30 June 2014

Gibraltar budget 2014

Today's budget announcements by Chief Minister Fabian Picardo included the following.

Key economic data for 2013/14:

Corporation tax As expected, the standard rate of corporation tax continues at 10%. Trust rate of tax The rate of tax which applies to ordinarily resident trusts has been significantly reduced, from 30% to 10%. Personal tax The Government continued to apply reductions to the tax burden for those taxed under the Allowance based system, with a small number of improved tax breaks for those choosing the Gross income based system of taxation. All taxpayers with income of less than £10,500 (previously £10,000) or less will pay no tax. The introduction of a Payroll Giving Scheme was announced - this will allow tax-free donations to approved charities to be made, capped at £5,000 per taxpayer per annum. Allowance based system

Changes to allowances include:

Personal allowance now £3,100 (previously £3,000) Spouse allowance now £3,100 (previously £3,000) Single parent family allowance now £4,000 (previously £3,000) Medical insurance allowance now £4,000 (previously £2,000) £3,000 allowance over two years for installation of solar energy boilers

Nursery school allowance now £4,000 per child (previously £3,000) Blind persons allowance now £4,000 (previously £3,000) Disabled individuals allowance now £6,000 (previously £5,000 - and 5 year residency requirement now

waived)

The standard rate of tax is reduced from 30% to 20%. (NB, although we welcome this, it has little impact on most taxpayers - it is applied mostly as an "emergency rate" of tax where the tax code of an employee is not available, or to trusts - see change to 10% rate for trusts above). Gross income based system The following were announced:

£3,000 allowance over two years for installation of solar energy boilers Deduction of up to £6,000 (previously £5,000) for approved expenditure towards the purchase of a home Deduction of up to £1,200 (previously £1,000) for contributions to approved pension schemes Deduction of up to £2,500 for private medical insurance

Directors' loans Loans to directors and connected persons may now not be treated as earnings - where an arms-length rate of interest is payable and approval is given by the Commissioner of Income Tax. (Up to now, all loans made to directors were taxable as earnings, irrespective of interest or repayments). Social insurance There is no change to contributions. Rates for businesses Discounts for early payment of rates for business increased from 10% to 15%, whilst the discount for bars and restaurants in connection with the smoking ban is extended until September 2015. Early payment discounts for new business start-ups is increased from 25% to 65% for first year of trading. Import duties Changes announced include the following:

Import duty discount and (increased) cash-back on hybrid vehicles is now extended to purely electric vehicles. Duty is introduced on the commercial importation of single-use plastic or paper (unless recycled paper) bags at 5p per bag.

Stamp duty on property For first and second-time buyers, no Stamp Duty now payable on the first £250,000 of the cost of their property, irrespective of the total cost. Minimum wage Increase from £6.00 per hour to £6.11 (w.e.f. 1 August 2014) Other measures Arrangements are being introduced to provide soft loans to residential estates for funding a change to LED lighting.

The figures and measures described above are based on the budget speech of 30th June 2014, and may be affected by subsequent clarification or other changes. The changes are not yet included in any legislation. The above is provided for general information purposes only, does not take account of individual circumstances and should not be construed as advice. Should advice be required, readers are recommended to consult a professional tax advisor.