Budget Summary 2009 22 April 2009

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Private Client (Short)

Summary of Changes Affecting Private Individuals

Last year, we warned that the Government´s forecasts for economic growth and tax revenue were optimistic - and that was before the wheels fell off the world economy. You would have to go back to the second World War to see a time when a Chancellor's hands were so tightly tied and in the medium- and longer- term there is no question whatsoever that the burden on the taxpayer will rise, even if the meteoric growth in the cost of funding the NHS and pensions burdens can be successfully addressed. Tax benefits which can be negated without too much political cost must be expected to be in line for abolition - and in this context, some of the tax benefits for pensions and investments, Inheritance Tax (IHT) reliefs and Capital Gains Tax (CGT) reliefs look certain to be curtailed over time.

Here, we are concentrating primarily on those changes announced in the budget which may affect clients adversely if action is not taken promptly.

Benefits
The main changes are that the winter fuel allowances are being maintained at £250 for those over 60 and £400 for those over 80 - for another year. It is also confirmed that the proposed 2.5 per cent increase in the basic state pension will be met despite the fact that consumer price inflation is expected to be negative this year.

In addition, grandparents of working age with child-minding responsibilities will be able to claim for the time spent looking after their grandchildren at home to be counted towards their pension contribution records.

Income Tax
In view of the state of the public finances, the only real surprise in the announcements regarding income tax was that the 50 per cent rate is not being introduced until 2010. The rate at which tax relief is given on pension contributions is to be restricted for 'big earners' (at least those who pay their contributions themselves – there appears to be no restriction on those whose pension contributions are paid for them by their employers). This change will be introduced in 2011. The insurance industry can expect a bumper year in 2009/10 as high earners top up their pension schemes while they can. However, where high earners change their pattern of pension contributions, anti-avoidance legislation may well catch them if their contributions exceed £20,000 per year.

In addition, the personal allowance will be reduced 'gradually' to nil for persons with 'adjusted net incomes' of more than £100,000.

A new 'tax' on the amount of compensation received under the Financial Services Compensation Scheme (where a financial institution fails) will apply to the extent that such compensation represents a payment for interest lost. This applies from 6 October 2008, so may affect tax returns for the tax year ending 5 April 2009. HM Revenue and Customs (HMRC) advise us that this should be shown in the box marked 'other income' on your tax return.

Trusts
Unmentioned in the Chancellor´s speech was the proposal to 'increase the trust rate and dividend trust rate to match those for income tax', which means that the taxes on trust income and on dividend income for higher earners will rise from 2010/11 by 10 per cent. Non Residents
Persons who are not resident in the UK but who claim a UK personal allowance for Income Tax purposes because they are Commonwealth citizens will lose the right to claim UK personal allowances against their UK income in 2010. This change will affect mainly citizens of the Bahamas; Cameroon; Cook Islands; Dominica; Maldives; Mozambique; Nauru; Niue; St Lucia; St Vincent & the Grenadines; Samoa; Tanzania; Tonga; and Vanuatu.

Tax Refunds
The present law relating to tax refunds is being 'simplified', which means that the time limits for claiming repayments are being reduced to four years commencing on 1 April 2010.

Inheritance Tax
Following adverse comment in the European Court, IHT relief for agricultural property and woodlands held in the European Economic Area is now being made available. Hold-over relief for CGT will also apply. IHT paid on such properties since April 2003 can be reclaimed.

Motoring

The inelegantly named 'car scrappage' scheme will mean that a £2,000 grant will be paid to the owner when a car more than 10 years old is traded in for a new car. This will do much for the resale values of 'old bangers', but how much of an incentive it will be to buy a new car remains to be seen - £2,000 is less than the value of a year's depreciation on an average-priced car. The scheme is to last until March 2010.

Property
The extension of Stamp Duty Land Tax reliefs to registered providers of social housing which operate on a profit-making basis in supplying shared-ownership residential property should help to make low-cost housing easier to obtain.

In addition, the continuation of the temporary Stamp Duty threshold increase until 31 December 2009 will benefit all buyers of properties with a value of less than £175,000.

Investments and Savings
The annual tax-free allowance for ISAs is being increased to £10,200 for those over 50 and half of the total can be held in cash. Although interest rates on ISAs are currently low, this change should produce benefits when the economy recovers. The increase will be extended to those under 50 from 2011.

Measures have been introduced to allow Enterprise Incentive Schemes and Venture Capital Trusts to be more flexible - mainly by allowing them to retain investor funds without making investments for a longer period of time than previously permitted. This will allow them to take more time to make investments without compromising their tax advantages.

Tax Powers Generally
Taxpayers unwise enough to understate their liabilities by £25,000 or more who get caught will, unless they make an unprompted disclosure or full prompted disclosure, be publicly named and shamed by HMRC.

The information contained in this newsletter is intended for general guidance only. It provides useful information in a concise form and is not a substitute for obtaining professional advice.

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Business Client (Short)

Summary of Changes Affecting Business Clients

Last year we warned that the Government´s forecasts for economic growth and tax revenue were optimistic - and that was before the wheels fell off the world economy. You would have to go back to the second World War to see a time when a Chancellor´s hands were so tightly tied and in the medium- and longer-term there is no question whatsoever that the burden on the taxpayer will rise, even if the meteoric growth in the cost of funding the NHS and pensions burdens can be successfully addressed. Tax benefits which can be negated without too much political cost must be expected to be in line for abolition – and in this context, some of the tax benefits for pensions and investments, Inheritance Tax (IHT) reliefs and Capital Gains Tax (CGT) reliefs look certain to be curtailed over time.

Here we are concentrating primarily on those changes announced in the budget which may affect clients adversely if action is not taken promptly.

Tax Payments and Refunds
The present law relating to tax refunds is being ´simplified´, which means that the time limits for claiming repayments are being reduced to four years from 1 April 2010. The penalty regime dealing with the late payment of taxes and the powers available to HM Revenue and Customs (HMRC) are being considerably changed and taxpayers in danger of incurring penalties should pay attention to Budget Notes 89 to 92 in particular.

Personal Responsibility for Accounting Officers
Not mentioned in the Chancellor´s speech, the regime proposed in HMRC´s Budget Note 62 makes worrying reading for the accounting officers of larger companies. It requires them, among other things, to certify annually that the company´s accounting system is ´adequate for the purposes of accurate tax reporting´ and promises penalties chargeable on ´the senior accounting officer personally and on the company´ in appropriate circumstances. Senior accountants who are uncomfortable with some of the accounting techniques used in their companies are advised to take legal advice promptly.

Corporation Tax
Corporation Tax rates are unchanged for both small and large companies.

There are significant changes to the rules governing controlled foreign companies, which will have the effect of bringing more foreign company profits into charge to UK tax.

One change that is likely to be welcomed by groups of companies is the simplification of the regime for dealing with capital gains and losses within groups of companies.

A number of anti-avoidance measures have been announced which will make use of ´principles-based drafting´, which means legislation which attacks the purpose of a tax structure or transaction rather than setting out in specific terms when tax will or will not apply. The problem with such an approach is that, no matter how laudable the aims, it can cause tax to be levied where, in the opinion of the taxing authority, the purpose of the transaction or structure is to avoid tax. This makes tax planning an altogether riskier activity in some circumstances.

Tax relief for trading losses of companies is being revamped to allow loss-making companies to be able to reclaim taxes paid in the last three years.

Inheritance Tax
Following adverse comment in the European Court, IHT relief for agricultural property and woodlands held in the European Economic Area is now being made available. Hold-over relief for CGT will also apply.

IHT paid or due to be paid in connection with such property after April 2003 will be able to be reclaimed after April 2010.

Tax Powers Generally
Taxpayers unwise enough to understate their liabilities by £25,000 or more who get caught will, unless they make an unprompted disclosure or full prompted disclosure, be publicly named and shamed by HMRC.

Property and Construction
A number of types of support for property and construction were announced, ranging from direct support for councils to build homes to additional expenditure on homes for Services families. Maintenance of support schemes at the ´demand end´ of the property market was also announced. However, more important (if it proves to be effective) will be the support for credit insurance, which has all but dried up in the building sector.

Landfill Tax
The Government has slipped in more or less unseen the announcement that a consultation exercise is being commenced to look at landfill tax. To quote the Treasury document, ´The consultation is aimed at ensuring the continued soundness of the administrative and legislative arrangements on which the tax is based. This will ensure the tax is robust and well placed to continue to make an important contribution to achieving environmental policy objectives´. The rate of landfill tax is being increased by £8 per tonne from April 2010.

Capital Allowances
The rate of first-year allowance will be 40 per cent for 2009/10. This move is intended to stimulate new capital investment. Interestingly, the HMRC technical note says these allowances will be available for:

  • 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.

Unreported in the speech was the extension of the 40 per cent rate for asset purchases above the £50,000 ´expenditure cap´ which would fall into the ´pool´ for the claiming of writing-down allowances. These will now attract the 40 per cent rate in 2009/10.

VAT
The standard rate of VAT is being returned to 17.5 per cent on 1 January 2010.

One change which may be easy to miss is the change in VAT scale charges for fuel, which come in from 1 May 2009. The scale charge is now to be calculated according to the carbon dioxide emissions of the vehicle.

The place of supply rules for services are being changed from 2010. These changes will be important for any business supplying services in another EU country.

The information contained in this newsletter is intended for general guidance only. It provides useful information in a concise form and is not a substitute for obtaining professional advice.

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Private Client - Long Version by Francis Clark

Budget 2009 Personal Tax changes

Another Budget bites the dust and once again the devil is in the detail.

With the exception of the changes to the rates of capital allowances, most businesses will be left unmoved by the majority of the Budget´s direct tax content. Even the VAT measures are relatively unexceptional; perhaps the biggest surprise there was that it was confirmed that the standard rate will be returning to 171/2% at the end of December this year and will not be raised to a higher level.

There are some measures that will impact on businesses but these are mainly administrative – such as the opportunity to defer some tax payments in cases of cash flow difficulty and extensions to HMRC´s powers to obtain information.

For many the changes to personal tax rates are likely to be some of the most interesting changes:

  • the increase in the proposed new higher rate of income tax to 50% (rather than 45%) for individuals earning in excess of £150,000 and its earlier introduction (from 6 April 2010 rather than 2011) is the most intriguing point; and
  • the complete withdrawal (or is it a phased withdrawal?) of personal allowances for those with incomes in excess of £100,000 from 2010.

As usual there are many new special anti-avoidance rules. This year seems to have produced a bumper crop that will, no doubt, swell the size of the Finance Bill to considerable proportions with long and complex legislation that will apply to few and which few will understand.

But as so often happens some of the most interesting things in the Budget were not mentioned in the Chancellor´s speech. Interestingly, this year, some of these were not even mentioned in the Budget Notes that are issued by HMRC immediately after his speech is finished. (This year the Budget Notes ran to the size of a small novel – 222 pages in total – so it might be expected to be reasonably comprehensive.)

The two main ´missing´ items are the abolition of Furnished Holiday Lettings with effect from 6 April 2010 and the introduction of a new tax ´amnesty´ to be called the ´New Disclosure Opportunity´.

The favourable tax treatment given to self-catering holiday accommodation that qualifies as Furnished Holiday Lettings is important to many individuals. Unfortunately the existing legislation seems to have offended European Union rules and so the government´s solution is to completely withdraw the existing status of Furnished Holiday Lettings altogether.

The New Disclosure Opportunity follows on from an earlier voluntary disclosure scheme operated by HMRC in 2007. Until March 2010, individuals holding bank accounts in foreign countries who have failed to fully declare all tax liabilities associated with those accounts can voluntarily disclose the facts to HMRC under a special simplified scheme.

Allowances and Rates
2008-09 2009-10
£ £
Basic personal allowance 6,035 6,475
Personal allowance (age 65–74) 9,030 9,490
Personal allowance (age 75 and over) 9,180 9,640
Married couple´s allowance (born before 6 April 1935) 6,535 6,865
Married couple´s allowance (age 75 and over) 6,625 6,965
Age related income limit 21,800 22,900
Married couples´ minimum 2,540 2,670
Blind person´s allowance 1,800 1,890

Notes

  1. All references to ´married couples´ include civil partners.
  2. The married couples´ allowances can be transferred by election.
  3. Married couples´ allowances are given at a rate of 10% of the allowance.
  4. Age related allowances are withdrawn by £1 for every £2 of income in excess of the income limit.

2008-09 2009-10

Taxable income Rate Taxable income Rate
£ £

Basic rate band 0 to 34,800 20% 0 to 37,400 20%
Higher rate over 34,800 40% over 37,400 40%

Notes

  1. Dividend income, treated as the highest slice of income, falling within the basic rate band is taxed at 10% and in excess of that is taxed at 32.5%.
  2. There is special Starting rate of 10% for interest/savings income only. It is not available to the extent that there is any other income that falls within the Starting rate limit - £2,320 for 2008-09 and £2,440 for 2009-10.

Capital gains tax
2008-09 2009-10
£ £
Annual exempt amount: individuals 9,600 10,100
Annual exempt amount: trustees 4,800 5,050

Notes

  1. Taxable gains in excess of the annual exempt amount are liable at a flat rate of 18%.
  2. Entrepreneurs´ relief may reduce the effective rate of CGT to 10% for an individual´s first £1million of taxable capital gains

Inheritance tax
£ £
Nil rate band 312,000 325,000
Combined nil rate bands for couples 624,000 650,000

Additional Rate of Income Tax and Income Related Reduction of the Personal Allowance

In 2008 the Chancellor announced an additional 45% higher rate of income tax from 2011 for taxable income above £150,000. This rate has now been increased to 50% and the date of introduction has been brought forward to April 2010.

As a result of this new tax rate there is now a higher dividend rate also for dividend income above £150,000 to 42.5%.

Furthermore, from April 2010 the basic personal allowance will either be gradually reduced to nil for individuals with income above £100,000 or completely removed at that income level (The Chnacellor´s speech and the Budget Notes contradict themselves in this respect).

Trust rate
The tax rates applicable to Trusts are based on the highest rate of income tax. As such the trust rates will be increased to match those for income tax, i.e. 50% for non-dividend income and 42.5% for dividend income.

Pensions: Limiting Tax Relief for High Income Individuals
From 22 April 2009, individuals earning over £150,000 will be affected by changes limiting the amount of higher rate tax relief available, where they change their regular pension contributions and where the contributions to their personal pension scheme exceeds £20,000.

Individuals who currently regularly pay in excess of £20,000, or those who do not pay in excess of £20,000 per tax year will not be affected.

Where an individual falls foul of the new regulations, they will have their tax relief on the excess over £20,000 restricted to the basic rate of tax.

Pensions: General
The annual allowance from 6 April 2010 will be increased to £255,000 (2009-10 £245,000).

Pensions:
Payments received from the Financial Assistance Scheme (FAS) in respect of failed occupational pension schemes have previously been received tax-free in the same way as a lump sum from a registered pension scheme.

However, it has been determined that the FAS is not a registered pension scheme. Subsequently it cannot benefit from the same tax relief´s as those paid from a registered scheme, and therefore future payments from the FAS will be taxable.

Changes are likely to be made in the future to achieve the same tax relief for a payment from the FAS to be treated as a payment similar to a lump sum from a registered pension scheme.

Dividends from non-UK resident companies
Individuals in receipt of dividends from non-UK resident companies are entitled to a non-payable tax credit of one ninth of the distribution. This has now been extended to individuals with a shareholding of 10% or more in the non-resident company. The effective rate on these dividends is therefore reduced to 0% for basic rate taxpayers and 25% for higher rate taxpayers.

Dividends from Offshore Funds
The above rules are extended to distributions from offshore funds. However, where the offshore fund holds more than 60% of its assets in interest bearing form then the tax credit is not available and the distribution will be treated as interest.

UK Personal Allowances for Non-UK Resident Individuals
Non-UK resident individuals who currently qualify for UK personal allowances and reliefs solely by virtue of being a Commonweath citizen will, from April 2010, only qualify if the Double Taxation Agreements so allows.

Inheritance Tax
There has been an extension to the relief given to Agricultural Property (APR) and Woodlands (WR) in respect of both Inheritance Tax (IHT) and Capital Gains Tax (CGT) hold over relief.

The new provisions relate to APR and WR situated inside the EEA and now allow for the same reliefs to apply to land situated outside the UK as they do inside.

The rules have effect from 22 April 2009 and mean that any estate that has paid IHT in respect of either Agricultural Property located in the EEA on or after 23 April 2003 can claim a refund. The earliest deadline for reclaiming overpayments will be 21 April 2010.

Hold over relief allows deferral of a CGT charge and is now available in respect of agricultural property in EEA states farmed by a person other than the owner. Hold over relief will also become available in respect of agricultural properties located in a qualifying EEA state in the past. Claims for relief in respect of tax year 2003/04 can be made until January 2010.

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 2009/10 and for all other ISA investors from 2010/11 onwards.

Child Trust Fund
From April 2010 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.

Administration

New Disclosure Opportunity
Until March 2010, individuals holding bank accounts in foreign countries who have failed to fully declare all tax liabilities associated with those accounts can voluntarily disclose the facts to HMRC under a special simplified scheme. The scheme (or Opportunity) will guarantee the level of financial penalties that HMRC will charge for the under declaration of tax. HMRC have also indicated that they will be issuing notices to banks and other financial institutions requiring them to provide information about any offshore accounts of which they are aware

Name and shame
HMRC will 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. Details will be published quarterly within one year of the penalty becoming final and will be removed from publication one year later.

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Business Client - Long Version by Francis Clark

Corporation Tax rates

The main rate of corporation tax, currently 28%, remains unchanged.

The small companies´ rate will remain unchanged at 21% for profits below the lower relevant maximum amount, currently £300,000. Single companies with profits above £300,000 suffer tax on tax on that excess at 29.75%.

Capital Allowances

New first year allowance
A first year allowance of 40% will be available for expenditure from 1 April 2009 for companies and 6 April 2009 for unincorporated businesses. This applies to expenditure eligible for the main pool that is not included in the claim for Annual Investment Allowance.

Green assets
The list of assets that qualify for the 100% enhanced capital allowances have been amended to include uninterruptible power supplies, air to water heat pumps and close control air conditioning systems. Three other types of asset have been removed from the list.

New rules on cars
The new rules detailed below will have effect for expenditure incurred on or after 1 April 2009 (corporates) or 6 April (unincorporated businesses).

  • Cars with emissions in excess of 160g/km will attract capital allowances of 10%
  • Cars with emissions of 160g/km or less will be added to the main pool and receive capital allowances at 20%. They will not attract the first year allowance introduced for 2009/10
  • Expenditure incurred under the old regime will be subject to transitional rules.
  • Cars with non-business use will be dealt with in their own pools, but the rate used will still be determined by their CO2 emissions.
  • For leased cars there will be a disallowance where the CO2 emissions exceed 160g/km of 15%. This will not be applied where the lease period is less than 45 days.
  • Cars leased before 1 or 6 April (for corporates and unincorporated business respectively) will be treated under the old rules.
  • Motor cycles will not be treated as cars;

Company Losses
Extended loss carry back
Trading losses made in accounting periods ending between 24 November 2008 and 23 November 2010 for companies and made in the tax years 2008/09 and 2009/10 for unincorporated businesses can be carried back three years against later years first.

The carry back into the period immediately prior to the current period is unrestricted. The carry back to the earlier two years is capped at a total of £50,000.

Enterprise Investment Scheme
Finance Bill 2009 amends several conditions for EIS:

  • All funds raised by the issue of shares now to be wholly employed within two years of the issue of shares or, if later, within two years of the commencement of a qualifying activity. This has increased from an 80% requirement
  • There will no longer be a restriction on the use of money raised by the issue of non- EIS shares.
  • A relaxation of other minor rules.

Corporate Venturing Scheme (CVS) & Venture Capital Trusts (VCT)

Legislation will be amended to simplify the time limit for the utilisation of money received from the investors. There will now be a two year time limit for utilisation.

Corporate Transparency
For accounting periods beginning on or after the date of Royal Assent, senior accounting officers of large companies and large groups of companies (as defined by the Companies Act 2006) must take reasonable steps to establish and monitor their accounting systems to ensure that they are adequate for the purposes of accurate tax reporting.

This will require the officer to certify annually that the systems are adequate or if they are not to specify the nature of any deficiencies and that the auditors have been made aware. The company must also identify the senior accounting officer to HMRC.

There are penalties chargeable on the senior accounting officer personally and on the company for careless or deliberate failures under these rules.

Furnished Holiday Letting Business
From 6 April 2010 the rules allowing a trading treatment for Furnished Holiday Lettings will be abolished.

The favourable treatment given to self-catering holiday accommodation that qualifies as Furnished Holiday Lettings is important to many. Unfortunately the existing legislation seems to have offended European Union rules and so the government´s solution is to completely withdraw the existing status of Furnished Holiday Lettings altogether.

Benefits in Kind
Accommodation
Where an employee is provided with living accommodation by their employer they are charged as a benefit in kind equal to the amount of rent paid by the employer. New rules have been introduced to include any amount of lease premium paid by the employer to secure the property. Any amount paid will be divided equally across the length of the lease and taxed on the employee accordingly.

Cars
From 6 April 2011, the price cap for calculating the taxable benefit on the provision of a company car, currently £80,000, will be abolished.

Discounts available to alternative fuelled cars will also be abolished, as well as those for electric/petrol hybrids. They will all now be taxed according to their CO2 emissions.

The current reduction of the 3% surcharge for diesel cars registered before 1 January 2006 that meet Euro IV regulations will also be abolished.

The lower threshold CO2 emissions is reduced to 125g/km from 6 April 2011 (130g/km for 2009-10), whilst the qualifying low emissions car rate of 10% remains in force for cars producing less than 120g/km. The 3% surcharge for most diesel cars will remain.

Taxation of foreign profits
The 2009 Finance Bill changes the way in which foreign profits are taxed.

Retrospective legislation, applicable from 1 April 2008 is introduced to ensure that the reduction in the main corporation tax rate from 30% to 28% does not unjustly affect the amount of double taxation relief (DTR) that would have been available to companies.

This will ensure that the amount of DTR available is not limited by reference to the UK corporation tax rate in force on the date of the foreign dividend payment but is instead limited by reference to the average CT rate of the accounting period.

Dividends receivable
However, foreign dividends received on or after 1 July 2009 will no longer be taxed differently to UK dividends received. This therefore means that the majority of distributions will now be exempt from charge.

Debt cap
For accounting periods beginning on or after 1 January 2010 there will now be a cap on the tax deduction for the finance expense payable by a UK member of a group of companies. The cap is calculated with reference to the consolidated gross finance expense of that group.

Controlled Foreign Companies
Changes to the regime remove certain exemptions from the rules, potentially bringing more companies into the charge.

Loan Relationships: Connected Companies

Legislation to be introduced makes two changes to the loan relationship rules affecting connected companies.

Release of trade debts
A creditor that formally releases a connected debtor from a trade debt is denied a deduction for the loss on the debt, but currently the debtor may be taxed on its ´profit´ in certain circumstances. The amended legislation means that the debtor company would not be taxed on the release. This applies to the release of trade debts on or after 22 April 2009.

Late payment of interest
Changes to legislation now mean that the current ´paid basis´ rules for connected parties only applies where the creditor company is resident in a tax haven. Other than this all interest payable to an overseas connected person is deductible on an accruals basis

This has effect for accounting periods beginning on or after 1 April 2009.

Debt restructuring
Legislation is being amended to ensure that companies issuing particular types of new preference share capital to external investors (for example where debt is being capitalised) do not lose the ability to enter into arrangements to claim and surrender group relief with other members of their group.

Transfer of assets within groups of companies
Existing legislation allows for the deemed transfer of a chargeable asset between group companies prior to the asset being disposed of outside the group. This would allow a deemed intra-group transfer to a group company that was carrying capital losses so that the gain on the disposal could be offset by the loss. However this election could not be used unless there was an actual disposal to a third party, either crystallising the gain or the loss. As such, the election could not be used for some types of gains or losses, e.g. where the asset is subject to a claim that it has become of negligible value.

Changes have now been made to the legislation that transfers the gain or loss intra-group rather than the asset. In rewording the legislation in this way, negligible value losses arising can then be utilised.

Intangible assets
Amendment to the legislation is being made to clarify that the regime applies also to internally generated goodwill. The legislation will also confirm that such goodwill is created in the course of carrying on the business and is subject to rules in determining whether goodwill is created before or after 1 April 2002, i.e. the date of commencement of trading will determine whether goodwill is qualifying or non-qualifying. This will prevent a claim for a tax deduction on amortisation on internally generated goodwill that is first recognised on a company´s Balance Sheet after 1 April 2002.

Administration
Name and shame
HMRC will 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. Details will be published quarterly within one year of the penalty becoming final and will be removed from publication one year later.

SDLT: Temporary Increase in Thresholds
Transfer of Property

All Land
Residential Non-Residential
Zero 125,000 150,000
1% 125,001 - 250,000 150,001 - 250,000
3% 250,001 - 500,000 250,001 - 500,000
4% Over 500,000 Over 500,000

Disadvantaged Areas
Residential Non-Residential
Zero 150,000 All
1% 150,001 - 250,000 -
3% 250,001 - 500,000 -
4% Over 500,000 -

For the period to 31 December 2009 the 0% threshold for residential property is increased from 125,000 to 175,000.

SDLT: Treatment of shared ownership
Relief from SDLT is currently available for some land transactions where the purchaser is a Registered Social Landlord. This relief has now been extended to include profit-making companies who are registered providers where the purchase is funded with the assistance of a public subsidy.

SDLT: Leasehold enfranchisement
Relief from SDLT is being introduced to allow for any nominee or appointee who acquires the freehold of a block of flats on behalf of leaseholders under a statutory right of leasehold enfranchisement.

VAT

Changes in VAT Fuel Scale Charges New reduced VAT fuel scale charges will apply for accounting periods beginning on or after 1 May 2009.

VAT Thresholds

  • registration raised to £68,000
  • deregstration raised to £66,000
  • effective from 1 May 2009

VAT – Change of Standard Rate

The standard rate of VAT will increase from 15% to 17.5% with effect from 1 January 2010.
Anti-forestalling legislation will be introduced where prior to 1 January 2010, suppliers issue invoices to or receive payment from customers who are unable to recover the VAT. This will apply where:

  • The supplier and the customer are connected
  • The supplier funds the purchase by the customer or
  • The supplier issues an invoice and payment is not due for at least 6 months

In addition a supplementary charge will also apply where a pre-payment in excess of £100,000 is made in respect of goods or services to be provided after 31 December 2009.

Cross-Border VAT Changes

HMRC is introducing a package of new measures which will affect businesses that trade with other members of the EC. The changes which will come into effect from 1 January 2010 include:

  • New rules for determining the place of supply of services
  • Requirement to complete quarterly European Sales Lists for services
  • Monthly EC Sales Lists where the value of goods sold exceeds £70,000 in a quarter
  • Reduced time limit for submitting EC Sales Lists
  • New electronic refund procedure for claiming VAT incurred in other EC member states

Other indirect taxes

Landfill Tax
Changes in rates

  • standard rate increased from £32 to £40 per tonne from 1 April 2009
  • will be increased further to £48 per tonne from 1 April 2010

Other changes
Use of waste on a landfill site will not represent a taxable disposal of waste

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