Businesses Given More Time to Pay Business Rates

Alistair Darling made a late change to the impact of business rate rises which were due to take effect in England from 1 April 2009.

Business rates were due to go up by 5% from 1 April 2009. However under the new scheme the rise will be restricted to 2%, with businesses being able to spread the cost of the remaining 3% over the following two years. Many had feared that the proposed increase could have caused major cash flow issues for many businesses.

For more information see the fact sheet.

Internet links: Fact sheet BBC news

VAT System for Cross-Border Trading

A package of measures is being introduced to simplify and modernise the VAT system for cross-border trading and to counter fraud across the EU. The measures include:

  • changes to the basic place of supply of services rules
  • changes to the time of supply rules
  • European Sales List (ESL) reporting for supplies of cross-border services
  • a new electronic refund procedure for VAT incurred in other EU Member States.

To read more about these proposed changes visit the link below.

Internet link: HMRC VAT changes link

Restricted Tax Relief on Pension Contributions

Pension contributions made by an individual are usually paid net of basic rate tax. Where the individual is a higher rate taxpayer further relief is due which significantly reduces the net cost of the contribution.

The government has announced its intention to restrict tax relief on pension savings with effect from 6 April 2011 for people with taxable income of £150,000 or more. The relief will be tapered down until it is 20%.

Legislation will be introduced to prevent those potentially affected by the new rules from seeking to forestall this change by increasing their pension savings in excess of their normal regular pattern, prior to that restriction taking effect.

The forestalling measures will apply to individuals with incomes of £150,000 or more who, from Budget Day, change:

  • their normal pattern of regular pension contributions, or
  • the normal way in which their pension benefits are accrued, and
  • their total pension contributions or benefits accrued exceed £20,000 a year.

Reacting to the Chancellor’s Budget speech, Richard Lambert, CBI Director-General, said:

‘Changing the higher-rate tax relief on pensions weakens incentives to save for retirement and is yet another change to a system which really needs stability.’

Internet link: HMRC pensions changes

Bradford & Bingley Position of Former Shareholders

As you are no doubt aware, shares in Bradford & Bingley plc were taken into public ownership last year. HMRC have issued guidance relevant to former shareholders and employees who were members of employee share schemes.

The guidance sets out the capital gains tax and income tax implications for former shareholders and employees who were members of employee share schemes.

For the majority of shareholders the guidance sets out the procedures for claiming any capital gains tax loss relief.

Please get in touch if you have any concerns in this area.

Internet link: HMRC brief

Capital Allowances on Plant and Machinery

Additional capital allowances are to be available for expenditure incurred by a business in the 12 month period (starting 1 April 2009 for companies and 6 April 2009 for individuals and partnerships).

Most businesses have since April 2008 been able to claim the new Annual Investment Allowance (AIA) on the first £50,000 spent on most plant and machinery. Expenditure on qualifying plant and machinery not covered by the AIA will be eligible for a temporary first year allowance (FYA) of 40% instead of a 20% writing down allowance.

The temporary FYA will not apply for certain expenditure including integral features, cars, long life assets and assets for leasing. This additional allowance will be attractive to larger or plant intensive businesses where the AIA is insufficient, particularly groups of companies where one AIA has to be shared between all companies.

Internet link: HMRC budget note 4