HMRC confirms that the Code of Practice on taxation for banks will be introduced. The Government's aim in bringing in the Code is to encourage banks to follow the spirit as well as the letter of the law.
The Code sets out a constructive framework with several components:
The Small Companies' Rate will remain at 21% for the Financial Year commencing 1 April 2010 and will not be increased to 22% as previously announced
The flat rate scheme provides an optional simplified VAT arrangement for businesses with a turnover up to £150,000. The percentages were re-calculated in December 2008 to reflect the temporary reduction in the standard rate of VAT. The flat rate percentages have now been re-calculated to reflect the reversion of the standard rate of VAT to 17.5%. The new rates will be implemented on 1 January 2010.
They also include technical adjustments to reflect more up to date business patterns. This means that, for some sectors, the rates will not simply return to the level set prior to the December 08 changes. Virtually all sectors will face an increase (as a result of the increase in the standard rate) but some sectors' increases will be bigger than others'.
This is consistent with the approach adopted last year when the standard rate went down. It should also be noted that from January over two thirds of users have a lower rate or the same rate as they did last December when the flat rates changed to reflect the 15% VAT rate.
In order to strengthen the incentives to invest in innovative industries and ensure the UK remains an attractive location for innovation, the Government will introduce a Patent Box, a reduced rate of Corporation Tax applying to income from patents, from April 2013. There will be consultation with business in time for Finance Bill 2011 on the detailed design of the patent box, which will apply to patents granted after the legislation is passed.
The "worldwide debt cap" forms part of the reforms to the taxation
of the foreign profits of companies, which the Government introduced this
year. The legislation guards against excessive debt funding of UK resident
companies by restricting relief for UK financing costs where these exceed
the financing costs of the worldwide group but Finance Bill 2010 will introduce
some amendments to ensure that the provisions work as intended. The debt
cap legislation as a whole has effect for periods of account of the worldwide
group beginning on or after 1 January 2010. The FB10 changes will apply
from the same date.
See PBR Note 04.
Subject to confirming compatibility with the State Aid rules, legislation will be introduced to provide a 100 per cent first-year allowance for business expenditure on new, unused (not second hand) electric vans for expenditure incurred on or after 1 April 2010 (corporation tax) or 6 April 2010 (income tax) - See PBR Note 30
The standard rate of VAT returns to 17.5% from midnight on 31 December 2009. There will be a period of grace for certain businesses trading across the midnight deadline to charge the lower rate until either when they close, or if earlier, 6.00am.
An unintended anomaly affecting the amount of tax credit claimable where
films are produced over more than one accounting period will be corrected.
See PBR Note 07
A lessor company will have the option to elect for an alternative treatment when it is sold. This will remove the need to calculate an immediate charge under the provisions of Schedule 10 to the Finance Act (FA) 2006 (the "Sale of Lessor Companies" legislation) but ensure that tax is collected on the profits of the leasing business following the sale - See PBR Note 10
Legislation, effective on and after 9 December 2009 will be introduced in Finance Bill 2010 to prevent companies from exploiting a weakness in Schedule 10 to the Finance Act (FA) 2006 (the "Sale of Lessor Companies Legislation") which would allow a group to sell a lessor company without suffering the full effect of the charge imposed by the Schedule - See PBR Note 11
The condition requiring that any intellectual property (IP) deriving from the R&D to which the expenditure is attributable be owned by the company making the claim will be abolished. The change will have effect for any expenditure incurred by a SME company on R&D in an accounting period ending on or after 9 December 2009 - See PBR Note 06
Details on the proposed shape of the new CFC Regime will be published in the New Year.
There will be preliminary discussions concerning the possibility of a move to exemption for foreign branch profits. No decision has been taken about whether such a change will be implemented and the purpose of the announcement is to provide for debate with business about the merits of such a change and to identify important technical and policy issues related to it.
Exchequer exposure to losses from overhedging and underhedging structures will be restricted to the real economic loss from these transactions by ensuring that any losses from these arrangements, other than the real economic loss at group-level, are ring-fenced and can only be offset against profits from the same arrangements - See PBR Note 08
New regulation-making powers are being introduced so that the loan relationships and derivative contracts rules can be amended in response to changes in accounting standards - See PBR Note 05
PBR 2008 committed HMRC and the Department for Business, Innovation and Skills to review the costs to business of trading across UK borders and make proposals for reducing those costs alongside this year's PBR. The resulting report 'Simplifying Trade across UK Borders - A Plan of Action' was published on 02/12/2009.
The Government is considering changes for alternative property refinance arrangements that do not include payment of interest so they have the equivalent tax treatment to conventional loans.
The Government will continue to adapt tax rules on alternative (Islamic) finance in response to market developments, and will issue guidance on the VAT treatment of Islamic bonds (known as 'sukuk').
A consultation document that will detail proposals to simplify the capital gains regime for groups of companies will be published soon.
A non-interpretative summary of responses to the Budget 09 consultation on the modernisation of landfill tax legislation has been published. The Government intends to undertake further discussions with landfill operators on technical issues arising from responses to proposals on what constitutes a taxable disposal; and with Defra, the devolved administrations and environment agencies to understand the inert characteristics of materials affected by the lower rate proposals. Daily cover will be taxed.
For other anti-avoidance measures - see Enforcement and Compliance Page
The place of supply element of the Cross-Border VAT Changes 2010 was included in FA 2009. Secondary legislation is required to amend the VAT Regulations in respect of:
A single statutory instrument has been prepared for all changes which amend the VAT Regulations and come into effect on 1 January 2010.
Further changes will be made to the package of measures that were introduced in Finance Act 2009 to provide support through the North Sea fiscal regime for investment in the UK and UKCS. Regulations will also be introduced to provide further support for investment.
This measure increases the rates for the tax charge on short service lump sum refunds and Employer-Financed Retirement Benefits Schemes (EFRBS) payments, other than to individuals, and sets new rates for the special annual allowance charge with effect from 6 April 2010.
The special rules introduced at Budget 2009 to prevent people from making large additional contributions to their pensions before 6 April 2011, have been extended to those with incomes of £130,000 or over from 9 December 2009.
The restriction of higher rate tax relief being introduced from 6 April 2011 which the Government is consulting on, will affect individuals with a 'gross income' of £150,000 or over who save in a registered pension scheme. 'Gross income' includes both the value of the individual's pension contributions and any pension benefit funded by the employer on their behalf - See PBR Note 18.
It is also calculated before any deductions for charitable donations are made. However, there will also be a 'floor', so it will only apply where the individual's income (excluding employer pension contributions) is £130,000 or over. So people who have an income of less than £130,000 are not affected.
The Government has also published a consultation document on how the restriction of higher rate tax relief for pension contributions for high-income individuals will be implemented from 6 April 2011. This is available on the HM Treasury website (Opens new window)
The current rate of bingo duty is 22 per cent. The Government has announced its intention to cut the rate to 20 per cent at next year's Budget but no decision has been made about the date that the cut will take effect. Full details of the change will be published at Budget 2010.
As announced at Budget 2009 the main fuel duty rate will increase by 1penny per litre in real terms on 1 April 2010 and by a further 1 penny per litre for each year to 2013.
The current 20 pence per litre (ppl) duty differential for biofuels will cease from 1 April 2010. A relief scheme will be introduced to allow producers of biodiesel from waste cooking oil to continue to benefit from the 20 ppl duty differential for a limited period of 2 years.
The duty rates for biodiesel and bioethanol for road use will be amended, alongside changes to other duty rates for hydrocarbon oils and alternative fuels, to reflect the ending of the differential. Secondary legislation will be introduced to maintain the 20 ppl duty differential for biodiesel produced only from used cooking oil for a period of 2 years - See PBR Note 31
Alcohol and tobacco duties will remain at their current levels when VAT returns to 17.5% on 1 January 2010.
A landline duty is being introduced on UK landlines ("local loops") to be introduced from 1 October 2010. The duty will be charged at rate of 50 pence per month on each "local loop". HMRC and the Department for Business, Innovation and Skills will consult shortly on the implementation of the new duty.
HMRC is considering the policy and practicalities of allowing large connected employers to combine or pool their PAYE references, thereby reducing their administration time and costs. HMRC has already carried out informal discussions about PAYE pooling with selected employers and representative bodies. Following on from this HMRC expects to publish draft PAYE Regulations for formal consultation early in 2010 in order to seek wider views and comments.
HMRC and the Department for Business, Innovation and Skills are to consult in the New Year on proposed changes to the National Minimum Wage Regulations to tackle the problem of arrangements commonly called "travel schemes". Travel schemes" take advantage of the tax and National Insurance expenses rules relating to travel to a temporary workplace. Where temporary workers paid through such arrangements are paid at or near the NMW, such arrangements are potentially exploitative as they can impact adversely workers' entitlements to earnings related social security benefits.
