• At-a-glance
• Administration Of Tax
• Personal Taxation
• Employment Taxation
• Business Tax
• Corporation Tax
• Capital Gains Tax
• Savings and Investments
  
• Trusts
  
• Anti-Avoidance
  
• Stamp Taxes
• Value Added Tax
• Insurance Premium Tax
• Environmental Taxes
• Excise Duties
• Miscellaneous

Corporation Tax

Main Rate

The main rate of corporation tax for companies with profits above the upper limit of £1.5m will be reduced to 27% from 1 April 2011. There will be further reductions to 24% by 1 April 2014. The main rate for companies with profits arising on and after 1 April 2011 from oil extraction and oil rights in the UK and the UK Continental Shelf (ring-fence profits) will remain at 30%.

Small Profits Rates

For companies with profits below the lower limit of £300,000, the small profits rate of corporation tax will be reduced to 20% from 1 April 2011. The small profits rate for companies with profits arising on or after 1 April 2011 from oil extraction and oil rights in the UK and the UK Continental Shelf (ring-fence profits) will remain at 19%.

Worldwide Debt Cap

The autumn Finance Bill will include 14 separate changes to the worldwide debt cap regime. Most of these have been previously announced, following consultation with business. The changes are intended to ensure that the provisions operate as originally intended. Companies within the special corporation tax regime for securitisation companies will be excluded from the main debt cap rules. This will include the exclusion of their financing expenses when computing the worldwide group’s cost of finance. There will also be a power to make regulations to enable companies involved in capital market arrangements to transfer any additional tax liability incurred as a result of the debt cap regime to another company in the group.

Consortium Relief

Two changes are to be made to the consortium relief rules. The changes are to be included in a Finance Bill to be introduced after the summer recess and will apply for accounting periods beginning on or after the date the legislation is published.

The first change extends the link company rule, under which a consortium member can transfer its share of the consortium’s losses to a member of its group, so that a company established within the European Economic Area can be a link company.

The second change is to the rule for determining the maximum amount of losses that can be claimed from a consortium company. Currently, the maximum is determined by the lowest result from 3 tests. A fourth test is to be added based on the proportion of voting rights and the extent of control the member holds in the consortium.

Capital Distributions

Legislation will be introduced to clarify the treatment of certain distributions received by UK companies. Essentially the provisions will confirm HMRC’s existing practice of treating all UK distributions as being of an income nature unless they are specifically excluded. The legislation will have retrospective effect (although companies can elect for the legislation not to apply retrospectively).

Research and Development Tax Relief

The current conditions under which small or medium-sized enterprises can claim enhanced tax relief for expenditure on research and development include a requirement that any intellectual property deriving from the research and development to which the expenditure is attributable must be owned by the company making the claim. This requirement will be abolished. The abolition will have effect for any expenditure incurred by an SME company on research and development in an accounting period ending on or after 9 December 2009.

Oil and Gas Fiscal Regime

Finance Act 2009 included several measures to provide support for investment by oil and gas companies operating in the UK or on the UK Continental Shelf. These included a provision that chargeable gains would not arise in some circumstances where the disposal proceeds were reinvested in new oil trade assets, and the disposal and acquisition qualified for rollover relief. The scope of this reinvestment relief will be widened so that it can apply when proceeds are reinvested in exploration and development expenditure, including drilling costs, and can apply as intended in a group context when the company making the reinvestment is not the company making the disposal. These changes will have retrospective effect, to 24 March 2010 and 22 April 2009 respectively.

In addition, the scope of the measure providing that in certain circumstances chargeable gains do not arise on the swap of UK/UKCS licences will be widened. The scope of the ‘field allowance’ will be extended to investment in fields that have previously been decommissioned, with retrospective application to fields whose development was authorised on or after 22 April 2009. The qualifying criteria for a high pressure/high temperature field will be reduced, and the allowance will be tapered, by means of an order which will be introduced before 29 July 2010, and will come into force on the day after the date on which it is made.

Life Insurance Companies

A number of measures are to be introduced to amend the tax regime for life insurance companies, with effect from various dates. The measures will amend the rules applying where insurance business carried on in the UK is transferred to a non-European Economic Area (EEA) overseas company or to a UK branch of a company resident elsewhere in the EEA. It is also confirmed that an anti-avoidance rule announced in the March Budget which prevents manipulation to avoid tax on previously unrecognised profits will be introduced in the Finance Bill.

Interest Harmonisation: Corporation Tax and Petroleum Revenue Tax

Corporation tax and petroleum revenue tax will be brought within the harmonised interest regime introduced in Finance Act 2009. The new harmonised interest provisions will replace the current range of differing regimes with a single legislative framework for interest chargeable on late payments and payable on repayments and this will apply to all taxes and duties administered by HMRC. Interest will be charged from the date the tax or duty was due to be paid to HMRC until the date it is paid. HMRC will pay interest on repayments from the date the tax or duty was due to be paid or, if later, the date the payment was actually received, to the date the repayment is made. The statutory description of interest for each of these taxes will be ‘late payment interest’ and ‘repayment interest’. Interest harmonisation will be phased in over a number of years and the dates from which these changes take effect will be specified by Treasury orders. The rules for Quarterly Instalment Payments remain unchanged and do not form part of the harmonised rules that will apply to corporation tax.