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AIA

PBR 2008: Corporation tax changes

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24th Nov 2008
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The planned increase in the small companies rate from 21% to 22% has been delayed until 1 April 2010. This was previously to take effect from 1 April 2009.

A maximum £50,000 of trading losses incurred in accounting periods ended between 28 November 2008 and 23 November 2009 can be carried back three years, starting with the latest year.

Where companies are connected under loan relationship rules, a creditor company which releases a debtor company from a trade debt cannot claim a deduction for the loss. However, the debtor company could be taxed on the “profit”. Provisions will be introduced to the effect that the debtor company will not be taxed on the release.

Provisions will be introduced to counter an anomaly on the introduction of international accounting standards that could have given rise to double taxation or double relief in connection with financial instruments and foreign exchange hedging transactions.

There will be consultation on the following:

The position with regard to interest paid by a company to a connected company that is outside the loan relationship legislation, typically a connected foreign company will be clarified. At present interest is allowed on a paid basis, rather than on the usual accruals basis.

Measures are being considered, and comment has been invited, to introduce changes to the taxation of foreign profits, particularly focusing on the possible exemption of foreign dividends, and the modernisation of the Controlled Foreign Company (CFC) regime.

A discussion document has been published to consider the simplification of corporation tax calculations and returns. This document has resulted from feedback from respondents, and raises a number of questions for which answers have been invited.

Pre-budget report 2008 coverage sponsored by

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