The small companies’ corporation tax rate will remain at 21% for a further year, with the increase to 22% now due from 1 April 2011.
Income from patents will be taxed at a new 10% corporation tax rate from April 2013. This ‘patent box’ will apply only to income from patents granted after the passing of the legislation, which is planned to be in Finance Bill 2011 following consultation with business.
Bank payroll tax
From 9 December 2009, a new payroll tax will apply to banks, financial institutions and other financial businesses. The tax is set at a rate of 50% and is payable by the employer on the amount by which a banking employee’s bonus exceeds £25,000. Contractual bonuses agreed before 9 December 2009 are excluded where the employer has no discretion over the amount. The tax will apply until 5 April 2010, but the Government will consider extending it until the Financial Services Bill comes into force.
Research and development (R&D)
It will no longer be a condition that a small or medium sized (SME) company making a claim for R&D relief must own the intellectual property that derives from the R&D project. This change will have effect for R&D expenditure incurred in accounting periods ending after 8 December 2009. A company broadly qualifies as an SME if it meets two of the following thresholds: no more than 500 employees, annual turnover of no more than €100 million; and a balance sheet total of no more than €86 million.
Furnished holiday lettings
The withdrawal of the tax reliefs for furnished holiday lettings (FHL) from April 2010 has been confirmed. There will be transitional rules to cover businesses’ unrelieved FHL losses, capital allowances and capital gains tax reliefs.
Enterprise finance guarantee (EFG)
The EFG, launched in January 2009, provides a 75% guarantee for qualifying loans to viable businesses with a turnover of up to £25 million that cannot provide enough security. The scheme will continue for a further 12 months to March 2011.
Legislation will restrict relief to the real economic loss to the group for losses from overhedging and underhedging structures. It will have effect for accounting periods beginning after 31 March 2010 and affects large multinational groups of companies.
Value added tax (VAT)
The reversion of the standard rate of VAT to 17.5% from midnight on 31 December 2009 has been confirmed. There will be a period of grace for certain businesses trading across the midnight deadline to charge the lower rate until they close or 6.00 am on 1 January 2010, whichever is earlier.
The rates under the optional flat rate scheme for small businesses are amended from 1 January 2010 to reflect the increase in the standard rate, as well as the latest data on VAT payments by the various sectors.
© 9 December 2009. This summary is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking action on the basis of the contents of this summary. The summary represents our understanding of the law and HM Revenue and Customs practice as at 9 December 2009, which are subject to change. These proposals may be changed in the Spring 2010 Budget and subsequent legislation, or at any time.
The Financial Conduct Authority (FCA) does not regulate tax advice, so it is outside the investment protection rules of the Financial Services and Markets Act and the Financial Services Compensation Scheme.Last Updated