The Budget 2011 Corporate and Business Tax

Corporation tax rates

The main rate of corporation tax which applies to companies with profits of more than £1.5 million was due to fall by 1% to 27% from 1 April 2011. The Chancellor announced that this will now decrease by 2% to 26%.

The further annual decreases of 1% previously announced with eventually bring the rate to 23% (rather than 24%) by 1 April 2014.

The small companies’ corporation tax rate which applies to companies with up to £300,000 will fall to 20% from 1 April 2011, as previously announced.

Companies with profits between £300,000 and £1.5 million pay tax at a marginal rate to bring their overall rate to the main rate by the time they have profits of £1.5 million.

Comment: It’s worth noting that the thresholds of £300,000 and £1.5 million have been in place since 1994 – may be its time the Chancellor reviewed these too!

Business Payment Support

The budget documentation confirmed that the Business Payment support scheme would continue.

Comment: The Business Payment Support Service allows businesses and individuals having difficulty in paying their taxes to agree a payment schedule with HM Revenue and Customs without incurring any penalties for late payment. The contact number is 0845 302 1435.

Although the scheme is ongoing, users have reported that it is getting harder to agree a payment plan and businesses going back for a second time are being given a particularly hard time, and are often being refused.

Capital allowances

In 2010, the Chancellor announced a decrease in the rate of Annual Investment Allowance (AIA – the value of fixed asset additions for which a 100% relief can be claimed in the year of purchase) from £100,000 to £25,000 with effect from April 2012.

The annual writing down allowances will also be reduced, from 20% to 18% for the main rate pool and from 10% to 8% for the special rate pool.

It has also possible to elect to treat assets as short life assets if they were expected to last less than four years. This time period has been increased to eight years, but will have little impact for most small businesses since the majority of their expenditure is covered by the AIA.

 

 

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