7:28am Thursday 22nd March 2012
By Richard Garfield
THE Red Book which accompanies the Chancellor’s speech has confirmed that he will introduce a minimal level of tax which has to be paid on certain levels of income, regardless of whatever reliefs are available. From April 2013, the Government will introduce a new cap on income tax reliefs to ensure that those on higher incomes cannot use income tax reliefs excessively. This will mean that anyone seeking to claim more than £50,000 of relief, a cap will be set at 25 per cent of earnings of income. This approach mirrors the US system of Alternative Minimum Tax (AMT) which broadly speaking requires a taxpayer to do two calculations – an ordinary calculation with full deductions and then an AMT calculation which has far fewer deductions and a different basis of calculating taxable income.
The taxpayer would pay tax based on the higher of these calculations. Nick Parker, RSM Tenon’s Head of Tax in the Southern region and based in Basingstoke said: ‘What is interesting is how over time the number of individuals caught by this AMT regime in the US has increased. It was originally introduced to catch only a few people but after many years almost 4m people in the US fall within the regime.
‘Where the Tycoon Tax ends up, if it is introduced, is anyone’s guess, but the journey is definitely going to be interesting!’
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