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Budget 2008: Company and business taxation

Income shifting

For small companies the most important announcement for the budget was that the government is postponing the enactment of income shifting legislation for a year.

Changes to associated company rules

From 1 April 2008 the definition of control in s13 ICTA 1988 will be amended to ensure that the right or powers held by business partners will be attributed only when "relevant tax planning arrangements have at any time had effect in respect of the taxpayer company". "Relevant tax planning arrangements" will be defined as arrangements which involve the shareholder or director and the partner and secure a tax advantage by virtue of greater relief under section 13 of ICTA.
Source: Budget note 4

Company tax rates

From 6 April 2008 as previously announced in the pre-budget report:

• The small company corporation tax rate will be raised to stages, rising to 21% on 1 April 2008 and rising to 22% in 2009.
  
• The mainstream rate of corporation tax will be cut from 1 April 2008 to 28%.

Tax simplification

The government is to launch a programme of tax simplification which will review:

• VAT – option to tax, partial exemption, capital goods scheme, retail schemes and administration.
  
• Anti-avoidance legislation – to ensure it is clear, effective, well targeted and simplified.
  
• Related companies – group aspects of CGT, associated company rules, CTSA and transfer pricing.

Goods appropriated into or from trading stock: Market value adjustment

Legislation will be introduced in the Finance Bill 2008 to put on a statutory basis the market value rule where goods are appropriated into or from trading stock other than by way of trade; the profits of the trade for tax purposes should be adjusted to replace the cost of the stock or the actual proceeds with their market value.
Source: Budget note 19

Extended R & D tax relief

From 6 April 2008 as previously announced in the pre-budget report:

• An enhanced deduction for small companies from 150% to 175%.
  
• Large company deduction increases from 125% to 130%.

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Number of comments: 3

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Anon, 17 March 2008 @ 12:53 PM

Tax rate
Has anyone else noticed that Budget Note 2 states that the 28% tax rate will start from 1 April 2009 not 2008 as announced last year. Have I missed something here or is it just a typo?

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paul webb, 13 March 2008 @ 21:45 PM

Why the profession needs to get its head around the R&D Tax Credits
R&D credits have gone up this year and I think we can do more as a profession to look into how clients can qualify and help them through the process. Now it is 175%, this is almost double the original spend, so we need to ensure we are claiming this for clients wherever possible and this means looking into ways to achieve this.

The problem with R&D Tax Credits is that it the qualifying criteria for eligible expenditure is very prescriptive. and as practitioners it is sometimes easier to take the view that expenditure won’t qualify rather than examine theguidance and expenditure in detail. Additionally, it is regulated by a specialist department within the Revenue which is in reality a way to scrutinise whatever claims they do get as much as possible.

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Fraser Jopp, 13 March 2008 @ 09:54 AM

Tax Simplification Review
Sorry if this has been picked up elsewhere, but given the relatively short deadline (30 April 2008), and high interest to this site, please note that the Tax Simplification Review survey can be found here:

http://www.hm-treasury.gov.uk/budget/budget_08/documents/bud_bud08_taxsimplification.cfm

So let the gov't know what you think it should do soonest.

NB Please write on one side of the screen only