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Pre-Budget Report 2009: The main points

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9th Dec 2009
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Chancellor Alistair Darling used his Pre-Budget Report speech to the House of Commons to set out his stall for the forthcoming general election, including a populist measure to tax annual bonuses above £25,000 and anti-avoidance measures to “protect” £5bn in tax revenue.

The detailed documents that emerged from the Treasury and HMRC provided more illumination on the following key issues for small businesses and their advisers. For the full details, click the links below, or visit our 2009 Pre-Budget Report page.

Tax tables
A handy summary of the tax statistics from this year's Pre-Budget Report.

Summary of small business changes
Rebecca Benneyworth draws attention to R&D relief rule changes, a 1% planned increase for NICs from April 2011 and a £570 increase in the annual earnings threshold/lower profits limit for class 4 contributions. New VAT flat rate scheme percentages have been published to reflect the return to a 17.5% standard rate from 1 January.

Summary of employment tax changes
National Insurance thresholds and rates unchanged for 2010-11, but the plannned increase for April 2011 has been revised upwards to 1%. The bank payroll tax caught the most early headlines, but there's a more significant long term threat lurking behind a clampdown on salary sacrifice-funded canteens, warns PKF's Philip Fisher.

Summary of VAT measures: Standard rate returns to 17.5% next year
As planned, the temporary 15% rate of VAT will end on 31 December 2009. The VAT Flat Rate Scheme rates have been re-calculated to reflect the switch back to 17.5% from 1 January. A "period of grace" will be allowed for businesses such as pubs that trade across the midnight deadline. Also see: VAT rate increase: A tutorial.

Protecting Tax Revenues 2009: Summary
HMRC's key anti-avoidance document explained set out its strategy to reduce the tax gap as far as possible without placing disproportionate burdens on businesses and individuals. Mark Lee takes a closer look.

Bank bonus tax - the details
As widely predicted, Chancellor Alistair Darling unveiled a "supertax" on bonuses about £25,000. From the time of the Chancellor's announcement (1pm on 9 December) until 5 April 2010, 50% will be payable by the bank in respect of discretionary bonuses in excess of £25,000. Accountants differed on the ultimate effect it would have and whether it should be a permanent measure.

Summary of key large company measures
Changes affecting larger companies are summarised here, with an indication of areas of anti avoidance developments.

Company cars tax perk to return for electric vehicles
Electric powered company cars provided for private use will not be taxed as benefits in kind from 2010/11 through to 2014/15. There will also be no Class 1A National Insurance Contributions (NICs) on the taxable benefit.

Workplace canteens targeted by anti-avoidance change
Tax exemption for salary sacrifice-funded canteens to be removed - possibly the first shot in a wider clampdown on flexible benefits, warned PKF's Philip Fisher.

Summary of personal tax measures
A mixed bag for personal tax advisers. Income tax allowances and the £325,000 inheritance tax threshold have been held at their current rates, while the annual CGT exempt amount is yet to be announced. But an increase to 50% in the tax rate for certain pensions will come into effect from April and an anti forestalling measure will be amended with immediate effect to include employer pension contributions.

Pensions changes – a detailed explanation
The PBR included some opaque suggestions on pensions tax legislation. Rebecca Benneyworth examines what shape the anti-forestalling legislation and high income excess relief charge are likely to take.

Furnished holiday lettings – the final furlong
PBR 09 confirmed that all tax benefits applying to the Furnished Holiday letting (FHL) sector will come to an end in April. Rebecca Benneyworth highlights some key planning points that emerged from the PBR technical documents.

Simon Sweetman's small business perspective
Several of the measures predicted to hit small businesses failed to show up in the Pre-Budget Report, and the government's plan not to slam on the brakes and make big cuts in public expenditure should help keep us from falling deeper into recession. But the downside of this week's statement is likely to show up in increased National Insurance Contributions in 2011.

Economic outlook
Professor Michael Devereux, director of the Oxford University Centre for Business Taxation offers his insights on the chancellor's plans for the economy. Economic commentaries also from:
UK200Group PBR fails to tackle debt mountain
ICAEW IT Faculty The elephant in the room
Danny Cox, Hargreaves Lansdown Delaying the inevitable

Expert reactions from firms, institutes and AccountingWEB.co.uk members
"The chancellor failed to pull a rabbit out of the hat to restore much needed confidence both home and abroad. His PBR was largely neutral for 2010-11 as expected but started to put the pressure on with tax rises of £3.5 billion in 2011/12 and £5.1 billion in 2012/13," commented Grant Thornton chief economist Stephen Gifford. Click the headline link above to add your tuppence-worth. Also see: BDO video: What the PBR means for your business.

Live coverage and reaction
Follow a live transcript of Alastair Darling’s speech as it happened, with lively commentary from Rebecca Benneyworth, Richard Murphy, Mark Lee, Pimlico plumber Charlie Mullins and other AccountingWEB.co.uk and BusinessZone.co.uk members.

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Shorty
By Shorty
10th Dec 2009 09:55

Clarity

I will vote for a Government that does away with National Insurance and lumps in the charge with Income Tax!

That way at least everyone will know exactly how much they are really paying...

;-}

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avatar
By User deleted
10th Dec 2009 10:07

Who's that then?

Shorty, like most people, you probably won't have a party to vote for. 

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