employ the individual.

It is recognised that the existing HMRC guidance on receipts from sports testimonials needs to be updated. The consultation gives consideration to introducing a partial exemption or de minimis amount that is not subject to tax or NICs.

It considers whether such an exemption or a de minimis amount should be available once only during the individual's career, or be available in relation to each club the individual plays for.

Consideration is also given to the fact that an independent testimonial committee is subject to corporation tax but cannot deduct costs of payments to the individual against company profits for the purpose of calculating corporation tax. This is because the committee is not legally the employer, even it is required to operate PAYE. This could be alleviated by...