Budget 2012

The March 2012 budget contained few surprises and no nasty shocks for pensions and employee incentives. The big news for personal pensions was that there were no further changes to pension tax relief for higher rate taxpayers. There will be some welcome changes to the Enterprise Management Incentives (EMI) legislation, subject to State aid approval. The Government is proposing to increase the personal limit on the value of shares that can be subject to qualifying EMI options from £120,000 to £250,000 which is a very welcome uplift, and will also consult on ways to extend EMI to academics employed by start ups. In addition, gains made on shares acquired through exercising EMI options on or after 6 April 2012 will be eligible for capital gains tax entrepreneurs' relief even if the employee does not hold 5% of the company's shares, although all other conditions for entrepreneurs' relief will still apply, including the requirement that the shares be held for 1 year before being sold. The increase in the personal EMI grant limit will be implemented as soon as possible, subject to State aid approval.

In other news, the Government has announced that there will shortly be consultations on reform and integration of income tax and NICs, changes to PAYE late payment and filing penalties in the light of the introduction of Real Time Information, and the introduction of a legislative General Anti-Abuse Rule (GAAR) to be introduced in the Finance Bill 2013. The Government has also announced that it will be taking action to reform the IR35 (personal service company) legislation so that it is easier to understand and administer, and harder to avoid income tax. There will also be a consultation on requiring office holders or controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source. Again we await the draft legislation before we can assess the extent of this.