Steven Mugglestone

The more I learn, the less I know

A more measured budget summary

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Company Tax Rates

Company tax rates for small companies remain unchanged for a further year at 21%. In April 2011 the rate will increase to 22%. The main rate of corporation tax will remain at 28% until 2012. For unincorporated businesses it still may be worth transferring the business into a limited company.

VAT

From 1st April 2010 the threshold for registering for VAT will increase to £70,000 and the deregistration limit to £68,000. The VAT rates have been left unchanged. New VAT fuel scale rates for taxing private use on fuel provided will apply for returns beginning on or after 1st May 2010. The scale charge for a particular vehicle is determined by its CO2 emissions figure.

Restriction on loans released

From 24th March 2010 if a close company writes off or releases a loan to a participator in that company or an associated person of the participator then corporation tax relief will be denied on the amount written off.

Double AIA

The amount of Annual Investment Allowance (AIA) available will double to £100,000 from 1st April 2010 for companies, and from 6th April 2010 for unincorporated businesses.

Where accounting periods span the date of change then the businesses will be entitled to claim the appropriate proportions of each limit. Businesses are free to allocate the AIA in any way they wish, leaving them free to maximise their tax savings.

Anti-avoidance measures are being brought in to restrict losses that result from Annual Investment Allowances arising as from certain arrangements entered into on or after 24th March 2010.

Low and zero carbon vehicles

A 100% First Year Allowance will be available for businesses buying new zero-emission goods vehicles from 1 April 2010 for companies and 6 April 2010 for unincorporated businesses.

From 6th April 2010 where an employee is provided with a company car or van that cannot produce CO2 emissions when driven, then the employee with not suffer a benefit in kind for personal use of the vehicle. If a company car provided to an employee produces emissions of 75g per kilometre or less then the appropriate percentage used to calculate the benefit will be 5%.

Other issues for businesses

The Business Payment Support Service and Time to Pay arrangements are to continue through the next Parliament. For larger businesses where the debt exceeds £1million then an independent review will be required.

Legislation is to be brought in to target employers who have a serious history of paying late or not paying their pay as you earn (PAYE) or national insurance liability. The measure will allow HM Revenue & Customs to require financial security from the offending employers. This would be in line with the current practice for VAT. We are assured that the measure is for serious risk cases and not innocent employers who merely need time to pay.

Main changes for individuals

On top of the already announced increases to Tax Credits from 2010, further increases to Tax credits are proposed, but not until 2012. Families with one and two year olds are to receive an additional £4 per week in child tax credit from 2012.

Tax Credits are become increasingly more important to more individuals. McGregors Corporate  offer a compliance service in this area, and can review the position as part of a proactive tax planning service.

Allowances and rates

From 6 April 2010 all income tax allowances will remain the same as for 2009-10, except for the introductions of:

  • The new 50% additional tax rate for total annual income over £150,000
  • The withdrawal of the personal allowance for total annual income between £100,000 and £112,950.
  • The National Insurance rates largely remain the same from 6th April 2010, but will increase in April 2011. This makes potential tax savings much greater for those prepared to undertake tax planning.

Frozen IHT threshold

The Inheritance Tax (IHT) threshold is sometimes referred to as the Nil Rate Band, as below this level the tax rate used is 0%. The current level of the threshold (£325,000) was expected to increase to £350,000 in 2010. The 2009 Pre-Budget announced that from 6th April 2010 the threshold will remain at £325,000 and now we know it will remain at this level until 2015. This announcement may focus some clients on their Inheritance Tax position.

Pension Relief changes

The 2009 Budget announced that from 6th April 2011 tax relief on pension contributions would be restricted for people with taxable income of £150,000 or more. There will be a sliding scale reduction in relief so that those with incomes in excess of £180,000 will only receive 20% tax relief on their pension contributions in the same way as basic rate tax payers.

Anti-forestalling provisions were brought in from 22nd April 2009 to catch any payments made after this date in excess of £20,000 in a year that were not regular. This was subsequently tweaked to a £30,000 limit or an average of the past 3 years if lower, for money purchase schemes. If the anti-forestalling rules were not already complicated enough, from 9 December 2009 the taxable income limit fell to £130,000, and the definition of income for the £150,000 limit now includes the value of employer pension contributions.

SDLT—Good and Bad

The good news is for first time buyers, who will not be liable to Stamp Duty Land Tax for residential property bought as their home up to £250,000. The measure is being brought in for 2 years from 25th March 2010 and is conditional on the first time buyers intending to occupy the property as their main home. The 1% rate will continue to apply for all other residential property purchases from £125,000.

The bad news for purchasers of residential property over £1 million is that the rate will increase to 5% from 6th April 2011. At present the highest SDLT rate of 4% applies to purchases where consideration exceeds £500,000.

Entrepreneur’s Relief doubles

The good news for many business owners is that the lifetime limit for Entrepreneur’s Relief will increase to £2million from 6th April 2010. Where individuals or trustees make qualifying gains after 5th April 2010, they will be entitled to the new £2 million lifetime limit. This may be the sweetener before a possible increase in Capital Gains Tax rates after the election in May this year.

For a chat about how we can help plan for these changes and to talk through how a pro-active accountant can help, visit http://www.mcgregorscorporate.co.uk and contact one of our offices.

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Written by Steven Mugglestone

March 26, 2010 at 3:06 pm

Posted in Tax

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