Cap on Income Tax relief | Lanop News

Cap on Income Tax relief


Aug 15

Friday the 13th (of July) saw the launch of a consultation on Income Tax reliefs. The date of the consultation is unlikely to provide any relief to higher rate taxpayers who are faced with the introduction of a cap to Income Tax reliefs.

The measure was first announced by the Chancellor as part of the 2012 Budget and new legislation is expected to be introduced in Finance Bill 2013 that will seek to apply a cap to Income Tax reliefs claimed by individuals from 6 April 2013. This would limit existing reliefs for the first time. The cap is to be set at 25% of income or ?50,000, whichever is the greater. The reliefs affected by the introduction of the cap include loss relief that can be claimed against general income ? presently this relief is not capped. The losses affected include trade loss relief, post-cessation trade relief and qualifying loan interest relief. Any other reliefs which do not meet this criteria will be unaffected by the change.

As has been well reported, the Government faced a severe backlash from charities and rich donors who argued that proposals to cap charitable giving would greatly reduce the amount of money given to charities. The Chancellor removed plans to introduce a cap on charitable giving but commented that the government will ?go ahead with the cap on other reliefs that wealthy people can claim on Income Tax but not if they are giving money to charity?.

Interested parties can submit their responses to specific questions raised in the consultation including:

• How an individual?s income will be defined and calculated for the purposes of the cap.
• When the cap will apply.
• How reliefs will be ordered.
• The operation of the cap through Income Tax Self Assessment (ITSA).

The closing dates for responses to the consultation is 5 October 2012 and draft legislation is expected to be published in the autumn.

Source: http://news.lanop.co.uk/?p=127

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