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Watch out for hidden pitfalls in the Budget
9:47am Wednesday 20th March 2013 in Business news
AHEAD of the Budget to be announced today, a York adviser has warned businesses to look carefully behind the headlines.
Changes due to come into force in April include new regulations under which businesses with different income streams may end up paying more in tax than they earn.
The draft legislation contained in the Finance Bill 2013 was part of last year’s budget, but was hidden away in consultation documents.
Currently, if a business makes a loss, other income received by the business owner can be used to make up that loss and therefore is not taxed.
For example, a farmer who also operates a farm shop as a separate unincorporated business could make a loss of £100,000 on the farm and a profit of £100,000 on the farm shop. Under current rules no tax would be paid.
The Finance Bill 2013, which will come into force on April 6, restricts the amount of losses and other income tax relief that can be claimed by unincorporated businesses to £50,000 or 25 per cent of income, whichever is greater. So under the new rules, the £50,000 of the farm shop’s profit would be subject to tax of nearly £10,000.
Louise Battison, senior tax manager at JWPCreers, said it was increasingly happening that measures were sneaking through.
“If you look back five years, most of the announcements were made in the Budget and came in in that finance bill.
“What this Government is doing is consulting on more issues, which in a way is good and admirable, but what happens is sometimes, things like this which don’t affect the man in the street, but a smaller group of people, can slide under the radar.”