The Chancellor delivered his Pre-Budget Report on 24th November 2008. Our Partners and Managers posted a number of blogs in relation to the 2008 Budget announcement – on both SME Plus blog and Tax Plus blog.

For concise, up-to-date and easy to digest Pre-Budget information please find below a list of the respective blogs posted: 

SME Plus 

Pre-Budget Report 2008 - VAT

Pre-Budget Report 2008 - Plant and machinery leasing

Pre-Budget Report 2008 - Income tax...relief for trading losses

Pre-Budget Report 2008 - Tax relief for business expenditure on cars

Pre-Budget Report 2008 - Corporation tax...small companies rate

Pre-Budget Report 2008 - Corporation tax...tax relief for trading losses

Pre-Budget Report 2008 - Empty property relief

Pre-Budget Report 2008 - Taxation of foreign profits

Pre-Budget Report 2008 - HMRC Business Payment Support

Tax Plus 

Pre-Budget Report 2008 - Non doms update

Pre-Budget Report 2008 - Income Shifting Rules...the dog that didn't bark!

Pre-Budget Report 2008 - Top rate of income tax to be increased to 45%

Pre-Budget Report 2008 - National Insurance to be increased

Pre-Budget Report 2008 - Consultation documents

Pre-Budget Report 2008 - VAT

Pre-Budget Report 2008 - Compensation for the loss of 10% band made permanent

Pre-Budget Report 2008 - Tax rate for trusts to be increased

Pre-Budget Report 2008 - Pension tax telief...freeze on limits

Pre-Budget Report 2008 - Changes to trusts...trust Darling!

Pre-Budget Report 2008 - Penalties for late tax returns

To receive our blogs direct to your inbox visit http://www.mercerhole.co.uk/news, click on the blog of your interest and follow a few simple subscription directions.

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On the same day as the Chancellor announced short term 'enhanced support' for businesses experiencing cash flow problems, HM Revenue & Customs issued a Consultation Document looking at a longer term approach to late paid tax.

In the short term at least, the Revenue is expected to adopt a softer approach towards businesses unable to pay their taxes on time, though how this will actually be played out in some offices remains to be seen!

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A number of changes to the taxation of foreign profits have been proposed:-

• an exemption for foreign dividends received by large and medium sized groups will be introduced in next year's Finance Bill;
• the Government will consult on options to reform the UK's Controlled Foreign Companies (CFC) rules so that profits genuinely earned by overseas subsidiaries are not taxed in the UK; and
• there will be a worldwide debt cap on interest, so that tax deductions for interest claimed by UK members of multinational groups will be restricted by reference to a group's consolidated net external finance costs.

Thanks to Sarah Withers for submitting this blog.

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The Chancellor has given a one year relief with the aim of helping smaller businesses manage short term pressures in the property market.

For Finance Year 2009/10, empty business properties with a rateable value of less than £15,000 will be exempt from business rates .

This is expected to apply to 70% of empty business properties.

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At present, companies making losses from trading activities are allowed to carry those losses back up to twelve months and set them against profits made in the previous year or to carry them forward indefinitely to set against profits from the same trade.

The Chancellor has announced that, for accounting periods that end between today and 23 November 2009, up to £50,000 of trading losses may be carried back up to three years.

There is no restriction on the amount of the loss that can be carried back twelve months, or carried forward against profits from the same trade.

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The previously announced increase in the small companies' rate of corporation tax, from 21% to 22%, has been deferred for twelve months and will now come into effect on 1 April 2010.
 

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As expected, the rules for capital allowances on cars are to change from April 2009 (1st April for companies and 6th April for unincorporated businesses). The rate of capital allowances will be determined by the CO2 emissions figure for the car rather than its cost. Cars with emissions up to 160g/km will be added to the main capital allowances pool and attract writing down allowances of 20% per annum on a reducing balance basis. Cars with emissions over 160g/km will go into the special rate pool with only 10% writing down allowances.

The relief for the cost of hiring or leasing cars is also set to change. At present the leasing costs are restricted if the original price of the car exceeds £12,000, with the amount of restriction increasing as the price of the car increases. From April 2009 the disallowance will be a flat 15% of the leasing costs for cars with emissions over 160g/km. For less polluting cars there will no restriction regardless of the price of the car.

The new rules give rise to a potential planning point for unincorporated businesses, which should ensure that all 'company' cars have some element of private use. By doing so, the cars will not fall within the pools mentioned above and balancing allowances will be available when the cars are sold - this is likely to accelerate the tax relief available.

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At the moment, trading losses suffered by businesses may be set against profits in two ways:

• carried back up to one year, to set against profits in the previous year; or
• carried forward against future trading profits from the same trade.

The Chancellor has announced that, for trading losses suffered during periods ending in the current tax year (ie to 5 April 2009) up to £50,000 of the loss may be carried back up to three years.

There is no restriction on the amount of the loss that can be carried back twelve months, or carried forward against profits from the same trade.
 

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As widely reported, the PBR today has confirmed that the standard rate of VAT will be cut to 15% with effect from 1 December 2008. (The new VAT fraction to be applied to VAT inclusive prices will be 3/23).

This means that standard rated supplies of goods and services made after this date will attract the new rate of VAT. Supplies at the zero or reduced rates and exempt supplies are not affected. The new rate will remain in place for 13 months till 1 January 2010, when it will rise again to 17.5%. (Anti- forestalling legislation will be brought in to prevent planning around the subsequent rate increase).

For sales spanning 1 December, special tax point rules mean that businesses can choose to charge VAT at the new rate on goods removed and services performed after the rate change, even if payment has already been received or VAT invoices issued. In those cases, credit notes will have to be issued to correct the VAT overcharged.

Special rules will apply to retailers, those providing continuous supplies of services (e.g construction industry) and other special schemes (second hand dealers etc). Detailed guidance on how to deal with the change is available on HMRC’s website.

The reduction in the standard rate will also amend the rates applied under the Flat Rate Scheme for small businesses. The revised percentages are published on HMRC’s website.

Other VAT and duty changes announced are;

Increase in threshold for Bespoke Retail Schemes with effect from 1 April 2009.
Simplification of the entry and exit rules for VAT Flat Rate Scheme with effect
from 1 April 2009.
Payment arrangements for those having difficulties paying VAT bills via the “Business Payment Support Service”.
Increases in fuel/alcohol and tobacco duty.
The Chancellor has urged retailers to pass on the rate cut “as quickly as possible”. In reality, businesses may choose not to pass on the cut. They are unlikely to welcome it as it will cost them to implement changes to prices /accounting and point of sale systems. In the retail sector, where prices are already being heavily discounted, it is hard to see that a further 2.5% cut will have much of an impact on sales turnover.
 

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The Pre Budget report will be on 24 November at 3:30pm according to the Treasury website.

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As my colleague Barry Hallam blogged earlier today on our sister blog Tax Plus, the Pre-Budget Report may well be announced this week.  Below is the blog which he posted on Tax Plus blog this morning...

It is being reported by the BBC that Gordon Brown has stated that the Pre Budget Report will be “in a few days”. On GMTV today the Prime Minister increased the speculation that the Chancellor Alistair Darling is considering tax cuts to help people through the down turn.

If Mr Darling does present his Pre-Budget Report this week, we will of course be blogging on SME Plus Blog and Tax Plus Blog, providing analysis on the key highlights. 

If you do not already subscribe to our blogs click here for SME Plus Blog or here for Tax Plus Blog to ensure you get our comment and analysis as and when it happens.

Watch this space for details as announcements are made.

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