Budget Action Points for Businesses

Action Points for Business Clients

Corporation Tax

Carry Back of Losses
The temporary extension of trading loss carry back from one to three years for losses up to £50,000 continues for company losses arising in accounting periods ending between 24/11/08 and 23/11/10.

Consider the best use of trading losses

Denial of Tax Relief on Loans to Participators
No Corporation Tax relief will be given to a company where there is a loan from the company to a ‘participator’ (i.e. shareholder or director) in the company and the loan is written off. The removal of the requirement to repay the loan to the company will still be a ‘distribution’ for tax purposes for the participator.

Consider using other emans to extract company profits

Capital Allowances

R&D Expenditure
Businesses are reminded that expenditure which can be identified as Research and Development (R&D) expenditure may qualify for a 175 per cent tax allowance.

Where a patent is created, consider how you treat the related expense – do you want to write off development costs now or capitalise them and take advantage of the R&D treatment?

Increase in Annual Investment Allowance (AIA)
The 100 per cent AIA is being increased to £100,000.

If you have a capital investment pending which is above that figure, consider postponing it (but mind the VAT implications).


Security for Payment of Taxes
Employers who have a history of serious non-compliance in terms of paying late or not paying their pay as you earn (PAYE) income tax may face a requirement to give a personal security (the amount will be set by HMRC). In practice, this means that if HMRC consider you are a persistently late payer, they may seek a personal guarantee for PAYE.

If you have a bad history of PAYE compliance, now may be the time to get your affairs in order.

Motoring and Travel
The ‘staging’ of the increase in fuel duty was widely predicted. In addition, the benefit in kind rules are being amended to reduce charges for ‘carbon friendly’ vehicles and increase them for those that are not, by reducing the CO2 emissions which define the bottom of each chargeable band by 5 per cent.

Never before has being 'green' so important

Beware Business Class
Air passenger duty (APD) is going up from November as expected. What is less well known is that the APD on a non-economy class seat for a flight of more than 6,000km is rising to a whopping £170.

Easyjet, anyone?

National Insurance Contributions
NICs are being increased this year as expected, but there are further increases on top of those already announced being introduced in 2011.

Staffing levels may need to be scrutinised

Entrepreneurs’ Relief
Entrepreneurs’ relief, touted in some areas as a candidate for abolition,
is being increased to £2 million. This is a move that many small business owners will welcome.

If you were about to sign that contract for sale...

VAT

Payment Date (Effectively) Brought Forward
Though announced by HMRC in February, not in the Budget, as from 1 April VAT will be treated as received on the day the payment is cleared by HMRC’s bank.

Payments will have to be sent earlier than hitherto in order to avoid them being considered as late. (Although most businesses must file online form 1 April)

For more information on the Budget, we would recommend looking at HMRC's Budget Notes.