| £ per year (unless stated) | 2010-11 | 2011-12 | 2012-13 |
|---|
£0-£300,000
| 21% | 20% | 20% |
| £300,001 - £1,500,000 | Marginal Relief | Marginal Relief | Marginal Relief |
£1,500,001 or more
| 28% | 26% | 24% |
22 July Emergency Budget
The Budget announced annual reductions to the main rate of corporation tax. The main rate of corporation tax will be reduced to 27 per cent in 2011-12, with further reductions to 26 per cent in 2012-13, 25 per cent in 2013-14 and 24 per cent in 2014-15.
The Budget also announced a reduction in the small profits rate of corporation tax to 20 per cent from April 2011.
* The small profits rate was due to rise to 22 per cent in 2011-12, as announced originally at
Budget 2007 and deferred to 2011-12 at 2009 Pre-Budget Report.
Bank levy
The Budget further announced that a bank levy based on banks’ balance sheets will be introduced, effective from 1 January 2011. It is proposed that the levy will be set at a rate of 0.07 per cent, with a lower initial rate of 0.04 per cent in 2011.
The 2009 Pre-Budget Report announced that a rise in the small companies’ rate to 22% would be deferred until 2011-12.
Marginal relief eases the transition from the small companies’ rate to the main rate for companies with profits between £300,000 and £1,500,000.
The profits limit may be reduced for a company that is part of a group or has associated companies. The small companies’ rate and marginal relief do not apply to close investment holding properties.
Rates for financial years starting on 1 April
| | 2008 | 2009 | 2010 | 2011 | 2012 |
|---|
| Small Companies Rate* | 21% | 21% | 21% | 20% | 20% |
| Small Companies Rate can be claimed by qualifying companies with profits at a rate not exceeding | £300,000 | £300,000 | £300,000 | £300,000 | £300,000 |
| Marginal Small Companies Relief Lower Limit | £300,000 | £300,000 | £300,000 | £300,000 | £300,000 |
| Marginal Small Companies Relief Upper Limit | £1,500,000 | £1,500,000 | £1,500,000 | £1,500,000 | £1,500,000 |
| Marginal Small Company Relief (MSCR) Fraction | 7/400 | 7/400 | 7/400 | 3/200 | 1/100 |
| Main rate of Corporation Tax | 28% | 28% | 28% | 26% | 24% |
| Special rate for unit trusts and open-ended investment companies | 20% | 20% | 20% | 20% | |
The main rate of Corporation Tax applies when profits (including ring fence profits) are at a rate exceeding £1,500,000, or where there is no claim to another rate, or where another rate does not apply.
* For companies with ring fence profits (income and gains from oil extraction activities or oil rights in the UK and UK Continental Shelf) these rates differ. The small companies’ rate of tax on those profits is 19 per cent and the MSCR fraction is 11/400 for financial years starting 1 April 2008, 2009 and 2010. The main rate is 30 per cent for financial years starting on 1 April 2009 and 2010.
Company taxes on profits from UK Oil and gas production
£ per year (unless stated)
| 2009-10 | 2010-11 | 2011-12 | 2012-13 |
|---|
| Ring fence corporation tax main rate | 30% | 30% | 30% | 30%* |
| Supplementary charge | 10% | 10% | 20% | 30% |
| Petroleum revenue tax | 50% | 50% | 50% | 50% |
* Petroleum Revenue Tax is deductible in computing profits chargeable to ring fence corporation tax and supplementary charge.
The Supplementary Charge has applied from 17th April 2002 to the UK upstream profits of companies in the oil industry. It is based on ring-fence CT income as adjusted for financing costs. The charge commenced in April 2002 at 10 %. This was increased to 20% from 1st January 2006.
Legislation was introduced in 2009 to include:
- changes to the ring fence corporation tax (RFCT) and Petroleum Revenue Tax (PRT) rules to facilitate change of use activities where North Sea assets and infrastructure are reused for purposes other than oil and gas production.
- Amendments to the chargeable gains rules to make it easier to allow companies to transfer their UK and UKCS assets to those most able to maximise the potential of those assets.
- An extension to the PRT rules that provide relief for decommissioning costs to cover the situation where, as a result of licence expiry, a company is no longer a licensee. In addition, changes will be made to the PRT legislation to reduce the compliance burden and further simplify the regime.
- Amendments to the RFCT legislation to fully align the definition of a consortium with the general corporation tax (CT) definition.
The change of use measures have had effect respectively for RFCT in relation to expenditure incurred on or after 22 April 2009; and for PRT in relation to chargeable periods beginning after 30 June 2009.
Capital Allowances
From 1 April 2008 for corporation tax, and 6 April 2008 for income tax, changes were made to the rates of capital allowances. Allowances for plant and machinery reduced to 20%, allowances for long-life assets increased to 10% and a new classification of features integral to a building was be introduced at a rate of 10%. The amount of relief claimable under industrial and agricultural buildings allowances was reduced by one quarter, as part of phasing them out in full by 2011. First-year allowances for small and medium-sized enterprises will be replaced by a new Annual Investment Allowance of £50,000 for most businesses regardless of size, giving relief on 100% of the first £50,000 of expenditure. This was increased to £100,000 for 2010-11.
Loss making companies investing in plant and machinery which qualifies for Enhanced capital allowances for environmentally beneficial and energy saving technologies can surrender losses from qualifying expenditure for a cash payment of 19% of the expenditure, subject to a cap of the higher of £250,000 or a company’s PAYE/National Insurance Contributions liabilities.
From April 2008, the rate of research and development tax credits rose from 125% to 130% for large companies and from 150% to 175% for SMEs.
R & D Tax Credit
| | 2009-10 | 2010-11 | 2011-12 | 2012-13 |
|---|
| SME Rate | 175% | 175% | 200% | 200% |
| Large Company Rate | 130% | 130% | 130% | 130% |
For businesses investing in plant and machinery between April 2009 and April 2010, legislation in Finance Bill 2009 introduced a new temporary 40 per cent first-year allowance (FYA) for expenditure on general plant and machinery. That is expenditure on plant and machinery that would normally be allocated to the main capital allowance pool.
Capital Allowances
| | 2009-2010 | 2010-2011 | 2011-12 | 2012-13 |
|---|
| Main writing down allowance | 20% | 20% | 20% | 18% |
| Special rate writing down allowance | 10% | 10% | 10% | 8% |
| Temporary first year allowance | 40% | 0 | 0 | 0 |
| Annual Investment Allowance | £50,000 | £100,000 | 0 | 0 |
Tax relief for business expenditure on cars
New rules for tax relief for business expenditure on cars were introduced from 1 April 2009 for businesses in the charge to Corporation Tax and 6 April 2009 for businesses in the charge to Income Tax. The rate at which qualifying expenditure on cars can be written down against profits will depend on the car’s CO2 emissions. Expenditure on cars with CO2 emissions exceeding 160 g/km will be allocated to the special rate capital allowances pool and attract 10% writing-down allowance (WDA). Expenditure on cars with CO2 emissions of 160g/km or less will attract 20% WDA in the main plant and machinery pool. The associated rules which disallow a proportion of car lease rental payments have also been amended in line with the new capital allowances rules.
Construction Industry
There are special tax rules that apply to businesses in the construction industry that can require a deduction of tax at source on payments by a “contractor” to a “Sub-contractor”. The current rate of deduction is 18%.
Before they can get paid at all under the Scheme, subcontractors must hold either a Registration Card or a Subcontractors Tax Certificate. To obtain either of these a subcontractor must first be registered with the Inland Revenue.
Subcontractors who meet certain qualifying conditions will be issued by the Inland Revenue with Subcontractors Tax Certificates, enabling them to be paid gross. Those who do not will be issued with Registration Cards.
The deduction, when made, applies to all payments for labour and is an amount on account of the subcontractor’s tax and National Insurance contribution (NIC) liability.
What is meant by “Construction operations“.
An update to the rules of the scheme.
Business Rates
Updated property values for business rates take effect from 1 April 2010 (revaluation for business rates takes place every five years). The multiplier for 2010-11 is reduced to compensate, so that total revenue from business rates remains the same in real terms. The standard multiplier includes a supplement on the small business multiplier to fund small business rate relief (SBRR). Budget 2010 announces a temporary increase in the level of small business rate relief for one year, from 1 October 2010.
Business Rates
| | Rate per pound of a business property's rateable value |
|---|
| 2009-10 | 2010-11 |
| Standard Multiplier | 48.5 | 41.4 |
| Small Business Multiplier | 48.1 | 40.7 |
