Corporation Tax rates
The main rate of corporation tax, currently 28%, remains unchanged.
The small companies’ rate will remain unchanged at 21% for profits below the lower relevant maximum amount, currently £300,000. Single companies with profits above £300,000 suffer tax on tax on that excess at 29.75%.
New first year allowance
A first year allowance of 40% will be available for expenditure from 1 April 2009 for companies and 6 April 2009 for unincorporated businesses. This applies to expenditure eligible for the main pool that is not included in the claim for Annual Investment Allowance.
The list of assets that qualify for the 100% enhanced capital allowances have been amended to include uninterruptible power supplies, air to water heat pumps and close control air conditioning systems. Three other types of asset have been removed from the list.
New rules on cars
The new rules detailed below will have effect for expenditure incurred on or after 1 April 2009 (corporates) or 6 April (unincorporated businesses).
• Cars with emissions in excess of 160g/km will attract capital allowances of 10%
• Cars with emissions of 160g/km or less will be added to the main pool and receive capital allowances at 20%. They will not attract the first year allowance introduced for 2009/10
• Expenditure incurred under the old regime will be subject to transitional rules.
• Cars with non-business use will be dealt with in their own pools, but the rate used will still be determined by their CO2 emissions.
• For leased cars there will be a disallowance where the CO2 emissions exceed 160g/km of 15%. This will not be applied where the lease period is less than 45 days.
• Cars leased before 1 or 6 April (for corporates and unincorporated business respectively) will be treated under the old rules.
• Motor cycles will not be treated as cars;
Extended loss carry back
Trading losses made in accounting periods ending between 24 November 2008 and 23 November 2010 for companies and made in the tax years 2008/09 and 2009/10 for unincorporated businesses can be carried back three years against later years first.
The carry back into the period immediately prior to the current period is unrestricted. The carry back to the earlier two years is capped at a total of £50,000.
Enterprise Investment Scheme
Finance Bill 2009 amends several conditions for EIS:
• All funds raised by the issue of shares now to be wholly employed within two years of the issue of shares or, if later, within two years of the commencement of a qualifying activity. This has increased from an 80% requirement
• There will no longer be a restriction on the use of money raised by the issue of non- EIS shares.
• A relaxation of other minor rules.
Corporate Venturing Scheme (CVS) & Venture Capital Trusts (VCT)
Legislation will be amended to simplify the time limit for the utilisation of money received from the investors. There will now be a two year time limit for utilisation.
For accounting periods beginning on or after the date of Royal Assent, senior accounting officers of large companies and large groups of companies (as defined by the Companies Act 2006) must take reasonable steps to establish and monitor their accounting systems to ensure that they are adequate for the purposes of accurate tax reporting.
This will require the officer to certify annually that the systems are adequate or if they are not to specify the nature of any deficiencies and that the auditors have been made aware. The company must also identify the senior accounting officer to HMRC.
There are penalties chargeable on the senior accounting officer personally and on the company for careless or deliberate failures under these rules.
Furnished Holiday Letting Business
From 6 April 2010 the rules allowing a trading treatment for Furnished Holiday Lettings will be abolished.
The favourable treatment given to self-catering holiday accommodation that qualifies as Furnished Holiday Lettings is important to many. Unfortunately the existing legislation seems to have offended European Union rules and so the government’s solution is to completely withdraw the existing status of Furnished Holiday Lettings altogether.
Benefits in Kind
Where an employee is provided with living accommodation by their employer they are charged as a benefit in kind equal to the amount of rent paid by the employer. New rules have been introduced to include any amount of lease premium paid by the employer to secure the property. Any amount paid will be divided equally across the length of the lease and taxed on the employee accordingly.
From 6 April 2011, the price cap for calculating the taxable benefit on the provision of a company car, currently £80,000, will be abolished.
Discounts available to alternative fuelled cars will also be abolished, as well as those for electric/petrol hybrids. They will all now be taxed according to their CO2 emissions.
The current reduction of the 3% surcharge for diesel cars registered before 1 January 2006 that meet Euro IV regulations will also be abolished.
The lower threshold CO2 emissions is reduced to 125g/km from 6 April 2011 (130g/km for 2009-10), whilst the qualifying low emissions car rate of 10% remains in force for cars producing less than 120g/km. The 3% surcharge for most diesel cars will remain.
Taxation of foreign profits
The 2009 Finance Bill changes the way in which foreign profits are taxed.
Retrospective legislation, applicable from 1 April 2008 is introduced to ensure that the reduction in the main corporation tax rate from 30% to 28% does not unjustly affect the amount of double taxation relief (DTR) that would have been available to companies.
This will ensure that the amount of DTR available is not limited by reference to the UK corporation tax rate in force on the date of the foreign dividend payment but is instead limited by reference to the average CT rate of the accounting period.
However, foreign dividends received on or after 1 July 2009 will no longer be taxed differently to UK dividends received. This therefore means that the majority of distributions will now be exempt from charge.
For accounting periods beginning on or after 1 January 2010 there will now be a cap on the tax deduction for the finance expense payable by a UK member of a group of companies. The cap is calculated with reference to the consolidated gross finance expense of that group.
Controlled Foreign Companies
Changes to the regime remove certain exemptions from the rules, potentially bringing more companies into the charge.
Loan Relationships: Connected Companies
Legislation to be introduced makes two changes to the loan relationship rules affecting connected companies.
Release of trade debts
A creditor that formally releases a connected debtor from a trade debt is denied a deduction for the loss on the debt, but currently the debtor may be taxed on its ‘profit’ in certain circumstances. The amended legislation means that the debtor company would not be taxed on the release. This applies to the release of trade debts on or after 22 April 2009.
Late payment of interest
Changes to legislation now mean that the current ‘paid basis’ rules for connected parties only applies where the creditor company is resident in a tax haven. Other than this all interest payable to an overseas connected person is deductible on an accruals basis
This has effect for accounting periods beginning on or after 1 April 2009.
Legislation is being amended to ensure that companies issuing particular types of new preference share capital to external investors (for example where debt is being capitalised) do not lose the ability to enter into arrangements to claim and surrender group relief with other members of their group.
Transfer of assets within groups of companies
Existing legislation allows for the deemed transfer of a chargeable asset between group companies prior to the asset being disposed of outside the group. This would allow a deemed intra-group transfer to a group company that was carrying capital losses so that the gain on the disposal could be offset by the loss. However this election could not be used unless there was an actual disposal to a third party, either crystallising the gain or the loss. As such, the election could not be used for some types of gains or losses, e.g. where the asset is subject to a claim that it has become of negligible value.
Changes have now been made to the legislation that transfers the gain or loss intra-group rather than the asset. In rewording the legislation in this way, negligible value losses arising can then be utilised.
Amendment to the legislation is being made to clarify that the regime applies also to internally generated goodwill. The legislation will also confirm that such goodwill is created in the course of carrying on the business and is subject to rules in determining whether goodwill is created before or after 1 April 2002, i.e. the date of commencement of trading will determine whether goodwill is qualifying or non-qualifying. This will prevent a claim for a tax deduction on amortisation on internally generated goodwill that is first recognised on a company’s Balance Sheet after 1 April 2002.
Name and shame
HMRC will publish the names and details of individuals and companies who are penalised for deliberate defaults leading to a loss of tax of more than £25,000. Names will not be published of those who make a full unprompted disclosure or a full prompted disclosure within the required time. Details will be published quarterly within one year of the penalty becoming final and will be removed from publication one year later.
SDLT: Temporary Increase in Thresholds
Transfer of Property
Zero 125,000 150,000
1% 125,001 - 250,000 150,001 - 250,000
3% 250,001 - 500,000 250,001 - 500,000
4% Over 500,000 Over 500,000
Zero- 150,000 All
1% 150,001 - 250,000 -
3% 250,001 - 500,000 -
4% Over 500,000 -
For the period to 31 December 2009 the 0% threshold for residential property is increased from 125,000 to 175,000.
SDLT: Treatment of shared ownership
Relief from SDLT is currently available for some land transactions where the purchaser is a Registered Social Landlord. This relief has now been extended to include profit-making companies who are registered providers where the purchase is funded with the assistance of a public subsidy.
SDLT: Leasehold enfranchisement
Relief from SDLT is being introduced to allow for any nominee or appointee who acquires the freehold of a block of flats on behalf of leaseholders under a statutory right of leasehold enfranchisement.
Changes in VAT Fuel Scale Charges
New reduced VAT fuel scale charges will apply for accounting periods beginning on or after 1 May 2009.
• registration raised to £68,000
• deregstration raised to £66,000
• effective from 1 May 2009
VAT – Change of Standard Rate
The standard rate of VAT will increase from 15% to 17.5% with effect from 1 January 2010.
Anti-forestalling legislation will be introduced where prior to 1 January 2010, suppliers issue invoices to or receive payment from customers who are unable to recover the VAT. This will apply where:
• The supplier and the customer are connected
• The supplier funds the purchase by the customer or
• The supplier issues an invoice and payment is not due for at least 6 months
In addition a supplementary charge will also apply where a pre-payment in excess of £100,000 is made in respect of goods or services to be provided after 31 December 2009.
Cross-Border VAT Changes
HMRC is introducing a package of new measures which will affect businesses that trade with other members of the EC. The changes which will come into effect from 1 January 2010 include:
• New rules for determining the place of supply of services
• Requirement to complete quarterly European Sales Lists for services
• Monthly EC Sales Lists where the value of goods sold exceeds £70,000 in a quarter
• Reduced time limit for submitting EC Sales Lists
• New electronic refund procedure for claiming VAT incurred in other EC member states
Other indirect taxes
Changes in rates
• standard rate increased from £32 to £40 per tonne from 1 April 2009
• will be increased further to £48 per tonne from 1 April 2010
• Use of waste on a landfill site will not represent a taxable disposal of waste