All you need to do is sign 2 forms:

1. Form 64-8, this informs H M Revenue & Customs that you have authorised a new agent to act on your behalf when dealing with them in the future; and

2. A letter of engagement. The letter of engagement is a standard agreement explaining what we are responsible for and what you are responsible for.

Elpizo and your outgoing advisors will between them deal with the professional formalities on your behalf. It is worth pointing out at this point, other than in rare situations, NO FEE’S will be charged to you by the old accountant or us for changing accountants.

Although not necessary, we find in most cases a short letter from you to your old accountant explaining we will now be dealing with your affairs helps make the transition smoother. If appropriate, you may wish to take this opportunity and thank the old accountants for their help in the past.

If you would like to discuss changing accountants contact Elpizo today.

CONSULTATION/CONVERSATION IS FREE!!

New campaigns will focus on builders, direct selling and people who fail to do tax returns. Plus, campaigns aimed at electricians and e-marketplaces will be launched soon.
HMRC has announced its plans for campaigns in 2012. There will be three new campaigns, plus two which have already been announced will be launched before 31 March 2012.

Campaigns are designed to tackle tax evasion by encouraging people with undeclared tax to bring their affairs up to date. Each campaign focuses on a particular group, eg a trade sector or people with money in offshore accounts.

The new campaigns, to be launched later in 2012, are aimed at:
• Missing returns: focusing on people who fail to complete tax returns and who are liable to pay tax at the higher rates.
• Home improvement trades: focusing on tradespeople in construction and building work such as roofing, window fitting, bricklaying, carpentry and joinery.
• Direct selling: focusing on people with taxable income from buying and selling goods direct to others, or from the commission on these sales.
Two campaigns which were announced previously and will be launched before the end of 2011/12 are targeted at:
• Electricians and electrical fitters. This will be launched in February 2012.
• E-marketplaces. This will be launched in spring 2012 and will target those who are using e-marketplaces to buy and sell goods as a trade or business but not declaring the income. People who only sell a few items and who are not traders are unlikely to be liable to tax and will not be targeted by this campaign.

Each campaign follows a similar pattern. People are encouraged to come forward and settle their tax on favourable terms. There are usually two stages with deadlines first for notifying HMRC that you intend to use the disclosure opportunity, and then for making the disclosure and paying the arrears. HMRC will use information from other sources to seek out people whom it thinks should have come forward in response to the campaign but didn’t. Such people will face higher penalties and possibly a criminal investigation.

Previous campaigns have targeted offshore investments, medical professionals, plumbers, VAT defaulters and private tutors. HMRC says that more than £500m has been raised from voluntary disclosures and a further £105m from follow-up activity.

Although none of the latest campaigns listed above has been launched yet, it is worth noting that HMRC’s announcement says: “People who believe they need to make a disclosure and want to come forward now and voluntarily disclose can call 0845 601 5041.”

November ushers in late autumnal gloom and long dark nights. What better time to stay indoors and review your financial affairs, making sure you are not missing any tax deadlines or losing out on any entitlements.
Our tips to keep you occupied in reviewing your tax and tax credits are set out under the following headings:
When dealing with HMRC, always keep independent evidence of postage, copies of documents you send to them and notes of telephone calls.

1. PAYE taxpayers – have you received a ‘P800’ tax calculation?
HMRC’s automated process for issuing tax calculations to PAYE taxpayers who they think have not paid the correct tax in the year is now settling into its second year. Refunds for 2010/11 should have already been issued and the first ‘underpayment’ calculations (where HMRC think you have not paid enough tax) should be hitting doormats from the end of this week through to the end of the year.
Always check the calculation and ensure you are happy with it or query it with HMRC if you are in any doubt. Follow our guidance to check yours, and to ensure you know your rights to challenge the calculation, where appropriate.

2. Self-assessment taxpayers – 2010/11 tax return pointers
a. Have you missed the 31 October paper filing deadline?
If you have not yet filed your paper return, the only way to avoid a fixed £100 penalty is by not filing on paper, but instead to file online by 31 January 2012.
Penalty rule changes this year mean that it is no longer possible to escape a fixed £100 fine if you file late, even if pay all your tax on time or have nothing to pay.
b. Do you have a reasonable excuse for sending in a paper tax return late?
If you do submit a late paper return, you will be charged a penalty but you might be able to appeal on the grounds that you had a reasonable excuse.
HMRC have a very restricted view of what constitutes a reasonable excuse. They will normally accept industrial action at the Post Office, loss of tax records through fire, flood or theft, serious illness which prevented you from dealing with your tax affairs (for example coma, heart attack, stroke or mental illness), or death or serious illness of a close relative or domestic partner.
However, HMRC’s guidance is only their view and is not conclusive. For example, a combination of factors might together make up an overall reasonable excuse. And if HMRC reject your appeal, you can appeal via their internal review system and/or to the tax tribunal.
c. What do you do when your ‘reasonable excuse’ ends?
You might be late with your return and the reason which made you miss the deadline is still causing you problems now. You should submit your return as soon as possible after the problem is resolved. It would also be useful to note in the ‘additional information’ section of the return why it is late.
d. How do you get your tax collected through PAYE?
If you have filed your return on paper, you had until the end of October to request HMRC to collect your tax for 2010/11 through your 2012/13 PAYE code, provided the amount due is £2,000 or less. If you file online and you want your tax coded in this way, you need to submit it by 30 December 2011.
HMRC do now have power to collect up to £3,000 via PAYE. This will be reflected in self-assessment tax returns from 2011/12 onwards. If you owe between £2,000 and £3,000 for 2010/11, we understand that HMRC might be able to apply the higher limit if you would prefer your tax to be collected via PAYE. But you would need to contact them to ask if they can do this.

3. Tax credits
All tax credit claimants are required to renew their claim each year, most by completing ‘renewal’ forms or telephoning the helpline and giving or confirming details of their income and circumstances for the year just ended. This process finalises the claim for the year just ended and acts as a claim for the new tax year.
The principal deadline for renewing 2010/11 claims was 31 July 2011. See our August article for more information about renewals.
a. Did your renewal contain estimated figures? Confirm the actual details to HMRC
If, for example, you are self-employed, you may not have known your 2010/11 income by 31 July and therefore may have provided HMRC with an estimate. The date by which you must report final figures to HMRC is 31 January 2012, which fits in with the last self-assessment filing date for the self-employed.
If final figures are not sent in by 31 January, HMRC will finalise your 2010/11 claim using your earlier estimate. This may be incorrect and, as well as leading to an incorrect 2010/11 award, could also lead to your 2011/12 claim being wrong.
b. Have your tax credit payments stopped?
If HMRC did not receive your renewal papers or you did not renew by phone by 31 July 2011, it is likely that HMRC will have ended your claim and sent you a statement of account explaining that the payments have stopped and detailing any overpayment. Even if you don’t want to continue claiming, if you have received forms from HMRC you must complete them otherwise you may find yourself with an overpayment.
Normally, you have 30 days from the date on that statement of account to contact HMRC and have your claim reinstated. It is important to take immediate action if your payments stop by contacting the tax credit helpline on 0845 300 3900 (textphone 0845 300 3909). This year HMRC have confirmed they will extend the 30 day time limit to 60 days. Outside of this 60 day period you can still have your claim reinstated from 6 April 2011 if you had good cause for not renewing by the deadline provided you contact HMRC by 31 January 2012.

4. Junior ISAs – savings for children
Now that Child Trust Funds are no longer available for children born on or after 3 January 2011, a new tax-free investment – a ‘Junior Individual Savings Account’ (or ‘Junior ISA’) – has been introduced for young people. The Directgov website gives more information.

Key findings from the UK report
Download the UK Enterprise Survey Report 2011 (PDF 2MB/32 pages)
Growth
Since the UK emerged from recession the proportion of businesses reporting growth has recovered, although it has not yet returned to 2007 levels.

Other key findings:

Six in ten businesses expect to grow their turnover over the coming 12 months.
Roughly half of growth in the economy will come from the UK’s c.5,890 large (250+ employee) firms. This suggests that policy-makers need to give at least as much consideration to the needs of larger businesses as to those of smaller businesses.
Two in ten businesses expect to grow their turnover by 10% or more over the coming 12 months. These higher growth businesses are hard to spot, as they have surprisingly similar characteristics to businesses in general. This represents a challenge to policy-makers seeking to direct support at firms with ambitions to expand.
Higher growth businesses are more likely to be exporters expecting to grow overseas sales, which undoubtedly explains their high propensity to be more positive about globalisation than those not expecting to grow.
The majority of growth in employment in the private sector is likely to be created by SMEs.
Increasing profitability and turnover are the key objectives for businesses over the next 12 months.
Attitudes to the business friendliness of the UK regulatory and tax environment have become less favourable since 2010, especially for medium-sized firms.
Competition in the marketplace and customer demand are the other main challenges to business performance at this time.
Globalisation
The perceived likely impact of continued globalisation remains more positive than negative, although the proportion of businesses believing that the overall impact will be negative has risen since 2010.

Other key findings:

The majority of businesses have some form of global business engagement, primarily through imports and exports, and this remains strongly related to company size.
The proportion of exporters who report growth in international sales has recovered to 2007 levels but is not expected to rise over the next 12 months.
Overall, 7% of non-exporters claim they are definitely planning to start exporting over the next two years.
Businesses in the Production industries are more likely than those in Services to be globally engaged, with manufacturers more likely than businesses in other sectors to export or import.

Many become directors for one reason and one reason only – to save on their tax bill via the ‘salary/dividend’ method.
What many owner-directors might not appreciate is that the role requires them to undertake specific legal duties; the penalties for non-compliance can be severe to include possible criminal proceedings.
This checklist is intended to form the basis of a list that can be given to all directors for their reference.
• Prime Duty
Directors hold a position of trust on behalf of the company’s shareholders. Their prime duty is to manage the company for the benefit of those shareholders and not for any individual shareholder or group of shareholders.
• Statutory Duties
As with many UK legal rules the duties owed by directors derive from Common Law having evolved as a result of different rulings, comments and decisions made in Court Cases over the years. The Companies Act 2006 ‘codified’ (brought together) some of those rulings with particular relevance to ‘conflicts of interest’ such that there are now seven statutory duties as follows: S172 – s177 Companies Act 2006.
1. To act within the powers conferred as per the company’s articles
The usual example given of abuse of this duty concerns the issue of shares. The issuing of shares in order to raise money for the entire company is acceptable but not if for any other purpose e.g to increase the number of shares to benefit one particular director.
SUGGESTION: Directors should provide the company with written confirmation that they have read the company’s articles to enable them ‘to act within its powers’.
2. To promote the success of the company
Directors must act in a way which they consider, in good faith, will promote the success of the company for the benefit of all shareholders, having regard to:
(a) the likely long term consequences of any decision
(b) the interests of the company‘s employees
(c) the need to foster the company‘s business relationships with suppliers, customers and others
(d) the impact of the company‘s operations on the community and the environment
(e) the need to maintain a reputation of high standards of business conduct and to act fairly as between shareholders
3. To exercise independent judgement
This duty is the overall method of decision-making that hopefully will alleviate any conflict of interest.
4. To exercise reasonable care, skill and diligence
The standard is the usual standard exercised by a diligent person; higher standards are expected from directors responsible for decisions on matters for which they have specialist or professional knowledge.
5. To avoid conflicts of interest
This duty is particularly relevant in any property, information or opportunity transaction. A director cannot have a direct or even indirect interest that conflicts or may potentially conflict with the interests of the company. Such transactions can be actioned but need to be authorised by the non-conflicted directors on the board subject to the necessary quorum for a directors meeting excluding the director with the conflict of interest; that director is not allowed to vote on the transaction. Such a conflict may be encountered by non-executive directors who are more likely to hold multiple directorships.
6. To not accept benefits from third parties
Conflict of interest may arise on the acceptance of a benefit given by virtue of the directorship. ‘Benefits’ can be monetary or non-monetary in nature. This does, however, bring into question as to how far to take the acceptance of corporate hospitality.
SUGGESTION: Should guidelines be introduced by the company to disclose gifts above a certain amount?
7. To declare interests in any proposed transaction or arrangement
This duty requires the declaration of any interest – note: NOT only in a situation where a ‘conflict’ may arise but any interest of a director or any person connected with the director, for example, his/her spouse/ children. The nature and extent of the interest must be declared to the other directors unless they are already aware or ‘ought reasonably to be aware’ of the interest. Chapter 3 Companies Act 2006 covers declaration of existing transactions or arrangements; failure to declare can result in a fine.
SUGGESTION: It should at least be noted in minutes or board papers that these statutory duties have been considered by each director.
Other legal duties
There are laws that give right of prosecution against directors in their personal capacity for certain actions undertaken whilst fulfilling that role, for example:
• Directors of companies that fail to prepare and deliver documents, on behalf of the company, to Companies House as and when required by the Companies Act. Conviction could result in a criminal record for each director and a Level 5 fine of £5,000. s387; s 858 Companies Act 2006
• Shareholders are allowed to bring legal action on behalf of the company against any director who is personally liable for any loss suffered by the company due to the ‘negligence, default of duty or breach of trust by the director’. Part 11 Companies Act 2006 – Derivative action. SUGGESTION: Although the likelihood of a claim being successful is limited should indemnity insurance be considered?
• The Insolvency Act 1986 allows proceedings to be brought against the company’s directors if they knew or ought to have known that the company was insolvent or the company was trading fraudulently with intent to defraud creditors. The directors may be ordered to make such contribution to the company’s assets as the court thinks fit.
• The Health and Safety at Work Act 1974 s37 imposes liability if a health and safety offence is committed with the knowledge or ‘connivance’ of a director
• Laws relating to the control and disposal of hazardous waste
• The UK Enterprise Act 2002 imposes personal liability on directors for breaches of competition rules

IT contractor Elaine Richardson, trading as ECR Consulting, emerged victorious last week from an IR35 case that could have cost her £50,000.
In their ruling, the tribunal judges concluded, “It is clear to us that ECR is a genuine business and therefore not a target of the IR35 legislation.”
After it decided Richardson was a disguised employee through an engagement with Vertex Data Science, HMRC handed her a £50,000 tax assessment in November 2005. As a member of the Professional Contractors Group (PCG), she was covered by tax investigation insurance and was represented by Accountax Consulting.
The tribunal applied three status tests – mutuality of obligation, substitution and control – to determine the nature of her working relationship with Vertex and concluded: “ECR operates from a dedicated business area at her home. It has a company domain and website. ECR advertises its services and is a member of the PCG. It has retained reserves and invested in development and has over the years taken on fixed price work for a variety of clients.”
In a press release on the case, the PCG argued that the tribunal’s focus on Richardson being in business on her own account could signal a shift of thinking by tax tribunals. “The classic tests of employment and IR35 status – control, substitution and mutuality of obligation – are increasingly irrelevant in today’s knowledge economy, and can no longer reflect modern flexible working patterns,” the group said.
Accountax Consulting’s Matt Boddington, who represented ECR Consulting at the tribunal, commented: “What is particularly pleasing about this judgement is that the tribunal had their commercial heads on, and understood that contracting through a single person limited company is a prudent and sensible method of providing freelance services, and not just about disguising employment.”
In a recent interview with TAXtv, Boddington commented: “the Revenue has done a very good job of convincing, or trying to convince everybody, that mutuality simply means someone does some work and gets paid for it. In every case that comes before the court, somebody has done some work and been paid for it – and if that were true no case would ever be decided on mutuality of obligation.”
With defeats in IR35 cases such as Novasoft and MBF Design Services accumulating in its files alongside the latest reverse with ECR, Boddington suggested HMRC might be losing its taste for much more litigation on this front.
“There are thousands of these cases, but somehow they never seem to make it into HMRC’s manuals. The last few IR35 cases that have been prosecuted by HMRC – there just does not seem to be the appetite that there was a few years ago. It’s almost as if HMRC is weary of the legislation themselves,” he said.

All change from April 2011

The rules for paying some of the most common taxes are changing.

•Corporation Tax. From 1 April 2011, companies and organisations must submit their company tax returns online and pay all corporation tax and related payments electronically. This includes interest on overdue corporation tax and penalties for not filing company tax returns on time.
When, exceptionally, payment is made by cheque after March 2011, the funds will be treated as being received by HMRC on the date when cleared funds reach HMRC’s bank account – not the date when HMRC receives the cheque. See also How to pay Corporation Tax

•Class 2 National Insurance contributions will in future become due on 31 July and 31 January, the same as self assessment income tax. See also How to pay Class 2 National Insurance contributions

•PAYE late payment penalties. HMRC will start issuing late payment penalty notices to employers who paid their PAYE late in the 2010/11 tax year. See also How to pay PAYE late payment penalties

•Penalties for submitting a VAT Return on paper instead of online. From April 2011 if you should have submitted your VAT Return online but sent it in by paper instead, you will be charged a penalty. These penalties will apply to returns for accounting periods ending on or after 31 March 2011. See also How to pay VAT and Find out more about penalties for submitting a VAT Return on paper instead of online

Family businesses face very specific challenges in their quest for growth and success. Here Grant Gordon identifies the potential obstacles and advises on how to overcome them.
The strengths of family businesses have been highlighted by a number of recent studies and include their tendency towards long-term thinking, a restrained attitude to debt, a genuine commitment to customer service and an unceasing entrepreneurial approach.
In the UK, according to the Institute for Family Business (IFB), family businesses account for 65% of private sector enterprises and 40% of private sector employment. Other studies show that one third of the USA’s Standard and Poor’s 500 and 40% of the 250 largest companies in France and Germany are family businesses.
In this article we look at the common structures of family businesses and the issues that most affect the growth and future success of such firms. Then we identify the 10 key ways successful family businesses overcome these problems.
Overview: The family business system
The family business system includes three component parts: the ownership, the family and the business. These can be pictured as overlapping circles in what is called the ‘three-circle model’ (see Figure 1, opposite).
Many family businesses begin with a single entrepreneur who unifies all three circles: the ‘owner-manager’. The founder owns the business, works in it, and represents ‘the family’. The system is very simple with a centralised decision-making process.
As the business prospers the system becomes more complex. There are more managers who are neither family nor owners. Perhaps an external investor takes a stake in the business, becoming an owner but not a manager. Then the entrepreneur has children who are family, but not owners or managers. Within a few years there could be many people involved.
In some firms the founding entrepreneur remains for a long period as the only person wearing all three owner, manager and family hats. They work on and on, never passing on ownership, or business leadership, to others. When they are finally overtaken by ill health, or death, this may trigger a crisis in the system. The family may feel forced into a rushed sale, destroying value and bringing an end to the family business.
But there are many other ways for the system to develop (see Figure 2, below). A common trajectory is for the children of the founding entrepreneur to form a ‘sibling partnership’ as owners, managers and family members. Centralised control in one person gives way to shared control.
When they retire, if the business is still successful, the next move is for the third generation to create a ‘cousin consortium’ involving different branches of the family. As the system becomes more complex there is increased need for the formalising of governance structures and protocols to manage the family input.
As the number of family members grows, it may be advisable to ‘prune the family tree’ – buying out some of the shareholders and concentrating ownership back into a few hands: perhaps even back to a single controlling owner, allowing the cycle to begin all over again.
Three obstacles to growth
Family businesses face three main obstacles to growth, as outlined below.
1. Succession issues
Typically the founding entrepreneurs may be reluctant to give up their position. Stepping back from management, and possibly handing down their shares, can be psychologically very hard to do. There can also be a reluctance to engage the ‘next generation’ of the family – perhaps valid. The younger family members may feel that they should be given the opportunity to enter the business, yet may not have the skills to make effective contributions as employees.
On the other hand sometimes family members are hired into the business too readily, with too little reflection on their true capabilities and career ambitions. Indeed, much unhappiness can be caused when members of the next generation feel coerced into a role that could be beyond them, with no allowance for their personal ambitions or preferences.
As a result of these issues, the younger generation can drift away from the business and feel little connection to it. They could become more inclined to cash in their shares and may have no regrets when the family business system comes to an end.
2. Family dynamics
Sibling rivalry can become a major issue if two or more siblings are owner-managers. Who will be top dog? How will they divide roles and responsibilities?

Intergenerational struggles can occur when there is a lack of clarity over the family’s involvement in the business. The family owners may feel that it is essential for the next generation to take the leadership in the business circle in order to maintain the family business. Alternatively the family owners may prefer to delegate the running of the business entirely to professional managers, staying involved at board level in a more strategic capacity, for example with a family member as chairman of the business.
3. Finance and strategy issues
The family may not wish to expand the ownership circle. On the positive side, this means that the family keeps control and can take a long-term view, but on the negative side, a refusal to bring in external capital can limit expansion and hold the business back.
On strategy, a basic decision needs to be made about which circle gets priority. Is it most important that:
• the family members get jobs;
• the owners get dividends; or
• the business gets investment for growth?
Over the long term, there are very strong reasons to give priority to growing the business.

Income tax and CGT for 2011/12 and beyond

In advance of the Budget there was much media excitement about whether the Chancellor would increase the tax-free personal allowance for 2011/12 by an extra £600 on top of the £1,000 increase we already knew about.

In the event, there will be no changes to the rates and thresholds for 2011/12 for income tax, National Insurance contributions and tax credits, full details of which were announced in autumn 2010.

However, there will be an increase in the personal allowance of £630 in April 2012, Thus the personal allowance will increase by £1,000 to £7,475 for 2011/12, and then to £8,105 for 2012/13.

There is a sting in the tail of this increase in the basic personal allowance. As the allowance increases, the higher rate income tax threshold falls, so that higher rate taxpayers do not benefit. Thus for 2011/12 the higher rate threshold will be £35,000 (down from £37,400) and in 2012/13 it will be £34,370. As more people are brought into the higher rate tax bracket, this must be a concern for child benefit claimants, because the Government intends to withdraw child benefit from families with a higher rate taxpayer in 2013

By law, income tax allowances are indexed up each year, unless the Government decides to do something different. At present the default indexed rise is based on the Retail Prices Index. From 2012/13 it will be based on the Consumer Prices Index, which is likely to give a smaller increase. The CPI will also apply to indexation of National Insurance rates and thresholds; it already applies to tax credits. However, the RPI will continue to be used for indexing the age-related personal allowances, blind person’s allowance and employers’ NIC threshold.

The Chancellor gave a strong indication that the additional 50% income tax rate could be withdrawn at some future date. He said that the Government views this rate as temporary and has asked HMRC to report on how much tax it actually brings in.

On capital gains tax, we now know the annual exempt amount for 2011/12 – it will be £10,600 (increased from £10,100 in 2010/11).

CGT rates for 2011/12 remain at 18% or 28%, or 10% where entrepreneurs’ relief applies.

The limit for entrepreneurs’ relief will be increased again – to £10m (from £5m) with effect from April 2011.

Against a background of rising inflation, considerable public debt and borrowing requirements, George Osborne has stepped up to the plate today to confirm his changes to the UK tax system. Prior to the event we were advised that he would be confirming significant increases to personal allowances, taking steps to help with rising petrol prices and perhaps simplifying the tax system, in particular a possible merger of National Insurance and Income Tax.

This update summarises some of the changes disclosed today. And finally, note that the growth forecast for 2011 has been downgraded to 1.7%.

New tax changes announced today
(Legislation to be included in the Finance Bill 2011)

Enterprise Investment Scheme and Venture Capital Trusts — the rate of income tax relief given under the Enterprise Investment Scheme (EIS) will be increased from 20% to 30% with effect from 6 April 2011, subject to State aid approval.

Company Car Tax Rate 2013-14 — Legislation will be introduced in Finance Bill 2011 to reduce the appropriate percentages by 1% for all vehicles with carbon emissions between 95g and 220g from April 2013. Zero emissions cars will remain at 0% and ultra-low emissions cars with emissions up to 75g will remain at 5%.

Fuel Benefit Charge 2011-12 — Employees and directors who are provided with a company car and who also receive free fuel from their employers are subject to the fuel benefit charge. The cash equivalent of the taxable benefit is determined by multiplying a set figure (currently £18,000) by the appropriate percentage for the car, based on its CO2 emissions (grams per kilometre). This set figure will increase to £18,800 with effect from 6 April 2011.

Approved Mileage Allowance Payments Rates from 2011-12 — Where employees use their own cars for business mileage, they can claim reimbursement from their employers through the approved mileage allowance payments rates (AMAPs). These payments are not treated as taxable benefits. The current higher rate of 40p per mile for the first 10,000 business miles is to be increased to 45p. The rate for mileage over 10,000 miles remains at 25p.

Capital Gains Tax Entrepreneurs’ Relief — The lifetime limit on gains qualifying for entrepreneurs’ relief is to be increased from £5 million to £10 million with effect from 6 April 2011.

Capital Gains Tax Annual Exempt Amount — This will increase to £10,600 with effect from 6 April 2011.

Corporation Tax Rates:
• The main rate of corporation tax is being reduced by 2% to 26% for the financial year commencing 1 April 2011.
• The main rate of corporation tax will be further reduced to 23%, at the rate of 1% for each of the following three financial years commencing 1 April 2012, 2013 and 2014.
• The small profits rate of corporation tax will decrease to 20% from the financial year commencing 1 April 2011.

Capital Allowances: Short Life Assets — Businesses incurring expenditure on an item of plant or machinery from April 2011 onwards will be able to make a short life asset election in respect of that item if they expect to sell or scrap it within an eight-year cut-off period. This is an extension from the current four year period.

Research and Development Tax Credits for SMEs — The rate of the additional deduction for expenditure on research and development (R&D) for companies that are small or medium sized enterprises (SMEs) is to increase from 75% to 100% from 1 April 2011, giving a total deduction of 200%.

Supplementary Charge — To help fund fuel duty decreases announced today, the rate of the supplementary charge levied on profits from UK oil and gas production will increase from 20% to 32%.

Bank Levy — The Bank Levy rates will be increased from 1 January 2012 to offset the benefit to banks of the further decreases in corporation tax rates.

Business Rate Discounts in Enterprise Zones — The Government announced the creation of 21 new Enterprise Zones. 100% business rate discount for five years will be offered to businesses located in Enterprise Zones.

Extend Small Business Rate Relief (SBRR) Holiday — The SBRR holiday will be extended by one year from 1 October 2011.

Gift Aid Donor Benefit Limits — The maximum value of benefits that individuals and companies may receive as a result of making a donation to a charity of more than £10,000 under Gift Aid is to be increased from £500 to £2,500. The new limit will be subject to the existing rule that the benefit must not exceed 5% of the gift.

Alcohol Duty Rates — Changes announced today will add:
• 4p to the price of a pint of beer,
• 15p to the price of a bottle of wine, and
• 54p to the price of a bottle of spirits.
The changes will take effect on 28 March 2011.

Tobacco — Tobacco duty rates will increase by 2% above the rate of inflation. Duty on hand rolling tobacco will increase by an additional 10%. The Government is also restructuring cigarette duty. Ad valorem duty on cigarettes has been reduced to 16.5% and specific duty has been increased by 25% above inflation. These changes came into effect at 6pm on 23 March 2011.

Fuel Duty Rates — The following changes in fuel duty were announced today:
• the main fuel duty rate has been reduced by 1p per litre (ppl) from 6pm on 23 March 2011;
• the 1 April 2011 increase will be deferred and implemented on 1 January 2012 when the main fuel duty rate will increase by 3.02p per litre.

Vehicle Excise Duty — From 1 April 2011, VED rates will increase by indexation only apart from VED rates for heavy goods vehicles which will be frozen in 2011-12.

VAT: Registration and Deregistration Thresholds — The following changes will be made to the VAT registration and deregistration thresholds from 1 April 2011:
• the taxable turnover threshold, which determines whether a person must be registered for VAT, will be increased from £70,000 to £73,000;
• the taxable turnover threshold which determines whether a person may apply for deregistration will be increased 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.

Anti Avoidance Measures – A number of complex anti avoidance measures are to be introduced. In summary the schemes affected include:
• Sale of lessor companies
• SDLT anti-avoidance
• Corporate gains: degrouping charges

Time To Pay — Budget 2011 also confirmed that HMRC will continue its Business Payment Support Service to provide advice and time to pay to viable businesses experiencing temporary financial difficulty.

Tax reliefs to be Abolished – As part of the Governments Tax Simplification process the following tax reliefs are withdrawn from April 2011:
• Charities – transitional relief on distributions
• Millennium Gift Aid
• National Savings Bank ordinary account interest
• Payroll giving 10% supplement
• Exemption for certain assignments by seamen
• Instruments relating to National Savings, and
• Transfers in relation to ships and vessels

Future changes announced today:

Income tax and NICs Reform — The Government has announced that it will consult on the options, stages and timing of reforms to integrate the operation of income tax and National Insurance contributions (NICs). If this progresses to legislation, it will be a major reform of the UK tax system.

Enterprise Investment Scheme and Venture Capital Trusts — Subject to State aid approval, legislation will be introduced in Finance Bill 2012 making the following changes to the Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCT) which will have effect on and after 6 April 2012:
• an increase in the thresholds for the size of qualifying company for both EIS and VCTs to fewer than 250 employees and to the company having no more than £15million of gross assets before the investment;
• an increase in the annual amount that can be invested through both EIS and VCTs in an individual company to £10million; and
• an increase in the annual amount that an individual can invest through EIS to £1million.

Inheritance Tax Changes:
• The inheritance tax nil rate band is frozen until April 2015.
• The Government has announced that a reduced rate of inheritance tax (IHT) will apply where 10% or more of a deceased’s net estate (after deducting IHT exemptions, reliefs and the nil rate band) is left to charity. In those cases the current 40% rate will be reduced to 36%. The new rate will apply where death occurs on or after 6 April 2012.

Business Premises Renovation Allowance — The Government has confirmed it will extend the allowance for a further five years from 2012.

VAT:
• Registration, deregistration and changes in registration details will have to be completed online from 1 August 2012.
• VAT registered traders at April 2010, that are presently not legally required to file returns online (those with turnover under £100,000), will be brought into the online filing net for returns beginning on or after 1 April 2012.

Review of Non-Domicile Taxation — At the June Budget 2010, the Government confirmed that it would review the taxation of non-domiciled individuals. The Government will introduce the following reforms:
• remove the tax charge when non-domiciles remit foreign income or capital gains to the UK for the purpose of commercial investment in UK businesses;
• simplify some aspects of the current tax rules for non-domiciles to remove undue administrative burdens;
• increase the existing £30,000 annual charge to £50,000 for non-domiciles who have been UK resident for 12 or more years and who wish to retain access to the beneficial tax regime (the remittance basis). The £30,000 charge will be retained for those who have been resident for at least seven of the past nine years and fewer than 12 years;
• additionally, a statutory definition of residence is to be created to provide greater certainty for taxpayers.

Changes previously announced for 2011-12, now confirmed

Income Tax Personal Allowances:
• Personal allowance under 65, £7,475
• Personal allowance aged 65 to 74, £9,940
• Personal allowance aged 75 or over, £10,090
Income limit for aged related allowances is £24,000.

Income Tax Rates – unchanged at 20%, 40% and 50%. Basic rate limit £35,000.

Review of HMRC powers, deterrents and safeguards security for PAYE and National Insurance contributions — Legislation will be introduced in Finance Bill 2011 to give HMRC the power to require a security from employers for PAYE and NICs that are seriously at risk of non-payment. It will be treated as a criminal offence if security is not provided when required.

Furnished Holiday Lettings (FHL) – The following changes are confirmed from April 2011:
• Loss relief may only be offset against income from the same FHL business.
• UK losses can relieve UK FHL income only and similarly with the EEA losses.
From April 2012, to qualify as a furnished holiday lettings business, a property must:
• Be available to let for at least 210 days and actually let for 105 days in a year.
Businesses meeting the actually let threshold in one year may elect to be treated as having met it in the two following years (“period of grace”), providing certain criteria are met.

Employer-Supported Childcare — Relief is to be restricted for higher earners who join employer-supported childcare schemes from 6 April 2011.

Restricting Pensions Tax Relief — Changes announced are:
• the annual allowance for tax relief on pension savings for individuals will be reduced from £255,000 to £50,000 from 2011-12, and
• the lifetime allowance will be reduced from £1.8m to £1.5m from 2012-13.

Pensions Annuitisation — The requirement to annuitise by the age of 75 is to be removed from April 2011.