The financial crisis has caused a steep and synchronised global downturn. Government support, alongside action to restore the flow of credit in the financial system, is helping businesses across the UK.
Budget 2009 builds on this support with targeted measures that will help businesses’ short-term cash flow, including:
- further support to loss-making businesses, by extending the enhanced loss relief announced in the 2008 Pre-Budget Report for an additional year and expanding HMRC’s Business Payment Support Service;
- enabling businesses to spread payment of this year’s inflation up-rating to business rates over three years, as announced on 31 March 2009;
- a ‘top-up’ trade credit insurance scheme to help businesses maintain their finances, in which Government will offer to match private sector trade credit insurance provision, for a temporary period, if insurers reduce cover to any UK business; and
- for a temporary period, a vehicle scrappage scheme, co-funded with industry, that will enable consumers
who scrap vehicles older than ten years to replace them with a brand new vehicle at a discount of £2,000. Over the last decade, the UK has built up key strengths that provide a platform for growth as the UK emerges from the recession. Consistent with the strategic vision set out in Building Britain’s Future: New Industry, New Jobs [HM Government, April 2009] published 20 April 2009, Budget 2009 announces a package of measures
that will support the adjustment towards renewed economic growth and improve the UK’s competitiveness, offering:
- a temporary increase in capital allowances to 40 per cent for one year, with effect from April 2009, to allow a higher proportion of private investment to be offset in that year against taxable profits;
- a £750 million Strategic Investment Fund to support advanced industrial projects of strategic importance, of which a third of the funding will be earmarked for low carbon projects; and implementation of a package
of reforms to the taxation of foreign profits, including the introduction of an exemption for foreign dividends, supported by limited restrictions to the interest deduction rules.
How will the Budget affect your business?
The Business Payment Support Service which helps businesses that are having difficulty meeting payments due to the existing economic conditions, has now been extended to support businesses currently making losses. The extension applies to corporation and income tax.
The Three Line Account Limit is being increased from the current amount of £30,000 for trading or self employment income and £15,000 for property income to permanently align it with the VAT registration threshold to £68,000 from the tax year 2009/10. This is relevant to small businesses who can restrict the information they provide in their tax return to just their turnover, total allowable business expenses, and net profit or loss, rather than having to provide a detailed breakdown of their expenses.
There is a new temporary rate of 40 per cent for capital allowances – first year allowance for expenditure on general plant and machinery.
The loss carry-back rules , which were extended in the Pre-Budget Report in November 2009, are to be extended for a further year for both limited companies and the self-employed.
A package of measures on the taxation of foreign profits by UK companies that are members of groups is being introduced.
VAT changes to modernise cross-border trading will be introduced over a three-year period from 1 January 2010 and will include changes to the place of supply rules for cross-border supplies of services, completion of quarterly European Community Sales and a new electronic VAT refund procedure for cross-border supplies of services.
Tax relief on pensions contributions will be restricted to basic rate for individuals with an annual income of £150,000 or higher from 6 April 2011. New rules apply from Budget Day (22 April 2009) regarding this group making large additional contributions to their pensions.
The standard VAT rate will return to 17.5 per cent from 1 January 2010. Employers need to be aware that from 2010-11 (brought forward from 2011-12) the new additional rate of income tax will be 50 per cent instead of 45 per cent and will apply to taxable income above £150,000. This replaces the 45 per cent originally announced.
There have also been changes to the income-related reduction to the personal allowance from 2010-11. These changes only affect taxpayers with an annual income of over £100,000 for the tax year 2010-11.
Find more information about these Budget changes on the HMRC website .
Corporation Tax rates for the financial year 2010-11 will remain unchanged with the main rate at 28 per cent and for the financial year 2009-10 the small companies rate will be 21 per cent. Alcohol duty will increase by 2 per cent from 23 April. Tobacco duty will increase by 2 per cent from 18:00 on 22 April. Fuel duty rates will increase by 2p per litre from 1 September 2009.
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