The main tax points

Business Taxes

Corporation tax – the main rate of corporation tax remains at 28 per cent.

Small companies rate – the small companies rate of corporation tax remains at 21 per cent.

Close company loans – from 24 March 2010, if a loan made by a close company to a participator is released or written-off, a corporation tax deduction will not be available.

Consortium relief – the consortium relief rules will be amended so that EEA resident companies engaged in UK consortia will be able to pass on their losses to UK resident subsidiaries. However rules ensuring that consortium relief is only given in proper proportion to the member company’s involvement in the consortium will be tightened.

Annual Investment Allowance (AIA) – from 6 April 2010, the AIA is being doubled to £100,000; a targeted anti-avoidance rule to ensure that the AIA supports only genuine business investment is being introduced.
Video games industry tax relief – subject to state aid approval, a tax relief for the UK video games industry will be introduced.

Company car tax – from 6 April 2010 for 5 years, company car tax for ultra-low carbon cars will be halved.

Zero-emission goods vehicles – a 100 per cent first-year allowance for business expenditure on new and unused zero-emission goods vehicles will be introduced for 5 years from 6 April 2010.

Employee incentive arrangements

Employee reward arrangements – the government has announced that it is currently considering its options for future action to tackle the use of employee benefit trusts put in place for the purpose of avoiding, deferring or reducing income tax or National Insurance liabilities. Any forthcoming legislation will take effect from April 2011. In addition a consultation on the use of growth shares, JSOPs and similar arrangements has been announced in order to ensure that “income from employment is taxed correctly”.

Venture Capital and Enterprise Investment Scheme – the majority of the changes previously announced to the VCT and EIS regimes in order to ensure that they continue to benefit from state aid approval will be legislated for in a Finance Bill in the next parliament. VCTs will now be able to hold shares with preferential dividend rights.

Enterprise Management Incentives (EMI), as announced in the PBR 2009, the EMI regime will be extended to apply to companies which have a UK permanent establishment in order to comply with state aid rules. This will be implemented by legislating in a Finance Bill in the next parliament.

Company Share Options Plans – from 24 March 2010, CSOP share options can no longer be granted over shares in a company which is under the control of a listed company.

Personal Taxes

Income Tax – the previously announced increase in the rate of income tax to 50 per cent for those earning over £150,000 p.a. will come into force on 6 April 2010, as will the restriction of personal allowances in 2010/11 for income over £100,000. Most other rates and allowances are frozen at 2009/10 levels.

Inheritance Tax – the threshold for inheritance tax will be frozen at £325,000 until 2014/15.

Individual Savings Accounts (ISAs) – from 6 April 2010, the ISA limit for all savers will increase to £10,200, up to £5,100 of which can be saved in cash. From 6 April 2011, the ISA limits are indexed in line with the RPI.

Pensions tax relief – details of the operation of the previously announced restriction of pensions tax relief for those on high incomes have been published. Broadly, those with income up to £150,000 receive relief at 40 per cent and above this figure relief is restricted.

Landline duty – as announced in Pre-Budget Report 2009 (“PBR 2009”), from 1 October 2010 a duty of 50p per month will be introduced on all land-lines.

Capital gains tax – the annual exemption (£10,100) and main rate (18 per cent) remain unchanged.

Entrepreneurs’ Relief (ER) – from 6 April 2010, the lifetime limit of gains which can benefit from ER and can therefore be taxed at 10 per cent is being doubled to £2 million.

Furnished holding letting (FHL) – it appears that ER will apply to the disposal of FHL property within 3 years of 5 April 2010.

Property

Stamp duty land tax (SDLT) – from 25 March 2010 for 2 years, relief from SDLT for first-time buyers of residential properties of up to £250,000 who intend to occupy the property as their only or main home has been introduced. In order to fund this, SDLT on residential properties of more than £1 million will be payable at a rate of 5 per cent from 6 April 2011.

Empty Property Relief (EPR) – as announced in the PBR 2009, the threshold for EPR will be extended to £18,000 for 2010/11.

Small business rate relief – for 1 year from October 2010, small businesses occupying properties with a rateable value of up to £6,000 will pay no business rates. Those properties that benefit from rate relief taper (i.e. rateable value of up to £12,000) will also see reductions.

Landfill tax – from 1 April 2014, landfill tax will be increased by £8 per tonne.

Aggregates Levy – from 1 April 2011, the rate of aggregates levy will be increased to £2.10 per tonne.

VAT

Standard rate – the standard rate of VAT remains at 17.5 per cent.

Registration and de-registration thresholds – the registration threshold for VAT will, from 1 April 2010, is £70,000, and de-registration threshold decreased to £68,000.

HMRC and tax administration

Systemic risk tax – the government believes that progress could soon be made on an internationally coordinated systemic risk tax on financial institutions.

Time to Pay – HMRC will continue to offer ‘Time to Pay’ to all viable businesses experiencing difficulty in paying their tax on-time.

Offshore bank accounts – individuals who fail to pay taxes on offshore income and gains will be subject to new penalties of up to 200 per cent for funds held in countries which have not agreed to exchange financial information with the UK. However where the account is in a jurisdiction which agrees to share tax information annually with the UK, the penalties will only be 100 per cent.

Disclosure regime – a package of measures have been announced, effective from the autumn, which will introduce enhanced penalties for failing to disclose; a requirement for promoters to provide lists of clients to whom they have issued scheme reference numbers; and changes to the “hallmarks” to target those trying to avoid paying the new 50 per cent rate of income tax.

Security for payment of PAYE – where a trader has been associated with businesses which have failed to deduct income tax and National Insurance under PAYE, HMRC want the power to demand a deposit as security as a condition of trading. If implemented this will not become law until 6 April 2011.