This checklist highlights some of the key issues from the Pre-Budget Report that are likely to have an impact on small or medium sized businesses.
Small companies’ rate of corporation tax
The increase in the small companies' rate of corporation tax will be deferred for a further year. The rate will remain at 21% for 2010-11 and will increase to 22% for 2011-12.
Employers' National Insurance Contributions
Employers' National Insurance Contributions will rise from their current level of 12.8% to 13.8% from April 2011. A 0.5% increase was announced in the 2008 Pre-Budget Report and a further increase of 0.5% was introduced in the 2009 Pre-Budget Report.
Research and development tax relief
The Government has announced that one of the conditions that a small or medium-sized enterprise (“SME”) had to satisfy in order to claim the enhanced tax relief for research and development will be abolished. A SME company was previously obliged to prove that it owned any intellectual property derived from the research and development to which the expenditure was attributable. If your business is classed as a SME you may claim an enhanced tax relief at the rate of 175% for qualifying expenditure on research and development. The change will have effect for accounting periods ending on or after 9 December 2009.
Electric cars and vans
The Government announced that it will provide greater incentives for businesses to reduce emissions from their company car fleets by introducing a number of measures including:
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Exempting electric cars from company car tax (“CCT”) for five years from 2010.
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Extending CCT bandings in 2012.
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Exempting electric vans from the van benefit charge for five years and introduce (subject to confirming compatibility with state aid rules) a 100% first-year allowance for business expenditure on new electric vans.
Business rates: empty property relief
For the year 2010/11 empty commercial properties with rateable values of up to £18,000 will be exempt from business rates. The temporary increase in the threshold for empty property relief announced in the 2008 Pre-Budget Report has been extended and the threshold increased to £18,000. This higher threshold reflects the effects of the 2010 business rates revaluation.
Business Payment Support Service
The Business Payment Support Service (“BPSS”) helps viable businesses facing temporary financial difficulties to spread tax payments over an agreed timetable. It was announced in the 2009 Pre-Budget Report that the time to pay facility will continue for as long as it is needed. HMRC will require businesses seeking time to pay arrangements worth £1 million or more to provide an Independent Business Review in support of their request. It is expected that the new requirement will be implemented from April 2010.
Changes to business rates reliefs from 1 April 2010
Revaluation of business rates takes place every five years and the next revaluation will take effect from 1 April 2010. The Valuation Office Agency has provided details of various resources to help businesses with the revaluation process, including a dedicated website (http://www.voa.gov.uk).
Small Business Rate Relief provides certain business rate payers with a reduction of up to 50% on their bills. It is available where the rateable value of your property falls below the threshold, currently set at £14,999 (or £21,499 for properties in Greater London). The threshold will increase from £17,999 (or £25,499 for properties in Greater London) on 1 April 2010.
VAT rate increase reminder
The standard rate of VAT reverted to 17.5% from 1 January 2010. Shops are allowed to add the extra VAT to prices at the tills for up to 28 days, giving them additional time to complete the re-pricing of stock.
More information
If you have any questions about the content of this checklist or require further information on any of the issues raised in the Pre-Budget Report please contact:
Paul Davis Email: [email protected]
Tel: 020 7834 5526
Please contact Clarissa Jones if you require a copy of a report with more detailed coverage of the Pre-Budget Report.
Kerman & Co LLP
January 2010
January 2010
