Gibraltar Budget 2021 announcements

HM Government of Gibraltar has today announced its budget measures for the year 2021/22. The Chief Minister’s speech included the following:

Corporate taxation

An increase in the rate of corporate tax from 10% to 12.5%.  This is to apply to financial periods commencing after today’s date.
A series of measures to encourage investment by companies:
  • Capital allowances
    • Initial allowances for plant and machinery to be increased from the current limit of £30,000 in a year.  The initial allowance will now be the higher of (a) expenditure up to £60,000 or (b) 50% of the expenditure incurred
    • Initial allowances for computer equipment to be increased from the current limit of £50,000 in a year.  The initial allowance will now be the higher of (a) expenditure up to £100,000 or (b) 50% of the expenditure incurred
    • The annual allowance given on the remaining “pool” of such assets to be increased from 10% to 25% per annum (or from 25% to 30% in the case of companies whose profits are taxed at 20%)
    • “Plant and machinery” to include private vehicles that are partly used for the production of income, if the vehicle is fully electric
    • A wear and tear allowance to be introduced of 1% of acquisition cost of property from where business is conducted (this will not apply to industrial buildings which already attract an allowance).
  • An additional allowance of 50% of the fixed salary cost of new employees employed after today
  • The additional allowance already given for qualifying training costs is to be increased from 50% to 60%.  The increase applies to the cost of training only, and excludes ancillary costs, such as travel and accommodation
  • An additional allowance of 50% of marketing costs (subject to agreement by the Income Tax Office that it is validly incurred in marketing for purposes of the business)
  • Allowances to be given for the installation of any solar heating systems
  • Increase in deductions given for improvements to the EPC rating of a property.

Personal tax

  • No changes to the tax rates or bands under either the Allowance Based System or Gross Income Based System.
  • Category 2 Individuals
    • Minimum tax payable to increase from £22,000 to £32,000 per annum
    • Tax “cap” for income taxed under the certificate to be increased from £27,560 to £37,310
    • The above changes to apply as from 1 August 2021
  • HEPSS* Individuals:
    • Going forward, individuals will need to earn more than £160,000 per annum to qualify for HEPSS (currently £120,000)
    • Tax payable to be based on this new threshold amount (i.e., tax will increase from £29,940 to £39,940 per annum)
    • The above changes to apply as from 1 August 2021.  Transitional rules will apply for existing HEPSS employees earning between £120,000 and £160,000.
* HEPPS = High Executive Possessing Specialist Skills
  • Certain allowances under the Allowance Based System to be increased, including:
From
To
Age allowance (single/married)
£5,600 / £9,055
£5,685 / £9,190
Nursery school allowance (maximum)
£5,400
£5,480
Blind person’s allowance
£5,395
£5,475
Child educated abroad
£1,355
£1,375
Parent of a disabled individual
£9,475
£10,000
Single parent family
£5,690
£5,800
  • Social insurance contributions – increases with effect from 1 July 2021 were already announced – see our bulletin of 24th June 2021.

Economic data

GDP forecast 2020/21
£2.44bn (down 4.9%)
Total number in employment (October 2020)
29,516 employees (30,603 in October 2019)
Average gross earnings
£32,635 per annum
Projected tax revenue for 2021/22
Total £300m, of which personal tax £180m, corporate tax £120m
Tax revenue for 2020/21
Total £314m, of which personal tax £186m, corporate tax £128m
A copy of the Chief Minister’s budget speech can be seen here
For further information please contact either myself or stephen.carreras@gi.ey.com
 
Neil Rumford | Partner | Tax Services