Corporation tax rates
The corporation tax rates are as follows:
| 12 months to 31 March 11 |
12 months to 31 March 12 |
|
| Small profits rate | 21% | 21% |
| Marginal rate | 29.75% | 28.75% |
| Main rate | 28% | 27% |
It is proposed to cut the main corporation tax rate to 24% reducing the rate by 1% a year over a four year period.
The relevant limits for corporation tax are reduced proportionately where a company is associated with other companies. The associated company definition will be simplified from April 2011, so that this rule will only apply where businesses are fragmented between various companies to reduce their corporation tax.
THINK AHEAD
Get the timing right for your investment in new business equipment. At present, businesses of any size will generally benefit from immediate tax relief on the first £100,000 a year spent on most types of equipment. However, this allowance will fall to £25,000 from April 2012. So it could be worth bringing forward major investments.
Annual investment allowance (AIA) and writing down allowances (WDAs)
The 100% AIA expenditure limit will be reduced from £100,000 to £25,000 from April 2012.
The rates of WDAs for new and unrelieved expenditure on plant and machinery will be reduced as follows from April 2012:
• Main pool plant and machinery expenditure 18% (currently 20%).
• Special rate pool expenditure 8% (currently 10%).
A hybrid WDA rate is calculated for accounting periods that straddle April 2012.
From April 2010, business expenditure on new unused zero-emission goods vehicles qualifies for a 100% first year allowance. The 100% relief applies for five years to April 2015 and is capped at total qualifying expenditure of €85 million over this period per undertaking or group.
Research and development (R&D) tax relief
For many years, companies have been able to claim enhanced tax relief on their qualifying R&D expenditure. Current rates are 175% for small and medium-size enterprises (SME) and 130% for large companies. However, it is no longer necessary for the relevant SME incurring the R&D expenditure to own the intellectual property generated by the R&D. This applies for accounting periods ending on or after 9 December 2009, as previously announced.
SAVER
Sharing with your spouse. If you run a company or a business make sure your spouse/partner is appropriately paid and pensioned for any work and that they share in the profits if possible.
NIC exemption for new regional businesses
During a three-year qualifying period, new businesses which start up in targeted areas outside London, the South East and the East of England will get a reduction in their employers’ NICs. These employers will not have to pay the first £5,000 of class 1 employer NICs that would otherwise be due in the first 12 months of employment. This will apply for each of the first ten employees hired in the first year of business.The measure will apply in Scotland, Northern Ireland and Wales, and the following English regions: the North West, North East, Yorkshire and Humber, West Midlands, East Midlands and South West.
The scheme is intended to start no later than September 2010. Any new business set up from 22 June 2010 that meets the criteria to be announced will benefit from the scheme.
Capital distributions
With retrospective effect from 1 July 2009, distributions of a capital nature will still fall within the exempt distribution rules for companies as announced earlier. For example, a distribution from reserves created by a reduction of capital will qualify as an exempt distribution, despite being capital in nature.Consortium relief
The consortium loss relief rules will be relaxed. Currently, a consortium member could transfer its share of the consortium company’s losses to another company within its own tax group, but only where the member was UK tax resident. From a date to be announced, a consortium member can transfer losses to other members of its group, where the so-called ‘link’ consortium company is resident in any European Economic Area country.At the same time, an additional test will be introduced to restrict the amount of losses that may be claimed from a consortium company through consortium relief, based on the voting power and control that the member has in the consortium.
Other corporate tax changes
The UK introduced ‘debt-cap’ rules for large groups for periods starting after 31 December 2009. Broadly, these provisions restrict the tax relievable interest costs of highly geared UK companies and groups where the UK interest exceeds the group’s worldwide interest costs. A number of detailed technical changes are made to the operation of these rules.New anti-avoidance rules are being introduced from 22 June 2010 to deal with certain contrived ‘derecognition’ schemes involving loan relationships.
Special measures have been introduced from 22 June 2010 to prevent unintended tax credits being enjoyed by a UK corporate investor on distributions received from an authorised investment fund.
