Budget Update March 2010 Business Tax Announcement
The Chancellor has now set out his fiscal stall prior to the expected general election in May. As forecast there is a degree of electioneering in the speech! This report focuses on some of the tax changes we can now expect. We will also have further changes to deal with after the election.
BUSINESS TAX ANNOUNCEMENTS
Annual Investment Allowance
At present it is possible to write off the full cost of up to £50,000 of capital expenditure on qualifying assets. This limit is doubled from 1 April 2010 (for corporation tax) and 6 April 2010 (for income tax) to £100,000.
First Year Allowance
The temporary first year allowance of 40% ceases to apply on 31 March 2010 (corporation tax) and 5 April 2010 (income tax).
Tax incentive for British Video Games industry
The Government is to seek State Aid Approval to introduce a new tax relief for the UK video games industry. Consultations on the shape of the new relief will begin later this year.
Losses – carry back
The temporary extension of trading loss carry-back from one to three years for losses up to £50,000 continues for company losses arising in accounting periods ending between 24/11/08 and 23/11/10.
The temporary extension of trading loss carry-back from one to three years for losses up to £50,000 continues for the 2008-09 and 2009-10 tax years for unincorporated businesses; consequently this relief for income tax purposes will cease 5th April 2010.
Corporation Tax Rates
For the Financial Year commencing 1 April 2011, the small profits rate of corporation tax remains at 21%.
For the Financial Year commencing 1 April 2011 the main rates of corporation tax are set at 28%.
VAT increased registration and deregistration limits
The taxable turnover threshold, that determines whether you should be registered for VAT, will increase from £68,000 to £70,000 from 1 April 2010. The taxable turnover threshold that determines whether you could apply for deregistration will be increased from £66,000 to £68,000 on the same date.
Business Payment Support Service
This service which allows you to negotiate extended payment of your tax dues, including VAT, Corporation Tax, Income Tax and NICs and PAYE, is to continue.
HMRC will require businesses seeking Time To Pay (TTP) arrangements for arrears of £1m or more, to provide an Independent Business Review (IBR) in support of their request. It is expected that the new requirement will be implemented from April 2010 and HMRC will informally consult on how this will work.
There will be no change for other businesses.
Capital Gains Tax
There was speculation prior to the Budget that the CGT rate would be increased to close the gap between the present 18% capital gains tax rate and the more punitive income tax rates which peak, from 6 April 2010, at 50%.
Surprisingly there is to be no increase and as an unexpected bonus the lifetime limit of gains that can be covered by Entrepreneurs’ Relief is to be doubled, from £1m to £2m.
The present annual exempt amount for individuals of £10,100 is unchanged for 2010-11.
There are the usual spate of complex issues which are coming under HMRC scrutiny – this includes closer exchange of information with certain off-shore tax havens that have benefited a particular high profile individual recently!
One of the more relevant areas of proposed legislation is with regard to Employee Benefit Trusts and similar arrangements. HMRC consider these as being used to disguise payments of remuneration with a consequent loss of tax and National Insurance. They have declared their intention to introduce anti-avoidance legislation to take effect from 6 April 2011.
The expected increase of 2.76p per litre in fuel duty that was due to be implemented on 1 April 2010 is now to be phased in as follows:
- 1 April 2010 increase of 1p per litre
- 1 October 2010 increase of 1p per litre
- 1 January 2011 increase of 0.76p per litre