• At-a-glance
• Administration of Tax
• Personal Taxation
• Employment Taxation
• Business Tax
• Corporation Tax
• Capital Gains
• Savings and Investments
  
• Inheritance Tax
  
• Charities
  
• Trusts
• Anti-avoidance
• Value Added Tax
• Stamp Taxes
• Insurance Premium Tax
• Environmental Taxes
• Excise Duties
• Landline Duty

BUSINESS TAX

Increase in the Amount of Annual Investment Allowance

The maximum amount of the annual investment allowance (AIA) will be increased from £50,000 to £100,000 for expenditure incurred on or after 6 April 2010 for businesses chargeable to income tax, and on or after 1 April 2010 for businesses chargeable to corporation tax. The maximum amount of the AIA will be pro-rated where a business has a chargeable period which spans the operative date of the increase. Anti-avoidance legislation will be introduced to disapply property loss relief against general income to the extent that the loss is attributable to the AIA for any losses arising as a result of tax avoidance arrangements entered into on or after 24 March 2010 where, broadly, the main purpose of the arrangements is obtaining a reduction in tax liability.

Capital Allowances for Expenditure on Cushion Gas

With effect from 1 April 2010 expenditure on cushion gas will be treated for capital allowances purposes as special rate expenditure, qualifying for writing-down allowances at 10%. All leases of cushion gas commencing broadly on or after 1 April 2010 will be treated as funding leases.

Capital Allowances on Environmentally Beneficial Technology

Permanent magnet synchronous motors and biomass-fired warm air heaters will be added to the list of technologies, expenditure on which qualifies for 100% first-year allowances. Compact heat exchangers and liquid pressure amplification will be removed from the list. The criteria for taps and showers qualifying for the allowances will also be tightened. The changes will have effect on or after a date to be appointed by Treasury Order.

100% First-Year Allowances on Zero-Emission Goods Vehicles

A 100% first-year allowance is announced for goods vehicles which produce no CO2 emissions. The allowance is available on expenditure incurred on or after 1 April 2010 and before 1 April 2015 for corporation tax or on or after 6 April 2010 and before 6 April 2015 for income tax.

As a result of state aid rules there are a number of restrictions to the availability of the allowance and a cap on the amount of expenditure which may qualify.

Sale of Lessor Companies: Option to Elect

CTA 2010, ss 382–431 (deriving from FA 2006, Sch 10) are intended to prevent a loss of tax when a lessor company changes hands, by calculating a charge and matching relief designed to recoup the tax timing benefit enjoyed by the selling group and returning it to the buying group. The Finance Bill will include legislation to offer companies the opportunity to opt for an alternative treatment that is intended to recoup the tax timing benefit by isolating the profits of the business following the sale of the company as an alternative to an immediate charge. The legislation will differ from the draft legislation which was published at the time of the Pre-Budget Report, in order to:

• preserve entitlement to capital allowances on expenditure in some circumstances;
  
• ensure that the legislation will operate fairly where the lessor company is a controlled foreign company or leases ships into tonnage tax; and
  
• address a flaw in the draft that would have allowed a lessor company owned by a consortium to contrive to end the period during which profits are isolated without the tax timing benefit being recouped in full.
  

Changes that benefit the taxpayer will take effect from 9 December 2009, while other changes will take effect from 24 March 2010.

Corporation Tax Relief Removed for Release of Loans to Participators

Finance Bill 2010 will amend the corporation tax rules relating to the write-off or release of loans to ‘participators’ made by ‘close companies’. Corporation tax relief will be denied for a debit in the accounts arising from the write-off or release of such a loan on or after 24 March 2010.

The person to whom the loan is made will continue to be treated as if they had received a distribution.

Bank Payroll Tax

The Government has confirmed that the bank payroll tax announced in the Pre-Budget Report will be enacted in the 2010 Finance Bill. The tax will be chargeable on banks and building societies, on awards of bonuses over £25,000 made to, or in respect of, certain employees in the period 9 December 2009 to 5 April 2010. It will be charged at 50% on the aggregate of the excess of each bonus over £25,000 awarded in the above period.

A number of changes to the previously published draft legislation are to be made to clarify the scope of the tax and to provide machinery for assessment and collection.

Worldwide Debt Cap

A number of changes have already been pre-announced in relation to the worldwide debt cap regime following consultation with business. (A summary of these can be found in the Pre-Budget Report (PBR Note 4).) These changes aim to ensure that the provisions operate as originally intended. In addition, it has been announced that further provisions will be enacted in relation to securitisation companies which will:

• ensure that the results of any securitisation companies are not included in group consolidated accounts when calculating the financing costs of the group as a whole;
  
• include a regulation-making power to enable companies involved in capital market arrangements to transfer any additional corporation tax liability incurred as a result of the debt cap regime to another group company.

Risk Transfer Schemes

The legislation relating to risk transfer schemes was announced in the 2009 Pre-Budget Report and applies broadly from 1 April 2010. It has effect in relation to financial instruments that are treated for tax purposes as loan relationships or derivative contracts. In order to counter any avoidance that might be undertaken by affected companies, a regulation-making power will be introduced, subject to the negative resolution power, to extend the scope of the original provisions, as necessary, to cover other instruments held on trading account by financial traders.

UK Real Estate Investment Trusts and Stock Dividends

Legislation is planned for the next Parliament to relax the rules on distributions by UK real estate investment trusts (REITs). Currently, in order to meet the conditions to qualify as a REIT, the company (or group of companies) must distribute at least 90% of the profits from its rental business to its shareholders by way of a cash dividend. From the date of Royal Assent, any stock dividends issued by the REIT to its shareholders will also be included to determine if 90% of the profits have been distributed.