Business Tax Issues
Corporation Tax
The current main corporation rate of 30% will remain unchanged
until 1 April 2008 when it will be reduced to 28%.
The small companies rate will increase as follows:
-
In 2007-2008 - increase from 19% to 20%
-
In 2008-2009 - increase from 20% to 21%
-
In 2009-2010 - increase from 21% to 22%
Research & Development tax relief
Support for SME companies with fewer than 500 employees will
be introduced in the Finance Bill 2007 - the operative date
is yet to be announced.
From 2008-2009, and subject to State Aid approval, the enhanced
deduction available to SMEs in respect of qualifying expenditure
will rise from 150% to 175%.
Increased rate of Capital Allowances for small businesses.
The temporary 50% first-year capital allowance will be extended
for a further year. For the self-employed until 5 April 2008,
for companies paying corporation tax until 31 March 2008.
The rate of first year allowance for medium sized businesses
remains unchanged at 40%.
Reform of Capital Allowance system proposed for 2008-2009
From April 2008 it is proposed to abandon the present system
of FYAs (first year allowances) in favour of an Annual Investment
Allowance. The scope of the allowance is subject to consultation
but will be applied to the first £50,000 of expenditure
on plant and machinery.
Changes in writing down allowance
From April 2008 the annual writing down allowance on "pooled"
plant and machinery will be reduced from 25% to 20%.
From the same date the 6% rate of writing down allowance on
long-life assets will be increased to 10%.
Industrial Building Allowance(IBAs)/Agricultural Buildings
Allowance(ABAs)
As part of a major reform of business tax it is proposed to
phase out both IBAs and ABAs over the next 4 years.
To prepare the way balancing adjustments and recalculation
of writing down allowances will be withdrawn for all transactions
on or after 21 March 2007.
Business Premises Renovation Allowance
The long awaited commencement date for this tax allowance has
now been published - it will be applied to qualifying expenditure
incurred on or after the 11 April 2007.
The allowance will provide a 100% write off for capital expenditure
on the renovation or conversion of business property in disadvantaged
areas. The allowance will only be given if the building has
been vacant for at least one year.
Employee Benefit Trusts
Measures are to be introduced that will limit the amount an
employer can deduct for tax purposes to the amount that is actually
paid or transferred to the employee within 9 months of the end
of the relevant accounting period. The payment must be made
in a form that gives rise to an income tax and National Insurance
contribution charge.
Green Issues
Stamp Duty Land Tax(SDLT) - New zero carbon homes
Buyers of new zero carbon homes on or after the 1 October 2007
will be exempt from SDLT if the following provisions apply:
-
The building passes the certification process to qualify
as a zero carbon dwelling. Note that qualifying homes cannot
be connected to the gas main!
-
There will be no SDLT to pay on homes up to a purchase
price of £500,000. Where the purchase price exceeds
this amount the total SDLT liability will be reduced by
£15,000.
-
The relief will be available for 5 years and will therefore
finish on the 30 September 2012.
-
The relief is only available on the first sale of a new
home - sales of existing homes, or the second or subsequent
sales of new homes will not qualify.
Landfill Tax
Landfill Tax is to be increased:
-
From 1 April 2007 - the standard rate will increase from
£21 to £24 per tonne.
-
From 1 April 2008 - the standard rate will increase from
£24 to £32 per tonne. There will also be an
increase in the lower rate from £2 to £2.50
per tonne.
Landlords energy saving allowance.
From the 6 April 2007 floor insulation will be included in
this allowance together with loft insulation, cavity and solid
wall insulation, hot water system insulation and draught proofing.
A deduction will be allowed of up to £1,500 per property
rather than for each building. The allowance will continue until
2015.
Microgeneration
If a householder installs microgeneration equipment at home
with the primary intention of providing electricity for their
own use, then any financial reward received for the sale of
any surplus power generated is to be exempt from income or capital
gains tax.
VAT and Other Duty
VAT Issues
The registration and deregistration limits have been increased,
effective date 1 April 2007. The new amounts are:
Registration limit £64,000
Deregistration limit £62,000
The general principles to be applied remain unchanged.
Fuel Scale Charges
VAT fuel scale charges will be based on CO2 emissions for accounting
periods beginning on or after 1 May 2007.
Reduced VAT for supply of smoking cessation products.
Nicotine patches and similar smoking cessation products will
be subject to a reduced rate of 5% VAT. The effective date is
expected to be 1 July 2007.
Alcohol duty rates
Increases from 21 March 2007 are:
Beer - 1p per pint
Wine - 5p per 75cl bottle
Still Cider - 1p per litre
Sparkling Cider - 5p per 75cl bottle
Spirits - No increase
Sparkling Wine - 7p per 75cl bottle
Tobacco products duty
New rates of duty from 21 March 2007 are:
Cigarettes - an amount equal to 22% of the retail price plus
£108.65 per thousand cigarettes. Typically an increase
of 11p on a packet of 20.
Cigars - £158.24 per kilogram. Increase of 4p on a packet
of 5.
Hand rolling tobacco - £113.74 per kilogram. Increase
of 11p per 25g pack.
Other smoking tobacco and chewing tobacco - £69.57 per
kilogram. Increase of 7p per 25g of pipe tobacco.
Vehicle Excise Duty
The Government is raising the rate for the most polluting cars
(band G) to £300 in 2007-08 and £400 in 2008-09;
and reducing the rate for low carbon band B cars to £35
in 2007-08, with that rate then frozen for the subsequent two
years.
|
