As usual, the Chancellor introduced a number of measures to try
to close down loopholes. Some of these were announced at the time
of the Pre-Budget Report in December, including a sweeping attack
on the variety of schemes used by employers to pay big bonuses in
a tax-efficient way. Artificial attempts to defeat the spirit of
the law - that employee rewards should be charged to income tax
and NIC - are supposed to be rendered ineffective with effect from
2 December 2004. Time will tell whether these measures succeed,
or whether they are too vague to be legally effective.
A number of measures announced are much more specific. Those who
market tax avoidance schemes now have to tell the Revenue what they
are doing and how it is supposed to work; not surprisingly,
the Revenue are then changing the rules at the earliest opportunity
so that it will not work any more.
These disclosure rules will be extended from 1 July 2005 to cover
SDLT schemes relating to commercial property worth over £5m.
Up to now, only income tax, corporation tax and CGT schemes have
Gift aid and museums
Museums and zoos have been able to claim 'Gift Aid' relief
on entry charges. This means that the Inland Revenue contribute
a further 28% of the entry fee, where the customer makes a declaration
to the organisation. In 2004, the government suggested that this
was a loophole and it would be closed down; but it has now decided
to keep the relief in a modified form. For the next year, the relief
appears to operate as before. For admissions from 6 April 2006,
there will be a restriction to one or other of the following situations:
where the entry fee permits unlimited access to the site for
a 12-month period;
where a donation is made which exceeds the normal entry fee
by at least 10%.
The Civil Partnership Act 2004 recognises a new formal relationship,
equivalent to a marriage between same-sex partners, from 5 December
2005. The Budget confirms that the tax rules will be changed to
recognise this relationship in the same way as a traditional marriage
for tax purposes. This will be very significant for inheritance
tax and CGT, where married couples can in most cases transfer assets
from one to the other without any charge to tax. There will be a
number of other tax consequences, and those considering a civil
partnership should take advice about the effect on their finances.