Yearly Archives: 2010

01 Dec 2010

Corporate Tax Reform: Delivering a More Competitive Tax System

Introduction

The Government has this week published a document entitled “Corporate Tax Reform: Delivering a More Competitive System”.

The thrust of the document is to make the UK corporate tax system more competitive in a global context so that companies will be attracted to locate in the UK, and to prevent any further exodus from the UK of groups which are currently UK based.

Most of the content has been discussed already, at least in general terms.  Details of a number of the proposals will become available when the draft Finance Bill 2011 is published on 9th December.  A number of areas still need to be developed further and continue to be the subject of consultation.

The document includes what the Government calls a “Road Map for reform” under which it sets out its intention to reform the UK corporate tax regime using the following principles

a)    Lowering the rate while maintaining the tax base

b)    Maintaining stability

c)    Alignment with business practice

d)    Simplicity, and

e)    Maintaining a level playing field

They acknowledge there might be some tension between these principles.

A key objective is to have one of the lowest EU CT rates, the process for which has already been set in motion with the proposal put forward earlier this year to reduce the rate to 24% by the end of this Parliament. The intention is also to make the UK tax base more territorial by aiming to only tax those profits that have been earned from activity in the UK.

Consistent with this approach is the amendment of the CFC rules and an exemption for overseas branch profits, both of which have been under discussion with industry for some time.  There are, however, a number of other areas dealt with in the document, which are discussed further below.

CFC Changes

The new CFC regime will be a mainly entity-based system with a CFC charge arising only on the proportion of the entity’s profits that are viewed as having been artificially diverted from the UK. Little detail is given at this stage however on how the scheme will operate.

The proposals outlined in the current document concentrate on two main areas for reform, monetary assets and IP.

The approach with respect to finance companies (monetary assets) is that partial exemption from a direction is to apply where the company is funded with an appropriate level of debt to equity (to be agreed). The rules for financing companies are also to be extended to cover trading companies. Where these companies hold cash which is not incidental or ancillary the financing company exemption will apply such that only a proportion of that excess cash will generate a CFC direction.

In terms of the oil industry, the CFC changes under discussion, both the interim improvements to be introduced in the Finance Bill 2011, and the more comprehensive changes scheduled for Finance Bill 2012, are unlikely to have a significant impact.

The one area where the industry typically has a problem with the CFC rules is where operations are run through the branch of a non UK resident and incorporated entity, typically a Dutch company. This does not appear to be being addressed.

A number of further helpful changes are, however, proposed such as

      I.    An increase in the deminimis test from £50,000 to £200,000

    II.    In assessing whether a lower level of taxation applies profits are to based on accounting figures rather than those produced under UK tax principles

   III.    A three year grace period when companies are taken over

Comment

With the other recent changes to the UK regime, both those already enacted and currently proposed, it is likely that many UK based groups will be happy to run such operations from a UK company in future.

Branch Exemption

The other significant change referred to in the paper which will have an impact on the oil and gas industry is the proposed branch exemption.  This again has been under discussion for some time and it appears that most of the concerns raised by the industry are to be accommodated in the new regime.

There is to be an exemption by way of opt in, i.e. either the company continues under the current system of worldwide taxation, relief for losses, and credit relief for foreign tax, or one makes an irrevocable election for exemption, which will be a complete exemption.  Capital gains and finance income attributable to the branch will also be exempt, although there are to be some anti-avoidance rules.

The rules will be applicable for all branches of medium or large companies.  For small companies only those branches based in an appropriate treaty country will fall within the opt-in regime.  

The measure of profits to be exempt will be based on the relevant treaty or, if no treaty applies, based on the OECD Model Treaty.

Where tax losses have previously been relieved, transitional provisions will apply to prevent exemption until an amount of branch profits equal to those losses have been earned.  In most cases only losses utilised in the last 6 years will need to be taken into account but where the losses are “large” (yet to be defined) the full amount will be required to be clawed back.

Comment

The optionality deals with the divergent views in the industry between those with non ring fence UK profits who wanted to retain relief for losses, against the majority of E & P companies who have only ring fence income in the UK and would prefer the simplicity of exemption. Government has also listened to the lobby for capital gains to be included which was thought to be essential by many of the UK players with non UK interests.  It appears that groups will be able to choose to exempt certain branches from the charge to UK tax whilst having other remain within the UK tax net (in order to access reliefs) by ensuring that branches are held by different legal entities within the group.

Interest Expense

As part of this review Government has stated that there is no intention to change the UK’s regime for granting financing cost deductions.  Such a change would arguably be seen as consistent with a more territorial based approach, but the existing regime is seen as attractive compared to other jurisdictions, and the Government seem keen to maintain this “advantage”.

Patent Box

The other major change proposed in the document, for a “Patent Box” under which profits from patents would, again by election, be taxed separately at a 10% rate, is thought unlikely to be of relevance to the oil and gas industry.

R&D

Following the Dyson report which considered the impact of the current R&D regime on the decision making process of companies investing in R&D, and HMRC’s own assessment, the Government proposes further consultation on changes to the regime.

Capital Gains Tax

We understand that the provisions dealing with the reform of corporate capital gains, that have been the subject of prior consultation, and which might be thought to be part of this road map process but are not mentioned in the document, are nevertheless to be included in the draft Finance Bill 2011 that is due to be published next week.

04 Nov 2010

Change in the treatment of business entertainment of overseas customers

HMRC have just announced a change to their policy on the treatment of business entertainment provided to overseas customers.  This follows a decision of the ECJ in the joined case of Danfoss and AstraZeneca (Case-371/07).  

 The changes are to be enacted shortly, but, in the meantime, HMRC have said they will consider claims for previously restricted input VAT wrongly denied (subject to the normal four-year cap). Businesses may also begin to claim relevant current and future input VAT straight-away on the new basis.

 Background

 The UK has blocked the recovery of input tax on business entertainment since VAT was introduced here on 1 April 1973.  At the time, the block denied recovery of input tax on all entertainment costs, except for entertainment of members of staff or where business entertainment was provided to an overseas customer. In 1988, however, the law was changed in line with that for direct tax, so as to extend the block to cover all business entertainment (including that of overseas customers). 

 The recent ECJ judgments show this to be contrary to EU law, with the result that the rules on the input tax block are now to be changed.  Until this happens, HMRC have said they will consider claims for previously restricted input tax VAT wrongly denied.  As a direct effect of EU law, businesses may, therefore, wish to submit relevant claims – subject to the normal four year cap, Direct tax is unaffected by the change.

 Comment  

 Entertainment, by definition, includes hospitality of any kind but business entertainment, by definition, does not include anything provided to employees.  The block on recovering input VAT on entertainment costs remains for anything provided to anyone other than an overseas customer; for example, suppliers, UK customers and non-UK business contacts who are not customers.   All claims are subject to the qualifications and may need to be supported by evidence.

 Although, in appropriate cases, the input tax may be recovered, in some situations, HMRC now take the view that this recovery may be counter-balanced by a corresponding charge to output tax where the entertainment confers a personal benefit on the recipient.  Where that is the case, businesses will need to consider whether there is ultimately any benefit in making a claim.  Revenue & Customs Brief 44/10 gives examples of situations where such a charge may be sought – for example corporate hospitality.  It will not normally be expected where entertainment is at the business’ own premises or its provision does not go beyond merely providing basic food and refreshment to facilitate, say, the smooth running of a meeting or event .

 Anyone wanting further clarification on this may contact Peter Landon or their usual CWE contact.

20 Oct 2010

October Newsbrief

The Finance Bill (No 2) 2010 was published on 1st October 2010.  In addition HMRC have recently released draft legislation dealing with proposed changes to certain oil industry provisions to be included in the Finance Bill 2011.  This newsbrief sets out details of the measures included within these two sets of documents which will be most relevant to our clients.     

  1. Licence Disposals

 1.1. Changes to reinvestment relief rules 

There are two changes to the reinvestment rules contained in sections 198A to 198G TCGA 1992.

 The first is contained in clause 198H, to be inserted by Finance (No.2) Bill 2010, and relates to group reinvestment.  The second is contained in the draft clauses which will be in Finance Bill 2011 (to be published in draft late November / early December) and relates to the expansion of categories of qualifying expenditure for reinvestment relief.

 1.2. Group reinvestment

 The current Finance Bill includes provisions to expand the scope of reinvestment relief to reinvestment by any other company in the group.  The rules will treat the company which makes the disposal and the company making the acquisition as if they were the same person, so that reinvestment relief can be claimed by means of a joint election.

 Comment:

 These provisions bring the applicability of the reinvestment relief in line with the rollover relief provisions. Helpfully they are backdated to 22nd April 2009 emphasising that it was always the intention that this wider form of the relief would be available to groups of companies. Like the group rollover provisions there is no requirement that the selling company and the reinvesting company are part of the group at the same time. The requirement is simply that the seller was a member of the relevant group at the time of the disposal and the company reinvesting is a member of that same group when the expenditure is incurred.

 1.3. Extension of scope of reinvestment expenditure

 The draft clauses for Finance Bill 2011 propose to expand the scope of reinvestment relief to include “exploration or development expenditure”.  The new rules will apply for disposals taking place on or after 24th March 2010, although the reinvestment can take place before that date, subject to the usual 12 month time limit.

 To ensure that these costs can qualify for reinvestment relief, there are a series of deeming provisions in the draft legislation to ensure that the costs qualify for rollover relief, which is one of the preconditions for reinvestment relief.  In particular the costs are deemed to be within the classes of qualifying assets for rollover relief (thereby avoiding the need to decide whether they are land or fixed plant and machinery).

 Comment:

 When the reinvestment rules were initially under discussion relief for drilling costs was promised but when the legislation was published these costs were excluded.  It is welcome that HMRC have listened to industry and agreed to include such costs within the scope of costs eligible for reinvestment.

 The legislation does not specifically talk about drilling costs but instead deems “exploration or development expenditure” to be qualifying expenditure for the purposes of the reinvestment relief.  The scope of the rules would therefore seem to be wider than drilling and could include for example engineering studies, feasibility studies, seismic and geological studies etc.  There is no definition of “exploration or development expenditure” although the legislation provides that the Treasury can issue regulations to say what is, and is not, such expenditure.  Given the other definitions available in the legislation this seems odd, particularly when the qualifying cost does not appear to include “appraisal”.  We do not believe that it is intended that appraisal costs are excluded and this aspect will therefore need to be clarified.  Leaving the definition open in this way creates unacceptable uncertainty for taxpayers and we believe representations should be made for a clear definition to be included in the legislation.

 Qualifying costs also exclude consideration for the purchase of an asset.  It is unclear why this restriction is included.  For example, is this intended to prevent consideration allocated to exploration or development costs for capital allowance purposes in an SPA from qualifying for reinvestment relief, given that an allocation to the licence element would qualify under the existing provisions of section 198A?

 1.4. Swap rules

 Provisions were introduced in FA 2009 to limit the taxable consideration for CGT purposes on swaps of licence interests, where at least one licence related to a developed field. The limit was to the non-licence consideration, if any, payable in respect of any difference in value. The rules only applied to transactions where non-licence consideration was given by only one party.  As drafted it was likely that the requirements to fall within the provision could not be met for many typical North Sea disposals, as one needed to look at the position at completion, when it is common for non-licence consideration to be payable by both parties.  Government has acknowledged that this was not the intent of the provision and has revised the requirements such that the tests have to be applied at the commercial “effective date” of the deal.  All “interim period” adjustments to the consideration, apart from any time value of money adjustment on the initial cash amount, are effectively ignored for CGT purposes, such that any CGT (before reinvestment relief) is limited to the amount by which the cash differential, plus any time value of money adjustment to that number, exceeds the basis the company had in the licence they have disposed of.

 Comment:

 While more development licence swaps may now fall within the provision the rules would appear to have little practical significance as the reinvestment rules which, as noted above are being extended to include exploration and development costs, are likely to mean that no capital gain will in any event arise if the transaction does not fall within these swap rules. Indeed in many cases companies might well prefer to fall exclusively in the reinvestment relief rules rather than in these swap rules, although the swap rules, if they apply, take priority.

 2.   Other measures

 2.1. Extension of Definition of New  Field

 Draft legislation has been published for consultation, as previously announced, in order to extend the definition of a “new field” for the purposes of field allowances against SCT, to include certain previously decommissioned fields.

 A new field is now to be defined as an oil field whose development is first “authorised” on or after  April 22, 2009, i.e. essentially a field which received its first development consent after this date.  For a field which has previously been developed the draft legislation states that any earlier development consent is to be ignored in identifying whether the development of a field can be treated as first authorised after April 22, 2009 provided any assets which have been used for the purposes of winning oil from the field under that previous development consent have been “decommissioned”.  The definition of decommissioned follows that introduced in Finance Act 2009 in connection with the cessation of oil fields due to licence expiry.

 The extended definition is to be backdated to April 22, 2009, the date of introduction of the first field allowance rules.

 Comment:

 Arguably the existing legislation could be interpreted to include fields which had previously received development consent but the new legislation will in most cases remove the uncertainty, which is welcome.  In order to fall within the redrafted legislation it will be necessary to establish that any asset which has been used for the purposes of winning oil from the relevant field has been decommissioned.  If a field has previously been produced across another field and that field has not been fully decommissioned this could prevent any redevelopment qualifying for the field allowance. 

 2.2. PRT compliance

 As previously announced the rules relating to interest in respect of over or under payment of PRT , penalties for failing to make returns, penalties for failing to pay tax, and recovery of overpaid PRT, are being brought into line with the same rules applying to other taxes.  The changes in respect of the first three areas are to be effective from a date to be set out in a Statutory Instrument, while the change in respect of claims in respect of overpayments will be effective for claims made after April 1, 2011.

 Comment:

 It is not thought that these new rules will have any significant effect in practice. 

 2.3. Venture Capital Schemes

 In the past various oil and gas start- up operations have looked at whether they could raise equity funding through the venture capital trust (VCT) , enterprise investment scheme (EIS), and corporate venturing schemes (CVS).  There are many hurdles to overcome before the qualifying requirements of such schemes can be met, but for oil and gas companies there was one clear hurdle that couldn’t typically be met, , and that was that the investee company had to carry on a trade wholly of mainly in the UK.  HMRC confirmed many years ago that activities in the UK sector of the Continental Shelf beyond the Territorial Sea limit did not meet this requirement.  Companies other than those investing in “onshore” projects were therefore excluded.

 The corporate venturing scheme has now lapsed, but in order to comply with EU requirements the above test within the VCT and EIS schemes is being changed such that the requirement will be that the investee has a permanent establishment in the UK through which the business of the company is wholly or partly carried on. 

 Comment:

 It is thought that most UK E&P companies should satisfy the new permanent establishment test and while there are still a lot of other requirements to be met, not least the limited amount of funding that can be raised, this may be an area which smaller start-up operations may want to revisit.

 2.4. Consortium Relief

 There are two changes to the group relief rules included in the current Finance Bill that have been previously announced. 

 The group relief rules are to be amended to allow EU and EEA-resident companies who are members of a consortium to be able to act as link companies.  The current statutory rules only enable companies which are within the charge to UK tax to “pass on” relief for losses of consortia to UK-resident group companies.  These provisions were shown to be in contrary to EU law in the first tier Tribunal decision in the Phillips case earlier this year and the law is now to be changed.  

 At the same time, the consortium relief rules are to be amended to modify the ownership test for consortia.  Group relief claims and surrenders are restricted to the relevant ownership proportion.  This is currently based on the lowest of the beneficial ownership, profits available for distribution, and assets available on a winding up. The legislation will now also include a test based on voting power.

 Both these changes will have effect from October 1, 2010, the date of publication of the Bill.

 Comment:

 The first change is welcome but companies entering into joint venture arrangements will now need to take account of the new “voting” test when planning which consortium member groups can use any available losses.

 2.5. Capital Distributions

 Draft clauses, which were initially published as part of the Emergency Budget package, concerning the treatment of distributions following capital reductions, are included in the current Finance Bill.

 Finance Act 2009 introduced an exemption from tax for UK companies on the receipt of most forms of distributions.  However, “capital” distributions were excluded from this exemption.

 HMRC practice has been to treat all UK distributions as income in nature (subject to certain specific exemptions).  Considerable uncertainty had been created following a change of practice by HMRC which emerged last year.

 The dividend exemption introduced in Finance Act 2009 is therefore to be amended with retrospective effect to remove the exclusion from the exemption for capital distributions.

 The new law is also to include changes to make it clear that distributions made out of reserves arising from a reduction in capital (whether under the Companies Act or under corresponding overseas provisions) are not to be regarded as repayments of share capital, and therefore they will not be excluded from being treated as income  distributions.

 Distributions which would otherwise fall to be treated as giving rise to a deemed disposal for capital gains tax, for example the amount which does not represent the repayment of capital on a redemption of shares, are also to be excluded from capital gains tax treatment where they fall within the amended dividend exemption.  However the fact that an actual disposal of shares, for example as a result of a purchase of own shares, gives rise to a distribution, which would be exempt from corporation tax on income under the 2009 dividend exemption, will not prevent that distribution from being brought within the charge to capital gains tax.  Similarly distributions made in a winding up will continue to fall within the capital gains tax rules. 

 These changes are effective for corporation tax purposes for distributions made on or after July 1, 2009 but are applied to distributions made out of reserves created by capital reductions whenever the reduction occurred, with an option to elect out of this change for any distribution made before June 22, 2010.  

 Comment:

 These proposals remove the threat of dividends following capital reductions from being brought within the charge to capital gains tax.  Capital repaid directly is still however likely to be treated as within the capital gains tax rules.  We understand that the value shifting rules are currently being reviewed and it is possible that they will be amended to prevent capital reductions followed by a distribution being used to strip down the value of companies prior to a sale or liquidation.

14 Oct 2010

EU VAT refund claims

Businesses established for VAT in the EU may recover VAT incurred in other member States under what is known as the 8th Directive.  The rules for doing this were changed from 1st January 2010 as part of last year’s VAT Package so that claims must now generally be made electronically via the competent authorities in the Member State in which the claimant is established.   In making the changes, the overall time limits were extended from 6 months to 9 months after the end of the calendar year to which these claims relate. 

Unfortunately, the refund portals in some member States have not been functioning correctly.  This has led the Commission to propose temporarily extending the deadline for the submission of the 2009 cross-border VAT refund claims.  The effect of this will be that claims relating to 2009 may be submitted at any time up to 31 March 2011. 

Anyone wanting further clarification on this may contact Peter Landon or their usual CWE contact.

30 Sep 2010

VAT – reverse charge accounting for trading in emissions allowances

In August 2009, we advised clients of changes in the VAT treatment of trading in emissions allowances.  These were needed to counter an escalating threat of Missing Trader Intra-Community (MTIC) VAT fraud.  The effect was that, from 31 July 2009 trading of emissions allowances were to be generally zero-rated, rather than taxable at the standard rate. The changes, at that point, were just an interim measure, pending the agreement of a common EU approach. 

An EU Directive was eventually adopted in March 2010, allowing Member States to introduce a reverse-charge.  Section 50 FA 2010 provided the enabling UK legislation and implementing secondary law was laid on 9 September.  The rules will affect only business-to-business transactions in the UK and the start date is 1 November 2010. 

The way the new rules will work is that, from 1 November 2010: 

  • the zero-rate will no longer apply; but 
  • the customer, rather than the supplier, becomes liable to account to HMRC for any output VAT due;  
  • there is no ‘de-minimis’ rule, so the reverse charge applies to all specified supplies of emission allowances; however, 
  • unlike the similar rules for mobile phones and computer chips, businesses will not be required to complete a Reverse Charge Sales List.

 The changes will have an effect on the VAT returns of both suppliers and customers and on the invoices raised by the supplier.

 The new rules will apply to:

  • transfers of allowances, as defined in Article 3 of Directive 2003/87/EC (concerning the EU emissions trading scheme);
  • transfers of emission reduction units which can be used by an operator for compliance with the scheme established by the Directive; and
  • transfers of certified emission reductions which can be used by an operator for compliance with the scheme established by the Directive but not to supplies of options for emissions allowances which are not covered by the EU legislation.

These changes do not affect the application of the Terminal Markets Order under which certain transactions on specified markets are zero-rated.

Detailed guidance can be found in HMRC Notice 735: VAT reverse charge for mobile phones & computer chips.

Anyone wishing to discuss this, especially the important impact on the VAT returns of both suppliers and customers and on the invoices raised by the supplier, should contact Peter Landon or their usual CWE contact. 

30 Sep 2010

Other Duties and Taxes

Tobacco duty rates

Tobacco duty rates have risen to:

Product2009-102010-11
Cigarettes24 per cent of the retail price
plus £114.31 per thousand cigarettes
24 per cent of the retail price
plus £119.03 per thousand cigarettes
Cigars£173.13 per kilogram£180.28
Hand-rolling tobacco£124.45 per kilogram£129.59
Other smoking tobacco and chewing tobacco£76.12 per kilogram£79.26

Alcohol duty rates

Duties on alcohol are:

 2009-102010-11From 30 June 2010
Rate per litre of pure alcohol
Spirits£22.6423.80
Spirits-based ready to drink£22.6423.80
Wine and made-wine: exceeding 22% abv.£22.6423.80
Rate per hectolitre per cent of alcohol in the beer
Beer£16.4717.32
Rate per hectolitre of product
Still cider and perry:
exceeding 1.2% - not exceeding 7.5% abv.
£31.8336.0133.46
Still cider and perry:
exceeding 7.5% - less than 8.5% abv.
£44.7754.0450.22
Sparkling cider and perry:
exceeding 1.2% - not exceeding 5.5% abv.
£31.8336.0133.46
Sparkling cider and perry:
exceeding 5.5% - less than 8.5% abv.
£203.14217.83
Still and sparkling wine and made-wine:
exceeding 1.2% - not exceeding 4% abv.
£65.9469.32
Still and sparkling wine and made-wine:
exceeding 4% - not exceeding 5.5% abv.
£90.6895.33
Still wine and made-wine:
exceeding 5.5% - not exceeding 15% abv.
£214.02225.00
Still and sparkling wine and made-wine:
exceeding 15% - not exceeding 22% abv.
£285.33299.97
Sparkling wine and made-wine:
exceeding 5.5% - less than 8.5% abv.
£207.20217.83
Sparkling wine and made-wine:
8.5% and above - not exceeding 15% abv.
£274.13288.20

Fuel duties

All fuel duty rate changes will take effect from 1 October 2008.

Pence per litre (unless stated)From 1 September 2009From 1 April 2010From 1 October 2010From 1 January 2011
Ultra-low sulphur petrol/diesel54.19p57.19p58.19p58.95p
Sulphur-free petrol/diesel54.19p57.19p58.19p58.95p
Biodiesel36.199p57.19p58.19p58.95p
Bioethanol36.19p57.19p58.19p58.95p
Liquefied petroleum gas used as road fuel27.67p per kg30.53p per kg31.95p per kg33.04p per kg
Natural gas used as road fuel22.16p per kg23.60p per kg25.05p per kg26.15p per kg
Rebated gas oil (red diesel)10.80p10.99p11.18p11.33p
Fuel Oil10.37p10.55p10.74p10.88p

Budget 2009 announced that the main rate of fuel duty would increase by 1pence per litre in real terms on 1 April 2010. This equates to a 2.76 pence per litre increase.          Budget 2010 announced

that this increase will be implemented in three stages: 1 pence per litre on 1 April 2010, 1 pence per litre on 1 October 2010, and 0.76 pence per litre on 1 January 2011.

Vehicle excise duty

Vehicle excise duty for Cars and Light Goods Vehicles

Pre-graduated VED (registered before March 2001)

VED band2009-10 rate2010-11 rate
1549cc and below125£125
above 1549cc185£205

* As announced at the 2008 Pre-Budget Report

Graduated VED for Cars registered from March 2001: 209-10 and 210-11 standard rates*

VED bandCO2 (g/km)Change from
2008-09 to
2009-10
Standard rate
2009-10
Standard rate
2010-11**
First year rate 2010-11
A100 and below-£0£0£0
B101 to 110-£35£20£0
C111 to 120-£35£30£0
D121 to 130-£120£90£0
E131 to 140-£120£110£110
F141 to 150+£5£125£125£125
G151 to 165+£5£150£155£155
H166 to 175+£5£175£180£250
I176 to 185+£5£175£200£300
J186 to 200+£5£215£235£425
K*201 to 225+£5£215£245£550
L226 to 255+£5£405£425£750
MOver 255+£5£405£435£950

Alternative fuel discount: 2009-10, A-I £20, J-M £15; 2010-11 onwards, £10 all cars

*Includes cars emitting over 225g/km registered between 1 March 2001 and 23 March 2006

Vehicle excise duty for Brand New Cars: 2010-11 first-year rates*

VED
band
CO2
emissions
(g/km)
First-year rate 2010-11**
AUp to 100£0
B101-110£0
C111-120£0
D121-130£0
E131-140£110
F141-150£125
G151-165£155
H166-175£250
I176-185£300
J186-200£425
K201-225£550
L226-255£750
MOver 255£950

* As announced at the 2008 Pre-Budget Report

**Alternative fuel discount: 2010-11 onwards, £10 all cars

Vehicle excise duty for Light Goods Vehicles (registered from March 2001)

VED
band
Ê
Change from
2008-09 to
2009-10
2009-10 rate2010-11 rate
Euro 4** & 5*** discount rate+£5125£125
Standard rate+£5185£200

*As announced at the 2008 Pre-Budget Report

**for Euro 4 compliant vans registered between 1 March 2003 and 31 December 2006

***for Euro 5 compliant vans registered between 1 January 2009 and 31 December 2010

Vehicle excise duty for motorcycles

VED band
Ê
2009-10 rate2010-11 rate
150cc and below£15£15
151-400cc£33£33
401-600cc£48£50
above 600cc£66£70
*As announced at the 2008 Pre-Budget Report

Vehicle excise duty for Heavy Goods Vehicles

VED
band
Standard rate
2009-10
Standard rate
2010-11
Reduced Pollution
Certificate Rate
2009-10
Reduced Pollution
Certificate Rate
2010-11
A£165£165£160£160
B£200£200£160£160
C£450£450£210£210
D£650£650£280£280
E£1,200£1,200£700£700
F£1,500£1,500£1,000£1,000
G£1,850£1,850£1,350£1,350

* As announced at the 2008 Pre-Budget Report

On 1 May 2009, new emissions based VED bandings were introduced for all cars registered on or after 1 March 2001. Full rates are set out in the table above.

Vehicle Excise Duties

Air passenger duty

VED band
Ê
ÊFrom 1 November2009ÊFrom 1 November2010
Band A (0-2000m) reduced£11£12
Band A (0-2000m) standard£22£24
Band B (2001-4000m) reduced£45£60
Band B (2001-4000m) standard£90£120
Band C (4001-6000m) reduced£50£75
Band C (4001-6000m) standard£100£150
Band D (>6,000m) reduced£55£85
Band D (>6,000m) standard£110£170

Gambling tax rates

As announced at the 2009 Pre-Budget Report, the rate of bingo duty is reduced to 20 per cent.

Budget 2010 announced an increase in amusement machine licence duty and gaming duty bands in line with inflation. All other gambling tax rates remain unchanged.

Gambling tax ratesÊ2009-10Ê2010-11
General betting duty15%15%
General betting duty Ð Sports10%10%
spread betsÊÊ
General betting duty Ê10%10%
Financial spread bets3%3%
Bingo dutyÊ22%20%
Remote gaming duty15%15%
Pool betting duty15%15%
Lottery dutyÊ12% of ticket value12% of ticket value

Marginal Tax Rate15% of firstÊ20% of nextÊ30% of nextÊ40% on next
2009-10 bands£1,929,000£1,329,500£2,329,000£4,915,500
2010-11 bandsÊÊ£1,975,000£1,361,500£2,385,000£5,033,500

Casinos pay 50 per cent gaming duty on the remainder of their gross gaming yield.

Amusement Machine Licence Duty (AMLD) rates

MachineAnnual licence cost 2009-10ÊAnnual licence cost 2010-11
A£5,625£5,805
B1£2,815£2,905
B2£2,215£2,285
B3£2,215£2,285
B4£2,010£2,075
C£830£860

Landline duty

The 22 July Emergency Budget announced that this would not now be introduced.  The original proposals were:

Landline duty2009-10From 1 October 2010
Rate per fixed linen/a50 pence

30 Sep 2010

National Insurance

National insurance contributions

£ per week (unless stated)2009-102010-112011-12
Lower earnings limit, primary Class 1£95£97
Upper earnings limit, primary Class 1£844£844
Upper Accruals Point£770£770
Primary threshold£110£110
Secondary threshold£110£110
Employees' primary Class 1 rate between primary threshold and upper earnings limit11%11%12%
Employees' primary Class 1 rate above upper earnings limit1%1%
Employees' contracted-out rebate - salary-related schemes12.80%12.80%
Employees' contracted-out rebate - money-purchase schemes1.60%1.60%
Married women's reduced rate between primary threshold and upper earnings limit4.85%4.85%
Married women's rate above upper earnings limit1%1%
Employers' secondary Class 1 rate above secondary threshold12.80%12.80%13.80%
EmployersÕ contracted-out rebate, salary-related schemes'3.70%3.70%
Employers' contracted-out rebate, money-purchase schemes1.40%1.40%
Class 2 rate£2.40£2.40
Class 2 small earnings exception (per year)£5,075 per year£5,075 per year
á Special Class 2 rate for share fishermen£3.05£3.05
Special Class 2 rate for volunteer development workers£4.75£4.85
Class 3 rate (per week)£12.05£12.05
Class 4 lower profits limit (per year)£5, 715 per year£5, 715 per year
Class 4 upper profits limit (per year)£43, 875 per year£43, 875 per year£42,225 per year
Class 4 rate between lower profits limit and upper profits limit8%8%
Class 4 rate above upper profits limit1%1%

Class 1A NICs are calculated using the previous year’s benefit figure and the rate appropriate at the due date – July.

22 July Emergency Budget

The Budget announced that the level at which employers start to pay NICs will increase by £21 per week above indexation from April 2011. The value of indexation will be determined by data available in the autumn.

The Government will shortly announce a three-year scheme to exempt new businesses in targeted regions from up to £5,000 of class 1 employer NICs payments, for each of their first 10 employees hired in their first year of business. Subject to meeting the necessary legal requirements, the Government aims to have the scheme up and running by September, but any qualifying new business set up from today will also benefit.

The Budget announced that, in 2011-12, the income tax personal allowance for under 65s will be increased by £1,000 in cash terms, taking it from £6,475 in 2010-11 to £7,475 in 2011-12. To ensure that the majority of higher rate taxpayers will pay the same total level of income tax and National Insurance Contributions (NICs) as previously planned, the Government will also reduce the basic rate limit for tax by £2,500, and the upper earnings and profits limits for NICs by £1,650, based on current estimates of the Retail Prices Index (RPI). Exact figures for the basic rate limit and higher rate threshold will be confirmed in the autumn.

The upper earnings limit and the upper profits limit will maintain alignment with the income tax higher rate threshold.

*Reduced rate for married women between primary threshold and upper earnings limit is 4.85 per cent for 2010-11 and 5.85 per cent for 2011-12. The reduced rate applies to women married before 6 April 1977 who have elected to pay a reduced rate of class 1 contributions.

*Class 2 NICs are paid at a weekly flat rate of £2.40 by all self-employed persons. Those with profits less than, or expected to be less than, the level of the small earnings exception may apply for exemption from paying Class 2 contributions.
**The exact figure for Class 2 for 2011-12 will be determined by data available in the autumn.

30 Sep 2010

Insurance Premium Tax (IPT)

IPT is imposed on certain insurance premiums where the risk is located in the UK.

 Standard rate (%)Higher rate (%)
From 1 July 1999517.5

22 July Emergency Budget

With effect from 4 January 2011 the standard rate of Insurance Premium Tax will increase to 6 per cent and the higher rate will increase to 20 per cent.

The higher rate was extended to all sales of travel insurance from 1 August 1998.

On and after the date that Finance Bill 2008, overseas insurers with no business establishment in the UK who write
taxable risks located in the UK will no longer be required to appoint a tax representative. They will , however, still need to
register for IPT , but will be able to choose whether or not to appoint an agent to act for them in the UK. This agent
will not be jointly and severally liable for the tax due by the insurer.

30 Sep 2010

Inheritance Tax

Inheritance tax threshold

 2009-102010-11
Individual inheritance tax allowance£325,000£325,000

As announced in Budget 2009, the individual nil-rate band will be held at £325,000 in 2010-11.  This gives an effective £650,000 for married couples and civil partners. The value of estates over and above the allowance is taxed at 40 per cent.   In previous Budgets it was forecast that the rates for 2010-2011 would be £350,000 for individuals or £700,000 for married couples and civil partners.

Rates

Gross transfers on death%
Up to cumulative chargeable transfer limitNil
Over cumulative chargeable transfer limit40
Gross lifetime transfersÊ
Up to cumulative chargeable transfer limitNil
Over cumulative chargeable transfer limit20

Exemptions and reliefs

Exemptions£
Annual£3,000
Small gift to same person£250
Marriage- by parent£5,000
- by remoter ancestor£2,500
- by a party to marriage£2,500
- by others£1,000
Spouses with separate domicile£55,000
Gifts to- charitiesExempt
- political partiesExempt

Taper relief

Transfers on or within seven years of death are chargeable, but the tax is tapered as follows:

No of years between gift and death% of full charge
0 - 3100
3 - 480
4 - 560
5 - 640
6 - 720

Agricultural and business property relief   – between 100 and 50 %

30 Sep 2010

Capital Gains Tax

 2009/102010/11From 23 June 2011
Standard rate18%18%18%
Higher rate*n/an/a28%
Entrepreneurs'relief lifetime limit of gains£2,000,000£2,000,000£5,000,000
Annual exempt amount
Individuals etc.£10,100£10,100£10,100
Most trustees£5,050£5,050£5,050

22 July Emergency Budget

The Budget announced that, from 23 June 2010 capital gains tax will rise from 18 to 28 per cent for higher and additional rate taxpayers. The 10 per cent lifetime limit for entrepreneurs’ relief rate will be extended from the first £2 million to the first £5 million of gains made over a lifetime.

*For higher and additional rate tax payers

The capital gains tax (CGT) annual exempt amount was increased in line with statutory indexation to £10,100 for the tax year 2009-10 for individuals, personal representatives of deceased persons, and trustees of certain settlements for the disabled. The annual exempt amount for most other trustees is increased to £5,050.

Every husband, wife, civil partner, and child has his or her own £10,100 annual exempt amount.

For gains above the annual exempt amount, the CGT rate for 2010-11  will remain at 18 per cent. In addition, a new entrepreneurs’ relief will reduce the effective tax rate on some gains to 10 per cent. The Budget 2010 announced an increase in the Entrepreneurs’ Relief lifetime limit from the first £1 million to the first £2 million of qualifying gains.  the effective rate for Entrepreneurs’ Relief is 10%.

The amount chargeable to CGT is added to the individual’s income liable to income tax and treated as the top part of that total.