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Corporation tax
Rate of tax on profits
£ per year (unless stated) |
2008-09 |
2009-10 |
|
£0-£300,000 |
21% |
21%* |
|
£300,001 - £1,500,000 |
Marginal relief |
Marginal relief |
|
£1,500,001 or more |
28% |
28% |
* The 2008 Pre-Budget Report announced that a rise in the small companies' rate to 22% would be deferred until 2010-11.
Marginal relief eases the transition from the small companies' rate to the main rate for companies with profits between £300,000 and £1,500,000.
The profits limit may be reduced for a company that is part of a group or has associated companies. The small companies' rate and marginal relief do not apply to close investment holding properties.
Capital Allowances
From 1 April 2008 for corporation tax and 6 April 2008 for income tax, changes will apply to the rates of capital allowances. Allowances for plant and machinery will reduce to 20%, allowances for long-life assets will increase to 10% and a new classification of features integral to a building will be introduced at a rate of 10%. The amount of relief claimable under industrial and agricultural buildings allowances will be reduced by one quarter, as part of phasing them out in full by 2011. First-year allowances for small and medium-sized enterprises will be replaced by a new Annual Investment Allowance of £50,000 for most businesses regardless of size, giving relief on 100% of the first £50,000 of expenditure.
Loss making companies investing in plant and machinery which qualifies for Enhanced capital allowances for environmentally beneficial and energy saving technologies will be able to surrender losses from qualifying expenditure for a cash payment of 19% of the expenditure, subject to a cap of the higher of £250,000 or a company’s PAYE/National Insurance Contributions liabilities.
From April 2008, the rate of research and development tax credits will rise from 125% to 130% for large companies and from 150% to 175% for SMEs (the SME increase is subject to approval from the European Commission and will be made effective by Treasury Order from a date not earlier than 1 April 2008).
For businesses investing in plant and machinery between April 2009 and April 2010, legislation in Finance Bill 2009 will introduce a new temporary 40 per cent first-year allowance (FYA) for expenditure on general plant and machinery. That is expenditure on plant and machinery that would normally be allocated to the main capital allowance pool.
Tax relief for business expenditure on cars
New rules for tax relief for business expenditure on cars were announced on 1 April. These take effect from 1 April 2009 for businesses in the charge to Corporation Tax and 6 April 2009 for businesses in the charge to Income Tax. The rate at which qualifying expenditure on cars can be written down against profits will depend on the car's CO2 emissions. Expenditure on cars with CO2 emissions exceeding 160 g/km will be allocated to the special rate capital allowances pool and attract 10% writing-down allowance (WDA). Expenditure on cars with CO2 emissions of 160g/km or less will attract 20% WDA in the main plant and machinery pool. The associated rules which disallow a proportion of car lease rental payments have also been amended in line with the new capital allowances rules.
Upstream Oil Industry
The main rate of CT for companies’ ring fence profits will remain at 30 per cent on and after 1 April 2010.
Companies in the upstream oil industry also face a Supplementary Charge. The charge applied from 17th April 2002 to the UK upstream profits of companies in the oil industry. It is based on ring-fence CT income as adjusted for financing costs. The charge commenced in April 2002 at 10 %. This was increased to 20% from 1st January 2006.
Legislation will be introduced in Finance Bill 2009 to include:
-
changes to the ring fence corporation tax (RFCT) and Petroleum Revenue Tax (PRT) rules to facilitate change of use activities where North Sea assets and infrastructure are reused for purposes other than oil and gas production.
Amendments to the chargeable gains rules to make it easier to allow companies to transfer their UK and UKCS assets to those most able to maximise the potential of those assets.
An extension to the PRT rules that provide relief for decommissioning costs to cover the situation where, as a result of licence expiry, a company is no longer a licensee. In addition, changes will be made to the PRT legislation to reduce the compliance burden and further simplify the regime.
Amendments to the RFCT legislation to fully align the definition of a consortium with the general corporation tax (CT) definition.
The change of use measures will have effect respectively for RFCT in relation to expenditure incurred on or after 22 April 2009; and for PRT in relation to chargeable periods beginning after 30 June 2009.
The changes to the chargeable gains rules will have effect in relation to disposals made on or after 22 April 2009.
The 2009 Budget also announced a package of measures which will provide support through the North Sea fiscal regime for investment in the UK and UKCS.
Legislation in Finance Bill 2009 will introduce a new ‘Field Allowance’ which will reduce the rate of tax paid in respect of certain challenging new developments. Specific types of new fields will receive a field allowance which, when the field is producing, can be offset against supplementary charge. The new Field Allowance will apply to fields given development consent on or after 22 April 2009.Construction Industry
There are special tax rules that apply to businesses in the construction industry that can require a deduction of tax at source on payments by a “contractor” to a “Sub-contractor”. The current rate of deduction is 18%.
Before they can get paid at all under the Scheme, subcontractors must hold either a Registration Card or a Subcontractors Tax Certificate. To obtain either of these a subcontractor must first be registered with the Inland Revenue.
Subcontractors who meet certain qualifying conditions will be issued by the Inland Revenue with Subcontractors Tax Certificates, enabling them to be paid gross. Those who do not will be issued with Registration Cards.
The deduction, when made, applies to all payments for labour and is an amount on account of the subcontractor's tax and National Insurance contribution (NIC) liability.
What is meant by "Construction operations".
An update to the rules of the scheme.