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Budget report 2010: tax planner

Budget report 2010: tax planner

Wednesday, 06 January 2010 12:32

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This is a summary of the key measures in recent budgets with links to our tax planning guidance.

Subject	2010/11	2011/12
Tax rates and allowances	Freeze on main rates and allowances (they remain as 2009/10). Restriction of personal allowances when income is in excess of £100,000 50% super tax applies to individuals with income > £150,000	TBA
National Insurance	No changes to rates except that the employee NI lower earnings limit will increase by £2.	Rates to increase by 1%
Capital allowances: Individuals Companies	100% FYA on electric vans Excess capital allowances: from 9/12/09 new rules prevent companies buying a company with excess capital allowances subject to tax avoidance purpose test.
R & D	Research and Development (R&D): from 9/12/09 it is no longer a requirement for SMEs to own the Intellectual Property derived from their R&D expenditure. Note also November policy change regarding overheads.
VAT	Increase to 17.5% on 1/1/10 Changes to flat rate scheme percentages
Salary sacrifice schemes	Pensions: sacrifice ineffective in terms of pensions anti-forestalling rules from 9/12/09 on.	Free lunches: the tax-free exemption for employer provided free or subsidised meals will not apply where entitlement arises out of a salary sacrifice or flexible working arrangement.
Pensions tax planning	Anti-forestalling measures restrict higher rate tax relief for those who have relevant income of £130,000 or more. Relevant income = taxable income ignoring personal pension contributions, gift aid donations and salary sacrificed on or after 9/12/09).	Tax relief on employer and employee pension contributions is restricted for those who have relevant income in excess of £130,000. Tax relief for those with income in excess of £180,000 will be restricted to 20%. A taper will apply where income falls in the band £150,000 to £180,000.
Company cars and vans	Electric cars and vans: no taxable benefit for employees or Class 1A for employers. CO2 emissions appropriate percentages: lower threshold reduced.	From 2011/12: Simplification in rules for alternative fuels. £80,000 limit will no longer apply. CO2 emissions appropriate percentages: lower threshold reduced. From 6 April 2012 the current graduated table of company car tax bands will be extended down to a new 10% band. The new band will apply when CO2 emissions are 99g/km or below.
Cars and vans fuel benefit	Car fuel benefit charge rises to appropriate percentage x £18,000 (2009/10 £16,900). Van fuel benefit rises from £500 to £550
Bonus tax for banks	From 9/12/09 banks will be charged 50% tax on bonuses paid to employees. There is no tax charge on the employee.
Stamp Duty Land Tax	Anti-avoidance measure: in year notification of tax schemes (designed to curtail promoters who have been using timing to their advantage).
Business rates	Businesses with empty buildings with a rateable value below £18,000 will be exempt from business tax until 2011.
Tax compliance	Business Payment Support Service or “time to pay” initiative has been extended indefinitely. It also now applies to large partnerships. New penalty regime for late tax payments. Set to apply to PAYE & NICs from 2010. CIS late penalties will be capped when they fall into the new regime.	Penalties for tax agents (subject to ongoing consultation, more coming soon)
International	Foreign branches: will be a review of the tax treatment of foreign branches with the possibility of a move to a UK tax exemption. No timeframe is given. Controlled Foreign Company (CFC) reform: no changes were announced, however details on the proposed shape of the new CFC regime will be published in January. No start date is mentioned. Worldwide debt cap: HMRC is still working on these rules with the aim of providing a fair means of agreeing tax relief for international companies who can structure their debt to take advantage of lower marginal tax rates. Offshore accounts: HMRC is considering a notification requirement for certain new offshore bank accounts as well as a consultation on a tougher approach to penalties for offshore non-compliance.
Government loan/funding initiatives	The Enterprise Finance Guarantee scheme is extended until March 2011. This is a loan guarantee arrangement under which the Government guarantees up to 75% of the loan, and the remaining 25% is guaranteed by a participating bank. A new growth capital fund is planned for expanding companies who are seeking to raise £2 to £10 million in capital.