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CORPORATION TAX |
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Zero-emission goods vehicles See TM ¶298, ¶327 For expenditure incurred on zero-emission goods vehicles on or after 1 April 2010 (6 April 2010 for income tax purposes), and for the following 5 years, a first year allowance is to be introduced. Where a business purchases a new, unused vehicle that is designed primarily for the carriage of goods and it cannot under any circumstances produce CO2 emissions, it will be able to claim 100% capital allowances on the item in the period it is purchased. This expenditure will then be excluded from the annual investment allowance. In order to comply with State Aid rules the following businesses will not qualify: » those that are considered to be in difficulty; » those who are yet to repay State Aid that has been deemed illegal; » those engaged in the fisheries or aquaculture sectors; and » those managing waste for others. Further, there will be an overall cap on the amount of expenditure that a business (along with associated businesses) can claim over the life of the relief which will be set at €85 million. Environmentally friendly assets See TM ¶329, ¶332 The annual review of the Energy and Water Technology Criteria lists will result in the following changes after the passing of a Treasury Order which is due prior to Parliament’s summer recess. Energy Technology List While the main technology of compact heat exchangers and a sub-technology (liquid pressure amplification) are removed, two new sub-technologies are to be added (permanent magnet synchronous motors and biomass fired warm air heaters). Water technology list No additions or removals are to be made but the criteria relating to taps and showers are to be tightened. Annual investment allowance changes See TM ¶369 The limit for the annual investment allowance is to be increased from its current £50,000 to £100,000 per annum for expenditure incurred on or after 1 April 2010 (6 April 2010 for those within the charge to income tax). Where a business has a period straddling this date the total AIA it can claim will be calculated based on the length of the period falling into each financial year.
A further change has also been introduced to restrict the use of losses in property businesses by individuals (see “Restriction of property losses” on Income Tax). Share Incentive Plans See TM ¶786 From 24 March 2010 the usual corporation tax deduction will not be allowed for payments to a SIP trust, which are part of a tax avoidance scheme where the main purpose or one of the main purposes of the company in making the payment is to obtain a corporation tax deduction. Further changes to worldwide debt cap rules See TM ¶877 A number of technical changes are being made to the recently introduced provisions on interest restrictions. Firstly, in looking at the assets and liabilities in the net debt calculation, long-term arrangements that, while not being in the legal form of a loan, have similarities to a loan, including an interest-like return, will be included. Secondly, the rules will be clarified to put beyond doubt that a limited liability partnership cannot be the ultimate parent of a group for these purposes. Finally, distributions made by industrial and provident societies will not be included as finance expenses, even though they are normally treated as interest payments for tax purposes. Real Estate Investment Trusts See TM ¶985 The rules on the distribution level that a REIT must make in order to retain its status are to be changed in the first Finance Bill of the next Parliament. From the date the Bill receives Royal Assent a REIT will be able to count any stock dividends it makes towards the 90% requirement. The recipients of such dividends will still be taxed in the same way as if they had received a cash dividend from the REIT. Rates See TM ¶1342, ¶9962 The rate of tax applying to companies with profits below the lower limit has been set at 21% for the financial year commencing 1 April 2010. This further postpones the original planned increase to 22%. The corporation tax rate for the financial year commencing 1 April 2011 has been frozen at 28% for companies with profits over £1.5 million. Gift aid and charities See TM ¶1342, ¶4420 A statutory definition for tax purposes is to be introduced. For gift aid purposes this will be effective from 6 April 2010 with other areas following throughout the tax year. In order to be considered a charity a body will have to be: » established for charitable purposes only; » located in the EU or in any other country specified by Order (Iceland and Norway will be the first); » regulated by a body similar to the Charities Commission; and » supervised by “managers”, being trustees, directors and similar, who are “fit and proper” persons. Conditions 2 and 4 above will also be applied to community amateur sports clubs. Consultation is to be entered into in relation to how the administration and recovery of tax will function with the extended territorial extent of the scheme. Sale of lessor companies See TM ¶1800+ Following the draft legislation published in the Pre-Budget Report a number of technical changes have been made. Firstly, where a company had concluded a contract prior to the draft legislation, with payment being made afterwards, it may have been deprived of the allowances it expected. The legislation is amended to ensure it will retain its original right. Secondly, in the case of a lessor company owned by a consortium, the election to ring fence the leasing trade acquired will continue where only small changes are made in the proportionate interests of the consortium members. It will then remain in force until such time as all of the income calculated under the rules has been subjected to tax. Finally, a non-resident company that is deemed to be a controlled foreign company, carrying on a leasing business will come within these rules if it changes hands. Deeming provisions that would allow a CFC an advantage over a UK resident leasing company in this situation will be removed. Loans to participators See TM ¶2115 Where a loan made to a participator (or their associate) is written off on or after 24 March 2010 the company will no longer be entitled to any corporate tax deduction. This in essence restores the previous position and closes an apparent loophole where the company could obtain a deduction when the write off is treated as a distribution in the recipient’s hands. Disclosure of tax avoidance schemes See TM ¶2215 Legislation will be introduced to make these changes: » disclosure of actively marketed schemes will have to take place when a promoter first communicates a fully designed scheme to a third party for the purpose of obtaining clients of that scheme; » a person who introduces a client to a notifiable scheme will have to provide HMRC with the name and address of the promoter who provided the introducer with details of that scheme; » the penalties for failure to comply with a disclosure obligation will be increased; and » promoters will have to provide HMRC with periodic information about clients who implement a notifiable scheme. |
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Example A Limited has a year ending 31 December 2010. Its total AIA will be calculated as follows: 3/12 x £50,000 £12,500 9/12 x £100,000 £75,000 Total AIA available £87,500 The total that can be claimed on expenditure prior to the increase is limited to £50,000. |
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Example Continuing the above, A Limited will be able to claim allowances up to £50,000 for the 3 months prior to 1 April 2010 but a total of £87,500 for the entire period. |