Corporation tax rates
The small companies corporation tax rate which applies to companies with up to £300,000 of profits is currently 21%. An increase to 22% was originally planned to take effect from 1 April 2010 but was deferred. This has now been deferred for a further year until 1 April 2011.
Business Payment Support Service (BPSS)
The service launched by the 2008 Pre-Budget, which enables viable businesses to negotiate more flexible payment arrangements to meet business tax liabilities including PAYE, will continue to be available for the foreseeable future.
The service supplements the existing Time to Pay (TTP) arrangements which may be negotiated by all taxpayers. However from April 2010 a new requirement will apply where a business seeks a TTP arrangement and the liability is worth £1 million or more. Such a business will need to provide an ‘Independent Business Review’ in support of the request and this is expected to be implemented from April 2010.
Capital allowance boost for low-carbon transport
A 100% first year allowance will be available for capital expenditure on new electric vans from 1 April 2010 for companies and 6 April 2010 for an unincorporated business. This proposal is subject to European State Aid rules.
Reduced corporation tax for innovation companies
A reduced corporation tax rate of 10% is to apply from April 2013 to income arising from patents. It is intended that there will be a consultation with business in time for the Finance Bill 2011. It will apply to patents granted after the legislation is passed.
This proposal is to be known as the ‘Patent Box’ and is designed to ensure that the UK remains an attractive location for innovation, by offering stronger incentives.
Venture Capital Schemes
Certain changes to the qualifying conditions for the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) are being made to ensure that both schemes continue to meet European State Aid requirements.
In summary the proposed changes are:
- to qualify a company must not be in difficulty
- to qualify a company need only have a permanent establishment in the UK rather than carrying on a qualifying trade wholly or mainly in the UK
- a VCT’s shares must now be traded on an EU regulated market rather than being restricted to an official UK list
- rules governing the amount of a VCT’s investment which must be held as equity are changed.
In addition a new ‘small enterprise’ definition is to be incorporated into legislation to ensure that the schemes remain targeted on the small enterprises for which they are intended and do not benefit larger enterprises.
Controlled Foreign Company (CFC) reform
The government remains committed to the reform of these rules and has announced that proposals will be issued in the New Year.
Worldwide Debt Cap for large groups
Further amendments have been proposed to the debt cap legislation which comes into force for periods of account beginning on or after 1 January 2010 for large groups. The amendments eliminate various anomalies which have been identified in applying the rules and include additional provisions relating to the allocation of disallowed finance costs.
Bank payroll tax
A temporary bank payroll tax of 50% is to apply to certain bonuses (in whatever form). The tax will apply to the amount of the bonus which exceeds £25,000 for any individual employee. The tax will apply to banks, building societies and other related financial businesses.
It is to apply to all discretionary and contractual bonus awards made after the announcement of the measure on 9 December 2009, except for contractual bonus entitlements which existed at the time of the announcement, where the payer has no discretion as to the amount of the bonus. The initial charging period will run until 5 April 2010. However the government has indicated that this period of charge could be extended until other relevant provisions of the Financial Services Bill come into force.
This one-off tax is payable on 31 August 2010. It will not be deductible in calculating the institution’s profit or loss for corporation tax or income tax purposes.
This intervention is designed to tackle certain remuneration practices that are considered to have contributed to the excessive risk taking in the banking industry.