Headline tax announcements

• There is to be a new 50% rate of tax from 2010/11 which will apply to income in excess of the limit for those earning £150,000 or more.
• At the same time, there is a change to the originally announced plan with regard to personal allowances. These are now to diminish at a rate of £1 for every £2 of additional income over £100,000. This means that in broad terms, allowances will disappear completely for those earning more than £115,000.
• There was further bad news for those earning more than £150,000 each year in that higher rate pension tax relief is to be withdrawn from April 2011 on a sliding scale which means that for those earning £180,000 or more tax relief will only be available at 20%.
• This is combined with “anti-forestalling” measures which will limit higher rate tax relief on the individual's “normal pattern of contributions”, or £20,000, whichever is greater, for payments made in 2009/10 and 2010/11.
• There were no changes to either the main or small companies rates of corporation tax.
• A temporary first year allowance is to be introduced for plant and machinery. This will be at a rate of 40% for businesses on expenditure in excess of £50,000 (the first £50,000 will in most cases qualify for the 100% annual investment allowance) which would normally qualify for 20% writing down allowances, in the twelve month period beginning on 1 April 2009 for companies and 6 April 2009 for individuals.
• There are to be some relaxations to the legislation relating to the Enterprise Investment Scheme, the Corporate Venturing Scheme and the Venture Capital Trust Scheme, making it easier to carry back EIS income tax relief to the previous year, and relaxing the requirement for funds to be used for a qualifying purpose within a year of subscription. These changes will all apply from 22 April 2009.
• The limited facility for businesses to carry back trading losses for up to three years (announced at the 2008 pre-Budget Report) has been extended so that it will apply in the two year period to 23 November 2010 or, for unincorporated businesses, the tax years 2008/9 and 2009/10. This is limited to losses of up to £50,000. Unlimited losses continue to be able to be carried back for a maximum of one year.
• The three-line account threshold for income tax self-assessment returns is to be permanently aligned with the VAT registration limit, enabling a number of businesses to submit shorter income tax returns.
• Numerous legislative changes are planned in attempts to counter tax avoidance, in addition to HMRC targeting specific avoidance schemes. It is suggested that those who might be affected should take detailed advice.
• HMRC is to be given the ability to publish the names and details of individuals or companies who have deliberately defaulted on sums of tax of £25,000 or more.
• In addition, there will be increased monitoring for those who have deliberately defaulted on amounts in excess of £5,000, with extra information to be provided to HMRC for a number of years following the default.
• Senior accounting officers of large companies will in future be obliged to certify either that accounting systems are adequate for the purpose of accurate tax reporting or specify inadequacies, where these are considered to exist. They will then become personally responsible if they have not taken reasonable steps to establish and monitor accounting systems within their companies. For these purposes large companies are those as defined in the Companies Act 2006.
• A recent review of HMRC powers has led to several new proposals. Voluntary managed payment plans are to be introduced to allow tax payers to spread their income tax or corporation tax payments. HMRC are to be permitted to collect small debts through the PAYE system. In future, companies and businesses may be obliged to supply HMRC with contact details of people who are in debt to HMRC, although it is unclear how this will work in practice.
• The penalty regimes for late filing of tax returns and late payments of tax are to be unified such that the same penalties should apply to almost all taxes levied in the UK. A similar harmonisation is to take place in respect of interest rates applying to tax over or under paid.
• There is to be a further review of HMRC powers and a consultation on the monitoring or registering of tax agents.
• A new HMRC charter is to be put into place at the latest by 31 December 2009. The Charter is expected to be given force of law by the addition of a clause in Finance Bill 2009. It is expected to set out standards of behaviour and values to which HMRC will aspire in dealing with tax payers and others and is the subject of a current consultation.
• At the moment, Commonwealth citizens are entitled to claim UK personal allowances even when they are not resident in this country. This right is to be withdrawn from 6 April 2010, although the Government points out that many of those affected will be covered by double taxation agreements anyway.
• There are to be two changes to company car taxation commencing on 6 April 2011. First, the lower threshold for CO2 emissions is to be reduced by 5g per km to 125g per km. These emissions give rise to a benefit equivalent to 15% of a car’s list price. It follows that all other rates up to the full charge at 35% will increase by a similar amount.
• Secondly, the £80,000 price cap that applies when calculating the cash equivalent benefit for “expensive cars” is to be abolished.
• New rules are to be introduced to ensure that where companies account for profits and losses in foreign currencies, they will not be either advantaged or disadvantaged by fluctuations where losses are carried forwards or backwards.
• Where individuals receive dividends from non-UK resident companies, the treatment has, in the past been different from that for UK dividends. It has been confirmed that, in future, the availability of dividend tax credits is to be extended, subject to some limitations.
• Helpful new legislation will permit groups of companies to offset capital gains in one group member against losses in another with much greater ease than has been the case in the past.
• There is to be an extension to the temporary increase in the threshold for stamp duty land tax. This means that the £175,000 exemption limit that was introduced for a year from 3 September 2008 will now continue to 31 December 2009.
• There is to be a change in the rules relating to substantial donors to charities. In future, donors can make contributions of up to £150,000 in a six year period, increased from £100,000, but the current limit of £25,000 a year on such donations is to remain unchanged.
• The limit for investment in ISAs is to be increased from £7,200 to £10,200 from the current tax year for those aged over 50 and from 2010/11 for all other investors. Of this amount, up to £5,100 can be saved in cash.
• The maximum statutory redundancy pay is to be increased from £350 to £380 per week.
• The beneficial tax treatment given to furnished holiday lettings is to be extended to properties within the European Economic Area (EEA) until 5 April 2010, prior to the abolition of the relief in 2010/11.
• Agricultural property relief for inheritance tax is to be extended to cover property within the EEA.
• Simplifications to the procedure for Opting To Tax land and buildings are to be introduced.
• The VAT turnover threshold is to be increased from £67,000 to £68,000. Similarly, the level at which you can apply for deregistration will be increased from £65,000 to £66,000. There are also a number of VAT changes relating to cross-border transactions and reverse charges. Many of these have previously been announced or consulted upon.
• Road fuel duties will increase by 2p per litre on 1 September 2009 and 1p per litre above inflation in future years to 2013.
• Alcohol duties are to rise by 2% from 23 April 2009. This will equate to duty increases of 1p per pint on beer, 1p on a litre of cider, 1p on a 275ml bottle of alcopop, 4p on a bottle of wine and 13p on a bottle of spirits.
• Tobacco duties will increase by 2% from 6pm on 22 April 2009. This will equate to duty increases of 7p on a pack of 20 cigarettes, 3p on a packet of 5 cigars and 7p per 25g of hand-rolling tobacco.
• The Government has increased the amount it will contribute to Child Trust Funds for disabled children born on or after 1 September 2002. It will contribute £100 every year for most disabled children and £200 for severely disabled children, starting in April 2010.