Budget. Report 2009: Budget. Report Summary of the main taxation provisions announced by the Chancellor of the Exchequer on 22 April 2009

Transcription

1 Budget Report 2009 Budget Report 2009: Summary of the main taxation provisions announced by the Chancellor of the Exchequer on 22 April 2009 This publication is brought to you by Holden Associates. If you would like to contact us you will find our details on the last page.

2 Table of Contents 2. Introduction 2. The Chancellor s Options 3. Previously announced changes 3. Summary of what the Chancellor said 4. Did commentators like it? 5. The Budget Proposals 5. Pensioners 5. Child Trust Fund: disabled children 5. The housing market 5. Income tax 6. Taxation of personal dividends 6. Taxation of personal dividends: distributions from offshore funds 7. Extension of trading loss carry back for businesses 7. Corporation Tax 8. Capital Allowances 9. Taxation of Foreign Profits 10. Improvements to the venture capital schemes 10. North Sea fiscal regime 11. Life insurance companies: consultation outcomes and simplification 11. Financial services compensation scheme: Payments representing interest 12. UK dividend exemption for Lloyd s corporates 12. Group relief: Preference shares 12. Stock lending and repurchase arrangements: Stamp duty, stamp duty reserve tax and tax on chargeable gains 13. Foreign denominated losses 13. Transfers of business between Mutual Societies 13. Tax elected funds 13. Offshore funds 14. Certainty on trading and investment for authorised investment funds and investors in equivalent offshore funds 14. New tax rules for investment trust companies investing in interest bearing assets 14. Double taxation relief on dividends 14. Save as you earn process simplification 15. Corporate intangible fixed asset regime 15. Anti avoidance 19. Real estate investment trusts: amendments 19. Stamp duty land tax 20. Pensions: limiting tax relief for high income individuals (anti-forestalling) 20. Taxation of payments from the financial assistance scheme 21. Avoiding unintended tax consequences in relation to pension savings 21. Corporate transparency: personal tax accountability of senior accounting officers of large companies 21. Individual Savings Accounts (ISAs): increase in investment limits 21. Charities: substantial donors regulations 22. UK personal allowances and reliefs for non-resident individuals 22. The remittance basis: minor amendments 22. Publishing the names of deliberate tax defaulters 23. Cars 23. Value Added Tax 27. Landfill tax and climate change 28. Changes to customs powers 28. HMRC Harmonisation 29. Amusement machine licence duty: changes to rates and machine categories 29. Withdrawal of the warehousing for export drawback scheme for alcoholic liquors 30. Tobacco products duty: rates 30. Alcohol duty: rates 30. Reclaiming income tax, capital gains tax and corporation tax overpayments 30. Furnished holiday accommodation 31. Trade credit 31. Digital Britain 31. Redundancy payments 32. Insolvency consultation 32. Employment 33. Allowances, Reliefs and Rates 38. Calendar for the remainder of Further Information 1

3 Introduction Today, the Chancellor of the Exchequer Alistair Darling delivered his second Budget to the House of Commons. As ever, his predecessor Gordon Brown looked on with a watchful eye. This publication focuses only on the main taxation provisions in the Budget Report. It does not cover or comment on the Government s Spending Review. This Budget is being held after the start of the new tax year for 2009/10 and is the latest date since 1945 when the government of the day was looking to a recovery programme after the end of Word War II. Today, there is a different battle turmoil in the financial markets. In the Chancellor s pre-budget forecast last November, he said the recession would be mild however, the International Monetary Fund has warned that Britain will be the hardest hit among G7 countries. In setting the date of the Budget to 22 April 2009, both the Chancellor and the Prime Minister seemed to be pinning their hopes that the G20 financial summit would offer some relief. The Chancellor s Options According to Peter K. Hargreaves, Chief Executive, Hargreaves Lansdown, a trillion pounds has been borrowed to prop up the financial system but revenue from taxes has already been decimated. Royal Bank of Scotland, which was the biggest payer of corporation tax in the UK, no longer makes a profit. The government used to enjoy 8 billion in stamp duty from property transactions, but the number of transactions has halved over the last year. The lower value of houses has also reduced the inheritance tax take. At the same time, increased unemployment is giving rise to greater welfare payments and the loss of taxes from those who have lost their jobs. All main political parties are advocating tax rises for those on higher incomes. The very wealthy already pay the most taxes so as they rise further there is more incentive to employ schemes of avoidance and circumvent the system. Raising top rates of tax therefore usually results in the government's total tax take going down. The only other option is to raise taxes across the board. On 14 April 2009, the Institute of Chartered Accountants in England and Wales (ICAEW) called on the Chancellor of the Exchequer to apply five tests when deciding on measures to help businesses and the economy within the 22 April Budget. The ICAEW has said that the Chancellor should: Keep regulatory and tax changes to a minimum. At a time when businesses are struggling through the recession the government should not be adding to the regulatory burden. Be clear on the cost of any new measures he announces. Within the budget, he should set out plans on how he expects the growing public debt to be repaid, by whom and by when. Tackle some of the systemic problems in the market which are having a real impact on businesses ability to survive. For example access to finance especially for small businesses and the cost of credit insurance. Ensure that any measures announced are readily accessible and, where possible, are delivered to those businesses and organisations which need help most, using channels already in place. Implement any policy changes over a period of time, resisting the temptation to rush them out and add additional pressure to companies. Meanwhile, EEF, the manufacturers trade body, called for a five-fold increase in the annual investment allowance, taking it from 50,000 to 250,000. It is a 100% allowance for business expenditure on plant and machinery, excluding cars and can be claimed by businesses of any size. EEF is also lobbying for a number of other tax changes for inclusion in the April 22 budget. It wants relief on business rates on empty property to be restored, a temporary extension of a payable R&D tax credit for low-carbon companies and a temporary scrappage incentive scheme for motor vehicle manufacturers. Rather than wait for a possible Government Scrappage Incentive Scheme, Citroën has already rolled out its own scheme which promotes the replacement of older cars with cleaner, safer and better equipped new ones. The question is: will this be followed by other car manufacturers or will the Chancellor introduce a UK-wide scheme? Summary This publication summarises the main proposals announced by the Chancellor on 22 April The information is derived from the many press releases issued by Government departments immediately after the Chancellor delivered his speech. Given the timescales involved in producing this publication only hours after the press releases became available, this is only a summary and is based on the press releases resourced by us on the day. Accordingly, there may be some proposals that are not covered here. How things have changed The first regular tax levied in England was that introduced in 991 AD by Ethelred the Unready - set at two shillings (10p) a year per man for the defence of the realm. The first attempt to draw up a national budget (though not by that name) was in 1362 under Edward III. It was essentially a balance sheet for the nation and showed a deficit of 55,000. An engraving of Ethelred (artist unknown) The Royal Collection 2006, Her Majesty Queen Elizabeth II 2

4 Previously announced changes New time limits for tax claims and assessments. Many are now 4 years. New two-tier system of tax tribunals - a 'first-tier tribunal' and an 'upper tribunal'. General Commissioners, Special Commissioners and the VAT & Duties Tribunal no longer exist. Corporation tax rates remain 28% (main) and 21% (small) for Financial Year New rules for tax relief for business expenditure on cars capital allowances will be dependent on emission levels. Hire charges for cars will only be restricted for cars emitting over 160g/km using flat rate of 15%. The new rules for cars are that those with emissions below 160g/km go into 20% pool, cars with emissions over 160g/km go into 10% pool. The 100% first year allowance is still available for cars not more than 110g/km Industrial and Agricultural Buildings Allowances falls to 2% (was 3%). On property, newly rated premises qualify immediately for small business rate relief. For 2009/10 only, empty premises with rateable value below 15,000 are exempt from business rates. Employers - employers with 50 or more employees have to file their employee starter and leaver notifications and similar pensions notifications online. There is mandatory e-filing of PAYE end of year returns by small employers (under 50 employees) for 2009/10 returns onwards. For the retired, the most significant change is the 5% increase in the basic state pension. Individuals have seen their weekly income increase from to Pension Credit also increased to a week for individuals and for couples. Meanwhile, Personal Allowances have increased from 6,035 to 6,475. People aged over 65 now have a Personal Allowance of 9,490, up from 9,030. The income level at which National Insurance must be paid has increased from 5,435 a year (or 105 a week) to 5,715 (or 110 a week). People earning more than 40,000 will see their National Insurance (NI) contributions increase - previously, NI was payable at 11% of the first 40,040, but from 6 April this changed to 11% of the first 43,875 and 1% thereafter. Expectant mothers can now claim a one-off tax-free cash bonus of 190. The new Health in Pregnancy Grant (HiPG) is intended to help pregnant mothers stay healthy in the run up to the birth, and help meet some of the costs of parenthood. Parents collecting child tax credit have benefited from a rise in the credit amount (up from 2,085 to 2,235). Pension credit, has increased from 124 ( 189) a week to 130 (3198) for individuals. Figures in brackets are for couples). The IHT threshold, above which 40% tax must be paid, has increased to 325,000, up from 312,000. Summary of what the Chancellor said Alistair Darling, the Chancellor of the Exchequer, today promised a Budget to speed economic recovery by protecting jobs and spreading prosperity. He warned that Britain faced the most serious global economic turmoil for over 60 years. But he said the Government would protect investment in schools, hospitals and other key public services, while rebuilding the financial services sector. BBC News summarised the main points from the Chancellor s Budget Speech as follows: The Chancellor says it will take time for unemployment to start falling. He announced that 1.7bn would be made available to help jobseekers and said that the long-term jobless will get additional support via the Flexible New Deal. Inflation is expected to come down to 1% at the end of this year, the chancellor said. Economic growth of 1.25% is predicted for next year. The UK economy is expected to contract by about 3.5% this year, the Chancellor said, including 1.6% in the current quarter. The Chancellor promised 260m of extra money to help young people acquire more skills and training. There will be a 2,000 discount from next month for car owners on cars bought where the owner scraps another car more than 10 years old. The Chancellor said that loss-making businesses will be able to reclaim more taxes on profits made in the previous three years. 3

5 The Chancellor said that the lack of mortgage credit is holding the housing market back. The stamp duty "holiday" for properties worth less than 175,000 will be extended to the end of The basic state pension is usually based on RPI in September each year. The Chancellor predicted RPI will be -3% this September, but the government has already vowed that the basic state pension will rise by a minimum of 2.5%, whatever the RPI level. The recession has hit tax revenues, Mr Darling said. Tax as a share of GDP is 1.2% lower than last year as a result, he added. Government borrowing will be 175bn this year, some 12.4% of GDP, the Chancellor said. The Budget deficit is expected to halve in the next four years, the Chancellor said. The Chancellor said that the government will make savings while increasing spending on schools and healthcare. A 50% income tax rate for those earning 150,000 or more a year will come in from April The Chancellor said that pensions tax relief will be restricted for those earning more than 100,000 a year. Mr Darling announced the setting up of a 750m investment fund for emerging technologies. The Chancellor said that strengthening the banking system is crucial to the economy. He added that construction firms will get 500m of extra finance to help them borrow to build more homes. Armed forces accommodation will get 50m to accelerate improvements. Mr Darling said that he will announce plans later to reduce UK carbon emissions by 34% by The Chancellor promises 405m to advance green manufacturing. Grandparents looking after grandchildren will, for the first time - where they are of working age - have their efforts acknowledged in the state pension, the Chancellor announced. From April 2010, the child element of the child tax credit will increase by 20, the Chancellor said. The total annual limit for ISAs will increase this year to 10,200 of which 5,100 can be in a cash ISA. The winter fuel allowance will be maintained at a higher level for the coming year. Alcohol and cigarettes taxes to go up 2% while fuel duty will rise by 2p a litre from September Budget Basics 50% tax rate for earnings over 150,000 The Budget's measures offer "hope for the future", Mr Darling said, and will help ensure fairness and opportunity. Did commentators like it? Nick Robinson s Newslog (accessed at optimistic_abou.html) says that Alistair Darling was clearly determined to use his Budget speech to tell the country a story about why the economy is in the mess it's in and about the help that the government has already given. That's why he took nine minutes at the top of his speech before revealing any forecasts or making any policy announcements. The Chancellor was also determined to look optimistic about the future - predicting a return to growth "towards the end of the year". If he's right and the first quarter of resumed economic growth comes at the beginning of 2010, the figure would be unveiled just days before a general election. Meanwhile, BBC business editor Robert Peston says the 220bn of bonds the government says it will have to sell this year is "massively" bigger than previous amounts. People will be concerned that the borrowing situation will be worse than that outlined by the Chancellor, he added. He has a blog too: bertpeston Growth forecast revised down Borrowing increased 15bn 'efficiency savings' 2bn help for young unemployed 1bn to boost housing market Car scrapping scheme 4

6 The Budget Proposals Pensioners Savers The Government is introducing measures to target support on lower income pensioners who may have seen a fall in their income from savings. From Autumn 2009: the first 10,000 of savings held by pensioners will not be taken into account for assessment of their entitlement to Pension Credit, Housing Benefit and Council Tax Benefit. This will increase the income of around 540,000 Pension Credit claimants who have savings above the current disregard level of 6,000. They will benefit by around 4 per week; and Pension Credit recipients who may have overpaid tax on their savings income in the past 6 years will be contacted as part of a taxback campaign. This campaign will encourage people to claim tax back on savings income and, where possible, register to avoid overpaying tax in future. Those who claim are expected to receive around 200 on average. Support for pensioners Building on the Government's commitment to help pensioners, Budget 2009 announced an additional payment of 100 to households with someone aged 80 or over and 50 to households with someone aged 60 or over, to be paid alongside the Winter Fuel Payment in Child Trust Fund: disabled children The Government will contribute 100 every year to the Child Trust Fund accounts of all disabled children, with severely disabled children receiving 200 per year. This further Government payment recognises that disabled children are likely to have higher financial needs when they make the transition to adulthood. Over 4 million children now have a Child Trust Fund account, which will ensure that at age 18, all young people will have access to a financial asset. The housing market A 600 million fund to unlock stalled housing sites and provide a kick-start to house building was announced by the Chancellor, to deliver up to an additional 10,000 homes in England over the next 2 years. This package includes 100m for local authorities to build new social housing at higher energy efficient standards. The current economic climate continues to have a significant impact on housing supply. Additional, short-term, spending during the downturn will stimulate housing development as well as boost the capacity of the house building industry in the long term. Income tax Budget 2009 has announced the following income tax changes: from , there will be an additional higher rate of 50 per cent for taxable income above 150,000; from the basic personal allowance for income tax will be gradually reduced to nil for individuals with adjusted net incomes above 100,000; from there will be increases to the trust rate and dividend trust rate to match those for income tax; and the measure includes new powers to vary the income tax rates for the charges that apply to registered pension schemes. The above changes replace the announcements made at the 2008 Pre-Budget Report. The reduction of personal allowances affects those with incomes over 100,000 and the new tax rate affects those with incomes over 150,000. The additional rate of income tax, the reduction to the personal allowance and the increases to the trust rate and dividend trust rate will have effect on and after 6 April Current law and proposed revisions For , there are two main rates of income tax. The 20 per cent basic rate of income tax applies to taxable income up to 37,400. The 40 per cent higher rate applies to taxable income above 37,400. From April 2010, a 50 per cent additional rate of tax will apply to taxable income above 150,000. From there will be three rates of tax for dividends. Dividends otherwise taxable at the 20 per cent basic rate will continue to be taxable at the 10 per cent dividend ordinary rate and dividends otherwise taxable at the 40 per cent higher rate will continue to be taxable at the 32.5 per cent dividend upper rate. Dividends otherwise taxable at the new 50 per cent additional rate will be taxable at a new 42.5 per cent dividend additional rate. 5

7 From , the dividend trust rate will be increased from 32.5 per cent to 42.5 per cent and the trust rate will be increased from 40 per cent to 50 per cent. The basic personal allowance provides an amount of tax free income. All individuals entitled to the basic personal allowance receive the same amount. From , the basic personal allowance will be subject to a single income limit of 100,000. Where an individual s adjusted net income is below or equal to the 100,000 limit, they will continue to be entitled to the full amount of the basic personal allowance. From , where an individual s adjusted net income is above the income limit of 100,000, the amount of the allowance will be reduced by 1 for every 2 above the income limit. The personal allowance will be reduced to nil from this income limit instead of the two-stage reduction announced at the Pre-Budget Report. Meaning of Adjusted net income Adjusted net income is the measure of an individual s income that is used for the calculation of the existing income-related reductions to personal allowances those aged between 65 and 74, and for those aged 75 and over. Adjusted net income is calculated in a series of steps. The starting point is net income which is the total of the individual s income subject to income tax less specified deductions, the most important of which are trading losses and payments made gross to pension schemes. This net income is then reduced by the grossed-up amount of the individual s Gift Aid contributions and the grossed-up amount of the individual s pension contributions which have received tax relief at source. The final step is to add back any relief for payments to trade unions or police organisations deducted in arriving at the individual s net income. The result is the individual s adjusted net income. The tax rates for charges applying to registered pension schemes are generally linked to the highest rate of income tax. There are existing powers to vary the rates for some of these charges by Statutory Instrument. This measure includes powers to vary the rates for the remaining charges, again through secondary legislation, taking into account the new additional higher rate of income tax. Taxation of personal dividends This is likely to affect individuals who are in receipt of dividends from non-uk resident companies to make changes to the system of taxation for individuals who own foreign shares. Individuals in receipt of dividends from UK resident companies are entitled under current law to a non-payable dividend tax credit. Since 6 April 2008, individuals with shareholdings of less than 10 per cent in non-uk resident companies have also been entitled to a non-payable tax credit. From 22 April 2009, individuals with shareholdings of 10 per cent or more in receipt of dividends from non-uk resident companies will become entitled to a nonpayable tax credit, subject to certain conditions. Taxation of personal dividends: distributions from offshore funds This will affect individuals who are in receipt of distributions from offshore funds. Since 6 April 2008, individual shareholders with shareholdings of less than 10 per cent in non-uk resident companies have been entitled to a non-payable dividend tax credit. However, the tax credit was withdrawn for offshore funds as some collective investment schemes were seeking to exploit the extension by locating their cash or bond fund ranges offshore, with the intention of securing tax advantages to restore the non-payable dividend tax credit for offshore funds which are largely invested in equities. It also provides 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. These rules apply equally to all holdings in offshore funds (whether less than 10 per cent, or 10 per cent or more). These changes will have effect on and after 22 April

8 Extension of trading loss carry back for businesses This measure will affect all companies and unincorporated businesses making losses from carrying on trades, professions or vocations (referred to below as trading losses ) to extend the ability of businesses to carry trading losses back against profits of earlier years to get a repayment of tax. The measure will have effect on and after 22 April 2009 for company accounting periods ending in the period 24 November 2008 to 23 November 2010 and for tax years and for unincorporated businesses. Under current rules, businesses already have a number of mechanisms to ensure tax from profitable years is repaid through set-off against losses that arise in subsequent periods. Firstly, businesses can offset unlimited trading losses against profits in the preceding year and reclaim tax previously paid. Secondly, start-up unincorporated businesses in the early years of operation can carry trading losses back for three years. Thirdly, any business ceasing to trade can also carry trading losses back for three years. Lastly, ongoing trading losses can be offset against profits in future years. Finance Bill 2009 will extend the period for which trading losses can be carried back against previous profits. This extension 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 in tax years and by unincorporated businesses. Trade loss carry back will 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 trading losses that can be carried back to the preceding year remains unlimited. 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 50,000 limit applies separately to the unused losses of each 12 month period or tax year within the duration of the extension. For companies this means a cap of 50,000 on the extended carry back of losses incurred in accounting periods ending in the 12 months to 23 November 2009 and a separate 50,000 cap on the extended carryback of losses incurred in accounting periods ending in the 12 months to 23 November For unincorporated businesses, a separate 50,000 cap will apply to the extended carry-back of losses made in each of the tax years and Corporation Tax This change affects companies with profits above the upper relevant maximum amount (URMA) (currently 1.5 million), companies that are part of a group with profits above the URMA, and companies with profits from oil extraction and oil rights in the UK and the UK Continental Shelf ( ring fence profits ) to set the main rate of corporation tax (CT) at 28 per cent on and after 1 April The main rate of CT for companies ring fence profits will remain at 30 per cent on and after 1 April These rates will have effect on and after 1 April Small Companies This measure will affect companies with profits chargeable to corporation tax (CT) lower than the lower relevant maximum amount (LRMA) (currently 300,000), companies with CT profits between LRMA and the upper relevant maximum amount (URMA) (currently 1.5 million), and companies with profits from oil extraction and oil rights in the UK and the UK Continental Shelf ( ring fence profits ) to keep the small companies rate for all profits, apart from ring fence profits, at 21 per cent from 1 April 2009 and keep the fraction used in smoothing the difference between the main rate of CT and the small companies rate (marginal small companies rate) at 7/400. The small companies rate for ring fence profits will remain at 19 per cent from 1 April 2009 and the marginal small companies relief fraction for ring fence profits will remain at 11/400. The above measure will have effect on and after 1 April

9 Loan relationships This will affect companies that are subject to the corporation tax legislation on corporate debt (the loan relationships rules) to amend the loan relationships rules affecting connected companies. The first change amends the rules on the release of trade debts between connected companies. The second change amends the rules on the late payment of interest between connected companies. The first change will apply to releases of trade debts that take place on or after 22 April The second change will have effect for company accounting periods beginning on or after 1 April Legislation will be introduced so that, where a trade or property business debt is released, the loan relationships rules apply to the debtor as well as to the creditor. This means that if the debtor company is connected with the creditor, no tax charge arises on the debt release. If the creditor and debtor companies are not connected, the debtor is taxed (unless the release is part of a statutory insolvency arrangement) and the creditor gets relief as it does at present. The second change concerns the rule that allows a debtor company a tax deduction for interest payable to a connected creditor that is outside the loan relationships rules only on a paid basis, rather than on the accruals basis that normally applies. This late interest rule will be amended in cases where the connected creditor is a connected company (as defined in the loan relationships rules), or a company that is a close company participator in the debtor company, or where either debtor or creditor have a major interest in the other party. In such cases, the late interest rule will only apply if the creditor company is resident in a non-qualifying territory (broadly, a tax haven). If this relaxation of the rule is abused, an anti-avoidance provision will be introduced in a future Finance Bill. Rules similar to the late interest rule apply where connected and close companies issue deeply discounted securities. Equivalent changes will be made so that those rules also only apply to a creditor company that is resident in a non-qualifying territory. A company will be able to elect for the paid basis to continue for the first accounting period which begins on or after 1 April Meaning of connected Two companies are connected under the loan relationships rules if one controls the other, or they are both under common control so companies in the same group are connected. A creditor that formally releases a connected debtor from a trade debt (or a debt incurred in a UK or overseas property business) is denied a deduction for the loss on the debt, but currently the debtor may be taxed on its profit. Corporation tax: agreements to forgo tax reliefs This measure will affect groups of companies that enter into agreements with the Treasury or another Government Department or agency to surrender their rights to certain tax losses or other reliefs in connection with arrangements such as the Asset Protection Scheme to ensure that provisions of the Corporation Tax Acts do not override an undertaking by a company to surrender its rights to tax losses and other reliefs given in connection with the Government s Asset Protection Scheme, or similar arrangements designated by the Treasury. The legislation will apply to qualifying arrangements entered into on or after 22 April Capital Allowances This will affect businesses investing in plant and machinery between April 2009 and April Capital allowances allow business to deduct the costs of capital assets, such as plant and machinery, against their taxable income. They take the place of commercial depreciation, which is not allowed for tax. Since 1 April 2008 (corporation tax) or 6 April 2008 (income tax) most businesses, regardless of size, have been able to claim the new Annual Investment Allowance (AIA) on the first 50,000 spent on plant or machinery (subject to certain exclusions). Businesses have been able to claim the AIA in respect of special rate expenditure such as long-life assets, and integral features, as well as on general plant and machinery. 8

10 Legislation in Finance Bill 2009 will introduce a new temporary 40 per cent firstyear allowance (FYA) for expenditure on general plant and machinery. That is expenditure on plant and machinery that would normally be allocated to the main capital allowance pool. The temporary FYA will be available to: any individual carrying on a qualifying activity (this includes trades, professions, vocations, ordinary property businesses and individuals having an employment or office); any partnership; and any company. The temporary FYA will apply to qualifying spending incurred in the 12 month period beginning on 1 April 2009 for the purpose of corporation tax, and on 6 April 2009 for the purpose of income tax. As with previous and existing first-year allowances there are exceptions where the expenditure will not qualify for the temporary first-year allowance, the main exceptions include special rate expenditure (including long-life assets and integral features), expenditure on cars, and on assets for leasing. Enhanced capital allowances for energysaving and water efficient (environmentally beneficial) technologies This measure will affect businesses purchasing designated plant and machinery which is energy efficient, reduces water use or improves water quality. The Energy Saving and Water Efficient (environmentally beneficial) Enhanced Capital Allowance (ECA) schemes allow businesses investing in designated technologies that reduce energy consumption, save water or improve water quality to write off 100 per cent of the cost against the taxable profits of the period during which the investment was made. This measure amends the lists of technologies covered by the schemes. The changes to the schemes will have effect on and after a date to be appointed by Treasury order to be made prior to the Summer 2009 Parliamentary recess. Capital expenditure by business on plant and machinery normally qualifies for tax relief by way of capital allowances, normally given at the rate of 20 per cent a year on a reducing balance basis. Two schemes exist that provide 100 per cent first year allowances for expenditure on certain energy-saving and water efficient technologies. The qualifying technologies are published in the Lists: the Energy Technology Criteria List and Water Technology Criteria List. Taxation of Foreign Profits This will affect UK companies that are members of groups. The four elements of the foreign profits package will have the following impact: changes to the rules governing the tax treatment of distributions received apply to all companies receiving foreign or UK dividends and other company distributions; groups other than those consisting entirely of companies that are small or medium sized may be affected by the restriction of interest and other finance expense; consequential changes to the Controlled Foreign Company (CFC) rules apply to companies that are subject to the existing CFC legislation; and the repeal of the Treasury Consents rules applies generally and their replacement with a post-transaction information-reporting requirement applies to companies that undertake transactions of 100 million or more involving foreign investments. The foreign profits package will be introduced in Finance Bill 2009 after a long period of consultation and consists of four elements: dividends and other distributions received from foreign companies will largely be exempt from corporation tax (CT) and 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 that group; the CFC (superior and non-local) holding company exemptions and Acceptable Distribution Policy (ADP) exemption will be removed; and the Treasury Consents rules (that requires approval from HM Treasury before certain transactions are undertaken) will be repealed and replaced by a post-transaction information-reporting requirement. 9

11 The changes to the taxation of distributions will apply to dividends and other distributions received on or after 1 July The changes to the CFC regime have effect for accounting periods starting on or after 1 July 2009 with provision made for accounting periods that straddle this date. However, the exemption for non-local and superior holding companies may be available for qualifying companies in a transitional form until 1 July The new reporting requirement applies to transactions undertaken on or after 1 July The debt cap applies to finance expense payable in accounting periods beginning on or after 1 January Improvements to the venture capital schemes The measures will affect: investors receiving tax relief under the Enterprise Investment Scheme (EIS), Corporate Venturing Scheme (CVS) and the Venture Capital Trust (VCT) scheme; companies attracting investment under those schemes; Venture Capital Trusts; and EIS Investment Funds to make a number of improvements to the Venture Capital Schemes. For EIS, the measure: relaxes the time limits concerning the employment of money invested; removes the link to other shares of the same class issued at the same time as qualifying shares; extends the period for carry back of relief and allows the full amount subscribed (subject to the overriding limit) to be carried back; and corrects an anomaly regarding the capital gains position for investors in the event of a share for share exchange. Under the EIS, currently an investor may carry back income tax relief to the previous year by claiming that qualifying shares are treated as having been issued in the previous year. This is restricted to shares issued before 6 October and is subject to a limit of half of the subscriptions in that period, up to an overall limit of 50,000 subscribed. Finance Bill 2009 will remove these restrictions. The total investment that can be taken into account for the purposes of calculating income tax relief for any particular year will remain subject to a limit, currently 500,000 subscribed. For CVS and VCT, the measure relaxes the time limits concerning the employment of money by companies receiving investment. The measure in respect of the employment of money will have effect for EIS and CVS investments made on or after 22 April The removal of the link to other shares issued at the same time will apply to shares issued on or after 22 April 2009 and the correction of the capital gains anomaly to new holdings issued on or after 22 April In relation to the carry back of relief it will apply to the tax year and subsequent years. For VCT schemes the changes will apply to investments made out of funds raised by VCTs on or after 22 April North Sea fiscal regime This will affect oil and gas companies that operate in the UK or on the UK Continental Shelf (UKCS) to include the measures outlined below: Changes will be made to the ring fence corporation tax (RFCT) and Petroleum Revenue Tax (PRT) rules to facilitate change of use activities where North Sea assets and infrastructure are reused for purposes other than oil and gas production. The chargeable gains rules will be amended to make it easier to allow companies to transfer their UK and UKCS assets to those most able to maximise the potential of those assets. The PRT rules that provide relief for decommissioning costs will be extended to cover the situation where, as a result of licence expiry, a company is no longer a licensee. In addition, changes will be made to the PRT legislation to reduce the compliance burden and further simplify the regime. The RFCT legislation will be amended to fully align the definition of a consortium with the general corporation tax (CT) definition. The change of use measures will have effect respectively for RFCT in relation to expenditure incurred on or after 22 April 2009; and for PRT in relation to chargeable periods beginning after 30 June The 10

12 repeals and other changes to simplify the PRT regime will, where appropriate, have effect for chargeable periods beginning after 30 June The change to the RFCT legislation to modify the definition of a consortium will have effect on or after 22 April Incentivising production Legislation in Finance Bill 2009 will introduce a new Field Allowance which will reduce the rate of tax paid in respect of certain challenging new developments. Specific types of new fields will receive a field allowance which, when the field is producing, can be offset against supplementary charge. The new Field Allowance will apply to fields given development consent on or after 22 April Accelerated decommissioning relief This will affect companies that produce oil and gas in the UK and on the UK Continental Shelf (UKCS) that have entered into arrangements to incur decommissioning expenditure in advance of the decommissioning process to prevent oil and gas companies claiming tax relief for infrastructure decommissioning costs too far in advance of the actual decommissioning being undertaken. It does so by ensuring that tax relief for decommissioning will only be given in respect of those costs that relate to the work actually carried out in the accounting period. The measure will have effect on and after 22 April Life insurance companies: consultation outcomes and simplification This will affect companies and Friendly Societies carrying on life insurance business to: clarify the law relating to the tax treatment of amounts introduced by shareholders into the long term insurance fund (LTIF) of a life insurance company; restrict the Case I deduction for amounts allocated to policyholders in certain exceptional circumstances; clarify the transitional rules governing relief for repayments of contingent loans taxed under section 83ZA of the Finance Act (FA) 1989; amend the rules governing the calculation of the floor for gross roll-up business investment return to ensure consistent treatment of foreign business assets; and change the anti-avoidance rules relating to value shifting to ensure that they will not apply when a reduction in value arises as result of a transfer of long-term insurance business between companies in the same group. The changes to the tax treatment of amounts added to the LTIF will have effect for accounting periods ending on or after 22 April 2009 in respect of additions made on or after 22 April Financial services compensation scheme: Payments representing interest This will affect individuals who have received or will receive compensation from the Financial Services Compensation Scheme (FSCS) because of the default of a financial institution, such as a bank, where the compensation includes a payment in respect of accrued interest. Compensation paid by the FSCS to the customers of defaulting financial institutions has included an amount representing accrued interest from the last date interest was paid to the customer by the financial institution to the date that the financial institution defaulted (or for a fixed term deposit to the date of maturity if this is later than the date of default). Income tax payers will be charged to income tax on the amount representing accrued interest paid by the FSCS to them as part of the compensation. Legislation will be introduced in Finance Bill 2009 to ensure that the financial institution s customers are in the same position as if the accrued interest were paid by the defaulting financial institution. The measure only applies for income tax purposes because for companies, the taxation of bank deposits is within the loan relationship provisions in Parts 5 and 6 of the Corporation Tax Act The measure applies to payments made by the FSCS on or after 6 October

13 UK dividend exemption for Lloyd s corporates This will affect corporate members of the Lloyd s insurance market. Corporate members of the Lloyd s insurance market will no longer pay corporation tax (CT) on dividends and other distributions received from UK companies. This will bring them into line with general insurance companies, who are not currently chargeable on UK dividends and distributions received. These changes will apply to dividends and other distributions received on or after 1 July Group relief: Preference shares This is likely to affect groups of companies where some subsidiaries are funded in part by preference shares issued to external investors. The most commonly affected groups will be those including regulated financial institutions issuing preference shares that qualify as Tier 1 regulatory capital to change paragraph 1 of Schedule 18 to the Income and Corporation Taxes Act 1988 (ICTA) to ensure that companies issuing particular types of new preference share capital to external investors do not lose the ability to enter into arrangements to claim and surrender group relief with other members of their group. The same rules in Schedule 18 to ICTA are also used to define group relationships for other purposes, for example a chargeable gains group, or in some anti-avoidance rules. The changes will make it more difficult to inadvertently break a group structure or trigger an anti-avoidance provision through issuing a common commercial financing instrument to external investors. The changes apply to all accounting periods that commenced on or after 1 January 2008, unless an election is made to retain the existing treatment of shares issued before 18 December 2008 (or shortly after where a commitment to issue the shares was entered into before that date). Stock lending and repurchase arrangements: Stamp duty, stamp duty reserve tax and tax on chargeable gains This will affect market makers, securities dealers and financial institutions that enter into stock lending or sale and repurchase ( repo ) arrangements to provide relief from unexpected stamp duty and stamp duty reserve tax (SDRT) charges that would otherwise arise where a stock lending or repo arrangement terminates, so that stock is not returned to the originator under the terms of the arrangement owing to the entry into insolvency of one of the parties to the arrangement. As announced by the 2008 Pre-Budget Report, parallel provisions will also be introduced in Finance Bill 2009 disapplying the rule that treats the non-return of borrowed securities in these circumstances as a disposal by the lender for the purposes of capital gains tax and corporation tax on chargeable gains. The measure disapplies the stamp duty and SDRT rules that impose an SDRT charge on the borrower under a stock lending arrangement or purchaser under a repo where the arrangement terminates on the insolvency of the borrower or purchaser. Similarly, where, under a stock lending arrangement, it is the lender that becomes insolvent, the SDRT charge on the lender in respect of any collateral stock or securities provided by the borrower will also be removed. In addition, where the lender/seller buys securities to replace those lost owing to the insolvency of the borrower/purchaser, the purchase will be relieved from stamp duty or SDRT. And where the borrower under a stock loan arrangement needs to replace lost collateral securities, any replacement purchase will not incur a stamp duty or SDRT charge. The reliefs in question will apply where the insolvency of the borrower or lender occurs on or after 1 September

14 Foreign denominated losses This is likely to affect companies that compute their profits and losses in a currency other than sterling and have losses that are carried forward or back to other accounting periods. It will also affect companies that have losses originating in an accounting period computed in one currency that are then offset against profits computed for a different accounting period in a different currency to ensure that, where a company incurs a tax loss computed in a currency other than sterling and then offsets that loss (or part of that loss) against profits in a different accounting period, then the exchange rate for conversion of the losses into sterling will be the same rate as that used for conversion of those profits. When a company changes its functional currency, losses carried forward or backwards into periods across the change in the functional currency will be converted into that other functional currency at the spot exchange rate for the date of change. These losses will then be translated into sterling on the basis set out above. These changes, first announced on 18 December 2008, will apply to all accounting periods commencing on or after 29 December 2007 unless an election is made to defer the commencement date for these provisions to the first accounting period beginning on or after the date that Finance Bill 2009 receives Royal Assent. Transfers of business between Mutual Societies This is likely to affect Building Societies, Industrial and Provident Societies and Friendly Societies. Legislation in Finance Bill 2009 will introduce a power to make regulations in relation to the taxation consequences on the amalgamations of mutual societies and those arising on transfers of the whole or part of a business of a mutual society to another mutual society; to a company or to a subsidiary company of a mutual society. Regulations made under the power will have effect for transfers of business taking place on or after 22 April Tax elected funds This will affect authorised Investment Funds (AIFs) and their investors. This measure will introduce an elective regime for UK AIFs that will move the point of taxation from the AIF to the investor, so that the investor is treated as though they had invested in the underlying assets directly. The new regime will have effect on and after 1 September Offshore funds Chargeable gains and offshore funds This will affect investors in offshore funds that are transparent for the purposes of tax on income and gains to provide similar treatment to that given by section 99 of the Taxation of Chargeable Gains Act 1992 (TCGA) for investments in unit trusts to investments in other types of offshore funds which are not companies, unit trusts or partnerships. The effect of this change will be that an interest in a transparent offshore fund will be an asset for the purpose of calculating capital gains tax 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 capital gains tax on chargeable gains. The Government will also 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 United Kingdom partnerships. The new treatment will apply to investments in contract-based offshore funds on and after 1 December Elections into the new treatment can be made on and after 22 April 2009 and can be applied retrospectively back to the tax year

15 Offshore funds: other This will affect UK investors in certain offshore arrangements to change the definition of an offshore fund for UK tax purposes and amend the existing powers (in Finance Act 2008) to provide for the modernisation of the regime in regulations. Transitional rules will provide grandfathering for investors in existing arrangements. Details of the transitional rules will be included in the primary legislation. Draft legislation was published following the 2008 Pre-Budget Report and changes have been made following comments received during the consultation. The detailed rules for the operation of the offshore funds tax regime will be in regulations, as announced in Budget In order to provide sufficient time for transition, the new regime will have effect on and after 1 December Certainty on trading and investment for authorised investment funds and investors in equivalent offshore funds This will affect authorised investment funds (AIFs) and UK-resident investors in equivalent offshore funds. Legislation will be introduced to give AIFs and UK-resident investors in equivalent offshore funds certainty that defined transactions will not be treated as trading transactions for tax purposes. The legislation will set out a white list of transactions which, when undertaken by an AIF or equivalent offshore fund meeting a genuine diversity of ownership condition, will be treated as non-trading transactions. The legislation will also contain rules designed to ensure that financial traders cannot shelter profits from tax by routing them through an AIF or equivalent offshore fund. The rules applying to financial traders will not affect the tax treatment of the AIF or equivalent offshore fund. The legislation applying to AIFs will have effect on and after 1 September 2009 and the legislation applying to equivalent offshore funds will have effect on and after 1 December New tax rules for investment trust companies investing in interest bearing assets This will affect investment trust companies (ITCs) and their shareholders. This measure will introduce a new elective tax framework that will allow ITCs to invest in interest bearing assets in a tax efficient way. The rules move the point of taxation from the ITC to the shareholder, with the result that shareholders face broadly the same tax treatment as they would have, had they owned the interest bearing asset directly. The measure will have effect for any interest distributions made on or after 1 September Groups: reallocation of chargeable gains This will affect groups of companies to make it easier for groups to match gains and losses that arise on disposals of chargeable assets without the need to transfer ownership of assets within the group. The legislation will apply to losses or gains arising on or after the date that the Finance Bill 2009 receives Royal Assent. Double taxation relief on dividends This will affect UK resident companies in receipt of dividends paid by foreign companies to ensure that the reduction in the rate of corporation tax to 28 per cent does not unjustly affect the amount of double taxation relief available to companies. The measure will have retrospective effect from the financial year beginning 1 April Save as you earn process simplification This will affect banks, building societies and European institutions authorised by HM Treasury to provide Save As You Earn (SAYE) savings contracts to employees participating in HM Revenue & Customs approved SAYE share option schemes offered by companies. 14

16 It will also affect share scheme administrators providing SAYE related services to those companies to transfer the process of specifying bonus rates and early leaver interest rates on SAYE savings and of authorising savings providers from HM Treasury to HMRC. The legislation will also provide that, following a change of bonus rates, HMRC may specify in a notice of withdrawal or variation of certified savings arrangements that certain savings contracts using the previous bonus rates will be valid even though they are entered into after the date the new rates come into effect. The legislation will also modernise the process by allowing electronic communications with the banks and building societies when issuing revised or updated SAYE notifications with new bonus or interest rates. The minimum period between a date when a notice with revised SAYE certifications including interest rates is issued and the date when the new rates come into force will be reduced to 15 days. The changes will have effect on and after 29 April 2009; the day after the Budget Resolutions are passed. Corporate intangible fixed asset regime This will affect companies applying the corporate intangible regime ( the regime ) to goodwill, or to other internally generated assets, such as assets representing nonqualifying expenditure to confirm that for the purposes of the regime, goodwill includes internallygenerated goodwill. It also confirms that all goodwill is created in the course of carrying on the business in question and is subject to rules determining whether goodwill is treated as created before or after 1 April Some amendments will also be made to the definition of intangible asset and to rules determining whether assets representing nonqualifying expenditure are treated as being created before or after 1 April The legislation will have effect on or after 22 April 2009 and shall be treated as always having had effect. For example, the legislation prevents future debits in respect of goodwill where a business, which commenced before 1 April 2002, has been acquired from a related party before 22 April Anti avoidance Financial arrangements avoidance This will affect large companies involved in avoidance of corporation tax involving Intra-group convertibles and derecognition of income from derivative contracts to tackle two schemes that have been notified to HM Revenue & Customs under the avoidance disclosure rules. In the first, intra-group finance is arranged under the terms of a bond that is highly likely to convert into shares of the issuing company. The debtor company accrues a deduction for a finance cost that is greater than the finance return that the creditor company brings into account. In the second, a company derecognises in its accounts a derivative contract that is carried at fair value with the result that profits arising to the company on the contract fall out of account for tax purposes. The legislation has effect for debits and credits arising on or after 22 April Anti-avoidance: plant and machinery leasing This is likely to affect businesses leasing plant or machinery. Legislation, which was announced and published in draft on 13 November 2008, will be introduced in Finance Bill 2009 to counter avoidance involving the leasing of plant or machinery. It will ensure that: a business entering into a sale and leaseback or lease and leaseback does not gain more relief than it would have done had it obtained loan finance; tax is not avoided when a lessor grants a long funding lease; and when a long funding lease ends the lessee has obtained an appropriate amount of relief. In addition: the definitions of sale and leaseback arrangements in existing antiavoidance legislation will be amended 15

17 for consistency and to achieve their objective; and amendments will be made to ensure initial payments under a lease do not escape taxation and to ensure consistency with the taxation of chargeable gains. The measure will generally have effect for transactions entered into on or after 13 November 2008 (as previously announced); some aspects of the measure will have effect on or after 22 April Foreign exchange losses: targeted Anti-avoidance rule This will affect companies that hold investments in foreign operations subsidiaries or other business enterprises that operate in a different currency to the company. A number of tax avoidance schemes have been disclosed to HM Revenue & Customs that abuse the provisions for foreign exchange (forex) matching. Legislation will be introduced in Finance Bill 2009 to stop such schemes by providing that exchange gains or losses on borrowings or currency derivatives can only be matched if they do not arise from tax avoidance arrangements. Two specific types of scheme are targeted. The first type one way bets involves arrangements that create an allowable foreign exchange loss if a foreign currency moves in one direction, but do not give rise to a taxable gain if the currency moves in the opposite direction. The second type tries to give a company a tax deduction for a forward premium on a forward currency contract a loss dependent only on interest rates without the counterparty being taxed on a corresponding profit. The measure will apply to company accounting periods beginning on or after 22 April Where an accounting period straddles 22 April 2009, it will apply only to exchange gains or losses arising between 22 April 2009 and the end of the period. Transfers of income streams This will affect companies and individuals, including partnerships, that dispose of rights to receive future income streams without disposing of any underlying asset to ensure that receipts derived from a right to receive income (and which are an economic substitute for income) are taxed as income for the purposes of corporation tax and income tax. The legislation is the result of consultation on the use of principles-based drafting to counter arrangements that could otherwise be used to reduce tax liabilities through the sale of income streams. The new legislation sets out a rule that comprehensively taxes the sale of income streams as income, for both corporation tax and income tax purposes. As a result of the consultation changes have been made to exempt certain types of transaction. The legislation will have effect for transfers of income taking place on or after 22 April Anti-avoidance: interest relief This is likely to affect individuals who claim relief for interest payments on loans used to invest in partnerships or small ( close ) companies when this is done for the purpose of tax avoidance. As announced by the Financial Secretary to the Treasury on 19 March 2009, legislation will be introduced in Finance Bill 2009 to block schemes notified to HM Revenue & Customs (HMRC) whereby provisions that allow individuals to claim relief for interest payments are used in avoidance arrangements that guarantee that the borrower will be able to make a profit as a result of the availability of the relief. The measure has effect for interest payments made on or after 19 March Manufactured interest It is likely to affect large companies that make payments of manufactured interest. As announced by the Financial Secretary to the Treasury on 27 January 2009, legislation will be introduced in Finance Bill 2009 to prevent a recent decision of the High Court from affecting the tax treatment of real payments of manufactured interest. The legislation will ensure that the tax treatment follows the treatment of the payments in company accounts prepared in accordance with Generally Accepted Accounting Practice. 16

18 To ensure that the decision of the High Court does not have adverse consequences for the Exchequer or for taxpayers, the legislation will apply to manufactured payments made before the date of the Financial Secretary s statement as well as to those made afterwards. For deemed payments of manufactured interest, the legislation will apply only to payments made on or after 27 January Sale of lessor companies This is likely to affect companies carrying on a trade of leasing plant or machinery either alone or in partnership. Schedule 10 to FA 2006 prevents a loss of tax when a lessor company changes hands. It achieves this by calculating a charge and relief designed to recoup the tax timing advantage gained from a claim to capital allowances. The legislation ensures that the charge affects the selling group and the relief benefits the buying group to make changes to Schedule 10 to the Finance Act (FA) 2006 ("Sale of Lessor Companies") to ensure that it operates appropriately in complex transactions involving partnerships and consortia. It will also extend the period over which losses arising as a consequence of Schedule 10 can be utilised by the wider purchasing group. The legislation will have effect where the transaction takes place on or after 22 April 2009 and, in relation to losses, it will have effect where those losses are incurred in accounting periods ending on or after 22 April Offshore disclosure A New Disclosure Opportunity (NDO) for holders of offshore accounts will run until March This will give holders of these accounts the opportunity to disclose, of their own accord, if they have unpaid tax or duties and to settle debts. HMRC is also seeking to issue notices requiring financial institutions to provide information about offshore account holders. Hedging proceeds from future share issues This will affect companies that use currency derivative contracts to hedge the value of the future proceeds from a rights issue of shares against the risk of currency fluctuations. The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2004 (Statutory Instrument 2004/3256) will be amended to bring in special rules that apply when a company announces a rights issue of shares denominated in a currency other than its functional currency and enters into a currency derivative contract that seeks to hedge the risk to the value of the future share issue proceeds from currency fluctuations. Where this is the case, any exchange gain or loss on the currency derivative contract will be excluded from being brought into account for tax purposes. Any such exchange gain or loss will be permanently excluded from being brought into account unless, in the case of a gain, any part of that gain is subsequently distributed to shareholders. In that case, the gain will be brought back into charge for tax purposes in the accounting period in which the distribution takes place and to the extent that the gain has been distributed. The new rules will apply to all currency derivative contracts (with one exception see below) entered into on or after 1 January 2009 with the intention of hedging the exchange risk to the future share proceeds. Where the hedge was entered into before 10 March 2009, the new rules will only apply where it was still current on 10 March In that case, any latent exchange loss on the contract between the date it was entered into and 9 March 2009 will be taken into account for tax purposes provided there is an exchange loss when the contract is closed out. Where the final exchange loss is smaller than the latent exchange loss at 9 March 2009, the loss to be brought into account will be restricted to the final loss. Real estate investment trusts: artificial restructuring This will affect companies or groups of companies considering joining the Real Estate Investment Trust (REIT) regime providing a power to make regulations that will prevent restructuring within groups from enabling companies to meet the REIT conditions and tests when, without the restructuring, they would not. The measure will also exclude owner occupied properties from the regime. The measure will also remove an obstacle in tax legislation that 17

19 would stop potential REITs with tied premises from entering the regime. The measure will have effect on and after 22 April Living accommodation provided by reason of employment: payments of lease premiums This will affect employees who occupy living accommodation provided by reason of their employment on short term leases where a lease premium is paid to stop attempts to avoid tax on the benefit of living accommodation. The measure will apply in cases where accommodation is provided to employees by reason of their employment through the payment of a lease premium. The legislation will apply to leases entered into or extended on or after 22 April Avoidance using life insurance policies This will affect individuals who own offshore life insurance policies where a chargeable event calculation for the policy does not show a gain, the calculation is said to produce a loss, and a claim for income tax loss relief has been or is to be made to counter schemes that are designed to exploit income tax loss relief rules using offshore life insurance policies. The measure amends the rules on income tax loss relief to put beyond any doubt that such relief does not arise on these policies. This measure has effect on and after 6 April Transitional provisions may also apply to for certain transactions taking place on or after 1 April Avoidance using employment income legislation This will affect individuals who seek to abuse reliefs for deductions and/or losses connected to employment to avoid tax. This measure will have no impact on those using the reliefs who are not attempting to avoid tax to close down avoidance schemes that seek to abuse reliefs available for employment-related liabilities and losses incurred by employees and former employees during the course of employments established for the purposes of the schemes. The schemes concerned rely on the creation of highly artificial liabilities and losses through a series of arrangements which have been established for the purposes of the schemes connecting individuals and companies or trusts, some of which may be offshore. A common feature is that liabilities and losses are created through intentional acts of default in the context of contrived employments. The measure will have effect on the tax liabilities of affected persons on and after 12 January Double taxation relief avoidance: banks using manufactured overseas dividends This will affect Banks and financial institutions using avoidance schemes involving manufactured overseas dividends (MODs) to deny relief for foreign withholding tax where the recipient of a MOD has not borne the economic cost of the tax. The measure will have effect on and after 22 April Double taxation relief avoidance: credit abuse This will affect UK banks participating in the avoidance schemes described below to clarify legislation introduced in Finance Act (FA) 2005 which limits the credit for foreign tax paid on trade receipts of a bank to no more than the corporation tax arising on the relevant part of the trade profits. The measure will put it beyond doubt that this restriction applies to any banking receipt where that income is artificially diverted to a non-banking company in the bank s group. The measure will also ensure that, in calculating the amount of double taxation relief (DTR) available, a proportion of a bank s average funding costs over all its transactions must be deducted, and that this cannot be avoided by the bank allocating a specific source of funds to specific investments. 18

20 The measure will have effect on and after 22 April Double taxation relief avoidance: repayment of foreign tax This will affect companies taking advantage of tax regimes which provide for the repayment of tax following the payment of a dividend but in respect of which full credit is claimed by another group company to put beyond doubt that, where foreign tax paid under the laws of any territory is repaid, double taxation relief (DTR), whether by way of credit or deduction, will be denied or withdrawn even if the tax has been repaid to a person other than the claimant. The measure will have effect on and after 22 April Real estate investment trusts: amendments This will affect existing and future Real Estate Investment Trusts (REITs) to make the existing legislation clearer and more consistent following discussions with the industry. The measure will have effect on and after 22 April Stamp duty land tax Capital allowances and tax on capital gains: alternative finance investment bonds This will affect anyone wishing to obtain finance by issuing Alternative Finance Investment Bonds using land assets as securities under the arrangements for issuing the bonds in the United Kingdom to provide relief from the provisions of stamp duty land tax (SDLT) and the Taxation of Chargeable Gains Act 1992 for persons wishing to raise finance by using land assets in the United Kingdom. Further legislation will also set out the capital allowances consequences of the SDLT and capital gains measures. The relief from SDLT and from tax on capital gains is available in respect of land transactions whose effective date for SDLT purposes is on or after the date that Finance Bill 2009 receives Royal Assent. The capital allowances changes apply to the same transactions. Treatment of shared ownership This will affect individuals who are: seeking affordable housing, and are purchasing housing under a rent to shared ownership scheme; seeking affordable housing under a shared ownership scheme operated by a profit-making Registered Provider of Social Housing, where the scheme is assisted by public subsidy; and Registered Providers of Social Housing who receive assistance from public subsidy to: extend favourable stamp duty land tax (SDLT) treatment to purchasers under shared ownership schemes operated by profit-making Registered Providers of Social Housing, where the scheme is assisted by public subsidy; extend the SDLT relief for purchases by Registered Social Landlords (RSLs) to profit-making Registered Providers of Social Housing where the purchase is assisted by public subsidy; and simplify the SDLT treatment of purchasers under rent to shared ownership ( Rent to HomeBuy ) schemes. The provisions for rent to shared ownership schemes will have effect where the effective date of the grant of the shared ownership lease, or the declaration of the shared ownership trust, under the scheme is on or after 22 April The remaining provisions will have effect for land transactions where the effective date for SDLT purposes is on or after the date that Finance Bill 2009 receives Royal Assent. Temporary increase in thresholds This will affect individuals who are purchasing residential property between 22 April 2009 and 31 December 2009 inclusive, where the chargeable consideration for the property is no more than 175,000. The Chancellor announced a holiday from stamp duty land tax (SDLT) in September 2008, using regulation-making powers, which exempted from SDLT any acquisitions of residential property of not more than 175,000. The measure applied to acquisitions between 3 September 2008 and 2 September 2009 inclusive. 19

21 These regulations will be revoked and replaced with primary legislation in Finance Bill This legislation will raise the starting threshold for SDLT on residential property from 125,000 to 175,000 and will be time limited, applying to transactions made between 22 April 2009 and 31 December 2009 inclusive. After that date the SDLT threshold for residential property will revert to 125,000. The measure will have effect for land transactions where the effective date for SDLT purposes is on or after 22 April 2009 but before 1 January Leasehold enfranchisement This will affect leaseholders of flats wishing to acquire the freehold of their block to change the rules for the stamp duty land tax (SDLT) relief for leasehold enfranchisement by removing the requirement that the relief can only be claimed by a statutory Right to Enfranchise (RTE) Company. This change will ensure that the relief can now be claimed by all who are exercising statutory rights of leasehold enfranchisement. The measure will have effect for land transactions where the effective date for SDLT purposes is on or after 22 April Pensions: limiting tax relief for high income individuals (antiforestalling) This will affect individuals with incomes of 150,000 or more who, on or after 22 April 2009, change: their normal pattern of regular pension contributions; or the normal way in which their pension benefits are accrued; and their total pension contributions/benefits accrued ( pension savings ) exceed 20,000 a year. This will also affect scheme administrators of registered pension schemes and advisors with individuals who have changes to pension savings that are affected by this measure. The Government has announced its intention to restrict, to the basic rate of income tax, tax relief on pensions savings with effect from 6 April 2011 for people with taxable income of 150,000 or more. Legislation will be introduced in Finance Bill 2009 to prevent those potentially affected from seeking to forestall this change by increasing their pension savings in excess of their normal regular pattern, prior to that restriction taking effect. These anti-forestalling provisions will have effect for affected contributions paid under money purchase schemes on or after 22 April Taxation of payments from the financial assistance scheme This will affect members of defined benefit occupational pension schemes (often referred to as final salary schemes), where the pension scheme is no longer able to meet all its pension obligations and qualifies for assistance from the Financial Assistance Scheme (FAS). The FAS is a Government-funded scheme. It provides financial help to members of defined benefit occupational pension schemes who have lost significant amounts of their accrued rights because their scheme was wound up when it had insufficient assets. It only applies to schemes wound up between 1 January 1997 and 5 April 2005; since then the Pension Protection Fund has been performing a similar function. The FAS is not a pension scheme. It makes payments to the members of qualifying pension schemes to top up any pension payments made by the scheme, bringing the total paid up to 90 per cent of the pension entitlement, subject to an overall cap. The FAS is being extended so that it will, in the future, be responsible for making all of the payments due to qualifying members, including lump sums. This means that it will in future make payments similar to those made by a registered pension scheme to allow payments made by the FAS to be given broadly the same tax treatment as if they had been made by a registered pension scheme. This means that the individual will not be disadvantaged by incurring charges to income tax that would otherwise arise because the payment is received from a body that is not a registered pension scheme. The measure will have effect for all payments made by the FAS, whenever made. 20

22 Avoiding unintended tax consequences in relation to pension savings This will affect individuals who have taxrelieved pension savings with an insurance company in the possible circumstance where the insurer qualifies for assistance from the Financial Services Compensation Scheme (FSCS) to provide powers to make regulations to ensure that in the circumstance where the FSCS assists an insurance company, there will be broadly the same tax treatment for the resulting payments or transfers as if the FSCS had not intervened. The FSCS assistance can include transferring an individual s rights to another insurer or paying compensation to the individual. Tax rules would apply differently because the FSCS is not a registered pension scheme. This measure will ensure that the individual will not be disadvantaged because of FSCS involvement. The proposed legislation will also extend other regulation-making powers in relation to registered pension schemes by allowing regulations to apply retrospectively where they do not increase the individual s liability. The measure will have effect on and after the date that Finance Bill 2009 receives Royal Assent. Any regulations made using the powers in this measure can be backdated to have effect before Royal Assent, provided they do not disadvantage the individual. Corporate transparency: personal tax accountability of senior accounting officers of large companies This will affect large companies, large groups of companies (effectively companies other than those defined as small and medium sized in the Companies Act 2006) and their senior accounting officers. To ensure that the accounting systems in operation within large companies liable to UK taxes and duties are adequate for the purposes of accurate tax reporting, legislation will be introduced in Finance Bill 2009 to require: senior accounting officers of such companies to take reasonable steps to establish and monitor accounting systems within their companies that are adequate for the purposes of accurate tax reporting; senior accounting officers of such companies to: - certify annually that the accounting systems in operation are adequate for the purposes of accurate tax reporting; or - specify the nature of any inadequacies and confirm that those inadequacies have been notified to the company auditors; and such companies to notify HM Revenue & Customs (HMRC) of the identity of the senior accounting officer. These new obligations will be supported by penalties chargeable respectively on the senior accounting officer personally and on the company for a careless or deliberate failure to the obligations set out above, and for the giving of a carelessly or deliberately incorrect certificate or notification. These obligations will apply only to returns due to be made for accounting reference periods beginning on or after the date that Finance Bill 2009 receives Royal Assent. It may be necessary to consider appropriate transitional arrangements. Individual Savings Accounts (ISAs): increase in investment limits This will affect people aged 50 and over and all individuals who invest in 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 to people aged 50 and over in and for all ISA investors from onwards. Raising the ISA limits for people aged 50 and over for will have effect on and after 6 October 2009, and raising the ISA limit to the same level for all ISA investors will have effect on and after 6 April Charities: substantial donors regulations This will affect charities which receive donations between 100,000 and 150,000 from a particular donor in a six year period, and the individuals and companies who make those donations. 21

23 The substantial donors rules potentially apply to all charities carrying out transactions with their largest donors (where tax relief is available in respect of their donation(s)). The rules tackle those who influence or set up charities with a view to avoiding tax rather than with any charitable intent. The measure increases the threshold of relievable gifts that a person can make before becoming a substantial donor to a charity. The measure will have effect on and after 23 April UK personal allowances and reliefs for non-resident individuals This will affect individuals who are not resident in the UK, but who claim UK personal allowances and reliefs as Commonwealth citizens. Individuals who are not resident in the UK normally have no entitlement to claim UK personal allowances and reliefs for income tax. There is a limited range of circumstances under which non-resident individuals may benefit from UK personal allowances and reliefs. This includes being a Commonwealth citizen. HM Revenue & Customs have been advised that this is not compliant with the Human Rights Act. Legislation will therefore be introduced in Finance Bill 2009 to withdraw the entitlement for non-resident individuals who currently qualify for UK personal allowances and reliefs from income tax solely by virtue of being a Commonwealth citizen. The vast majority of individuals affected will still benefit through other means, for example Double Taxation Treaties. The legislation will have effect on and after 6 April The remittance basis: minor amendments This will affect individuals who are resident but not domiciled, or not ordinarily resident, in the UK for tax purposes. Individuals who are resident but not domiciled or not ordinarily resident in the UK have the option of using the remittance basis of taxation. This allows them to pay UK tax on their foreign income only when it is brought into the UK, rather than on the arising basis of taxation which taxes their worldwide income as it arises. Finance Act 2008 introduced significant changes to the remittance basis regime which became effective from 6 April Following detailed consultation with external stakeholders, Finance Bill 2009 will introduce further minor changes to these rules. These are designed to make the rules simpler to operate in practice and to ensure the legislation effectively delivers its policy objectives. The changes which apply to individuals with small amounts of overseas employment income, individuals with less than 2,000 of unremitted foreign income and gains for a tax year, individuals with no UK tax liability and no remittances in a tax year, exempt property and Gift Aid donations will have effect on and after 6 April The remaining changes will have effect on and after 22 April Publishing the names of deliberate tax defaulters This will affect taxpayers (individuals, businesses and companies) who are penalised for deliberately understating tax due, or overstating claims or losses, of more than 25,000. It will also affect taxpayers who are penalised for deliberately failing to notify HM Revenue & Customs (HMRC) when required to do so, leading to a loss of tax of more than 25,000. Finally, it will affect taxpayers who are penalised for deliberately committing certain VAT and excise wrongdoings, leading to a loss of tax of more than 25,000. Those who make an unprompted disclosure or a full prompted disclosure within the required time will not be affected. This measure will not have effect for tax credits 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. Names will not be published of those who make a full unprompted disclosure or a full prompted disclosure within the required time. 22

24 Details will be published quarterly within one year of the penalty becoming final and will be removed from publication one year later. The new provisions will be brought into effect by Treasury Orders with the date that they have effect specified in the Orders. No details of deliberate defaults committed prior to the legislation becoming effective will be published. Cars Changes to company car tax from This will affect employees who pay income tax on a car that has been provided for their private use by their employer. Employers who pay Class 1A National Insurance contributions on the taxable benefit of a company provided car to: set the rates of company car tax for and subsequent years; and abolish the 80,000 price cap used to determine the cash equivalent of the car benefit charge, from The discounts given to cars using various alternative fuels will be abolished from by revoking secondary legislation (the relevant regulations are the Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) Regulations 2001 (SI 2001/1123)). The legislation will have effect on and after 6 April Modernising tax relief for business expenditure on cars This will affect all businesses that buy or lease cars. Budget 2008 announced the abolition of the expensive cars capital allowances rules and the associated restrictions on deductions for car hire expenses, to be replaced by rules with an environmental focus (the tax treatment depending on the car s CO2 emissions). The detail of the proposed changes was published, with draft legislation, in a technical note in December On 1 April 2009 the Government confirmed the changes and published revised draft legislation which had been amended in the light of comments made in response to the technical note. This included new anti-avoidance rules. The new rules will generally have effect for expenditure incurred (or leases entered into) on or after 1 April 2009 for businesses in the charge to corporation tax, and on or after 6 April 2009 for businesses in the charge to income tax. Hydrocarbon oils: duty rates This will affect businesses producing and importing hydrocarbon oils and alternative fuel products. Legislation will be introduced in Finance Bills 2009 to 2013 to amend fuel duty rates. The 2009 changes have effect on and after 1 April 2009 or 1 May 2009 and 1 September Changes in future years will have effect on and after 1 April in that year. Vehicle scrappage scheme The Government announced the introduction of a temporary vehicle scrappage scheme. 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 twelve months. The Government will set aside 300million for this scheme with funding matched by manufacturers participating in the scheme. Value Added Tax Simplifying the procedure for opting to tax: Land and buildings This will affect any business that wishes to opt to tax (i.e. to apply VAT to supplies in relation to) land and buildings on which they have made previous exempt supplies. The measure simplifies the procedure for opting to tax supplies of land and buildings, in respect of which taxpayers have made previous exempt supplies. It will be achieved through the replacement of an existing automatic permission condition (APC) for taxpayers that would otherwise need to seek permission from HM Revenue & Customs (HMRC) before opting to tax land or buildings. In order to further reduce the need for taxpayers to contact HMRC when opting to tax such supplies, HMRC will withdraw two related informal Extra-statutory Concessions, and partially regularise one of them. The new APC will have effect on and after 1 May The informal concessions will 23

25 continue to apply for a further 12 months until 30 April 2010, after which, one will continue, in part, while that area of law is reviewed and the remainder will be withdrawn. Reduced rate for child car seat bases Suppliers and consumers of children s car seat bases. The 5 per cent reduced rate of VAT for children s car seats will be extended to include bases for such seats. The reduced rate will have effect on and after 1 July Changes in fuel scale charges This will affect any businesses which recover input tax on fuel used for private motoring. This measure amends the VAT fuel scale charges for taxing private use of road fuel, to reflect changes in fuel prices. Businesses must use the new scale charges from the start of their next prescribed accounting period beginning on or after 1 May Increased turnover thresholds for Registration and deregistration This will affect businesses whose taxable turnover is close to the current VAT thresholds for registration and deregistration. The measure increases the taxable turnover threshold, which determines whether a person must be registered for VAT, from 67,000 to 68,000. The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from 65,000 to 66,000. The existing conditions for determining entitlement or liability to deregistration remain unchanged. The registration and deregistration threshold for relevant acquisitions from other European Union Member States will also be increased from 67,000 to 68,000. The new registration and deregistration thresholds will have effect on and after 1 May Change of standard rate This will affect all businesses registered for VAT. This measure will return the standard rate of VAT to 17.5 per cent from 1 January The 2008 Pre-Budget Report announced a temporary reduction in the standard rate of VAT to 15 per cent for a 13 month period from 1 December 2008 to 31 December The reduction was implemented by secondary legislation effective for 12 months. Legislation will be introduced in Finance Bill 2009 for the 15 per cent rate to apply during December 2009 and for the rate to revert to 17.5 per cent on 1 January The measure also provides for minor amendments to the powers contained in the VAT Act 1994 (VATA) to implement a temporary change to the standard rate and for related changes to the Agricultural Holdings Act 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 per cent, such as domestic fuel and power, are not affected by this change. The 17.5 per cent rate will have effect on and after 1 January The other changes to VATA will have effect on and after the date on which the Finance Bill 2009 receives Royal Assent. Change of standard rate: antiforestalling legislation This will affect organisations unable to fully recover the VAT they incur that enter into schemes or arrangements to avoid the effect of the standard rate of VAT reverting to 17.5 per cent. Targeted legislation will be introduced in Finance Bill 2009 to counter schemes that purport to apply the 15 per cent VAT rate to goods or services to be supplied on or after the date that the rate returns to 17.5 per cent. The measure provides that in certain circumstances a supplementary charge to VAT of 2.5 per cent will be due on supplies of goods or services on which VAT of 15 per cent has been declared. The supplementary charge will have to be accounted for on the date that the VAT rate reverts to 17.5 per cent. The scope of the legislation was announced by the Financial Secretary to the Treasury in 24

26 two Written Ministerial Statements of 25 November 2008 and 31 March The legislation will have effect from the dates detailed below. Exemption for gaming participation fees and other miscellaneous amendments This will affect anyone making a gaming machine available for play, casinos, and any business, club or institution offering nonremote or remote bingo or other games of chance. These measures: remove VAT on participation fees for playing bingo and other games of chance (participation fees are charges that a gaming operator makes to customers for participating in gaming); increase the money prize limit for bingo duty exemption that may be offered on small scale amusements provided commercially at, for example, family entertainment centres and adult gaming centres from 50 to 70; increase the rate of bingo duty to 22 per cent; remove the need to list individual games for the purposes of gaming duty and extend the scope of gaming duty to include charges for commercially provided equal chance gaming; raise the gross gaming yield (GGY) bandings for each gaming duty band in line with inflation; extend the scope of remote gaming duty to include remote bingo and remove remote bingo from the scope of bingo duty; and clarify the existing excise definitions of gaming and gaming machine. VAT will be removed from participation fees on and after 27 April The increase in the money prize limit for small scale amusements will have effect for bingo played on and after 1 June The bingo duty increase will have effect for any accounting period beginning on or after 27 April Gaming duty will have effect for charges made in connection with equal chance gaming in casinos on and after 27 April With effect on and after 27 April 2009 dutiable gaming for the purposes of gaming duty will no longer depend on games individually specified in law. Cross-border VAT changes 2010: place of supply of services rules This will affect businesses involved in cross border supplies of services, either as a supplier or recipient. This measure will introduce changes to the place of supply of service 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. The measure forms part of a package of changes to simplify and modernise the VAT system for cross-border trading and to counter fraud that will come into effect from 1 January 2010 across the EU. The package includes: new time of supply rules for services; European Sales List (ESL) reporting for supplies of cross-border services and changes to ESLs for goods; and a new electronic refund procedure for VAT incurred in other EU Member States. These changes will be phased in to have effect on 1 January 2010, 1 January 2011 and 1 January Cross-border VAT changes 2010: time of supply rules This will affect businesses receiving crossborder supplies of services in the UK, who are required to account for the VAT on those supplies as a reverse charge. This measure makes changes to the time of supply rules for cross-border supplies of services. The changes will affect supplies treated as made in the UK by the person who receives them. The time of supply determines when VAT is to be brought to account. 25

27 The changes are linked to the introduction of EC Sales Lists (ESLs) for services. They are intended to harmonise the reporting of cross border supplies by the supplier (on an ESL) with the inclusion of the supply (by the customer) on the VAT return. There are other related changes to the place of supply of services and the VAT refund scheme The changes will have effect on and after 1 January Cross-border VAT changes 2010: EC sales lists This will affect businesses that supply goods and/or services to business customers in other EU countries where the place of supply of those services is the customer s country and the customer is therefore required to account for VAT under the reverse charge procedure. 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. It will relate only to services on which the customer is required to account for a reverse charge in their country. The ESL should include the following information: the VAT registration number of the businesses to which the services were supplied; and the total value (excluding VAT) of those supplies to each of these businesses. Further secondary legislation will be introduced later in 2009 to enable HM Revenue & Customs (HMRC) to meet a new obligation to exchange information with other EU Member States more quickly to counter fraud. This will: reduce the time available to business to submit ESLs from the current six weeks to 14 days for paper and 21 days for electronic submission; reduce the length of time available for HMRC to collect, process and exchange ESL data with the tax administrations in other Member States to one month in total; and require monthly ESLs for goods where the value exceeds 70,000 in a quarter. The measure forms part of a package of changes to simplify and modernise the VAT system for cross-border trading and to counter fraud that will come into effect from 1 January 2010 across the EU. This package includes: new place of supply rules for services; new time of supply for cross-border services; and a new electronic refund procedure for VAT incurred in other EU Member States. The changes will have effect on and after 1 January Cross-border VAT changes 2010: VAT refund procedure This will affect UK businesses that incur VAT in other EU countries. Businesses established in other EU countries that incur VAT in the UK. A new electronic VAT Refund procedure is being introduced across the EU from 1 January 2010 to replace the current paperbased system. From 1 January 2010 businesses established in the UK will submit claims for overseas VAT electronically on a standardised form to HM Revenue & Customs (HMRC) rather than direct to the Member State of Refund. The main changes from the paper-based system are: businesses will be able to submit claims up to nine months from the end of the calendar year in which the VAT was incurred, rather than six months as at present; tax authorities will have four months, rather than six months, to make repayments, unless further information is requested in which case the deadline extends up to a maximum of eight months; the Member State of Refund will pay interest in cases where the business meets all its obligations but deadlines are not met by the tax authorities; and all EU Member States will be required to afford a right of appeal against nonpayment in accordance with the procedures of the Member State of Refund. Similarly, overseas businesses will make their claims for UK VAT through the electronic interface in the EU Member State where their business is established. This forms part of a package of changes to simplify and modernise the VAT system for cross-border trading and to counter fraud that will come into effect from 1 January 2010 across the EU. 26

28 The package includes: new place of supply rules for services; new time of supply for cross-border services; and European Sales List (ESL) reporting for supplies of cross-border services and changes to ESL reporting for goods. The measure will have effect for claims made on or after 1 January Landfill tax and climate change Landfill tax: standard rate This will affect businesses registered for landfill tax. Legislation will be included in Finance Bill 2009 to increase the standard rate of landfill tax by 8 per tonne to 48 per tonne. The new 48 per tonne rate will have effect for any standard rated disposal of waste made, or treated as made, on or after 1 April Landfill tax: taxable disposals of waste at a landfill site This will affect businesses registered for landfill tax. Legislation in Finance Bill 2009 and associated secondary legislation will: make certain uses of material on a landfill site subject to tax, in order to address the situation, arising from a recent Court case, that uses of waste are not taxable; remove provisions which stand to cause confusion in the light of the Court case; protect HM Revenue & Customs (HMRC s) access to the information necessary to determine whether a taxable disposal has taken place; and provide that the tax return form can be prescribed in a public notice. The arrangements provided for by the legislation will come into effect on 1 September Climate change levy: restricted entitlement to levy relief for plastics sector This will affect manufacturers of certain plastic products. Climate change agreements (CCAs) provide facilities in energy intensive sectors with entitlement to claim relief from climate change levy in return for making reductions in their emissions and / or energy use. CCAs are agreed between the relevant sector association and the Department of Energy and Climate Change (DECC). A restricted entitlement to claim this relief, applying to supplies of electricity and liquefied petroleum gas only, is being introduced for facilities manufacturing certain plastic products. This restricted entitlement will ensure compliance with State aid rules introduced in 2008 and enable DECC to extend eligibility to enter the CCA scheme to certain manufacturers in this sector. The new provision will have effect on and after the date that Finance Bill 2009 receives Royal Assent. However, the plastics sector will be unable to enter into a CCA with DECC until regulations, laid by DECC, are in force. Climate change levy: recovery of relief This will affect facilities that enter into a climate change agreement (CCA). CCAs provide facilities in energy intensive sectors with an entitlement to claim up to 80 per cent relief from climate change levy in return for making reductions in their emissions or energy use. CCAs are agreed between the relevant sector association and the Department of Energy and Climate Change (DECC). The measure introduces a mechanism to enable HM Revenue & Customs to recover levy where a facility that claims relief from levy fails to meet its target(s) under the scheme, and is in a sector that fails to meet its sector level target(s) for the same period. Recovery, when applied, would be proportionate to the extent to which the facility had failed to meet its target(s). The recovery mechanism will apply to CCA certification periods starting on or after 1 April Climate change levy: low value solid fuel This will affect suppliers and consumers of low value solid fuel. Supplies of low value solid fuel valued at no more than 15 per tonne will become subject to climate change levy. The measure will have effect for relevant supplies made on or after 1 January

29 Changes to customs powers This is likely to affect International travellers using major airports to clarify when HM Revenue & Customs (HMRC) officers and, following Royal Assent of the Borders Citizenship and Immigration Bill, officers of the UK Border Agency (UKBA) can use their powers to check EU travellers and to verify whether travellers are arriving from the EU. The changes will have effect on and after the date that Finance Bill 2009 receives Royal Assent. HMRC Harmonisation Interest harmonisation This will affect taxpayers who do not pay their tax liabilities on time, those who overpay their tax and those who receive a refund from HM Revenue & Customs (HMRC) for: income tax, corporation tax (CT), VAT, sums due under Pay as you Earn (PAYE), Class 4 National Insurance Contributions (NICs) and the Construction Industry Scheme (CIS); environmental taxes (aggregates levy, climate change levy and landfill tax); excise duties (alcohol, fuel, tobacco, oils) gambling and air passenger duty); stamp duties (stamp duty land tax and stamp duty reserve tax); and inheritance tax, insurance premium tax, pension schemes and petroleum revenue tax (PRT) to create a harmonised interest regime for the first time for all taxes and duties administered by HMRC (listed above) with the exception of CT and PRT. The legislation makes provision for the automatic setting and implementation of interest rate changes. This will replace the current range of interest regimes. It is expected that the legislation to apply the harmonised interest regime to CT and PRT will be introduced in Finance Bill For those taxes where HMRC currently charge and pay interest, rates will be aligned by Treasury Order and will have effect shortly after the date that Finance Bill 2009 receives Royal Assent. Implementation of interest harmonisation requires changes to HMRC s computer systems and is to be staged over a number of years. Interest on late payments of in year PAYE is expected to be introduced, using a risk based approach, from April The new provisions will be brought into effect by Treasury Orders which will specify the dates from which they have effect. Deterrents and safeguards: penalties for late filing of returns and late payment of tax This will affect taxpayers who do not file their tax returns or pay their tax liabilities on time for: income tax, corporation tax (CT), Pay as you Earn (PAYE), National Insurance Contributions (NICs) and the Construction Industry Scheme (CIS); stamp duty land tax (SDLT) and stamp duty reserve tax (SDRT); and inheritance tax (IHT), pension schemes and petroleum revenue tax. This measure will not have effect for tax credits to reform penalty regimes for late filing of tax returns and late payment of tax. The new regimes will replace the current variety of penalties and will treat late payment and late filed returns separately. Whilst broadly aligned across the taxes listed above, they are modified for PAYE and CIS. The measure includes applying penalties for the first time to all employers who are late in making monthly PAYE and NICs payments and companies paying CT late. It provides for removing late payment penalties where taxpayers have agreed a time to pay arrangement with HMRC whilst creating a more robust response to prolonged and repeated delay. Further explicit provision is included for the right of appeal against all penalty decisions using a common formulation for reasonable excuse. Deterrents and safeguards: compliance checks This will affect Individuals and businesses who are involved with the environmental taxes (aggregates levy, climate change levy and landfill tax), insurance premium tax (IPT), stamp duty land tax (SDLT) and stamp duty reserve tax (SDRT), inheritance tax (IHT) and petroleum revenue tax (PRT). 28

30 2009 to apply the compliance checking framework introduced by Schedules 36, 37 and 39 to the Finance Act (FA) 2008 to a number of other taxes which HM Revenue & Customs (HMRC) administers. A number of specialist powers which are no longer needed, as a result of the 2008 legislation, will be repealed and a penalty introduced where a person carelessly or deliberately provides inaccurate information or a document that contains an inaccuracy. Such a penalty was previously provided for under section 98(2) of the Taxes Management Act There will be the following elements: aligned and modernised record-keeping requirements; new inspection and information powers including a modernised HMRC valuation power; better aligned time limits for making tax assessments and claims; and repeals. The repeal of specialist information powers will be introduced by secondary legislation. The intention is that the relevant order will be laid once Finance Bill 2009 receives Royal Assent. 6. The record keeping requirement, information and inspection powers will be brought into effect by Treasury Orders with the date they have effect specified in the Orders. This is expected to be 1 April Deterrents and safeguards: payments, repayments and debt This will affect individuals and companies who wish to spread their tax payments over time, those who have not met their obligations to pay what they owe on time, and companies and businesses required by HM Revenue & Customs (HMRC) to provide up to date addresses for debtors. Three separate changes to the current law will be introduced in Finance Bill 2009 to: introduce voluntary managed payment plans (MPPs). These would allow taxpayers to spread their income tax or corporation tax payments equally over a period straddling the normal due dates; allow HMRC to collect small debts it is owed through the Pay As You Earn (PAYE) system; and provide a third party information power requiring companies and businesses to supply HMRC with contact details for people who are in debt to HMRC with whom the Department has lost contact. The legislation for MPPs will have effect on and after the date that Finance Bill 2009 receives Royal Assent. Making MPPs available require necessary changes to HMRC s computer and accounting systems. They will not be introduced before April HMRC will ensure that businesses are given sufficient notice ahead of introduction. The collection of small debts through PAYE will require changes to HMRC s systems, and is likely to begin from April HMRC will ensure that businesses are given sufficient notice ahead of introduction. The third party information power to trace missing debtors will have effect on and after the date that Finance Bill 2009 receives Royal Assent. Amusement machine licence duty: changes to rates and machine categories This will affect anyone who provides a gaming machine for play in the UK to increase the amount of amusement machine licence duty (AMLD) for all categories of gaming machines. The legislation will also make additional classes of gaming machines exempt from AMLD, increase the stake and prize levels for Category C machines and make changes to special licences and seasonal licences. The new duty amount for gaming machines will have effect for any licence applications received at HM Revenue & Customs (HMRC) Greenock accounting centre after 4pm on 22 April The other changes will have effect on 1 June Withdrawal of the warehousing for export drawback scheme for alcoholic liquors This will affect persons claiming repayment of duty on duty paid consignments of alcoholic liquors that are warehoused for export. 29

31 The measure withdraws the warehousing for export (WFE) drawback scheme for alcoholic liquors. Other drawback schemes remain unchanged. This measure is part of the Government s renewed Tackling Alcohol Fraud strategy, also announced in Budget Further information on this can be found on the HM Revenue & Customs (HMRC) website. Alongside this change is a technical amendment to the drawback provisions allowing HMRC to recover drawback by assessment where the claim is found to be ineligible. Previously such monies were recovered by HMRC on demand. This change now makes such recovery of drawback an appealable matter bringing drawback recovery in line with other areas of excise law. Alcoholic liquors warehoused for export on or after 1 June 2009 will not be eligible for repayment of excise duty. The technical amendment will have legal effect from the same day. Tobacco products duty: rates This will affect tobacco manufacturers and importers of tobacco products (i.e. cigarettes, cigars, hand-rolling tobacco, other smoking tobacco and chewing tobacco) to increase the rates of duty on tobacco products imported into, or manufactured in, the United Kingdom. The changes will represent an increase of 2 per cent on the current duty levels. The rate increase will have effect on and after 6pm on 22 April Alcohol duty: rates This will affect manufacturers, importers, distributors, retailers and consumers of alcohol products (spirits, beer, cider, wine and made-wine). All duty rates for alcohol will rise by 2 per cent from their current levels. Legislation will be introduced in Finance Bill 2009 to provide for these changes in duty rates. The impact of the changes on retail prices for typical alcoholic drinks is equivalent to: 13 pence on a 70cl bottle of spirits; 1 pence on a pint of beer; 1 pence on a litre of still cider; 4 pence on a 75cl bottle of sparkling cider; 4 pence on a 75cl bottle of wine/made wine; and 5 pence on a 75cl bottle of sparkling wine. These legislative changes will have effect on and after 23 April Reclaiming income tax, capital gains tax and corporation tax overpayments This will affect income tax, capital gains tax (CGT) and corporation tax (CT) payers to provide a means of reclaiming overpayments of income tax, CGT and CT 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 Furnished holiday accommodation HMRC have issued a Technical Note on the treatment of furnished holiday accommodation. Landlords with income from furnished holiday accommodation in the UK are currently treated as if they are trading for certain tax purposes, as long as they satisfy certain tests, under the Furnished Holiday Lettings (FHL) rules. Landlords with income from furnished holiday accommodation elsewhere in the European Economic Area (EEA) cannot currently qualify for this treatment. They were treated instead in the same way as landlords of other types of overseas property, under the property income rules. This difference may not be compliant with European law. The Government has decided it should repeal the FHL rules from But until the FHL rules are repealed, HMRC will regard the FHL rules as applying to furnished holiday accommodation elsewhere in the EEA. 30

32 Repeal of the FHL rules The FHL rules will be repealed from This repeal will affect properties situated in the UK and those situated elsewhere in the EEA. What has changed? Until now, the FHL rules have only applied to furnished holiday accommodation situated in the UK. HMRC will now treat the FHL rules as including furnished holiday accommodation elsewhere in the EEA. Therefore, if an EEA property satisfies all the other qualifying conditions, it will be a qualifying FHL property for tax purposes. Who is likely to be affected? Individuals, partnerships and companies who let furnished holiday property situated within the EEA (but outside the UK), and who are liable to UK tax on the income and capital gains from the property. This change does not affect those who let furnished holiday property situated outside the EEA. What are the Furnished Holiday Lettings (FHL) rules? The letting of property is not a trade. However, the Furnished Holiday Lettings rules allow landlords of furnished holiday properties, which satisfy certain conditions, some of the tax treatments available to traders. Under the FHL rules, landlords are treated as though their qualifying FHL business is a trade for the following purposes: loss relief; capital allowances; Landlords Energy Saving Allowance (LESA); certain capital gains reliefs (including business asset roll-over relief, entrepreneurs relief, relief for gifts of business assets, relief for loans to traders and exemptions for disposals of shares by companies with a substantial shareholding); and relevant earnings when calculating the maximum relief due for an individual s pension contributions. Trade credit Trade credit insurance The Government announced a 'top-up' trade credit insurance scheme to help UK businesses maintain their finances in the current economic climate. Under this scheme, the Government will offer to top up private sector trade credit insurance provision if insurers reduce cover from any business operating in the UK. Cover provided under this scheme will be time-limited and capped at 5 billion, providing a real breathing-space for businesses to adjust to changing circumstances. Further detail on the trade credit insurance top-up scheme can be found at: Export Credits Guarantee Department Letter of Credit scheme The Government announced that the Export Credits Guarantee Department (ECGD) will shortly consult on a new facility to provide Government support for short-term trade finance through sharing risks with banks in confirming letters of credit. This facility will give exporters greater certainty of payment when selling goods in difficult markets. Digital Britain The Budget announced that the Government will pursue Universal Service in broadband at 2 Megabits per second alongside further support to promote broadband take-up and basic digital skills. The Budget also announced a review of the powers and duties of Ofcom to ensure it can strike the right balance between delivering competition and promoting investment and confirms approval for Digital Region, a 100 million project led by Yorkshire Forward that will roll-out next-generation broadband to South Yorkshire. Redundancy payments Budget 2009 has announced that the maximum of a week's pay for statutory redundancy payment purposes will increase from 350 to 380. Accordingly, the maximum statutory redundancy payment will rise from 10,500 to 11,400. However, the budget speech is silent about whether the 31

33 maximum for an unfair dismissal basic award will also increase - it looks like that will stay at 350 (unless added in afterwards when the SI is drafted) and the Chancellor was silent on when this change will come into effect. Providers will receive a subsidy for offering sustained employment and training to young people who have been out of work for 12 months, giving them the skills and experience they need for a permanent career in the sector. Insolvency consultation The Budget announced that the Insolvency Service will launch a consultation in June 2009 on measures to help companies in financial difficulties. In addition, to prevent creditors from being unfairly treated through the abuse of pre-pack sales, Budget 2009 announced that this Summer the Insolvency Service will publish the first of a series of regular reports on the monitoring of pre-pack sales. Employment Jobcentre Plus funding Budget 2009 announced that an additional 1.7 billion will be set aside for the Department for Work and Pensions over the next two years to ensure Jobcentre Plus and Flexible New Deal capacity is in place to respond effectively to rising unemployment. The effectiveness of this support helps ensure that most people who become unemployed find work again very quickly 25% within a month and over half within 3 months Support for individuals who have been unemployed for 12 months The Government is introducing additional support for the long term unemployed, building on the extra support now available to those unemployed for over 6 months. The package will offer guaranteed support to year olds who have been unemployed for 12 months, to prevent them becoming detached from the labour market. As part of this, the Government will allocate funding for Local Authorities and voluntary sector partners to provide 100,000 new jobs in socially useful activity and a further 50,000 jobs in areas of dense unemployment across the country. It is expected that 10% of these will be green jobs. The guarantee will also offer new training courses, and Community Work placements. Budget 2009 also announced CareFirst, offering 50,000 traineeships for young people in the care sector. In the first half of last year, there were over 100,000 job vacancies in social care. The scheme will support providers to recruit young people to this growing sector, whilst providing opportunities for those in need of work. 32

34 Allowances, Reliefs and Rates For your convenience, the following Tables set out the allowances, reliefs and rates of taxation. Some of these were announced today. Personal Allowances The personal allowances for and are as follows. NATIONAL INSURANCE CONTRIBUTIONS Lower earnings limit, primary class 1 Upper earnings limit, primary class a week 95 a week 770 a week 844 a week Upper accruals point Not 770 a week applicable Primary threshold 105 a week 110 a week Secondary threshold 105 a week 110 a week PERSONAL ALLOWANCES per year (unless stated) Personal allowance (age under 65) 6,035 6,475 Personal allowance (age 65-74) Personal allowance (age 75 and over) Married couple s allowance* (aged less than 75 and born before 6/4/1935) Married couple s allowance* (age 75 and over) Married couple s allowance* (minimum amount) Income limit for agerelated allowances 9,030 9,490 9,180 9,640 6,535 ** see below 6,625 6,965 2,540 2,670 21,800 22,900 Blind person s allowance 1,800 1,890 Employees primary class 1 rate Employees contracted-out rebate Married women s reduced rate Employers secondary class 1 rate Employers contractedout rebate, salaryrelated schemes Employers contractedout rebate, moneypurchase schemes 11% on 105 to 770 a week 1% above 770 a week 11% on 110 to 844 a week 1% above 844 a week 1.60% 1.60% 4.85% on 105 to 770 per week 1% above 770 a week 12.8% on earnings above 105 a week 4.85% on 110 to 844 a week 1% above 844 a week 12.8% on earnings above 110 a week 3.70% 3.70% 1.40% 1.40% *Married couple s allowance is given at the rate of 10% **In the tax year, all claimants in this age group will become 75 at some point during the year and will then be entitled to the higher rate of the allowance for those aged 75 or over. Tax Rates INCOME TAX: TAXABLE BANDS Rate Basic rate Higher rate 40% (20% *) 0 to 34,800 (20% *) 0 to 37,400 Over 34,800 Over 37,400 NOTES: *There is a 10% starting rate for savings income only, of 2,440 for ). If an individual s taxable non-savings income is above this limit then the 10% savings rate will not be applicable. There are no changes to the 10% dividend ordinary rate or the 32.5% dividend upper rate. ** From April 2010, a new higher rate of income tax of 50% will be introduced for those with incomes over 150,000. National Insurance Contributions Class 2 rate Class 2 small earnings exception Special class 2 rate for share fishermen Special class 2 rate for volunteer development workers 2.30 a week 4,825 a year 2.95 a week 4.50 a week 2.40 a week 5,075 a year 3.05 a week 4.75 a week Class 3 rate 8.10 a week a week Class 4 rate 8% 8% Class 4 lower profits limit Class 4 upper profits limit Class 4 rate above upper profits limit 5,435 a year 40,040 a year 5,715 a year 43,875 a year 1% 1% NOTE: From April 2011, employer, employee and selfemployed rates will rise by 0.5% 33

35 Pensions On 6 April 2006 (known as A-Day) new tax rules for all pensions came into force. These new rules are intended to encourage us all to save more for our retirement. Amongst the changes that came in on 6 April 2006 were significant increases in the maximum amount an individual can put into a pension without tax penalty (the Annual Allowance), and a lifetime allowance being the value of pension savings anyone can draw in their lifetime without a tax penalty. The table below shows the allowance levels from A-Day up to 2010/11. There were also changes to the amount that can be taken as a tax free lump sum at retirement (from A- Day, it is basically 25% of total pension benefits) and the minimum age for taking pension benefits (from A-Day, 50, increasing to 55 from 6 April 2010). PENSIONS - ANNUAL AND LIFETIME ALLOWANCES Tax Year Annual Allowance Lifetime Allowance 2006/07 215,000 1,500, /08 225,000 1,600, /09 235,000 1,650, /10 245,000 1,750, /11 255,000 1,800,000 Single Person Couple (if wife is a noncontributor) STATE PENSIONS * per week per week per week per week NOTE * The Pre-Budget 2008 announced a payment of 60 to all pensioners in 2009 which is equivalent to bringing forward the April increase in the basic State Pension for a single pensioner to January Standard minimum income guarantee: PENSION CREDIT Single Couple Child Benefit and Guardian s Allowance The rates of Child Benefit and Guardian s Allowance are as follows: CHILD BENEFIT AND GUARDIAN'S ALLOWANCE (PER WEEK) * Eldest/only child Other children Guardian s Allowance NOTE: The Pre-Budget 2008 brought forward the April 2009 increase in Child Benefit Rates to January The Guardian s allowance did not increase until April 2009 (as originally scheduled). Child and Working Tax Credit Rates and Child Benefit The rates are: TAX CREDITS Working Tax Credits Basic element 1,800 1,890 Couple and lone parent element 1,770 1, hour element Disabled worker element 2,405 2,530 Severe disability element 1,020 1, Return to work payment (16-29 hours) 50+ Return to work payment (30+ hours) Childcare element of Working Tax Credit Maximum eligible cost for one child per week Maximum eligible cost for two or more children per week Percentage of eligible costs covered 1,235 1,300 1,840 1, % 80% Child Tax Credit Family element Family element, baby addition Child element 2,085 2,235 Disabled child element 2,540 2,670 Severely disabled child element 1,020 1,075 Income threshold and withdrawal rates First income threshold 6,420 6,420 First withdrawal rate (%) 39% 39% Second income threshold 50,000 50,000 Second withdrawal rate (%) 6.67% 6.67% First threshold for those entitled 15,575 16,040 to Child Tax Credit only Income disregard 25,000 25,000 34

36 Capital Gains Tax CAPITAL GAINS TAX RATES Year Individuals Trustees % 18% % 18% CAPITAL GAINS TAX EXEMPT AMOUNT Year Annual exempt amount for individuals Annual exempt amount for trustees ,600 4, ,100 5,050 On 24 January 2008, in response to pressure from the business community, the Chancellor announced a new Entrepreneurs Relief. The first 1m of gains qualifying for relief are charged at an effective rate of 10%. Gains in excess of 1m are charged at 18%. An individual can make more than one claim for relief, up to a lifetime total of 1m of gains qualifying for relief. VAT Rates VALUE ADDED TAX Standard rate 15.00%* VAT fraction 3/23rds Registration limit 68,000 ** Deregistration limit 66,000 ** Annual accounting turnover limit 1.35m *The rate reverts to 17.5% on 1 January 2010 ** The registration limit of 67,000 increases to 68,000 and the deregistration limit rises from 65,000 to 66,000, on 1 May Tax Shelters There were no announcements affecting existing tax shelters which are currently as follows: TAX SHELTERS Venture Capital Trusts - investment limit and rate of tax relief (maximum) EIS investment limit and rate of tax relief (maximum) Tax-free employment termination Tax-free "rent-a-room" income 200,000 (relief at 30%) 500,000 (relief at 20%) 30,000 4,250 ISAs 7,200 Cars CO 2 emissions in onwards Vehicle grams per Excise km Duty to Budget 2007 set out car Petrol VED rates fordiesel the next Petrol Diesel three120 years or lower to further sharpen Not the Not 10% 13% applicable applicable environmental signals to motorists Not and to Not 15% 18% continue to support theapplicable developmentapplicable of the low carbon market % 18% 16% 19% The Government has announced inflation-only increases on motorcycle VED rates in , while VED rates for special types vehicles, combined transport vehicles and all vehicle categories that are linked to the basic goods rate will be frozen. It also announced on 1 October 2007 that heavy goods vehicles (HGV) VED rates would be frozen in All changes take effect from licences commencing 1 April CO 2 emissions in grams per km CAR BENEFIT READY RECKONER % 19% 17% 20% % 20% 18% 21% % 21% 19% 22% % 22% 20% 23% % 23% 21% 24% % 24% 22% 25% % 25% 23% 26% % 26% 24% 27% % 27% 25% 28% % 28% 26% 29% % 29% 27% 30% % 30% 28% 31% % 31% 29% 32% % 32% 30% 33% % 33% 31% 34% % 34% 32% 35% % 35% 33% 35% % 35% 34% 35% % 35% 35% 35% % 35% 35% 35% CAR FUEL BENEFITS to onwards Petrol Diesel Petrol Diesel 120 or lower Not Not applicable 1,690 2,197 applicable Not Not applicable 2,535 3,042 applicable 140 2,160 2,592 2,704 3, ,304 2,736 2,873 3, ,448 2,880 3,042 3, ,592 3,024 3,211 3, ,736 3,168 3,380 3, ,880 3,312 3,549 4, ,024 3,456 3,718 4, ,168 3,600 3,887 4, ,312 3,744 4,056 4, ,456 3,888 4,225 4, ,600 4,032 4,394 4, ,744 4,176 4,563 5, ,888 4,320 4,732 5, ,032 4,464 4,901 5, ,176 4,608 5,070 5, ,320 4,752 5,239 5, ,464 4,896 5,408 5, ,608 5,040 5,577 5, ,752 5,040 5,746 5, ,896 5,040 5,915 5, ,040 5,040 5,915 5,915 35

37 Corporation Tax Rates The rates of corporation tax from 1 April 2009 are shown in the Table below. The profit limits may be reduced for a company that is part of a group or has associated companies. The lower rates and marginal reliefs do not apply to close investment holding companies. CORPORATION TAX RATES Companies earning under 300,000 Companies earning between 300,000 and 1.5million: Year to 31 March 2009 From 1 to 21% Capital Allowances The following capital allowances details, previously announced are: CAPITAL ALLOWANCES For onwards: Year to 31 March 2010 From 1 to 21% First 300,000 21% 21% Upper Marginal rate (excess over 300,000) Companies earning over 1.5million: 29.75% 29.75% Main rate 28% 28% NOTE: From 1 April 2010, the lower Corporation Tax rate increases to 22% (from 21%) 1. The writing down allowance (WDA) on Plant & Machinery in the general pool is reduced from 25% to 20% per annum. 2. The WDA on Plant & Machinery Long Life Assets in the general pool has been increased from 6% to 10% per annum. 3. The first 50,000 of qualifying expenditure in a chargeable period qualifies for the annual investment allowance at 100%. IHT Rates and Reliefs The following thresholds for IHT were previously announced up to : INHERITANCE TAX (IHT) THRESHOLDS Year Nil Rate Band , , , , ,000 For married and civil partners, Note: The rate of the above figures can IHT is 40% potentially be doubled from 9 October 2007 Annual gifts per donor IHT MAIN EXEMPTIONS Exempt Amount 3,000 per year Small gifts to same person 250 To non-domicile spouse To UK domicile spouse 55,000 for life unlimited gifts On marriage by either party to the marriage 2,500 On marriage by parent of either party 5,000 On marriage by remoter ancestor of either party 2,500 On marriage by any other person 1,000 To charities To political parties all gifts all gifts IHT CHARGE ON GIFTS WITHIN SEVEN YEARS OF DEATH Years between gift and %age of death death rate charge applied to gift 0 to 3 100% 3 to 4 80% 4 to 5 60% 5 to 6 40% 6 to 7 20% 4. The WDA on integral features is 10% per annum There is no relief available for expenditure incurred on or after 1 April 2008 for companies and 6 April 2008 for unincorporated businesses, on fire safety alterations in response to notices issued by Fire Authorities. Capital Allowances for expenditure on fire safety equipment continue unaffected. 36

38 If an estate includes UK woodlands, a claim may be made to defer IHT on the value of growing timber, subject to meeting certain conditions. Generous reliefs are available on 'relevant business property'. Qualifying assets can have their IHT values reduced substantially (subject to meeting certain conditions) as shown in the next Table. BUSINESS PROPERTY RELIEF Asset % Reduction Business or interest in a business Land, buildings, machinery or plant used in a company you control, or in a partnership to which you belong Interest on late payment of tax INTEREST ON LATE TAX PAYMENTS Income Tax, NIC & CGT Stamp Duty and Stamp Duty Reserve Tax CTSA, From normal due date Corporation Tax Pay and File Inheritance Tax, Capital Transfer Tax & Estate Duty FROM 24 MARCH % (previously 3.5%) 2.5% (previously 3.5%) 1.75% (previously 2.75%) 0% (previously 1%) Shares in an unquoted AIM company Shares in a fully quoted company in which there is control Owner-occupied farms and agricultural tenancies (after 1 September 1995) Interest of landlords in let farmland Stamp Duty Rates The Chancellor made no new announcements on the stamp duty land tax rates which are: STAMP DUTY LAND TAX RATES FROM 23 MARCH 2006 to 2 SEPTEMBER 2008 (and from 1 JANUARY 2010 ONWARDS) Rate 0% Land in disadvantaged areas Residential Up to 150,000 1% More than 150,000 but not more than 250,000 3% More than 250,000 but not more than 500,000 4% More than 500,000 More than 150,000 but not more than 250,000 More than 250,000 but not more than 500,000 More than 500,000 All other land in the UK Residential Up to 125,000 More than 125,000 but not more than 250,000 More than 250,000 but not more than 500,000 More than 500,000 More than 150,000 but not more than 250,000 More than 250,000 but not more than 500,000 More than 500,000 STAMP DUTY LAND TAX RATES FROM 3 SEPTEMBER 2008 to 31 DECEMBER 2009 Land in disadvantaged areas Rate Residential 0% Up to 175,000 1% More than 175,000 but not more than 250,000 3% More than 250,000 but not more than 500,000 4% More than 500,000 More than 150,000 but not more than 250,000 More than 250,000 but not more than 500,000 More than 500,000 All other land in the UK Residential Up to 175,000 More than 175,000 but not more than 250,000 More than 250,000 but not more than 500,000 More than 500,000 Nonresidential Up to 150,000 Nonresidential Up to 150,000 Nonresidential Up to 150,000 Nonresidential Up to 150,000 More than 150,000 but not more than 250,000 More than 250,000 but not more than 500,000 More than 500,000 37

39 Calendar for the remainder of SELF ASSESSMENT: The following 2009 dates apply to those who are employed, self-employed, and all other taxpayers 5 April 2009 The last day of the 2008/09 tax year. 31 May 2009 By this date, your employer should have given you a Form P60 (pay and tax details from employment) to assist you with the completion of your tax return for the year ended 5 April July 2009 You must make a claim to HMRC for any new tax credits to which you are entitled (in order to receive full entitlement). 6 July 2009 If applicable to you, your employer must provide you with a copy of Form P11D showing details of the benefits in kind provided to you or expense payments reimbursed to you. Benefits in kind include, for example, the provision of a company car. 31 July 2009 Some people may have to make payments on account. Each payment will normally equal one half of the previous year's tax liability (after taking off tax deducted at source and tax credits on dividends). The payments are due on 31 January in the tax year and 31 July following the tax year. If you need to make a second payment on account for the tax year ending on 5 April 2009, this is the date by which it should be made. If you have still not made a balancing payment of tax for 2007/08 by this date, you will be charged a second automatic 5% surcharge. The second 5% surcharge does not apply to late payment of the first payment on account for 2008/09. If you were sent a tax return, for 2007/08 you will be charged a second penalty of 100 if HMRC has not received your return by this date. 5 October 2009 You must tell HMRC of any income or capital gains you have received in the 2008/09 tax year, if you have not received a tax return. You have a legal obligation to do this. HMRC may, or may not, need to send you a tax return - some taxpayers will be able to pay the right amount of tax through an adjustment to their PAYE code. 31October 2009 If you were sent a 2008/09 tax return, this is the deadline for sending back the completed paper tax return. Paper tax returns must be filed by this date if you want HMRC to collect any unpaid tax (of under 2,000) for 2008/09 through PAYE. For self assessment tax returns filed on-line the filing deadline is 31 January December 2009 For those with a tax liability of less than 2,000, if you file your self assessment tax return on-line by this date, the tax office will adjust your PAYE code (provided you are an employee) so that you can pay any tax due for 2008/09 over time through PAYE, rather than as a lump sum on 31 January

40 PARTNERS AND PARTNERSHIPS: The following are 2009 dates for Partners and Partnerships 5 April 2009 The last day of the 2008/09 tax year. 5 July 2009 You must make a claim to HMRC for any new tax credits to which you are entitled (in order to receive full entitlement). 31 July 2009 Some people may have to make payments on account. Each payment will normally equal one half of the previous year's tax liability (after taking off tax deducted at source and tax credits on dividends). The payments are due on 31 January in the tax year and 31 July following the tax year. If you need to make a second payment on account for the tax year ending on 5 April 2009, this is the date by which it should be made. If you have still not made a balancing payment of tax for 2007/08 by this date, you will be charged a second automatic 5% surcharge. The second 5% surcharge does not apply to late payment of the first payment on account for 2008/09. If you were sent a tax return for 2007/08, you will be charged a second penalty of 100 if HMRC has not received your return by this date. 5 October 2009 You must tell HMRC of any income or capital gains you have received in the 2008/09 tax year, if you have not received a tax return. You have a legal obligation to do this. 31 October 2009 If you want HMRC to calculate your 2008/09 tax liability, your paper 2008/09 tax return must be with them by this date. The deadline for internet filed returns is 31 January

41 COMPANIES AND EMPLOYERS: The following are 2009 dates for companies and employers. NOTE: Dates relating to companies only are highlighted in purple. 14 April 2009 (Companies only) Due date for income tax due for the CT61 (Quarterly accounting) quarter to 31 March April 2009 Monthly PAYE/NIC to 5 April 2009 due. Any arrears of PAYE/NIC due for the year ended 5 April 2009 to be paid by this date. 3 May 2009 Last day for notifying car changes in quarter to 5 April Form P46 19 May 2009 Monthly PAYE/NIC to 5 May 2009 due. Employer's PAYE/NIC return P35 for the year ended 5 April 2009 must be with HMRC. 31 May 2009 Forms P60, showing pay and tax details, for the year ended 5 April 2009 should be given to all current employees (and to ex-employees who request them). 19 June 2009 Monthly PAYE/NIC to 5 June 2009 due. 1 July 2009 (Companies only) Corporation tax return for the year ended 31 March 2008, not filed before 31 March 2009, to be filed by this date to avoid a minimum 200 penalty ( 1,000 for third consecutive default). Tax geared penalties apply where returns are filed more than 18 months after the end of the return period. 6 July 2009 Copies of Forms P11D, showing details of the benefits in kind provided and/or expense payments reimbursed, for the year ended 5 April 2009 must be provided to all current employees (and to ex-employees who request them). 14 July 2009 (Companies only) Due date for income tax due for the CT61 (Quarterly accounting) quarter to 30 June July 2009 Monthly PAYE/NIC to 5 July 2009 due. Employers Class 1A NICs on Relevant Benefits in Kind must be paid. 2 August 2009 Last day for notifying car changes in quarter to 5 July Form P46 19 August 2009 Monthly PAYE/NIC to 5 August 2009 due. 19 September 2009 Monthly PAYE/NIC to 5 September 2009 due. 14 October 2009 (Companies only) Due date for income tax due for the CT61 (Quarterly accounting) quarter to 30 September October 2009 Monthly PAYE/NIC to 5 October 2009 due. 2 November 2009 Last day for notifying car changes in quarter to 5 October Form P46 19 November 2009 Monthly PAYE/NIC to 5 November 2009 due. 19 December 2009 Monthly PAYE/NIC to 5 December 2009 due. Dates that only apply to Companies: 9 months after company year end 10 months (9 months for PLCs) after company year end 12 months after company year end Annually on anniversary of company incorporation Quarterly (unless monthly or annual accounting opted for) Corporation Tax for the year to be paid. Company accounts for the year to be filed with Companies House. Company accounts for the year to be filed with HMRC, together with Corporation Tax return Form CT600. Annual Return showing details of Company Directors, Secretary and Shareholders to be filed with Companies House, within 28 days together with filing fee. VAT Return to be filed with Customs & Excise, together with any VAT due, by the end of the month following the end of the VAT quarter. 40

42 Further Information This guide is for general interest - it is always essential to take advice on specific issues. We believe that the facts are correct as at the date of publication, but there may be certain errors and omissions for which we cannot be responsible. If you would like to receive further information about this subject or other publications, please call us see our contact details on the next page. Important Notice Copyright , Bizezia Limited. All Rights Reserved. This publication is published on our behalf by Bizezia Limited. It is protected by copyright law and reproduction in whole or in part without the publisher s written permission is strictly prohibited. The publisher may be contacted at info@bizezia.com (telephone ). Articles and information contained herein are published without responsibility by us, the publisher or any contributing author for any loss howsoever occurring as a consequence of any action which you take, or action which you choose not to take, as a result of this publication or any view expressed herein. Whilst it is believed that the information contained in this publication is correct at the time of publication, it is not a substitute for obtaining specific professional advice and no representation or warranty, expressed or implied, is made as to its accuracy or completeness. The information is relevant within the United Kingdom. These disclaimers and exclusions are governed by and construed in accordance with English Law. Publication issued on: 22 April 2009 Ref:

43 Contact: JASON HOLDEN Telephone Number: Fax Number: Website: We are a family run accountancy and business support practice led by Jason Holden who offer far more than the traditional services you would expect from a firm of accountants. So, whether you are starting up in business or would like a fresh approach to your existing business, we are confident we can make a real difference to your future. Our aim is to provide a range of tailor made services to all our clients, this is why we place great emphasis on establishing close working relationships at an early stage. It is only by understanding your needs are we able to provide the practical solutions to your problems. We are always pleased to meet informally over a cup of coffee with new or potential clients, and remember, we do not charge for initial meetings.