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Pre-Budget Report Dec 2009 |
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The Chancellor's speech held few surprises today and included the expected windfall tax on bank bonuses. Spending cuts and tax increases were announced to fund the recent bail out of the banking sector and reflate the economy. A summary of the expected changes to tax, National Insurance and VAT follows. Please call if you would like more information. |
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Tax changes announced today |
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Bank Payroll Tax This tax will only affect bonuses paid directly, or via an intermediary, that exceed L25,000. The report describes the various banking institutions that will be included. All of our High Street banks and Building Societies are going to be affected as are asset managers, hedge funds, private equity and other similar businesses. The various terms published in the PBR are set out below:
The PBR also states that Bank Payroll Tax will not be taken into account when calculating the bank's profit or loss for corporation tax or income tax purposes.
Presently, to qualify for R & D relief, intellectual property associated with an R & D claim has to be owned by the company making the claim. This restriction is to be abolished for accounting periods ending on or after 9 December 2009.
Increases from 6 April 2010 The Lower Earnings Limit will increase by L2 a week to L97 per week The special Class 2 rate for Volunteer Development Workers will increase by 10p to L4.85 per week. All other NIC rates are unchanged. Increases from 6 April 2011 The main rates of NIC will be increased by an additional 0.5% over and above the rate increases announced in the Pre Budget Report 2008. The increased rates will be: Class 1 and Class 4 main rate NICs, 12% and 9% respectively Class 1 employer rate 13.8% The additional rate of Class 1 and Class 4 NICs, 2%. Capital Gains Tax adult placement carers From 9 December 2009 any person who disposes of a residential property that has been partly set aside for use under a local authority adult placement scheme, will not have their private residence relief restricted for capital gains tax purposes.
This will affect individuals with incomes of L130,000 or over who, on or after 9 December 2009, change:
and whose total pension contributions/benefits accrued exceed the special annual allowance of L20,000 a year (or in some circumstances L30,000). Please call if you would like us to quantify the effects of this change should you be affected.
The promised increase in the nil rate band in 2010-11 to L350,000 has been withdrawn. It will remain at current levels, L325,000. Legislation is also to be introduced to cover the avoidance of IHT using certain trust arrangements involving property. This will only affect transactions entered into after 9 December 2009.
From 6 April 2010 a new tax relief is to be introduced for Shared Lives Carers who:
The new relief will be available per household and will consist of:
If income from the caring activity does not exceed the tax free allowance for the year carers will be exempt from tax on their earnings from Shared Lives Care. If income exceeds the tax free allowance carers can choose to pay tax on:
From 6 April 2010 for individuals and 1 April 2010 for companies, the expected withdrawal of the special tax rules, as announced in Budget 2009, for FHL property is confirmed. From these dates earnings from these properties will be treated the same as other property businesses. If you own property presently benefiting from the favourable FHL rules there is a short window of opportunity to take advantage of the existing rules. Well worth a visit to discuss your options with us, if you have not already done so.
From 6 April 2010 the company car tax charge for company car users who drive a car propelled solely by electricity will be reduced to 0%. A similar reduction to 0% will apply to drivers of electric vans. The measure for cars and vans is introduced for 5 years and may well lead to an increase in interest in electric company cars as tax free perks.
From 6 April 2010 the figure used as the basis for calculating the benefit of private fuel for the use of a company car is set at L16,900, this is to be increased to L18,000. The equivalent figure used to set the basis for private fuel in vans increases from L500 to L550.
If you purchase a new electric van after 6 April 2010 (income tax payers), 1 April 2010 (corporation tax payers), you will be able to claim a 100% capital allowance. The vehicle must be unused, not second hand. The allowance is subject to the Government confirming that the facility is allowable State Aid.
The flat rate scheme percentages are to be revised from 1 January 2010 to reflect the reinstatement of the 17.5% VAT rate on 1 January 2010. Please note the rates will not return to those used prior to the December 2008 change to 15% VAT. A new table of rates should be available soon on HMRC's web site which will take into account the rate change and other data about VAT liabilities in each sector. Click here for a call back from our office regarding this article. |
DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred. |
Dean Statham, Dean Statham is a limited liability partnership, registered for VAT under reference 812 0016 96. Partners in the firm are members of the Institute of Chartered Accountants in England and Wales (ICAEW). This body has its headquarters in the UK and its rules of professional conduct can be obtained from its web site. Dean Statham are authorised to act as statutory auditors by the ICAEW. |
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