Wettone Matthews

Pre-Budget Report 2009

twettone@wmcca.co.uk (Tim Wettone) — Mon, 14 Dec 2009 16:12:00 -0800

Chancellor Alistair Darling has presented the 2009 Pre-Budget Report, to a politically charged House of Commons. In the context of the global recession, and with a General Election looming, this year’s statement has particular significance.

Despite revising down his economic growth forecast from -3.5% to -4.75% for 2009, and increasing his public sector net borrowing forecast from £175 billion to £178 billion for 2009/10, the Chancellor insisted that global confidence is returning, and predicted that the UK economy will return to growth by the turn of the year.

Describing this as a ‘critical time’ for the economy, the Chancellor outlined a number of measures aimed at securing economic recovery and promoting growth.

Key measures for businesses include a deferral of the planned 1% increase in corporation tax for small firms and an indefinite extension of the ‘time to pay’ scheme. Empty property relief will be extended from 2010/11 for business properties with a rateable value below £18,000, and the Enterprise Finance Guarantee Scheme will also be extended for one year.

Citing the need for ‘difficult choices’, the Chancellor confirmed that national insurance contributions will rise by a further 0.5% from April 2011, although the starting point will be raised so that those earning less than £20,000 will not be affected. The negative RPI to September 2009 meant that many allowances and thresholds were unchanged.

The temporary cut in VAT will end on 1 January 2010 as planned, with the standard rate reverting to 17.5%. The so-called stamp duty ‘holiday’ will come to an end at the same time, while the individual inheritance tax allowance will be frozen at £325,000 until 2011.

A much-anticipated announcement regarding bankers’ bonuses sees the introduction of a new one-off 50% ‘super tax’ on bonuses exceeding £25,000, payable by the bank. Plans to reduce pension tax relief for those earning in excess of £150,000 were also confirmed.

Meanwhile, ‘green’ measures include the introduction of a new ‘boiler scrappage scheme’, together with plans to exempt electric cars from company car tax for five years, and a 100% first year capital allowance for electric vans.

The Chancellor also confirmed a new 50p a month tax on telephone landlines, which will be used to fund next generation broadband services.

Do please contact us for specific advice about how these announcements might affect you or your business.

Measures for business
- Business Payment Support Service
- Business rates
- Small Companies’ Rate of corporation tax
- Patent Box
- R&D tax credits
- Company cars and vans
Personal measures
- Income tax
- National Insurance Contributions (NICs)
- Inheritance tax
- Capital gains tax (CGT)
- Child benefit
- State pension
- Pension Credit
- Tax relief on pension contributions
- Furnished holiday lettings
- Carers
- Salary sacrifice — workplace canteens
VAT and duties
- Standard rate of VAT
- Alcohol and tobacco duty rates
- Bingo duty
Green measures
- Climate change levy
- Green Boiler Incentive Scheme
Other measures
- Bank payroll tax
- Landline Duty
- SDLT holiday to end
- Seafarers
- Equitable liability
- Anti-avoidance measures
What they said

This guide is for general information only. No responsibility is taken for any action taken or refrained from in consequence of its contents. Always seek professional advice before acting.

Measures for business

A wide range of tax and other measures affecting businesses were announced by the Chancellor.

Business Payment Support Service

The 2008 Pre-Budget Report introduced HM Revenue and Customs’ (HMRC) Business Payment Support Service, designed to help viable businesses facing temporary financial difficulties to spread tax payments over an agreed timetable. According to the Government, over 160,000 businesses have taken advantage of the service, collectively employing more than 1.2 million people, spreading over £4 billion of tax. Of this, more than £3 billion has already been repaid.

HMRC will continue to offer this service as part of its time to pay arrangements. All requests will continue to be assessed on the same basis as when the service was introduced.

Business rates

In March 2009, the Government announced that businesses could spread payment of the April 2009 inflation up-rating to business rates over three years, helping ratepayers for an estimated 1.8 million properties in Britain. The Government also temporarily increased the threshold at which empty properties are liable for business rates to £15,000, exempting an estimated 70% of empty properties. On 18 September 2009, the Government removed the requirement for businesses receiving small business rate relief to reapply for relief at revaluation.

The Government is maintaining for a further year the temporary increase in the threshold at which an empty property becomes liable for business rates. For the financial year 2010/11, empty properties with a rateable value of less than £18,000 will be exempt from business rates. This higher threshold reflects the effects of business rates revaluation and is still expected to apply to 70% of empty properties.

Small Companies’ Rate of corporation tax

The Government is deferring, for an extra year, the planned increase in the Small Companies’ Rate of corporation tax. The rate will remain at 21% during 2010/11.

Patent Box

The Pre-Budget Report announced the intention to introduce a ‘Patent Box’, a reduced rate of corporation tax applying to income from patents from April 2013, designed to strengthen the incentives to invest in innovative industries.

The Chancellor announced that, following consultation, this will be a 10% corporation tax rate on income which stems from patents in the UK.

Research & Development (R&D) tax credits

Since the introduction of the R&D tax credit schemes, according to the Government, over 36,000 claims have been made for R&D tax credits with over £3 billion of relief claimed, supporting over £32 billion of research and development activity by companies.

The Chancellor has now announced the removal of the condition that any intellectual property (IP) deriving from the research and development must be owned by the company making the claim. This measure is designed to allow companies to benefit from the R&D tax credit for SMEs without distorting their commercial arrangements in relation to IP. It will have effect for any qualifying expenditure incurred in an accounting period ending on or after 9 December 2009.

Company cars and vans

A new 0% band will apply for company cars propelled solely by electricity, from 6 April 2010 and effective for five years. From the same date, and also applying for five years, will be a reduction to nil of the flat rate charge on company vans propelled solely by electricity.

The new bands will apply for both income tax (employees) and national insurance contributions (NICs) (employer contributions).

The fuel benefit multiplier, governing the tax paid by employees and the NICs paid by employers where free private fuel is provided, will be increased from 6 April 2010 to £18,000 (currently £16,900). Where fuel is provided for private travel in company vans the flat rate charge will be increased from the same date to £550.

The Chancellor also announced a 100% first year capital allowance for electric vans. The allowance will be available for business expenditure on new, unused electric vans incurred on or after 1 April 2010 (corporation tax) or 6 April 2010 (income tax).

The graduated table of company car tax bands will be extended down to a new 10% band (for cars with CO2 emissions up to 99g/km) and all thresholds moved down by 5g/km with effect from 6 April 2012.

Personal measures

Income tax

The tax thresholds and personal allowances for 2010/11 are as follows:

Income Tax	2009/10	2010/11
Basic rate band	£37,400*	£37,400*
Tax rate	20%	20%
Basic rate for dividend income	10%	10%
Higher rate — income over	£37,400	£37,400
Higher rate	40%	40%
Dividend upper rate	32.5%	32.5%
Additional rate — income over	n/a	£150,000
Additional rate	n/a	50%
Dividend additional rate	n/a	42.5%
* There is a 10% starting rate for savings income up to the starting rate limit within the basic rate band. Where taxable non-savings income does not fully occupy the starting rate band the remainder of the starting rate band is available for savings income.
Personal allowances (age at the end of the tax year)
Under 65	£6,475	£6,475
65 - 74	£9,490	£9,490
75 and over	£9,640	£9,640
Higher allowances scaled back if income exceeds	£22,900	£22,900
Adjusted net income above which personal allowances are tapered	n/a	£100,000

National insurance contributions (NICs)

The lower earnings limit for 2010/11 will increase by £2 to £97 per week. All other main NIC rates and thresholds are unchanged for 2010/11.

In his 2008 Pre-Budget Report the Chancellor announced that the main NIC rates would be increased by 0.5% for 2011/12. In his 2009 Report he announced a further 0.5% increase effective from 6 April 2011, taking rates to:

Employee Class 1	12%
Employer Class 1 and Class 1 A/B	13.8%
Self-employed Class 4	9%
Class 1/4 additional rate	2%

With effect from 6 April 2011, the primary threshold and lower profit limits were to be broadly aligned with the income tax personal allowance. It has been announced that these thresholds will be increased by a further £570 to compensate the lowest earners (up to £20,000) for the increase in Class 1 and 4 rates.

Inheritance tax

The Chancellor announced that the inheritance tax allowance will be frozen at £325,000 for individuals and therefore a maximum of £650,000 for married couples and civil partners in 2010/11.

Capital gains tax (CGT)

There is no change in the annual exempt amount which remains at £10,100 for individuals and £5,050 for most trustees.

Child benefit

Child benefit will be increased by 30p to £20.30 per week from April 2010.

State Pension

The Pre-Budget Report announced that in April 2010 the level of the basic State Pension will increase by 2.5%, meaning a full basic State Pension will be worth £97.65 a week. The full couples’ rate for those whose entitlement is based on their spouse or civil partner’s pension will increase to £156.15 a week.

These increases are in line with the policy of uprating the basic State Pension by RPI or 2.5%, whichever is higher.

Pension Credit

There will be an above-indexation increase in the Pension Credit’s minimum income guarantee to £132.60 for single pensioners and £202.40 for couples in 2009/10.

Tax relief on pension contributions

Budget 2009 announced that tax relief on pension contributions would be restricted from April 2011 for individuals with incomes of £150,000 and over.

The Chancellor has now announced that the income definition for the £150,000 threshold will include the value of employer pension contributions.

This will be subject to an income floor so that tax relief for those with incomes below £130,000 (before the inclusion of employer pension contributions) will not be restricted. They will still be subject to the existing annual and lifetime allowances.

The anti-forestalling measures introduced at Budget 2009 will be extended from 9 December 2009 so that all those with incomes of £130,000 and over will be subject to the special annual allowance.

Furnished holiday lettings

The current furnished holiday lettings provisions (now applying to UK taxpayers with qualifying lettings elsewhere in the EEA) will be withdrawn with effect from 6 April 2010.

From that date, furnished holiday lettings will be dealt with under the normal rules for the letting of property, and hence the following tax reliefs will no longer be available:

income tax sideways loss relief and capital allowances for new expenditure
capital gains tax entrepreneurs’ relief, business assets roll-over relief, relief for gifts of business assets; and
exemptions for disposals of shares by companies with a substantial shareholding.

From 6 April 2010 income from furnished holiday lettings will cease to be relevant income for pension relief purposes.

Carers

Two new provisions affecting carers were announced.

Income tax:

A new tax-free allowance will apply for Shared Lives carers, from 6 April 2010, replacing the current simplified income tax arrangements.

The tax-free allowance will be available per household and consists of:

£10,000 fixed amount per tax year
£200 per week (or part week) per placement aged under 11; and
£250 per week (or part week) per placement aged 11 or over.

Qualifying Shared Lives carers whose total receipts from providing care do not exceed the tax-free allowance for the year will be exempt from income tax on their income from providing Shared Lives care. Those whose receipts exceed the tax-free allowance for the year can choose to pay tax on either the amount by which their receipts exceed the allowance or on their profits calculated using the normal tax rules for businesses.

Capital gains tax (CGT):

Strictly, the CGT principal private residence (PPR) relief is not available for any part of the home which is used exclusively for the purpose of a trade, business, profession or vocation. Where a person cares for an adult under a local authority placement scheme, their contract may require them to set aside one or more rooms for the exclusive use of the adult in their care.

Legislation to be introduced in the 2010 Finance Bill will remove the potential restriction on the PPR relief, for disposals on or after 9 December 2009.

Salary sacrifice — workplace canteens

Measures will be introduced from 6 April 2011 to remove the income tax exemption for meals provided in a canteen or on the employer’s premises, in cases where the provision is linked to a salary sacrifice arrangement or a flexible benefits remuneration arrangement, where the food and drink provided (or the means of obtaining it) is commensurate with the amount of income given up.

VAT and duties

Standard rate of VAT

It has been confirmed that the temporary cut in VAT will end on 1 January 2010 as planned, with the standard rate reverting from 15% to 17.5%.

The VAT flat rate scheme percentages have been recalculated accordingly, to ensure they are based on the 17.5% rate effective from 1 January 2010.

Alcohol and tobacco duty rates

As announced in the 2008 Pre-Budget Report, alcohol and tobacco duty rates will remain at current levels when the standard rate of VAT returns to 17.5% in January 2010.

Bingo duty

Bingo duty is to be reduced from 22% to 20% from Budget 2010.

Green measures

Climate change levy

The reduced rate of climate change levy for facilities in energy intensive sectors, currently 20%, will be increased to 35% from 1 April 2011.

Claimants will be required to give their energy suppliers fresh certificates confirming their new relief entitlement — for existing claimants, this will be by the completion of their first annual review after 1 April 2011.

Green Boiler Incentive Scheme

The Pre-Budget Report announces a £400 incentive to help up to 125,000 households upgrade old inefficient boilers to the latest energy efficient models (available to those who buy a new efficient boiler or renewable heat unit to replace a working G rated boiler).

Other measures

Bank payroll tax

The Chancellor announced a new tax to be levied on banks (and certain other companies) providing a bonus exceeding £25,000 to a banking employee directly or through an intermediary.

The tax will be charged at 50% of the amount by which the bonus exceeds £25,000 and will have effect from 9 December 2009 to 5 April 2010, and is payable on 31 August 2010. It is in addition to the income tax and NICs the employee will pay, at a combined rate of up to 41%.

Bank payroll tax is not taken into consideration when calculating the bank’s profits or loss for corporation tax or income tax purposes.

Detailed provisions, including anti-avoidance provisions, are available on the HMRC website.

Landline Duty

HM Treasury, HMRC, and the Department for Business, Innovation and Skills will shortly consult on the implementation of the Landline Duty.

The Landline Duty of 50p per month for each line is being introduced to help fund the roll-out of superfast broadband (Next Generation Access) to 90% of the country by 2017. The Digital Britain White Paper committed to introduce the new duty in the financial year 2010/11.

SDLT holiday to end

A stamp duty land tax (SDLT) holiday was announced on 2 September 2008 for all houses costing up to £175,000.

The holiday will end as planned on 31 December 2009 and the threshold for houses will revert to £125,000 (or £150,000 in disadvantaged areas) from 1 January 2010.

Seafarers

Legislation will be introduced in the 2010 Finance Bill to extend, from 6 April 2011, the Seafarers’ Earnings Deduction to EU and EEA resident seafarers.

Equitable liability

The current law does not allow HMRC to forgo tax that is legally due. By a concession published in Tax Bulletin 18 in August 1995, HMRC has not pursued amounts when a taxpayer can prove they would not have been due if he or she had filed a return on time. The concessionary treatment applies only where a taxpayer:

shows that the figure of tax due is excessive
shows what the correct amount should have been; and
brings his or her tax affairs up to date, including payment of tax, interest and penalties.

The concessionary treatment can usually only apply to any taxpayer on one occasion although it may cover a number of years. The current concession will continue to apply until legislation is introduced to formalise it.

Anti-avoidance measures

Offshore bank accounts — New Disclosure Opportunity

Following a recent tribunal decision, HMRC is receiving details from over 300 financial institutions in the UK regarding offshore bank accounts. Alongside this, the Government is offering the New Disclosure Opportunity (NDO), giving those with undeclared assets a final chance to come forward to pay tax, interest and a reduced penalty. The notification window for the NDO runs until 4 January 2010, with a final disclosure and full payment required by 12 March 2010.

The Chancellor has also proposed that there will be a requirement to notify HMRC when opening offshore bank accounts in certain jurisdictions, supported by a separate penalty regime.

Inheritance tax avoidance schemes

Draft legislation has been published to close two schemes designed to avoid inheritance tax charges on relevant property trusts. First, where a person transfers property into a trust in which they retain a future interest they will be charged inheritance tax if they become entitled to an actual interest under the trust. Second, where a person purchases an interest in a trust that interest will be treated as part of their estate for inheritance tax purposes.

The Government has announced it is also examining ‘wider solutions’ regarding the use of trusts to avoid inheritance tax charges.

Disclosure of Tax Avoidance Schemes

Regulations will be introduced to extend the Disclosure of Tax Avoidance Schemes (DOTAS) to require the disclosure of certain stamp duty land tax (SDLT) avoidance schemes that concern residential property with a value of at least £1 million. Users of all SDLT avoidance schemes, for both commercial and residential property, will be required to report the use of the scheme back to HMRC.

Other anti-avoidance measures

Other announcements include measures to:

counter avoidance through the artificial creation of excess capital allowances
close a loophole through which fees are ‘artificially carved out’ of a taxable insurance contract to avoid insurance premium tax
ensure that the tax exemption for the inflationary return of an index-linked gilt cannot be exploited for avoidance purposes
prevent leasing schemes that generate artificial tax losses in excess of the value of taxable income taking income out of the charge to tax
prevent companies using consortium arrangements that attempt to deliberately circumvent the sale of lessors anti-avoidance legislation
remove the exemption from stamp duty or stamp duty reserve tax where new shares are issued within the EU and subsequently transferred to a depositary receipt system or clearance service outside the EU.

What they said

“The choice facing the country is between securing recovery or wrecking it.”
Chancellor of the Exchequer, Alistair Darling

“We were promised a Pre-Budget Report and what we got was a pre-election report.”
Shadow Chancellor, George Osborne

“This is a good Budget for bingo and boilers.”
Vince Cable, Liberal Democrat treasury spokesman

“It’s clear that the NIC rises mean a brake on employment growth. While everyone understands the importance of restoring the public finances to a sustainable path, a tax on jobs is not the way to do it.”
David Frost, Director General of the British Chambers of Commerce

“The key theme of this year’s PBR is prudence postponed.”
Miles Templeman, Director General of the Institute of Directors

Two new directors!

twettone@wmcca.co.uk (Tim Wettone) — Thu, 19 Nov 2009 10:01:00 -0800

We are delighted to announce that Paul Susans and Wendy Croucher have today been appointed as additional directors of Wettone Matthews Ltd.

Paul joined the firm in 1985, bringing with him a portfolio of clients for whom he provided a range of services. Over the years, Paul's increasing influence within the firm, coupled with a steady growth of new and loyal clients, have made this a long overdue appointment as a director and now gives proper recognition of his significant contribution to the firm.

Wendy joined the firm in 2000, was admitted as a qualified member of ACCA a year later and, like Paul, has grown in her influence within the practice. Her calm and reassuring manner has gained much admiration among clients and our staff.

We look forward to their added contribution now that they have both taken on this additional responsibility.

VAT changes for 2010

twettone@wmcca.co.uk (Tim Wettone) — Thu, 12 Nov 2009 08:11:00 -0800

There are some important changes that come into effect in 2010. The changes most likely to affect you are:

The standard rate of VAT increases to 17.5% on 1 January 2010.
HMRC has announced that they are to phase out paper VAT returns. From 1 April 2010, the only businesses permitted to continue using paper returns will be those with a turnover of no more than £100,000 net of VAT. All larger or newly registered businesses will, from that date, be forced to submit electronically.
If you or your company sells goods or services to other EU member states there will be changes to how you account for VAT.

a) Currently the basic rule (now to be called the general rule) is that VAT is due where the supplier belongs. From 1 January 2010 the general rule will be that VAT is due where the customer belongs for business to business supplies. For business to consumer supplies, VAT will continue to be due where the supplier belongs.

b) EC Sales Lists for Services

If you supply services to businesses in other EU countries and the place of supply of those services is the customer?s country (with the consequence that the customer must account for a reverse charge) then with effect from 1 January 2010 you must now complete an EC Sales list for those services.

The form that is currently used for the supply of goods to other EU Member States will still be used but marking the indicator box with code 3 for services.

c) Monthly EC Sales lists for Goods

Additionally, there will be new requirements for the submission of monthly EC Sales Lists for goods by businesses where EC sales in a calendar quarter exceed £70,000 (£35,000 from 2012).

d) New deadlines for submission of EC Sales Lists

The timescale for the submission of EC Sales Lists for goods (and now services) will be reduced from 42 days to 14 days for paper forms and 21 for electronic submission. Penalties for late submission, calculated at £5, £10 or £15 per day, depending how many times you have been late, will be imposed.

Selby Gray clocks up 25 years!

twettone@wmcca.co.uk (Tim Wettone) — Thu, 01 Oct 2009 07:10:00 -0700

We are proud to record the fact that, on 1 October 2009, Selby Gray completed 25 years service for this company and its predecessors.

Selby has been a totally dedicated and loyal staff member, whose taxation knowledge and experience has made a positive effect on clients over all these years and has been of huge assistance to us all internally. We don't know what we would have done without her.

Surrounded by all her colleagues, she was presented with a crystal decanter by the company's directors, Tim Wettone and Phil Du Gay, to mark the occasion, and was also given a brand new calculator, as her old one was looking totally worn out!

Here's to the next 25 years!!

Budget 2009 report

twettone@wmcca.co.uk (Tim Wettone) — Thu, 23 Apr 2009 03:04:00 -0700

This Report, which was written immediately after the Chancellor of the Exchequer delivered his Budget Speech, is intended to provide an overview of the latest announcements and recent measures most likely to affect you or your business.

Throughout this guide we have included tips and ideas for effective tax and financial planning, but it is important to remember that this planning should be an ongoing, year-round process, not something that is left until the last minute.

We can help you to reassess your plans regularly, and adapt them as your personal and business circumstances change. With our help, you can plan for a rewarding and financially secure future.

Please note: while most taxation changes take effect from the start of the financial year, or tax year, some may not take effect until 2010, or later. Where relevant, details of these changes have been included in this Report. Throughout the Report, 'HMRC' refers to HM Revenue & Customs.

Budget Highlights
Business Tax & Investment Incentives
Capital Taxes
Duties
Income Tax & Personal Savings
Value Added Tax
Tax and Travel
National Insurance
Other Measures Announced
2009/10 Tax Calendar

Darling defiant in face of recession

Chancellor Alistair Darling has unveiled a series of measures aimed at tackling the 'unprecedented economic crisis'. As widely anticipated, growth forecasts for 2009 have been revised down, with the economy expected to shrink by 3.5%; while borrowing forecasts have risen sharply to £175 billion. However, despite the economic gloom, the Chancellor asserted that the economy will recover, forecasting growth of 1.25% next year.

Key announcements include the introduction, from April 2010, of a 50% income tax rate for those earning more than £150,000 a year.

The stamp duty land tax 'holiday' for residential properties valued at £175,000 or less will be extended to the end of 2009.

Measures for businesses include the introduction of a temporary 40% first year allowance and an extension of help for loss-making companies.

The Chancellor allocated £1 billion to tackle climate change, and announced a commitment to cut UK carbon emissions by 34% by 2020.

The introduction of a 'car scrappage' scheme was also confirmed, offering £2,000 to people who trade in cars that are over 10 years old. Meanwhile, fuel duty will rise by 2p a litre from September 2009.

Other measures include an increase in the child element of Child Tax Credit from April 2010; credits towards the basic state pension for grandparents of working age who care for their grandchildren; and a rise in the annual limit for ISAs to £10,200.

Budget Highlights

50% income tax for high earners
40% first year capital allowance
Extension of trade loss carry back rules
Extension of SDLT 'holiday'
Removal of higher rate tax relief on pension contributions

Business Tax and Investment Incentives

Corporation Tax

Corporation tax rates and bands are as follows:

Financial Year to	31 March 2010	31 March 2009
Taxable profits
First £300,000	21%	21%
Next £1,200,000	29.75%	29.75%
Over £1,500,000	28%	28%

Trading losses

Trade loss carry back will be extended to a period of three years, with losses being carried back against later years first. After carry back to the preceding year, a maximum of £50,000 of unused losses will be available for carry back to the earlier two years. This will apply to trading losses made by companies in accounting periods ending between 24 November 2008 and 23 November 2010 and to trading losses made by unincorporated businesses in tax years 2008/09 and 2009/10. The £50,000 limit applies separately to the unused losses of each 12 month period or tax year.

Capital allowances

A 40% first year allowance will be introduced for expenditure on qualifying plant and machinery that would normally be allocated to the main capital allowance pool. This will be available to businesses incurring such expenditure in the 12 month period beginning on 1 April 2009 for corporation tax and on 6 April 2009 for income tax.

Qualifying expenditure incurred on cars on or after 1 or 6 April 2009 will now be allocated to one of the two general plant and machinery pools. Cars with CO2 emissions exceeding 160 g/km will be dealt with in the special rate pool and attract writing down allowances (WDA) at 10%. Cars with CO2 emissions of 160 g/km or less will be added to the main rate pool and attract WDA at 20%. Expenditure incurred before April 2009 will continue to be subject to the old 'expensive' car rules for a transitional period of around five years. Cars that have an element of non-business use will continue to be dealt with in single asset pools to enable the private use adjustment to be made, but the rate of WDA will be determined by the car?s CO2 emissions.

Car leases

From April 2009, the rules restricting the amount of car lease rental payments that can be deducted for tax purposes will be changed to a flat rate disallowance of 15% of relevant payments. This will apply only in respect of cars with CO2 emissions exceeding 160 g/km. For leases that commenced prior to April 2009, the previous rules will continue to apply until the end of the lease.

Enterprise Investment Scheme (EIS)

The restrictions on the carry back of income tax relief to the previous tax year will be removed. This will apply to 2009/10 and subsequent years. With effect from 22 April 2009, further changes will be introduced to simplify and improve the EIS rules.

Loan relationships

Where trade debts between connected companies are released after 22 April 2009, the debtor companies will no longer be taxed on the debts released.

For accounting periods beginning on or after 1 April 2009, deductions for interest payable to certain connected foreign companies will now be available on a paid basis rather than on the accruals basis.

Foreign profits

Legislation is to be introduced to ensure that dividends and other distributions received from foreign companies on or after 1 July 2009 will largely be exempt from corporation tax. UK distributions will be exempt to the same extent. Finance expense payable by UK members of a group of companies will be subject to a cap equal to the consolidated gross finance expense of the group. This will apply to amounts payable in accounting periods beginning on or after 1 January 2010. With effect from 1 July 2009 there will be changes to the controlled foreign companies rules and the Treasury Consent rules will be replaced.

Corporate transparency

For accounting periods beginning on or after Royal Assent the senior accounting officers of large companies and large groups of companies will have reporting obligations aimed at ensuring that the accounting systems are adequate for the purposes of accurate tax reporting.

These obligations will be supported by penalties chargeable on the senior accounting officer personally and on the company.

Anti-avoidance

A number of measures will be introduced to tackle anti-avoidance. These will affect:

Intra-group convertible finance
Derecognition of income from derivative contracts
Plant and machinery leasing
Foreign exchange matching
?Disguised interest?
Exploitation of qualifying loan interest relief
Real Estate Investment Trust (REIT) regime
Double tax relief where foreign tax is repaid
Receipts derived from a right to receive income.

Capital taxes

Capital Gains Tax (CGT)

The annual exempt amount is increased to £10,100 for individuals (£5,050 for most trustees) for 2009/10.

The rate of CGT remains 18% with entrepreneurs? relief potentially reducing the effective rate of tax on qualifying gains to 10%.

Offshore funds

The Chancellor announced that an interest in a transparent offshore fund will be an asset for the purpose of calculating CGT on chargeable gains (as is already the case for shares in a company or units in a unit trust). Investors will no longer be required to consider disposals of the underlying assets for calculating CGT on chargeable gains.

The Government will discuss with industry how to make similar changes to the tax treatment of chargeable gains for investors subject to corporation tax.

There will be no effect on interests in tax transparent foreign partnerships which will continue to be treated as transparent for both income and gains in the same way as UK partnerships.

Inheritance tax (IHT)

The IHT allowance (nil-rate band) is increased to £325,000 for 2009/10. The transferability of the allowance gives an effective joint tax-free maximum of £650,000 for married couples and civil partnerships.

The rate of IHT remains 20% for chargeable lifetime transfers and 40% for death estates (including transfers within seven years before death brought back into the estate for the purpose of calculating the tax due at death).

Agricultural property relief (APR) and woodlands relief (WR)

Legislation will be introduced in Finance Bill 2009 to extend IHT APR and WR to property in the European Economic Area. Property qualifying for this extended IHT relief will also qualify for CGT hold over relief.

The extension of APR and WR against IHT and CGT hold over relief will have effect on and after 22 April 2009 as well as for certain earlier events.

Duties

Stamp duty land tax (SDLT): temporary increase in thresholds

Last year the Government raised the threshold at which SDLT becomes payable from transactions in excess of £125,000 to those in excess of £175,000 in a bid to revive the UK?s ailing housing market.

This provides an exemption from SDLT for land transactions consisting entirely of residential property where the chargeable consideration is not more than £175,000.

The so-called SDLT 'holiday' applies to transactions with an effective date on or after 3 September 2008 and before 3 September 2009.

This latest measure means that the increased threshold of £175,000 for residential property will continue to apply beyond 3 September 2009 and will now end on 31 December 2009.

Following the reforms, SDLT is currently charged at 1% on properties sold for between £175,001 and £250,000, with the tax rising to 3% above this level. Homes worth more than £500,000 attract tax at a rate of 4%.

Alcohol and tobacco products duty

All duty rates for alcohol will rise by 2% from their current levels. The impact of the changes on retail prices from 23 April 2009 for typical alcoholic drinks is equivalent to:

13p on a 70cl bottle of spirits
1p on a pint of beer
1p on a litre of still cider
4p on a 75cl bottle of sparkling cider
4p on a 75cl bottle of wine/made wine
5p on a 75cl bottle of sparkling wine.

The duty rates for tobacco products are increased by 2%.

Income Tax and Personal Savings

Income Tax rates		2009/10	2008/09
Starting rate band limit*		£2,440	£2,320
Tax Rate*		10%	10%
Basic rate band		£37,400	£34,800
Basic rate		20%	20%
Savings rate		20%	20%
Dividend ordinary rate		10%	10%
Higher rate - income over		£37,400	£34,800
Tax rate excluding dividends		40%	40%
Dividend upper rate		32.5%	32.5%
* Where taxable non-savings income does not fully occupy the starting rate limit, the remainder of the limit is available for savings income at the 10% starting rate.
Personal allowances (ages are as at the end of the tax year)
Allowances that reduce taxable income		2009/10	2008/09
Personal allowance (PA)	under 65	£6,475	£6,035
	65 to 74*	£9,490	£9,030
	75 and over*	£9,640	£9,180
	minimum	£6,475	£6,035
Allowances that reduce tax
Married couple's allowance (MCA)
Age of elder partner	74*	n/a	£653.50
	75 and over*	£696.50	£662.50
	minimum	£267	£254.00
*Higher allowances for those aged 65 or more are scaled back when income exceeds £22,900 (2008/09 £21,800). MCA is only available where at least one partner was born before 6 April 1935.

Starting rate example

In 2009/10, Mr Morris has earnings from employment of £7,000 and savings income of £4,000. His personal allowance is £6,475 which is completely used against his earnings, leaving £525 taxable at 20%. The rest of the starting rate limit for savings (£2,440 - £525) can be used to tax £1,915 of his savings income at 10%. The balance of his savings income of £2,085 (£4,000 - £1,915) remains taxable at 20%.

Mr Morris? employer has deducted £105 through PAYE and his bank will have taken tax off all of his interest at 20%, so he can claim a repayment of tax of £191.50 (£1,915 at 10%) from HMRC.

Individual Savings Accounts (ISAs)

The ISA limit will be raised to £10,200, up to £5,100 of which can be saved in cash. The new limits will apply from 6 October 2009 for people aged 50 and over in 2009/10 and for all ISA investors from 2010/11 onwards.

Child Trust Fund

Starting in April 2010, for children in receipt of Disability Living Allowance at any point in 2009/10, the Government will contribute £100 every year to the Child Trust Fund accounts of all disabled children born on or after 1 September 2002, with severely disabled children receiving £200 per year.

Income shifting

The introduction of controversial legislation designed to prevent 'income shifting' will not take place in April 2009 as previously announced. The Government maintains its stance that it 'firmly believes it is unfair' to allow a minority of individuals to benefit financially from shifting part of their income to someone else who is subject to a lower rate of tax. However, in the light of the current economic climate the Government has deferred action and is instead keeping the issue under review.

Taxation of overseas dividends

Since 6 April 2008, individuals with shareholdings of less than 10% in non-UK resident companies have been entitled to a non-payable tax credit. From 22 April 2009, individuals with shareholdings of 10% or more in receipt of dividends from non-UK resident companies will become entitled to a non-payable tax credit, subject to certain conditions.

The non-payable dividend tax credit for offshore funds which are largely invested in equities will be restored from 22 April 2009. The new rules will also provide that where the offshore fund is substantially invested in interest bearing assets, individuals receiving distributions will be treated for tax purposes as having received interest and not a dividend or other type of distribution.

Pension savings

The Chancellor announced that tax relief on pension savings will be restricted to the basic rate from 6 April 2011 for those with taxable income of £150,000 or more.

Anti-forestalling measures have been announced. They will prevent those potentially affected from seeking to forestall this change by increasing their pension savings in excess of their normal regular pattern prior to the restriction taking effect. Those measures will not affect:

those with income of less than £150,000 for the 2011/12 tax year and for both of the preceding two tax years, and
those with income in any of the relevant tax years of £150,000 or more who continue with their existing pattern of regular savings and who do not make any additional pension savings.

Those who do increase their pension savings will be affected only if their total pension savings in the year exceed £20,000. The change will not affect any normal, regular ongoing pension savings that were in place before 22 April 2009, whatever their value.

Personal allowances for non-resident individuals

Certain non-residents are entitled to claim UK personal allowances by virtue of being Commonwealth citizens. Following advice that this particular condition is not compliant with the Human Rights Act, the entitlement of such non-residents will be withdrawn with effect from 6 April 2010.

Entitlement will continue for those qualifying as, for example, EEA nationals, Crown servants and residents of the Channel Islands and Isle of Man.

Employer-provided (rented) living accommodation

An employee has typically been charged to tax on the amount of rent the employer pays for the accommodation. Avoidance through payment of substantial premiums and small rents will be stopped for leases entered into or extended from 22 April 2009 by treating a premium paid for a lease of 10 years or less as rent paid.

2010/11 onwards

The Chancellor announced a new higher income tax rate of 50% to apply from 6 April 2010 for taxable income over £150,000. Also announced were consequent changes to the rate of income tax on dividends, with a top rate of 42.5% and the rates of tax on trusts with a 42.5% rate on dividends and a 50% rate for other trust income.

From 2010/11 the basic personal allowance for income tax will be gradually reduced to nil for individuals with 'adjusted net incomes' above £100,000.

Value Added Tax

From	1 Dec 2008	1 Jan 2010
Standard rate	15%	17.5%
VAT fraction	3/23	7/47
Reduced Rate	5%	5%
Taxable Turnover Limits from 1 May 2009
Registration - last 12 months or next 30 days over	£68,000
Deregistration - next 12 months under	£66,000
Annual accounting scheme	£1,350,000
Cash accounting scheme	£1,350,000
Optional flat-rate scheme	£150,000

VAT: Change of standard rate

The standard rate of VAT will return to 17.5% from 1 January 2010. Targeted legislation will counter schemes that purport to apply the 15% VAT rate to goods or services to be supplied on or after the date that the rate returns to 17.5%.

Cross-border VAT: Changes to EC sales lists

This measure introduces a requirement for UK businesses that supply services where the place of supply is the customer?s country to complete EC Sales Lists (ESLs) for each calendar quarter. The changes will have effect on and after 1 January 2010.

Cross-border VAT: Changes to place of supply of services rules

Changes were announced to the place of supply of services rules. The place of supply rules determine the country where a supply of services is made and where any VAT is payable. They also determine whether, if VAT is due on a supply, it should be accounted for by the supplier of a service or their business customer.

The new rules aim to ensure that, as far as possible, VAT is due in the country in which the service is consumed (e.g. where the customer is established) rather than where the supplier is established. The result for UK business customers is that they will be liable to account for UK VAT on most services provided by their overseas supplier under the reverse charge provisions, rather than the supplier charging VAT. This forms part of a package of changes designed to modernise the VAT system for cross-border trading, and to counter fraud. The changes will come into effect from 1 January 2010 across the EU.

Tax and Travel

Car and fuel benefits

The taxable petrol and diesel car benefit is based on the car's CO2 emissions. It is calculated using the car's UK list price and applying the 'appropriate percentage' as shown in the table below. The first line of figures in the table relates to qualifying low emissions cars (QUALECs).

The car fuel benefit is calculated by applying the same percentages to the fuel multiplier, which for 2009/10 remains at £16,900.

The percentages are reduced for cars (except QUALECs) that can be driven on alternative fuels by:

2% for cars manufactured to be capable of being run on E85 fuel
2% for bi-fuel cars or those which run on LPG only
3% for hybrid electric and petrol cars
6% for electric only cars (in practice the taxable benefit will be 9% of the price).

CO₂ emissions (g/km)	Appropriate percentage		Quarterly VAT
	Petrol %	Diesel %	Fuel scale charge £	VAT on charge
			Fuel scale charge £	£ (15%)	£ (17.5%)
120 and below	10	13	126	16.43	18.76
121 - 139	15	18	189	24.65	28.14
140 - 144	16	19	201	26.21	29.93
145 - 149	17	20	214	27.91	31.87
150 - 154	18	21	226	29.47	33.65
155 - 159	19	22	239	31.17	35.59
160 - 164	20	23	251	32.73	37.38
165 - 169	21	24	264	34.43	39.31
170 - 174	22	25	276	36.00	41.10
175 - 179	23	26	289	37.69	43.04
180 - 184	24	27	302	39.39	44.97
185 - 189	25	28	314	40.95	46.76
190 - 194	26	29	327	42.65	48.70
195 - 199	27	30	339	44.21	50.48
200 - 204	28	31	352	45.91	52.42
205 - 209	29	32	365	47.60	54.36
210 - 214	30	33	378	49.30	56.29
215 - 219	31	34	390	50.86	58.08
220 - 224	32	35	403	52.56	60.02
225 - 229	33	35	416	54.26	61.95
230 - 234	34	35	428	55.82	63.74
235 and above	35	35	441	57.52	65.68

Changes from April 2011

The Chancellor announced changes which will take effect from 6 April 2011:

the lower emissions figure will be reduced
the £80,000 price cap will be abolished
the reductions for cars using various alternative fuels will be abolished.

VAT on fuel for private use in cars

Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT on a scale charge.

The table above shows the VAT chargeable for quarters commencing on or after 1 May 2009. The last two columns take account of the change of the standard rate of VAT from 15% to 17.5% with effect from 1 January 2010.

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The rates at the time of the Budget are as follows:

Vehicle	First 10,000 miles	Thereafter
Car / Van	40p	25p
Motorcycle	24p	24p
Bicycle	20p	20p

Car - fuel only advisory rates
Engine Capacity	Petrol	Diesel	LPG
Up to 1400cc	10p	11p	7p
1401 - 2000cc	12p	11p	9p
Over 2000cc	17p	14p	12p

The fuel only advisory rates relate to company cars only. They can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys.

HMRC will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.

Car costs ? Vehicle Excise Duty (VED) rates

Vehicle Excise Duty ('Car Tax') rates also reflect emissions, with lower scale rates for cars using alternative fuels. The number of VED bands has been increased from seven to 13. The following table shows the rates which will apply for cars registered on or after 1 March 2001:

VED Band	CO₂ emissions (g/km)	From 1 May 2009		From 1 April 2010
VED Band	CO₂ emissions (g/km)	Petrol & Diesel	Alternative fuel cars	Petrol & Diesel	Alternative fuel cars
A	Up to 100	£0	£0	£0	£0
B	101 ? 110	£35	£15	£20	£10
C	111 ? 120	£35	£15	£30	£20
D	121 ? 130	£120	£100	£90	£80
E	131 ? 140	£120	£100	£110	£100
F	141 ? 150	£125	£105	£125	£115
G	151 ? 165	£150	£130	£155	£145
H	166 ? 175	£175	£155	£180	£170
I	176 ? 185	£175	£155	£200	£190
J	186 ? 200	£215	£200	£235	£225
K*	201 ? 225	£215	£200	£245	£235
L	226 ? 255	£405	£390	£425	£415
M	Over 255	£405	£390	£435	£425
* includes cars emitting over 225g/km registered between 1 March 2001 and 23 March 2006

Company vans

The taxable benefit for the unrestricted private use of vans is £3,000. There is a further £500 taxable benefit if the employer provides fuel for private travel.

Van and fuel charge	Van	Fuel	Total
Tax (20% taxpayer)	£600	£100	£700
Tax (40% taxpayer)	£1,200	£200	£1,400
Employer?s Class 1A NICs	£384	£64	£448

National Insurance

2009/10 National Insurance Contributions (NICs)
		Employer	Employee
Payable on weekly earnings of
£95 (lower earnings limit) to £110		0%	0%
£110.01 - £770 (upper accruals point)		12.8%	11%
£770.01 - £844 (upper earnings limit)		12.8%	11%
Over £844		12.8%	1%
Over state retirement age, the employee contribution is Nil
Class 1A	On relevant benefits	12.8%	Nil
Class 2	Self employed	£2.40 per week
Class 2	Limit of net earnings for exception	£5,075 per annum
Class 3	Voluntary	£12.05 per week
Class 4*	Self employed on profits
	£5,715 - £43,875	8%
	Excess over £43,875	1%
*Exemption applies if state retirement age was reached by 6 April 2009

Tax and NICs ? What lies ahead?

The Government has already made announcements about increases in tax and NICs over the next few years. However, the personal tax changes have now been replaced and the updated summary is as follows:

From April 2009, the upper earnings limit for Class 1 and Class 4 NIC has been increased substantially in order to align it with the level at which people generally start to pay higher rate income tax (£844 per week). The new upper accrual point (£770 per week) for Class 1 NICs sets a cap on the level above which there will be no additional pension benefits (there are none for Class 4 NICs in any case).
From April 2010, those with adjusted net incomes above £100,000 will have their basic personal allowances scaled back to a minimum of Nil. New tax rates will apply to incomes over £150,000 ? 50% for savings and non-savings income; 42.5% for dividend income. The small companies? rate of corporation tax will increase to 22%.
From April 2011, there will be a general increase of 0.5% to the main NIC rates. At the same time, the NIC threshold will be brought back into line with the basic personal allowance.

Other measures announced

Penalties for incorrect returns and failure to notify a taxable activity

For return periods ending on or after 1 April 2009, where the filing date is after 1 April 2010, the new penalty regime for incorrect returns introduced in 2007 for income tax, CGT, VAT, PAYE and NICs has been extended across all other taxes and duties. From 1 April 2009, the penalty regime for failure to notify HMRC of a new charge is aligned across all taxes and duties.

The new provisions for incorrect returns provide for penalties in line with Schedule 24 to FA 2007, which are based on the amount of tax understated, the nature of the behaviour and the extent of disclosure by the taxpayer. There is no penalty where a taxpayer makes a mistake, having taken reasonable care, but there is a penalty of up to:

30% for failure to take reasonable care
70% for a deliberate understatement
100% for a deliberate understatement with concealment.

Each penalty is substantially reduced where the taxpayer makes a disclosure (takes active steps to put right the problem), more so if this is unprompted.

Vehicle scrappage scheme

A vehicle scrappage scheme designed to boost the car industry will be introduced from May 2009. A discount of £2,000 will be offered to consumers buying a new vehicle to replace a vehicle more than ten years old, which they have owned for more than 12 months. The Government will set aside £300 million, with funding matched by participating manufacturers. The scheme will end by the start of March 2010, or when funding for the scheme has been used if earlier.

?Name and shame? legislation for tax defaulters

Legislation will be introduced in Finance Bill 2009 enabling HMRC to 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. Details will be published quarterly within one year of the penalty becoming final and then removed from publication one year later.

Names will not be published of those who make a full unprompted disclosure or a full prompted disclosure within a time limit (currently unspecified).

There is an appeal right to an independent tribunal against all elements of the penalty which would determine whether names would be published and taxpayers will be informed prior to publication and be able to make representations to HMRC. Details will not be published until all appeal avenues against the additional tax and penalties are exhausted or expired.

Reclaiming tax overpayments

Finance Bill 2009 will introduce a means of reclaiming overpayments of income tax, CGT and corporation tax where there is no other statutory route. It will replace any non-statutory claims. The legislation also amends the error or mistake relief rules to provide additional taxpayer safeguards.

The measure will have effect for claims made on or after 1 April 2010. The time limits for claiming repayments are currently from five years and ten months to six years from the end of the period for which the return was made. From 1 April 2010 they must be claimed within four years.

Penalties and interest regime harmonisation

Legislation will be introduced to create a harmonised interest regime and aligned penalties regimes for late filing, across the taxes and duties administered by HMRC, starting with interest and penalties on late paid PAYE from April 2010.

NIC credits for families

From April 2011, grandparents and other family members will be able to gain NIC credits toward their basic state pension for caring for their grandchildren or members of their family aged 12 or younger, for 20 hours a week or more.

Remittance basis

A number of changes were announced to the rules applying to the remittance basis. In some cases they will be backdated to 6 April 2008 (the date from which the new regime applies), others will have effect from 22 April 2009. The changes include:

removal of the obligation for individuals employed in the UK, who in the same year receive income from an overseas employment, to file a return so long as their overseas employment income is less than £10,000 and their overseas bank interest is less than £100 in any tax year, and it is all subject to a foreign tax
an extension of the exemption allowing an individual using the remittance basis to bring into the UK property which was purchased from relevant foreign income, to property purchased out of foreign employment income and foreign chargeable gains
confirmation that the £30,000 remittance basis charge will count as UK tax for the purposes of Gift Aid.

National Minimum Wage decision delayed

New National Minimum Wage (NMW) rates are traditionally implemented on 1 October, following the recommendations of the Low Pay Commission (LPC).

Since its establishment in 1998, the LPC has been charged with independently advising the Government on the NMW. However, as the UK grapples with the effects of the recession, the LPC has requested more time to compile its suggestions for 2009/10.

The Commission will now report to the Prime Minister and Secretary of State for Business by 1 May 2009, although the delay is not expected to affect the enforcement date of 1 October for any new rates.

The decision has been postponed from February to May 2009 to allow the LPC to amass an additional two months' worth of economic data, including the Bank of England's inflation report, employee job figures for December, GDP figures for the fourth quarter of 2008, and updates on average earnings.

The current NMW for those over 21 is £5.73 per hour. For those aged 18 to 21 the rate is £4.77 per hour, while 16 and 17 year olds must be paid a minimum of £3.53 an hour.

2009/10 Tax Calendar

April 2009
5	Last day of 2008/09 tax year. Deadline for 2008/09 ISAs. Last day to make disposals using the 2008/09 CGT exemption. Last date for contracting back into the State Second Pension for 2008/09.
14	Due date for income tax for the CT61 period to 31 March 2009.
19/22	Quarter 4 2008/09 PAYE remittance due.
20	Interest will begin to accrue on unpaid PAYE/NI for 2008/09.
30	Normal annual adjustment for VAT partial exemption calculations (monthly returns).
May 2009
3	Quarterly submission date of P46 (Car) (for employees whose car and/or fuel benefit has changed in quarter to 5 April).
19	Last day for filing forms P14, P35, P38, and P38A - 2008/09 PAYE returns - without incurring penalties.
31	Last day to issue 2008/09 P60s to employees
June 2009
30	End of CT61 quarterly period. Last day for UK businesses to reclaim EC VAT chargeable in 2008. Annual adjustment for VAT partial exemption calculations (March VAT year end).
July 2009
6	Deadline for submission of Form 42 (transactions in shares and securities). Deadline for submission of EMI40 (EMI Annual Return). File Taxed Award Scheme Returns, file P11Ds, P11D(b)s and P9Ds. Issue copies of P11Ds or P9Ds to employees.
14	Due date for income tax for the CT61 period to 30 June 2009.
19/22	Quarter 1 2009/10 PAYE remittance due. Final date for payment of 2008/09 Class 1A NICs.
31	Second self assessment payment on account for 2008/09. Annual adjustment for VAT partial exemption calculations (April VAT year end). Liability to 2nd £100 penalty arises for 2008 Tax Return still not filed. 5% surcharge on any tax unpaid for 2007/08. Deadline for tax credit Annual Declaration (if estimated, final figures required by 31 January 2010).
August 2009
2	Last day for notifying car changes in quarter to 5 July - P46 (Car).
31	Annual adjustment for VAT partial exemption calculations (May VAT year end).
September 2009
30	End of CT61 quarterly period.
October 2009
1	Due date for payment of Corporation Tax for period ended 31 December 2008.
5	Individuals/trustees must notify HMRC of new sources of income/chargeability in 2008/09 if a Tax Return has not been received.
14	Due date for income tax for the CT61 quarter to 30 September 2009.
19/22	Quarter 2 2009/10 PAYE remittance due
31	Last day to file 2009 paper Tax Return.
November 2009
1	Please ensure you are retaining your documents for the 2010 Tax Return.
2	Quarterly submission date of P46 (Car) for quarter to 5 October.
December 2009
30	Last day to file your 2009 Tax Return electronically if you wish to have a 2008/09 balancing payment of less than £2,000 collected through your 2010/11 PAYE code.
31	Last day for non-EC traders to reclaim recoverable UK VAT suffered in the year to 30 June 2009. End of relevant year for taxable distance supplies to UK for VAT registration purposes. End of relevant year for cross-border acquisitions of taxable goods in the UK for VAT registration purposes. End of CT61 quarterly period. Filing date for Corporation Tax Return Form CT600 for period ended 31 December 2008.
January 2010
1	Due date for payment of Corporation Tax for period ended 31 March 2009. Standard rate VAT reverts to 17.5%.
14	Due date for income tax for the CT61 quarter to 31 December 2009.
19/22	Quarter 3 2009/10 PAYE remittance due.
31	First self assessment payment on account for 2009/10. Capital gains tax payment for 2008/09. Balancing payment - 2008/09 income tax/class 4 NICs. Last day to renew 2009/10 tax credits. Deadline for amending 2007/08 Tax Return. Last day to file the 2009 Tax Return.
February 2010
1	£100 penalty if 2009 Tax Return not yet filed. Additional penalties may apply for further delay. Interest starts to accrue on 2008/09 tax not yet paid.
2	Quarterly submission date of P46 (Car) for quarter to 5 January.
14	Last date (for practical purposes) to request NIC deferment for 2009/10.
28	Last day to pay any balance of 2008/09 tax and Class 4 NIC to avoid an automatic 5% surcharge
March 2010
31	End of Corporation Tax financial year. End of CT61 quarterly period. Filing date for Corporation Tax Return Form CT600 for period ended 31 March 2009.

Do you like extra time and penalties? Companies now have less time and more penalties!

twettone@wmcca.co.uk (Tim Wettone) — Fri, 20 Mar 2009 10:12:00 -0700

Many of us enjoy the added excitement of extra time and penalties when watching a game of football.

There will now be added excitement for company directors, because the time allowed to file accounts at Companies House is being reduced from 10 months to 9 months for private companies. This will apply, broadly, to accounting periods ending 30 April 2009 onwards.

In addition, late filing penalties have been increased as from 1 February 2009 to a minimum of £150, rising to £375 between 1 and 3 months late, £750 between 3 and 6 months late, and £1,500 after 6 months. If this is the second offence, the penalties will double.

It is therefore essential that we receive records from clients in a timely manner to ensure that these new deadlines are adhered to.

Sadly, we suspect this will reduce the time allowed for watching games of football etc.

Pre-Budget Report 2008

twettone@wmcca.co.uk (Tim Wettone) — Tue, 25 Nov 2008 04:11:00 -0800

Set against a backdrop of global economic uncertainty, Chancellor Alistair Darling has announced a raft of measures in this year's much-anticipated Pre-Budget Report, aimed at stimulating the economy and boosting consumer confidence.

Emphasising the wider global recession, and highlighting the crisis in the banking system as the cause of economic slowdown in the UK, the Chancellor announced that borrowing will increase to £78bn this year, and revised his economic growth forecast from 2.5% to 0.75% for 2008.

The Chancellor unveiled a £20bn package, effective until April 2010, supposedly designed to help individuals and businesses to weather the storm. This includes some significant tax measures, with a cut in VAT from 17.5% to 15% for a period of 13 months, from 1 December.

The temporary increase in the basic personal tax allowance, worth £120 a year, has also been made permanent, and the tax reduction will rise to £145 in 2009/10. However, from 2011 those earning in excess of £150,000 a year will be subject to an income tax rate of 45%, and national insurance contributions will also rise by 0.5% from 2011.

The Chancellor announced help for businesses, in the form of a deferral of the 1p increase in corporation tax for small firms, and new measures allowing businesses to spread the payment of all taxes to HM Revenue & Customs. A temporary small business finance scheme worth £1bn will also be made available, and there will be an increase in the empty property relief threshold, as well as tax breaks for foreign dividends for medium and large firms.

Other measures announced include: additional support for mortgage holders; early increases in child benefit and the state pension; and a new state supported savings scheme. Meanwhile, duty on fuel, alcohol and tobacco will be increased to offset the reduction in VAT, and new rates of vehicle excise duty will be phased in over time.

Do please contact us for specific advice about how these announcements might affect you or your business.

Value Added Tax
- Changes to the standard rate of VAT
- Flat Rate Scheme entry rules
Measures for business
- Corporation tax: Small Companies’ Rate (SCR)
- Extension of trading loss carry back
- Finance for SMEs
- Empty Property Rate Relief
- Interest-free payment schedule for backdated business rates bills
- Income shifting
- Taxation of foreign profits
- New Business Payment Support Service
Personal measures
- Income tax
- National Insurance Contributions
- Pension savings
- Child benefit
- Child tax credit
- State Pension
- Saving Gateway scheme
- Mortgages
Green measures
- Fuel duty
- Vehicle Excise Duty
- Air Passenger Duty
What they said

This guide is for general information only. No responsibility is taken for any action taken or refrained from in consequence of its contents. Always seek professional advice before acting.

Value Added Tax (VAT)

Changes to the standard rate of VAT

In a move that will affect all businesses registered for VAT, the standard rate of VAT has been cut from 17.5% to 15%, effective from Monday 1 December 2008. The rate will remain at 15% until 1 January 2010 when it will revert to 17.5%.

Zero-rated supplies, such as basic foodstuffs, children’s clothing and books; exempt supplies, such as education and health; and supplies subject to VAT at 5%, such as domestic fuel and power are not affected by this change.

Anti-forestalling legislation will be introduced in the 2009 Finance Bill to ensure that businesses are not able to use artificial arrangements to reduce the VAT rate on goods or services to be provided after the VAT rate reverts to 17.5% where there is no current economic activity. Genuine commercial transactions should not be affected.

The measure includes two consequential changes. Firstly, it amends the percentages used in the flat rate scheme for small businesses to reflect the reduction in the standard rate of VAT.

Secondly, it introduces a change to the timing of credit notes issued following a change of rate.

Operative date

The 15% rate will have effect for:

supplies of goods and services made on or after 1 December 2008;
imports on or after 1 December 2008; and
acquisitions of goods from other Member States on or after 1 December 2008.

The anti-forestalling legislation will have effect for arrangements entered into on or after 25 November 2008.

The consequential changes to the flat rate scheme percentages and the timing of credit notes will have effect on and after 1 December 2008.

Credit notes for payments received and VAT invoices issued in advance of 1 December 2008

Where payment has been received or a VAT invoice issued before 1 December 2008, VAT will have been charged at 17.5%. But where that payment or invoice relates to goods or services that are provided after 1 December 2008, the VAT rules allow the supplier to apply the new VAT rate, 15%, to the earlier payment or invoice.

Suppliers who choose this option are required to issue a credit note to their customer, if they have issued a VAT invoice, to evidence the credit for the reduction in VAT that is now due. The VAT Regulations specify that such a credit note must be provided to the recipient of the supply within 14 days after the change of rate. This time limit will be extended to 45 days.

Further information

Detailed information is provided in two supplementary documents:

These can be seen on the HMRC website at www.hmrc.gov.uk

Flat Rate Scheme entry rules

With effect from 1 April 2009, the test that requires a business to check that its total income is less than £187,500 for entry into the VAT Flat Rate Scheme will be removed. Instead, eligibility to join the scheme will be determined solely by the taxable turnover of the business, which must be less than £150,000.

Measures for business

A wide range of tax and other measures affecting businesses were announced by the Chancellor, with the stated aim of assisting businesses in the difficult economic climate.

Corporation tax: Small companies’ rate (SCR)

The Government had planned to increase the small companies’ rate (SCR) of corporation tax from 21% to 22% from 1 April 2009. However, this has now been deferred until 1 April 2010.

Legislation will now be introduced in the 2009 Finance Bill to maintain the SCR for all profits, apart from ring fence profits, at 21% from 1 April 2009 and effectively maintain the marginal rate (used to ‘smooth’ the difference between the main rate of corporation tax and the SCR) at 29.75%. Profits limits will remain the same.

Extension of trading loss carry back

The period for which current trading losses from businesses can be carried back against previous profits is to be extended from the current one year entitlement, to a period of three years, with losses being carried back against later years first.

The amount of losses that can be carried back to the preceding year is unlimited. After carry back to the preceding year, a maximum of £50,000 of the balance of unused losses is then available for carry back to the earlier two years.

This is a temporary measure for one year only. A company may make a loss relief claim under the new rules when it makes its return for an accounting period ending in the period 24 November 2008 to 23 November 2009.

Unincorporated businesses may make a loss claim under the new rules as soon as they have calculated their losses for their basis period for the 2008/09 tax year.

HMRC will make repayments arising from loss relief claims received under the new rules on or after Budget Day 2009.

Finance for SMEs

The Chancellor announced various measures designed to help SMEs with working capital and investment needs.

Early in 2009, the Government will launch a Small Business Finance Scheme - a new temporary guarantee scheme to enable up to £1 billion of new Government supported lending by banks.

The Export Credits Guarantee Department, in conjunction with the banks, will introduce a temporary guarantee scheme to support a £1 billion facility providing smaller exporters with better access to short-term working capital. The Government will also make available a capital fund of £50 million to convert SMEs’ debt into equity.

Earlier in November 2008, Advantage West Midlands, a Regional Development Agency (RDA), launched a transition fund for viable SMEs facing financial difficulties. Other RDAs will launch similar loan funds, now totalling £25 million, to help businesses over the next six months.

The Government has said that it ‘welcomes the commitment’ of UK lenders to approach the European Investment Bank (EIB) to access these funds. Following negotiations between UK banks and the EIB, £1 billion of EIB funds will be available to SMEs in the UK by the end of 2008.

Early in 2009, the Government will launch, in conjunction with Business Link, a new portal to direct credit-worthy SMEs who are experiencing problems accessing credit to the appropriate scheme.

Empty Property Rate Relief

The Government is temporarily increasing the threshold at which an empty property becomes liable for business rates. For the financial year 2009/10, empty properties with a rateable value of less than £15,000 will be exempt from business rates - exempting an estimated 70% of empty properties.

Interest-free payment schedule for backdated business rates bills

To reduce the cash flow impact on businesses, given current economic difficulties, the Government will legislate to give more time to pay certain backdated business rates bills issued before 31 March 2010. Businesses facing such bills will be able to pay their liability for previous years in equal interest-free instalments over 8 years, rather than immediately. Beneficiaries will include several occupiers of ports who have been affected by recent rating reviews.

Income shifting

The controversial proposed legislation designed to prevent ‘income shifting’ will not now be introduced in April 2009.

However, the Government has restated that it ‘firmly believes it is unfair’ to allow a minority of individuals to benefit financially from shifting part of their income to someone else who is subject to a lower rate of tax.

Taxation of foreign profits

The Government will bring forward a package of reforms to the taxation of foreign profits, with the object of making the UK a ‘more attractive location’ for multinational business. Measures will include an exemption from tax for most foreign dividends received by large and medium sized groups, regardless of the level of shareholding. The Government will also continue to examine options for reform of the Controlled Foreign Company (CFC) rules. Any reform will aim to improve the way the CFC rules achieve their objective of taxing profits diverted from the UK.

New Business Payment Support Service

HMRC has introduced a new Business Payment Support Service, which is designed to assist those businesses whose cash flow has been adversely affected by the economic downturn.

The service allows business owners who are concerned about making their tax, national insurance and other payments, to contact HMRC to discuss a range of payment options tailored to their business needs.

The scheme includes a Business Payment Support Line for new enquiries, which is available on 0845 302 1435, and is open from 8am to 8pm Monday to Friday, and 8am to 4pm at weekends.

Personal measures

Income tax

Following the compensation arrangements arising from the abolition of the 10% rate band, the Government will make permanent the £600 increase in the personal allowance with a further increase of £130 above indexation, meaning basic rate taxpayers pay £145 less a year in tax in 2009/10.

The basic rate limit for 2009/10 will be increased by £800 above indexation. The Chancellor announced the tax thresholds and personal allowances for 2009/10 as follows:

Income Tax	2008/09	2009/10
Starting rate band *	£2,320	£2,440
Tax rate	10%	10%
Basic rate band	£34,800	£37,400
Tax rate	20%	20%
Basic rate for dividend income	10%	10%
Higher rate - income over	£34,800	£37,400
Tax rate	40%	40%
Higher rate for dividend income	32.5%	32.5%

* 10% rate for savings income up to the starting rate limit within the basic rate band. Where taxable non-savings income does not fully occupy the starting rate band the remainder of the starting rate band is available for savings income.

Personal allowances
(age at the end of the tax year)
Under 65	£6,035	£6,475
65 - 74	£9,030	£9,490
75 and over	£9,180	£9,640
Higher allowances scaled back if income exceeds	£21,800	£22,900

From 2010/11, those with gross income in excess of £100,000 will lose some or all of their personal allowances. The basic allowance will be scaled back in two stages:

where gross income is between £100,000 and £140,000, to a minimum of 50%, and
where gross income exceeds £140,000, to a minimum of £0.

The scaling will be achieved by reducing the allowance by £1 for every £2 by which gross income exceeds the £100,000 and £140,000 thresholds.

Also announced for 2011/12 are new higher rates of tax:

for those with higher incomes, a tax rate of 45% will apply to savings and non-savings income over £150,000
a new 37.5% rate of tax will apply to taxable dividend income above £150,000
the rate of tax for trusts will be increased to 45%, with trust dividend income liable at 37.5%.

National Insurance Contributions

For 2009/10 the Upper Earnings Limit (UEL) for primary Class 1 National Insurance Contributions (NICs) will be aligned with the level at which people start to pay higher rate income tax. The UEL will therefore be £43,875 (2008/09 £40,040). This is equivalent to £844 per week (2008/09 £770).

The Class 1 and Class 4 rates of contribution remain unchanged until April 2011.

Class 2 NICs increase by 10p to £2.40 per week and Class 3 voluntary contributions go up by £3.95 to £12.05 per week. The Government is to reduce the burden on the self-employed by aligning the payment dates of Class 2 NICs with those for Self Assessment liabilities. This will reduce the number of bills issued. There will also be improved information to contributors.

For 2011/12, and thereafter, the Chancellor announced an increase of 0.5% to the main NIC rates:

the Class 1 primary (employee) rate increases to 11.5% on earnings between the primary and upper thresholds and to 1.5% thereafter
the Class 1 secondary (employer) rate increases to 13.3% on earnings over the primary threshold
Class 1A and Class 1B NICs will also increase to 13.3%
Class 4 NICs will increase to 8.5% (1.5% above the upper limit).

Pension savings

The limits on annual and lifetime investment have risen each year since 2006/07 and will continue to do so until 2010/11. The Chancellor announced that the limits will stay the same for the following five years - at £255,000 and £1.8 million.

Child benefit

The Chancellor announced that the increase in child benefit rates due in April 2009 will be brought forward to 5 January 2009.

The weekly rate for the first child will increase to £20, with the rate for other children increasing to £13.20 per week.

Child tax credit

Bringing forward promised increases in CTC, the Chancellor announced that the child element will increase to £2,235 from April 2009, while the disabled child element will increase at the same time to £2,670.

State Pension

The Chancellor announced that although the full State Pension will not rise to £95.25 per week until April 2009, it will make a payment of £60 to pensioners “in the new year”, equivalent to bringing forward the rise.

Also, the standard minimum income guarantee in Pension Credit will rise by £5.95 to £130 per week for single pensioners and by £9.10 to £198.45 a week for pensioner couples.

Saving Gateway scheme

A new state supported saving scheme, the Saving Gateway, is to be rolled out nationally in 2010, in a bid to encourage up to eight million low income earners to save money.

Under the scheme, the Government will contribute 50p for every £1 that is saved. A maximum payment of £300 will be made once an account holder has been saving for two years, and the contribution will only be applied for those months in which no withdrawals have been made.

The Saving Gateway will be available through a range of banks, building societies, credit unions, and the Post Office.

Mortgages

The Government has said it is committed to supporting households, through:

increasing the generosity of the Support for Mortgage Interest scheme
extending the Mortgage Rescue scheme to cover second charge lending
obtaining a commitment from major lenders not to initiate repossession action until at least three months after an owner occupier goes into arrears
better access to free and impartial debt advice.

Green measures

Fuel Duty

The Chancellor announced that the reduction in pump prices means the 2p per litre increase on fuel duty will take effect from 1 December 2008. Further increases of 1.84p per litre from 1 April 2009 and 0.5p per litre above indexation from 1 April 2010 will go ahead, as planned.

Vehicle Excise Duty

Six new bands of VED will be introduced in 2009, the Chancellor announced, taking the total to 13.

By 2010 the rate bands will start to separate out, with increases of up to £30 that year. Also due in 2010 is the First-Year Rate - the new higher Year One VED rate for new cars.

Air Passenger Duty

New air passenger duty rates will apply from 1 November 2009, based on four distance bands, and increase from 1 November 2010, when the maximum standard rate will stand at £170.

What they said…

In these exceptional economic circumstances, I want to take fair and responsible steps to protect and support businesses and people now - while putting the public finances on the right path for the future.
Chancellor of the Exchequer, Alistair Darling

Listening to the Chancellor's speech, no one can be in any doubt that the Prime Minister's claim to have abolished boom and bust is one of the biggest deceits ever told to the British public.
Shadow Chancellor, George Osborne

If I were marking the Chancellor’s report card, I’d say ‘could do better’.
David Frost, British Chambers of Commerce

Many of these measures […] will give small businesses a welcome breather from the taxman and allow them to concentrate on sustaining their business, supporting their staff and growing the economy in the long term.
John Walker, Federation of Small Businesses

Budget 2008 report

twettone@wmcca.co.uk (Tim Wettone) — Thu, 13 Mar 2008 13:03:00 -0700

This Report, which was written immediately after the Chancellor of the Exchequer delivered his Budget Speech, is intended to provide an overview of the announcements most likely to affect you or your business.

We can help you to reassess your plans regularly, and adapt them as your personal and business circumstances change. With our help, you can plan for a rewarding and financially secure future.

Please note: while most taxation changes take effect from the start of the financial year, or tax year, some may not take effect until 2009, or later. Where relevant, details of these changes have been included in this Report. Throughout the Report, 'HMRC' refers to HM Revenue & Customs.

Budget Highlights
Business Tax and Investment Incentives
Capital Taxes
Duties
Value Added Tax
Tax and Travel
National Insurance Contributions (NICs)
Other Measures Announced
2008/09 Tax Calendar

Darling emphasises environment in maiden Budget

Billed as a 'responsible' and 'green' Budget, the environment found its way to the top of the agenda in Chancellor Alistair Darling's debut Budget speech.

Darling used his first Budget statement to introduce a series of measures aimed at reducing the UK's carbon emissions, including a new zero rate of car tax to be levied in the first year for new, low polluting vehicles — a measure that was part of a wider reform of vehicle excise duty.

Despite attempts to prove his 'green' credentials, the Chancellor declared that a 2p increase on fuel duty will be postponed from April to October this year to help the country through the current 'credit crunch'. The Chancellor told MPs that the credit crunch posed a 'major risk to the world's economy'. As a consequence, Darling has revised the economic growth predictions that were made in his Pre-Budget Report last October.

Growth forecasts have been cut for 2008 to 1.75%-2.25%, a substantial reduction on the original 2.5%-3%. Darling has also advised that public borrowing will increase to £43 billion next year, rather than fall to the £36 billion he had anticipated.

Darling's brief reign as Chancellor has already been dogged by controversy. He confirmed the much-criticised changes to capital gains tax and the taxation of non-domiciliaries. CBI Director-General Richard Lambert, said: 'The Government has much to do if it is to win back its enterprise credentials, but the measures announced today are a credible first step on the road.'

Budget Highlights

Green light on non-doms
Entrepreneurs' Relief confirmed
Big increases in tax on alcohol
Increase in fuel duty deferred
Income shifting legislation delayed

Economic forecasts for 2008

Inflation 2.5%
Growth 1.75 to 2.25%
Government Spending £566 billion
Net Borrowing £43 billion
Government Receipts £575 billion
Public Sector Year End Net Debt £581 billion

Business Tax and Investment Incentives

Corporation Tax

Financial Year to	31 March 2009	31 March 2008
Taxable profits
First £300,000	21%	20%
Next £1,200,000	29.75%	32.5%
Over £1,500,000	28%	30%

The small companies' rate of corporation tax will increase from 21% to 22% in 2009/10.

Capital Allowances

Previous proposals, amended after due consultation, were confirmed for 2008/09 as follows:

Annual Investment Allowance (AIA)

Tax relief on the first £50,000 of investment in plant and machinery, except for cars, will be at 100%. This will apply to any size of business, but there will be provisions to prevent multiple claiming. Businesses will be able to allocate their AIA in any way they wish; so it will be quite acceptable for them to allocate their allowance against expenditure otherwise qualifying for a low rate of allowance.

Writing Down Allowance (WDA)

Any additional expenditure over the AIA level will enter either the 10% pool or the 20% pool, attracting WDA at the appropriate rate. The 10% pool will contain longlife assets, thermal insulation added to existing commercial buildings, and 'integral features' of buildings (including replacement expenditure). The 20% pool will apply to most other plant and equipment, including cars costing £12,000 or less. Cars costing more than £12,000 will continue to qualify for a 25% WDA subject to a maximum of £3,000.

A WDA of up to £1,000 can be claimed where the unrelieved expenditure in either the 10% or 20% pool is £1,000 or less.

Enhanced Capital Allowances (ECA)

In addition to AIA, 100% first year allowances are available on energy saving or environmentally beneficial equipment. Where companies (only) have unrelieved losses attributable to ECAs, they may choose to surrender such losses for a cash payment. The company will receive a tax credit of 19%, subject to a maximum of the greater of £250,000 or the company's PAYE and NI liabilities for the period for which the loss is surrendered. This credit will be clawed back where the asset is sold within four years after the end of the period for which the credit was paid. Electric and low CO2 emission (up to 110 g/km) cars and natural gas/ hydrogen/ biogas refuelling equipment also qualify for 100% first year allowances, but will not qualify for the payable tax credit.

Buildings

WDAs on industrial and agricultural buildings are gradually being phased out, with final withdrawal by the end of 2010/11. The WDAs (on building cost) for 2008/09 are reduced from 4% to 3% (subject to transitional arrangements). A maximum 100% initial allowance is available for the conversion of parts of business premises into flats. There are also 100% business premises renovation allowances and Enterprise Zone allowances (EZA). EZAs are to be withdrawn from the end of 2010/11.

Research and development (R&D) tax credits

The enhanced deduction available to small and medium enterprises (SMEs) in respect of qualifying R&D expenditure is to increase from 150% to 175%. For large companies the enhanced deduction is to increase from 125% to 130%. These changes will take effect from a date to be appointed once EC state aid approval has been received. As from the same date, the SME tax relief will no longer be available to those companies whose most recent accounts were not produced on a going concern basis. In addition, the SME relief is to be capped at €7.5 million per R&D project.

Associated companies

The tax bands are reduced where a company has one or more associated companies. As from 1 April 2008, a company will no longer be associated with companies controlled by the business partners of the person controlling that company. The exception to this is where at any time the shareholder or director of the company and the business partner have made arrangements to secure a tax advantage for the company.

Enterprise Investment Scheme (EIS)

From 6 April 2008, subject to EC state aid approval, the limit on which an investor can claim EIS income tax relief will be increased from £400,000 to £500,000.

Enterprise Management Incentives (EMI)

Currently, employees cannot hold qualifying EMI options (taking into account Company Share Option Plan options also granted to them) with a total market value at the date of grant of more than £100,000. For EMI options granted on or after 6 April 2008, this limit will be increased to £120,000. Options granted after the date of Royal Assent will not be qualifying EMI options if the company has 250 or more employees and/or it is involved in shipbuilding or coal and steel production.

Anti-avoidance

A number of measures will be introduced to tackle anti-avoidance. These will affect:

Individuals carrying on a trade in a non-active capacity and sideways loss relief
Plant or machinery lease schemes
'Disguised interest' schemes
Controlled foreign companies
The transfer of intangible assets between related parties where one party is subject to insolvency proceedings
Capital allowance buying and acceleration.

Capital Taxes

Capital gains tax (CGT)

The Chancellor confirmed the new standard rate of 18%, coupled with the withdrawal of indexation allowance and taper relief for individuals and trustees with effect from 6 April 2008. Other reliefs, such as those relating to principal private residences, losses brought forward, Enterprise Investment Scheme and Venture Capital Trusts, and business asset rollover relief, will continue to be available. Assets acquired before 31 March 1982 will be deemed to have had a cost equivalent to their market value at that date.

In certain circumstances the CGT base cost of an asset is tied to its value ascertained for inheritance tax (IHT) purposes. A correction made necessary by the IHT changes noted below means this rule will not apply where the value does not have to be ascertained for IHT purposes on the death of an individual.

The Annual Exempt Amount (AEA) will be increased for 2008/09 to £9,600 for individuals and £4,800 for some trustees.

CGT: Entrepreneurs' Relief

Following strong opposition from the business community to the proposed CGT changes, the Chancellor has introduced an Entrepreneurs' Relief which gives an effective 10% rate for the first £1million of lifetime capital gains on the disposal of trading businesses and on certain disposals of shares in trading companies. The relief actually works by reducing the gain by 4/9, leaving the residual 5/9 gain to be taxed at 18% (5/9 x 18% = 10%). The effective rate will be reduced by the application of the AEA.

The £1million may be made up of any number of disposals after 5 April 2008 and, unlike the former retirement relief (on which the rules are based), there is no minimum age qualification. There is, however, a one year qualifying period and other conditions to be met. Trustees will also be able to claim, jointly with a 'qualifying beneficiary'.

Capital gains made by companies are dealt with separately under the corporation tax regime, and these arrangements have not changed.

Inheritance tax (IHT)

As previously announced, the IHT standard threshold has been set at £312,000 for 2008/09. This defines the upper limit of what is commonly known as the IHT nil-rate band.

In the October Pre-Budget Report, the Chancellor announced a new concession for married couples and civil partners. With effect from second deaths on or after 9 October 2007 the unused percentage of the nil-rate band from the first death estate can be carried forward and added to the nil-rate band available to the second. The combined threshold for couples is therefore set at a maximum of £624,000 for 2008/09.

This new arrangement applies no matter how long ago the first death occurred. For example:

On the first death none of the original nil-rate band was used because the entire estate was left to a surviving spouse. Then if the nil-rate band when the surviving spouse dies is £350,000 that would be increased by 100% to £700,000.

If on the first death the chargeable estate was £107,500 when the nil-rate band was £215,000 (1997/98), then 50% of the original nil-rate band would be unused. If the nil-rate band when the surviving spouse dies is £350,000, then that would be increased by 50% to £525,000.

Pension savings

The Finance Bill 2008 will propose legislation to ensure that tax-relieved pension savings diverted into inheritance using scheme pensions and lifetime annuities are subject to unauthorised payment tax charges and, where appropriate, IHT. In addition, IHT protection to savings in overseas pension schemes will be restored.

Duties

Reduction of stamp duty administrative burden

Legislation will be introduced in Finance Bill 2008 to provide that instruments transferring stocks and shares that were previously chargeable with £5 stamp duty (generally where the consideration is £1,000 or less) will in future be exempt and will not need to be presented to HMRC for stamping. The measure will have effect for instruments executed on or after 13 March 2008.

Stamp duty land tax anti avoidance measures will be introduced affecting transactions by groups of companies on or after 13 March 2008.

Alcohol and tobacco products duty

Legislation will be introduced in Finance Bill 2008 to provide for the annual setting of duty rates for alcohol. Duty rates will increase by 6% in real terms for all alcoholic drinks. The impact of the changes on retail prices for typical alcoholic drinks and tobacco products is equivalent to:

55 pence on a 70cl bottle of spirits @ 37.5% abv
4 pence on a pint of beer
3 pence on a litre of still cider
14 pence on a 75cl bottle of sparkling cider
14 pence on a 75cl bottle of wine or made-wine
18 pence on a 75cl bottle of sparkling wine
cigarettes: 11p on a packet of 20
cigars: 4p on a packet of 5
hand-rolling tobacco: 11p on 25g
other smoking tobacco and chewing tobacco: 6p on 25g of pipe tobacco.

HMRC review of penalties for incorrect returns and failure to notify a taxable activity

For return periods ending on or after 1 April 2009, where the filing date is after 1 April 2010, the new penalty regime for incorrect returns introduced in 2007 for income tax, CGT, VAT, PAYE and NICs will be extended across all other taxes and duties. From 1 April 2009, the penalty regime for failure to notify HMRC of a new charge will be aligned across all taxes and duties.

The new provisions for incorrect returns will provide for penalties in line with Schedule 24 to FA 2007, which are based on the amount of tax understated, the nature of the behaviour and the extent of disclosure by the taxpayer. There will be no penalty where a taxpayer makes a mistake but there will be a penalty of up to:

30% for failure to take reasonable care
70% for a deliberate understatement
100% for a deliberate understatement with concealment.

Each penalty will be substantially reduced where the taxpayer makes a disclosure (takes active steps to put right the problem), more so if this is unprompted.

Value Added Tax

From		1 April 2008	1 April 2007
Standard rate		17.5%	17.5%
VAT fraction		7/47	7/47
		Turnover	Turnover
Registration	last 12 months or next 30 days over	£67,000	£64,000
Deregistration	next 12 months under	£65,000	£62,000
Cash accounting scheme	up to	£1,350,000	£1,350,000
Annual accounting scheme	up to	£1,350,000	£1,350,000
Optional flat-rate scheme	up to	£150,000	£150,000

Option to tax land and buildings

Legislation will be introduced for simplification of the option to tax land and/or buildings. It will also introduce minor changes to enable taxpayers to revoke an option to tax after 20 years and make a number of associated changes to improve practical administration of the option to tax.

The rewritten legislation will have effect on and after 1 June 2008. The earliest date an option to tax will be revocable will be 1 August 2009.

Indirect tax returns: correction of errors

Businesses registered for VAT, insurance premium tax (IPT), air passenger duty (APD), landfill tax (LFT), climate change levy (CCL) and aggregates levy (AGL) will have increases to the limit below which errors on previous returns may be corrected on the return for the period in which the errors are discovered. This measure will have effect for accounting periods commencing on or after 1 July 2008.

This measure increases the de minimis £2,000 limit to the greater of £10,000 or 1% of turnover, subject to an upper limit of £50,000 for VAT, IPT, LFT, CCL and AGL. For VAT, LFT, CCL and AGL errors above £10,000, the limit for correcting errors on the next return will be calculated by reference to net VAT turnover (Box 6 on VAT return) for the return period.

For IPT, this limit will be calculated by reference to the net IPT turnover (Box 10 on IPT return). APD procedures will be amended to increase the de minimis limit to the greater of £10,000 or 1% of duty due, before adjustments for errors from previous periods, subject to an upper limit of £50,000. For LFT, CCL and AGL taxpayers who are not required to be registered for VAT a single limit of £10,000 will have effect.

Tax and Travel

Car and fuel benefits

The taxable petrol and diesel car benefit is based on the car's CO₂ emissions. It is calculated using the car's UK list price and applying the 'appropriate percentage' as shown in the table below. The first line of figures in the table relate to the new category of qualifying low emissions cars (QUALECs).

The car fuel benefit is calculated by applying the same percentages to the fuel multiplier, which for 2008/9 is increased from £14,400 to £16,900.

The percentages are reduced for cars (except QUALECs) that can be driven on alternative fuels by:

2% for cars manufactured to be capable of being run on E85 fuel
2% for bi-fuel cars or those which run on LPG only
3% for hybrid electric and petrol cars
6% for electric only cars (in practice the taxable benefit will be 9% of the price).

VAT on fuel for private use in cars

Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT on a scale charge. The table below shows the VAT chargeable for quarters commencing on or after 1 May 2008.

CO₂ emissions	Appropriate percentage		Quarterly VAT
(g/km)	Petrol %	Diesel %	Fuel scale charge £	VAT on charge £
120 and below	10	13	138	20.55
121 to 139	15	18	207	30.83
140 to 144	16	19	221	32.91
145 to 149	17	20	234	34.85
150 to 154	18	21	248	36.94
155 to 159	19	22	262	39.02
160 to 164	20	23	276	41.11
165 to 169	21	24	290	43.19
170 - 174	22	25	303	45.13
175 - 179	23	26	317	47.21
180 - 184	24	27	331	49.30
185 - 189	25	28	345	51.38
190 - 194	26	29	359	53.47
195 - 199	27	30	373	55.55
200 - 204	28	31	386	57.49
205 - 209	29	32	400	59.57
210 - 214	30	33	414	61.66
215 - 219	31	34	428	63.74
220 - 224	32	35	442	65.83
225 - 229	33	35	455	67.77
230 - 234	34	35	469	69.85
235 and above	35	35	483	71.94

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The current rates are as follows:

Vehicle	First 10,000 miles	Thereafter
Car / Van	40p	25p
Motorcycle	24p	24p
Bicycle	20p	20p

Car - fuel only advisory rates
Engine Capacity	Petrol	Diesel	Gas
Up to 1400cc	11p	11p	7p
1401 - 2000cc	13p	11p	8p
Over 2000cc	19p	14p	11p

The fuel only advisory rates can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys.

HMRC will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.

Car costs – VED rates

Band	CO₂ emissions g/km	Petrol & Diesel	Alternative Fuel Cars
A	100 and below	£0	£0
B	101 - 120	£35	£15
C	121 - 150	£120	£100
D	151 - 165	£145	£125
E	166 - 185	£170	£150
F*	186 and above	£210	£195
G**	226 and above	£400	£385

* Cars registered before 23 March 2006 ** Cars registered from 23 March 2006

Company vans

The taxable benefit for the unrestricted private use of vans is £3,000. There is a further £500 taxable benefit if the employer provides fuel for private travel.

Van and fuel charge	Van	Fuel	Total
Tax (20% taxpayer)	£600	£100	£700
Tax (40% taxpayer)	£1,200	£200	£1,400
Employer’s class 1A NICs	£384	£64	£448

National Insurance Contributions (NICs)

2008/09 National Insurance Contributions (NICs)
		Employer	Employee
Class 1 - not contracted out
Lower earnings limit			£90
Weekly earnings bands
Up to £105		Nil	Nil
£105.01 – £770		12.8%	11%
Over £770		12.8%	1%
Over state retirement age		12.8%	Nil
Class 1A	On relevant benefits	12.8%	Nil
Class 2	Self employed	£2.30 per week
Class 2	Limit of net earnings for exception	£4,825 p.a.
Class 3	Voluntary	£8.10 per week
Class 4*	Self employed on profits
	£5,435 - £40,040	8%
	Excess over £40,040	1%
*Exemption applies if state retirement age was reached by 6 April 2008

Other measures announced

Dormant accounts - reporting and tax liability

Rule changes will mean that banks and building societies will only have to pay over the 20% 'tax at source' and report the interest to HMRC when the customer reclaims their dormant account balance.

Similarly, the customer will only be liable for any further tax due on the interest on such accounts when they reclaim their balance.

National Disaster

In the event that taxpayers are adversely affected by events designated as national disasters, HMRC will waive interest and surcharges on tax paid late.

Tribunal reform

HMRC inherited two systems of tribunals when the former Inland Revenue and HM Customs & Excise merged.

These are to be simplified under powers to be introduced in the 2008 Finance Act.

Funds of Alternative Investment Funds (FAIFs)

Taxation on certain offshore income gains of FAIFs can, under proposed new rules, be shifted from the fund to the investors. Authorised investment funds will be able to elect for a new tax treatment, making it exempt from tax on offshore income gains, which will in turn be taxable on the investor on the disposal of units in the fund.

Non-domiciles and the remittance basis

As announced last year, new rules for longer-term resident individuals who are not domiciled in the UK (non-doms) will come into force with effect from 6 April 2008.

Key to the new rules is a choice for non-dom adults with overseas income and gains over £2,000 in a tax year. Essentially, they can opt to have income and gains of the year taxed on the remittance basis (ie taxed in the UK only as and when they are remitted) and pay £30,000 or they can be taxed for the year on their worldwide income and gains (plus any income or gains from a 'remittance basis' year remitted in the year). The £30,000 will be a payment in respect of tax on unremitted gains or income, allocable by the taxpayer, and available for credit when said gains or income is remitted (and should also be treated as such for relief under double taxation treaties with other taxing regimes).

Opting for the remittance basis will also mean that entitlement to the year's UK personal allowances and the CGT annual exemption is lost.

Also featuring are new definitions of remittances, catching money or gifts made outside the UK and brought in by a relative and also the import of assets bought outside the UK with untaxed income or gains. There are some exclusions, covering for example personal effects and assets brought temporarily to the UK, but perhaps most importantly the rules will not apply to assets bought out of untaxed foreign income and owned at 11 March 2008. These exclusions are in addition to the exclusion for works of art brought to the UK for public display, already announced.

These changes will also apply to anyone who has been able to opt for the remittance basis because, though UK resident, they are not ordinarily resident.

New rules will apply from 6 April 2008 to give non-doms, including those opting to be taxed on the remittance basis, access to relief for capital losses when they are liable for tax on capital gains on the arising basis.

Employees who are resident but not ordinarily resident in the UK and receive shares or options as part of their remuneration will be liable for UK income tax on such employment-related securities (ERS). ERS gains derived from non-UK employment duties will be subject to income tax on the remittance basis. This will also apply to non-doms where the ERS income relates to a foreign employment, the duties of which are performed wholly outside the UK.

The rules bringing into UK tax the gains of offshore trusts have also been strengthened, with the effect that resident non-dom settlors will be taxed on gains on UK assets as they arise, while they and resident non-dom beneficiaries will be taxed on other gains as they are brought to the UK.

Trustees will be able to elect to rebase the CGT base cost of all assets to the 6 April 2008 value.

It is no longer possible to close a source and remit the income in the following tax year (closed source rule).

The rate on income tax chargeable on foreign dividend income remitted by individuals claiming the remittance basis will be corrected to 40% from 6 April 2008.

Day counting

It had been announced that in counting the number of days present in the UK for the residence tests it would be necessary from 6 April 2008 to include the days of arrival and departure. The Chancellor announced that the rule will be to count midnights spent in the UK as a day of presence in the UK, except where the midnight falls at a time when one is present in the UK in transit between two places outside the UK — 'days' spent in transit will not be counted unless the individual engages in activities that are to a substantial effect unrelated to their passage (for example, attending a business meeting).

National Minimum Wage to rise in October

The National Minimum Wage rates will increase in October 2008.

The main rate for adult workers will rise from £5.52 an hour to £5.73 an hour.

The development rate for 18-21 year olds will rise by 17p, from £4.60 to £4.77.

The rate for 16-17 year olds will rise by 13p, from £3.40 to £3.53.

2008/09 Tax Calendar

April 2008
5	Last day of 2007/08 tax year. Deadline for 2007/08 ISAs. Last day to make disposals using the 2007/08 CGT exemption and the 'old' CGT rules. Last date for contracting back into the State Second Pension for 2007/08.
14	Due date for income tax for the CT61 period to 31 March 2008.
19/22	Quarter 4 2007/08 PAYE remittance due.
20	Interest will begin to accrue on unpaid PAYE/NI for 2007/08.
30	Normal annual adjustment for VAT partial exemption calculations (monthly returns).
May 2008
3	Last day for notifying car changes in quarter to 5 April - P46 (Car).
19	Last day for filing forms P14, P35, P38, and P38A - 2007/08 PAYE returns - without incurring penalties.
31	Last day to issue 2007/08 P60s to employees
June 2008
30	End of CT61 quarterly period. Last day for UK businesses to reclaim EC VAT chargeable in 2007. Annual adjustment for VAT partial exemption calculations (March VAT year end).
July 2008
6	Deadline for submission of Form 42 (transactions in shares and securities). File Taxed Award Scheme Returns, file P11Ds, P11D(b)s and P9Ds. Issue copies of P11Ds or P9Ds to employees. Deadline for submission of EMI140 (EMI Annual Return)
14	Due date for income tax for the CT61 period to 30 June 2008.
19/22	Quarter 1 2008/09 PAYE remittance due. Final date for payment of 2007/08 Class 1A NICs.
31	Second self assessment payment on account for 2007/08. Annual adjustment for VAT partial exemption calculations (April VAT year end). Liability to 2nd £100 penalty arises for 2007 Tax Return still not filed. 5% surcharge on any tax unpaid for 2006/07.
August 2008
2	Last day for notifying car changes in quarter to 5 July - P46 (Car).
31	Annual adjustment for VAT partial exemption calculations (May VAT year end). Deadline for tax credit Annual Declaration (if estimated, final figures required by 31 January 2009).
September 2008
30	End of CT61 quarterly period.
October 2008
1	Due date for payment of Corporation Tax for period ended 31 December 2007.
5	Individuals/trustees must notify HMRC of new sources of income/chargeability in 2007/08 if a Tax Return has not been received.
14	Due date for income tax for the CT61 quarter to 30 September 2008.
19/22	Quarter 2 2008/09 PAYE remittance due
November 2008
1	Please ensure you are retaining your documents for the 2009 Tax Return.
2	Last day for notifying car changes in quarter to 5 October — P46 (Car).
December 2008
30	Last day to file your 2008 Tax Return electronically if you wish to have a 2007/08 balancing payment of less than £2,000 collected through your 2009/10 PAYE code.
31	Last day for non-EC traders to reclaim recoverable UK VAT suffered in the year to 30 June 2008. End of relevant year for taxable distance supplies to UK for VAT registration purposes. End of relevant year for cross-border acquisitions of taxable goods in the UK for VAT registration purposes. End of CT61 quarterly period. Filing date for Corporation Tax Return Form CT600 for period ended 31 December 2007.
January 2009
1	Due date for payment of Corporation Tax for period ended 31 March 2008.
14	Due date for income tax for the CT61 quarter to 31 December 2008.
19/22	Quarter 3 2008/09 PAYE remittance due.
31	First self assessment payment on account for 2008/09. Capital gains tax payment for 2007/08. Balancing payment - 2007/08 income tax/class 4 NICs. Last day to renew 2008/09 tax credits. Deadline for amending 2006/07 Tax Return. Last day to file the 2008 Tax Return online.
February 2009
1	£100 penalty if 2008 Tax Return not yet filed. Additional penalties may apply for further delay. Interest starts to accrue on 2007/08 tax not yet paid.
2	Last day for notifying car changes in quarter to 5 January - P46 (Car)
14	Last date (for practical purposes) to request NIC deferment for 2008/09.
28	Last day to pay any balance of 2007/08 tax and Class 4 NIC to avoid an automatic 5% surcharge
March 2009
31	End of Corporation Tax financial year. End of CT61 quarterly period. Filing date for Corporation Tax Return Form CT600 for period ended 31 March 2008.

Capital Gains Tax climbdown announced

twettone@wmcca.co.uk (Tim Wettone) — Thu, 24 Jan 2008 04:04:00 -0800

In the face of massive criticism from business organisations, the government has today announced an amendment to its capital gains tax proposals that were to become effective from 6 April 2008. This has been done in the form of a new Entrepreneurs' relief.

This will be targeted on the owners of small businesses, and will apply when they sell their business. The relief will also be available to all employees and company directors who hold at least a 5% stake in a qualifying company. It will take effect from 6 April 2008 alongside the rest of the capital gains tax reform package.

The relief will deliver a 10 per cent tax rate for up to the first £1 million of lifetime capital gains. Individuals will be able to claim relief for gains made on multiple occasions up to a cumulative total of £1 million. Gains in excess of the £1 million lifetime limit will attract the standard 18 per cent rate of tax.

This is a welcome change to the original plans, but will still mean an increase in capital gains tax payable for smaller businesses. By way of example, someone selling a business for £100,000 will pay an extra £2,760 from next year. However, they would still be better off by over £7,000 than with the original proposals.

At least those who were having to contemplate selling their businesses before 6 April 2008, in order to secure the tax levels under the current regime, will not now have to make hurried decisions.

Capital Gains Tax reforms - how will they affect you?

twettone@wmcca.co.uk (Tim Wettone) — Mon, 15 Oct 2007 08:10:00 -0700

The Government announced in the 2007 Pre Budget Report that it intends to abolish some tax reliefs and replace them with a flat rate of 18% for gains exceeding the annual allowance. The proposals will be sent out for consultation by HM Revenue and Customs, but as they currently exist they could influence your plans to sell before or after April 2008.

Although these proposals may impact on you if you are selling property, shares or other assets, you will also need to consider them if you are intending to hold onto your property, shares in your company or other assets. There may also be action you could take before April 2008 to make use of the current relief available.

We advise you to contact us to discuss these matters in more detail but, for your information, we have highlighted a few common examples below. Examples two to seven show how changes in circumstance would result in different decisions based on the tax consequences.

Example 1: 40% tax payer selling a business asset

A sole director/shareholder set up the company in August 1982. The shares were issued at a cost of 20,000. The shares will be sold in April 2008 for 250,000. Indexation is 20,940 (cost multiplied by 1.047). Taper relief 156,795. You are a 40% tax payer and make no other disposals.

If it is sold before April 2008, the gain will be (250,000 less indexation 20,940 less taper relief 156,795 less cost 20,000 less annual exemption 9,200 =) 43,065 chargeable at 40% = 17,226.

If sold after then, the gain will be (250,000 less cost 20,000 less annual exemption 9,200 =) 220,800 chargeable at 18% = 39,744.

A delay in sale would result in a higher tax charge of 22,518.

Example 2: 40% tax payer selling a non-business asset (1982 market value)

A property was bought in 1978 for 34,000. Its market value in 1982 was 25,000. Indexation is 35,598 (higher of 34,000 and 25,000 multiplied by 1.047). Taper relief 112,160. Sale proceeds will be 350,000. You are a 40% tax payer and make no other disposals. The option to use cost of an asset owned before March 1982 has been abolished from 6 April 2008.

If it is sold before April 2008, the gain will be (350,000 less indexation 35,598 less taper relief 112,160 less cost 34,000 less annual exemption 9,200 =) 159,042, chargeable at 40% = 63,617.

If sold after then, the gain will be (350,000 less market value March 1982 25,000 less annual exemption 9,200 =) 315,800 chargeable at 18% = 56,844.

A delay in sale would result in a lower tax charge of 6,773.

Example 3: 40% tax payer selling a non-business asset (1982 market value)

A property was bought in 1978 for 34,000. Its market value in 1982 was 70,000. Indexation is 73,290.(Higher of 34,000 and 70,000 multiplied by 1.047). Taper relief 82,684. Sale proceeds will be 350,000. You are a 40% tax payer and make no other disposals. The option to use cost of an asset owned before March 1982 has been abolished from 6 April 2008.

If it is sold before April 2008, the gain will be (350,000 less indexation 73,290 less taper relief 82,684 less market value 70,000 less annual exemption 9,200 =) 114,826, chargeable at 40% = 45,930.

If sold after then, the gain will be (350,000 less market value March 1982 70,000 less annual exemption 9,200=) 270,800 chargeable at 18% = 48,744.

A delay in sale would result in a higher tax charge of 2,814.

Example 4: 40% tax payer selling a non-business asset

A holiday home used solely by the owner and his family was bought in June 1996 for 80,000 to be sold in April 2008 for 265,000. Indexation is 5,040 (cost multiplied by 0.063). Taper relief 71,984. You are a 40% tax payer and make no other disposals.

If it is sold before April 2008, the gain will be (265,000 less indexation 5,040 less taper relief 71,984 less cost 80,000 less annual exemption 9,200=) 98,776 chargeable at 40% = 39,510.

If sold after then, the gain will be (265,000 less cost 80,000 less annual exemption 9,200=) 175,800 chargeable at 18% = 31,644.

A delay in sale would result in a lower tax charge of 7,866.

Example 5: 40% tax payer selling a non-business asset

A property was bought in November 1985 for 140,000 to be sold in April 2008 for 400,000. Indexation is 97,300. (Cost 140,000 multiplied by 0.695). Taper relief 65,080. You are a 40% tax payer and make no other disposals.

If it is sold before April 2008, the gain will be (400,000 less indexation 97,300 less taper relief 65,080 less cost 140,000 less annual exemption 9,200 =) 88,420, chargeable at 40% = 35,368.

If sold after then, the gain will be (400,000 less cost 140,000 less annual exemption 9,200 =) 250,800 chargeable at 18% = 45,144.

A delay in sale would result in a higher tax charge of 9,776.

Example 6: 22% tax payer selling a non-business asset

A property was bought in September 2004 for 55,000 to be sold in April 2008 for 80,000. No indexation. Taper relief 1,250. You are a 22% tax payer and make no other disposals.

If it is sold before April 2008, the gain will be (80,000 less indexation nil less taper relief 1,250 less cost 55,000 less annual exemption 9,200) = 14,550, chargeable at 22% = 3,201.

If sold after then, the gain will be (80,000 less cost 55,000 less annual exemption 9,200) = 15,800 chargeable at 18% =) 2,844.

A delay in sale would result in a lower tax charge of 357.

Example 7: 22% tax payer selling a non-business asset

A property was bought in March 1982 for 15,000 to be sold in April 2008 for 80,000. Indexation is 15,705. Taper relief 19,718. You are a 22% tax payer and make no other disposals.

If it is sold before April 2008, the gain will be (80,000 less indexation 15,705 less taper relief 19,718 less cost 15,000 less annual exemption 9,200 =) 20,377, chargeable at 22% = 4,483.

If sold after then, the gain will be (80,000 less cost 15,000 less annual exemption 9,200 =) 55,800 chargeable at 18% = 10,044.

A delay in sale would result in a higher tax charge of 5,561.

Broadly, if the proposals are implemented as they currently stand, it will mean that, after 6 April 2008, individuals who sell non-business assets will be subject to less tax, while those selling business assets are likely to be liable for significantly higher Capital Gains Tax bills. There are, however, exceptions to this generalisation due mainly to the abolition of indexation allowance and taper relief for assets sold after 5 April 2008.

The regime for charging companies corporation tax on their chargeable gains has not been changed so they will still be entitled to indexation allowance but not taper relief.

The following information may be appropriate for some individuals:

Those running a trading company who are currently questioning if they should continue trading as a limited company and who are entitled to business asset taper relief on the sale of the company may consider dis-incorporation to take advantage of indexation up to March 1998 and taper relief (75% if asset owned for two years) then continuing to run the business as a sole trader or partnership.
Individuals who have held assets like properties for some time and who are considering if they should trade through a company in the future may wish to consider accelerating that decision.
For individuals considering selling an asset which is subject to capital gains tax in the near future, the capital gains tax should be calculated under both the old and new systems so that the individual can decide whether to sell before or after 5 April 2008.
AIM (alternative investment market) shares qualify for 75% business asset taper relief if held for at least 2 years. Shareholders may wish to review these holdings before 6 April 2008 to take advantage of the current relief.

Please note in each of the examples the following assumptions have been made:

the annual exemption is not yet known and will be announced in the 2008 Budget, so for illustration the 2007/08 figure has been used it has been assumed that there are no other gains in 2007/08 or 2008/09 for the purposes of illustration, tax rates and allowances have not been altered prior to April 2008, gains are treated as a top layer of income, but this will no longer be the case from 6 April 2008.

Reliefs not affected principal private residence relief business asset rollover Enterprise Investment Scheme and Venture Capital Trusts business asset gift hold over relief losses brought forward

Wettone Matthews

Pre-Budget Report 2009

Contents

Measures for business

Business Payment Support Service

Business rates

Small Companies’ Rate of corporation tax

Patent Box

Research & Development (R&D) tax credits

Company cars and vans

Personal measures

Income tax

National insurance contributions (NICs)

Inheritance tax

Capital gains tax (CGT)

Child benefit

State Pension

Pension Credit

Tax relief on pension contributions

Furnished holiday lettings

Carers

Salary sacrifice — workplace canteens

VAT and duties

Standard rate of VAT

Alcohol and tobacco duty rates

Bingo duty

Green measures

Climate change levy

Green Boiler Incentive Scheme

Other measures

Bank payroll tax

Landline Duty

SDLT holiday to end

Seafarers

Equitable liability

Anti-avoidance measures

What they said

Two new directors!

VAT changes for 2010

Selby Gray clocks up 25 years!

Budget 2009 report

Darling defiant in face of recession

Budget Highlights

Business Tax and Investment Incentives

Corporation Tax

Trading losses

Capital allowances

Car leases

Enterprise Investment Scheme (EIS)

Loan relationships

Foreign profits

Corporate transparency

Anti-avoidance

Capital taxes

Capital Gains Tax (CGT)

Offshore funds

Inheritance tax (IHT)

Agricultural property relief (APR) and woodlands relief (WR)

Duties

Stamp duty land tax (SDLT): temporary increase in thresholds

Alcohol and tobacco products duty

Income Tax and Personal Savings

Starting rate example

Individual Savings Accounts (ISAs)

Child Trust Fund

Income shifting

Taxation of overseas dividends

Pension savings

Personal allowances for non-resident individuals

Employer-provided (rented) living accommodation

2010/11 onwards

Value Added Tax

VAT: Change of standard rate

Cross-border VAT: Changes to EC sales lists

Cross-border VAT: Changes to place of supply of services rules

Tax and Travel

Car and fuel benefits

Changes from April 2011

VAT on fuel for private use in cars

Mileage rates