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BUDGET REPORT MARCH 2011

Corporation Tax

The rate of tax for small businesses will reduce by 1% to 20% from 1st April, 2011. For those making over £300,000 profit per annum the mainstream rate of corporation tax will reduce by 2% to 26% from 1st April, followed by a further 1% per annum reduction until 2014, when the main rate will be 23%.

Research & Development Tax Credit

Some further help and incentive for those businesses who invest money in research and development. The R&D credit relief will rise from 175% to 200% of expenditure from 1st April 2011 – and increase to 225% from 2012.

Rates Relief

Small businesses will continue to benefit from the rate relief holiday, which has been extended for another year to October 2012. A welcome reduction in the level of next year’s fixed costs.

Approved mileage payments

The rate per mile that can be paid to employees using their own car for the first 10,000 miles driven for business purposes, is to be increased from 6th April 2011 by 5p per mile to 45p per mile.

Benefits in Kind

The fuel benefit charge associated with using a company car is to rise; the CO2 emission table will be applied to a notional flat rate amount of £18,800 from 6th April 2011 (up from £18,000). Further tax changes to company car benefits will occur in April 2013, when a 1% reduction will be applied for all vehicles with CO2 ratings between 95g and 220g.

VAT

The taxable turnover threshold, at which a person must be registered for VAT, will be increased from £70,000 to £73,000;
The threshold at which a person may apply for deregistration will go up from £68,000 to £71,000; and
The registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased from £70,000 to £73,000.

Time to Pay

If you are struggling to pay your business tax bill due to a temporary cash flow problem, the Chancellor has, contrary to earlier reports, agreed to keep the Business Payments Support Service up and running. If you contact them before the due date to arrange a payment plan you will also avoid incurring penalties – although interest will of course still be chargeable.

Capital Allowances

Remember that from 1st April 2012 (for companies) or 6th April 2012 (for individuals) the Annual Investment Allowances for capital purchases (on which you get 100% tax relief) is being reduced to £25,000. The rate of writing down allowance is also being reduced by 2% to 18% per annum. We suggest you plan any large amounts of capital expenditure well in advance of these changes, as the way the rules will work (unless you have a 31st March year end) may preclude you from getting the full100% relief.

IR35

If you provide your services through a company, essentially to one or very few customers, then you may be caught by the IR35 legislation. There are proposals (as yet with no timescale) to create a dedicated helpline to provide greater pre-transaction certainty, to publish better guidance on the type of cases which will be outside of IR35, to restrict HMRC reviews to high risk cases only and to create an IR35 monitoring Forum.

OTHER BUSINESS NEWS

P35’s

Please remember that by 19th May this year you will have to file your end of year return online. If you are not already geared up for this then act now.
If you have no return to make, because you did not need to keep any P11s then you need to notify HMRC in writing or online – https://online.hmrc.gov.uk/shortforms/form/P35NilEmployer?dept-name=&sub-dept-name=&location=1&origin=http://www.hmrc.gov.uk.

The filing deadline for forms P11D is 6th July. If you need any help in completing these, or are unsure whether or not your business has provided a benefit in kind for any of its employees or directors, then please contact us in good time before this deadline.

Late payments of PAYE will now attract penalties.

VAT

Remember that if you make overseas sales you will have to regularly complete an EC sales list. If for a particular period there is nothing to declare then only if you are registered for VAT online can you do nothing. If you are submitting paper VAT returns then you will have to send a Nil declaration in writing to avoid a penalty.
WATCH OUT when making your VAT payments online as payments take 3 days to clear (excluding weekends & bank holidays), if a payment is received late a surcharge will be applied.

RECORD KEEPING

HMRC intend to crack down on record keeping. Make sure you have got all your paperwork up to date and in good order. If you are in any doubt about the records you should be keeping you can find HMRC guidance for companies at www.hmrc.gov.uk/ct/managing/record-keeping.htm.

This budget summary is for general information purposes only. You should seek further specific professional advice before taking any action on the basis of the contents of this newsletter.