As before, small or medium sized enterprises (SME’s) will benefit most from the changes, which will include another increase in the R&D tax credits rate, from 200% presently to 225%, from April 2012 (130% for large companies).

The requirement for a minimum project expenditure of £10,000 in any one year period to qualify for the relief will also be removed, affecting accounting periods ending on or after 1st April 2012.

Futher information on the proposed changes can be found here and here.

HMRC
HMRC have introduced legislation (Statutory Instrument 2009/3218) detailing the requirement to submit Corporation Tax Returns electronically. From 1st April 2011 for most companies, tax returns must be filed online using iXBRL.

The effect of this important change is primarily that all companies now need to attach both tax computations and financial statements in iXBRL format to their Corporation Tax Return (which is also tagged using iXBRL). To help ease this changeover process, companies can currently make use of what’s known as the ‘minimum tagging’ list, thereby allowing the submission of ‘incorrectly’ tagged returns and supporting files. From 2013 however, it is likely that they will have to be tagged using the full taxonomy. For further information on how the changes will affect your business please click here

Companies House
iXBRL annual accounts for most types of incorporated businesses may now be filed to Companies House but there is no legal requirement as of yet requiring them to submit electronically (this is likely to change also from 2013).

From 6th April 2011 however, this marginal but worthwhile advantage was removed by raising the SLSDB charge to 55%. Also from this date, the effective tax rate on lump sum payments applicable if the policy-holder died after reaching 75 was reduced from 85% to 55%, so not all bad news.

Pensions are still quite a complicated area of taxation it has to be said, and professional advice is still a very good idea. Click here for some useful information on taxation for pensions.

Employees eligible will be those aged between 22 and the state pension age, whose earnings are above the threshold (currently £7,475) – i.e., those subject to PAYE liability. The changes are being phased in over a number of years, affecting the largest companies first (120,000 employees+) in October 2012, through to all employers from September 2016.

From a practical perspective, the exemption for very small employers is clearly to be removed, meaning all will need to consider what type of scheme to offer (there are a number of options). The Pension Regulator should contact each employer at least six months before their automatic enrolment date. From a cost perspective, all employers will eventually have to contend with the additional burdens of both administering a scheme (or having someone do that for you) and of course making the employer contributions, which we believe will be set at 1% minimum to begin with, rising eventually to 3%.

Further useful information can be found here; the complete framework document the new rules are based on can be found here.

The FSCS can pay compensation to depositors if a bank is unable to meet its financial obligations. Most depositors - including most individuals and small businesses - are covered by the scheme. The rules in general, and their applicablity, are broadly unchanged - please see our previous article on the subject for more details here.

So far as the increased limit is concerned, an eligible depositor is now entitled to claim up to £85,000. For joint accounts each account holder is treated as having a claim in respect of their share so, for a joint account held by two eligible depositors, the maximum amount that could be claimed is £85,000 each (making a total of £170,000). Note that the £85,000 limit relates to the combined amount(s) in all the eligible depositor’s accounts with the bank, including their share of any joint accounts (and not to each separate account held).

In the case of genuine redundancy, whereby an employment is terminated by an unconnected employer, no alternative employment is offered, no misconduct has occurred, the employee has not found another employment, and a number of other conditions are met, individuals will generally be entitled to a statutory minimum payment based on their years of service. Please follow this link for guidance on how to calculate an employee’s statutory entitlement; you can also follow this link to find out more about the eligibility criteria and other useful background.

It usually follows that if an employee is entitled to a statutory redundancy payment, this payment will fall within the special rules on the tax treatment of redundancy payments (and be tax-free).

Tax Treatment
ITEPA 2003 s309 states the general principle that there is no liability to income tax for redundancy payments, subject to the special rules (detailed in Chapter 3 of part 6). Aside from redundancy payments, it is worth noting that there are some other types of ‘payments on termination of employment’
that are entirely tax-free without limit, termed ‘Exempt Payments’. These include payments made in connection with the death, injury or disability of an employee, or for some overseas workers subject to a series of conditions.

For what might be described as redundancy payments paid in normal circumstances however, the employee will be looking to benefit from the rule that states the first £30k of payments or benefits received will not be treated as employment income (and so not subject to tax and National Insurance), found in the same part of the legislation. Note that any excess above the £30k is liable to income tax in the normal way. Note also that there are circumstances whereby some or all of the £30k threshold will not be applicable to the total redundancy payments/benefits received, although this is not common, dependent mostly on the wording of the employment contract and the ‘normal practices’ of the employer. In all cases, the individual circumstances should be checked at the earliest opportunity when considering a redundancy package.

When the payment and/or benefits are given is also relevant: if before the employee has left then any excess over the £30k threshold will be put through the PAYE system in the normal way; if after the employee has left (i.e. after the P45 is issued), the employer will deduct tax at the basic rate on any excess, whereupon the employee must pay any higher rate of tax on that amount under self-assessment. For employers, note that any excess must also be reported to HMRC by 6th July following the end of the tax year in which the payments and/or benefits were made.

For more information on one-off payments including for redundancy, refer to paragraphs 148-151 in booklet CWG2 - the tables on pages 101-103 are particularly helpful.

Broadly-speaking, it allows for an outside investor looking to put money into a suitably qualifying small business to recover a proportion of their investment by way of a tax rebate proportional to the amount they’ve put in, to benefit from any return made on their investment tax-free, and even to offset unrelated capital gains by way of a separate CGT credit.

The rules are relatively straightforward to understand (limited shareholding, and the investment must be for at least three years during which time the company invested in must remain ‘qualifying’), and the compliance requirements are relatively light, although professional advice should always be sought.

The Chancellor announced in the recent Budget that the EIS rules will change so that the rate of income tax relief will increase from 20% to 30% from April 2011, and, from April 2012, double the annual investment limit to £1m per person. The scheme rules will also be loosened to allow for investment in larger companies, from 50 to 250 in staff count, and from £7m to £15m in gross assets.

For more information on the Enterprise Investment Scheme, and eventually on the Budget 2011 changes, please follow this link.

Full details are as yet unconfirmed, although we presently do know that all Enterprise Zones will benefit from:
a) a business rate discount worth up to £275,000 per eligible business over a five year period
b) business rates growth within each zone, for a period of at least 25 years, will be shared and retained by the local area
c) help to develop ‘radically’ simplified planning approaches for each Zone using, for example, powers to grant automatic planning permission
d) superfast broadband roll-out throughout each Zone

In addition, there will be incentives to create and stimulate economic activity through enhanced Capital Allowances on money spent on premises, buildings, plant & machinery, and so on.

So clearly not any sort of a giveaway in terms of business taxes, and there may well be measures introduced to help prevent pre-existing resident businesses from benefitting in part at least, but the scheme should prove beneficial for new or pre-existing businesses looking to invest in one of the Zone areas.

Further details can be found in the Communities and Local Government prospectus found here. Full details of the scheme are yet to be announced and/or published.

Club Secretary Richard Shephard conveyed the following message: “We are delighted to confirm Best4Business as a sponsor of Canning Town Football Club. This deal will ensure that we can continue to provide facilities to all of our playing members for the coming season. The importance of this financial assistance from a local business cannot be overstated, particularly in a period of recession. On behalf of the committee I would like to thank Linda Arthey for her efforts in brokering the deal and William Phan at Best4Business Accountants for his work in ensuring its completion. We hope that this is the start of a long and harmonious relationship with the firm.”

The deal is in-keeping with Best4business Accountants’ continuing policy of proving support for local activities and groups when and where possible, and it is very likely that the firm will be looking to continue supporting Canning Town FC in future years.

Therefore, from that date onwards, you should double-check all your sales invoices and receipts to ensure that the right % is being added to the goods and services you are providing. Practically, standard templates with formulae to work-out the VAT will have to be amended, and software that generates invoices for you will have to be reset.

For those of you who are using it, note also the Flat Rate Scheme rates have also been amended (see: rates table) - the highest rate is now 14.5%.

In case you’re using it, the standard VAT at 20% fraction has changed from 7/47 to 1/6.