Given the current economic climate, everyone was prepared for tax hikes in the PBR and the increases in National Insurance (NI) and Corporation Tax for larger companies have been widely reported. However it isn’t all bad news and there are still opportunities to plan an efficient tax strategy.
Gradual increase in NI contributions: Between 2011 and 2012, the NI rate for those earning more than £20,000 will increase by ½%, and again in 2011/12 to 12% and 9% respectively for Class 1 and Class 4 payments. Next year the lower earnings limit will also increase by £2 per week to £97 per week. As the implementation dates for these changes nears, we will be advising you of what changes you need to make to your payroll to make sure you are fully compliant.
Corporation Tax sticking at 21% for now: Thankfully the planned increase in the small companies rate of Corporation Tax from 21% to 22% has been deferred by 12 months.
Inheritance Tax: The planned inflationary rise in the INT nil rate band next year has been blocked by the PBR and the threshold for paying IHT remains at £325,000.
VAT changes: As expected, the VAT rate will return to 17.5% from January 2010. The implications for pricing and invoicing are evident, however you may also want to consider reviewing your incoming and outgoing payment schedules to make the most of the current rate and ease cash flow at the start of 2010.
Another important change to the VAT system is the adjustments to the flat rate scheme. The changes to your industry rate may make this scheme cost effective or more expensive than traditional payment methods – make sure you know what the exact changes are.
Green company cars only: Company car tax band thresholds will be extended down to 10% from 6th April 2010, along with emission thresholds which will move down by 5g/km. Qualifying low emission cars will no longer exist as a separate category; however the benefit charge for purely electric cars and vans will reduce to 0% for 5 years.
Furthermore, if you buy a new electric van on or after 1st April 2010 you will benefit from a first year allowance of 100% where the investment exceeds the current £50,000 first year allowance. If your business relies on short distance transport, such as city and town deliveries, this option may prove beneficial.
With regard to fuel tax, the fixed sum for calculating the benefit on private fuel provided for a company car is to be increased from £16,900 to £18,000. Similarly the standard private fuel benefit for company vans the figure will be increased from £500 to £550.
Rewarding innovation: There’s good news for companies investing in research and development as the R&D Tax Credits scheme will continue to promote innovation next year. Also, the condition that any intellectual property (IP) deriving from the research must be owned by the company making the claim, which will allow companies to benefit without compromising commercial arrangements in relation to IP.
A little way off but still encouraging is the Taxation on Innovative Activity. Starting in April 2013, it will effectively lower the tax rate on income from patents.
Empty property: Relieving the pressure on business property owners, the PBR includes a 12 month extension to the increase in the thresholds at which an empty property qualifies for business rates, on properties with a rateable value below £18,000 are exempt.
No relief on Capital Allowances: Unfortunately the temporary additional rate of 40% first year Capital Allowances in addition to the standard £50,000 annual investment allowance is still coming to an end on 6th April 2010 as planned. The rate will fall back to 20% after this date.
Opportunity to come clean on off-shore investments: Between now and the 4th January 2010, the Government is giving those with undeclared off-shore investments an opportunity to come forward and pay tax, interest and a reduced penalty on off-shore assets. Failure to do so can result in 200% penalties of the tax underpaid.
