Tories reveal detailed corporation tax plans

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In an interview with Andrew Marr on BBC 1 on Sunday 28 February, George Osborne committed to more Corporation tax cuts than ever before.

During the course of the interview, Mr Osborne, the shadow Chancellor, promised that an incoming Conservative Government would cut the small company rate of corporation tax to 20% (a commitment previously made by the party leader David Cameron) but went further to promise that if elected, the party would also reduce the main rate of corporation tax to 25% in an emergency Budget to be delivered in June 2010.

Mr Osborne stated that the reductions in the rate of corporation tax would be paid for by the “abolition of some complex reliefs”, however, he went a little further and stated that an investment relief predominantly available to small busines...

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About Rebecca Benneyworth

Rebecca Benneyworth profile image

Rebecca trained in London with Kidsons and, on qualifying, spent some time as Chief Accountant of a manufacturing company. She now has her own small practice in Gloucestershire that comprises of owner managed businesses and small companies.

She also lectures extensively for a range of professional bodies, accountancy firms, commercial organisations and the Inland Revenue. Demand has grown for Rebecca on the lecture circuit where she is well known for her refreshing, enthusiastic and entertaining presentation style as well as having a practical and down-to-earth approach to tax.
 

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01st Mar 2010 09:30

Tax cuts funded from within the CT system

'The large print giveth and the small print taketh away!'

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By ringi
01st Mar 2010 12:47

“Annual Investment Allowance” removes the need to track capital
I like the “Annual Investment Allowance” as for small consulting companies (e.g when the none wage expenditure is less then £50,000, and there is no stock being hold) there is no need to separate capital expenditure from revenue expenditure.
(I am assuming there are no company cars etc)
None accountants find writing down pools very hard to understand, and given the fact that the life of a computer or software license is very hard to predict they tend not to be very useful for the running of the company.

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01st Mar 2010 13:35

But it does cost a lot!

AIA costs around £2.8bn so you can see why it is an easy target

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By ringi
01st Mar 2010 14:14

How match of the AIA cost is "real" rather then "delayed"

I can see that AIA reduces the tax take in the first few years it is in use for. 

However after a few years, I would have thought it balanced out, as there are no writing down deductions to make when calculating the corporation tax. The capital expenditure would have been all written off in the end, or am I missing something?

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01st Mar 2010 15:56

AIA

So one of the undeniably good things this government has done in tax is top of the list for removal, and a 25% rate for Tesco is to be paid for by small business. Well, whoopee.

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02nd Mar 2010 09:28

Real and delayed costs

The numbers in the Red Book are the thing to go on - I agree the relief will be given "eventually" but in terms of balancing the books, an annual cost of between £2.5bn and £3bn is no small figure. I would argue that it is a distortive allowance and leads to all sorts of other issues like tax credits etc and is probably undercosted in the books anyway. We'll all have our views, but we'll have to see what happens in the election!

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By Anonymous
02nd Mar 2010 14:59

Tescos

Surely if Tescos can retain more of their earnings, to enable futher expansion abroad, to bring further profits to the uk, that is a good thing!

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02nd Mar 2010 17:18

corporation tax

I see no difference to the taxation of the self-employed or Ltd Company. Why should there be??????? Both have to pay Employers Nic. Both have the same expenses.

CA's have been played about with for years. Why not write everything off over a 5 year period on a straight line basis???

Here comes the big one - I don't think the Tories are electable. They just haven't got it. So we won't have to worry about AIA being abolished.

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By ringi
02nd Mar 2010 17:30

Why not write everything off over a 5 year period on a straight

Because if you are a computer programmer a PC may only have a useful life of a year before it needs replacing.   The old PC may then be used for example as “print server”, but a dedicated “print server” can be brought for £50, so the old PC is still in use, but it has a very replacement cost. However if technology does not move on fast for a year or two the PC can have a much longer life,  it is impossible to tell at the time it is brought what is useful life is likely to be.

(The resale value of IT kit is very low.) However if you are an accountant the same PC may have a useful life of 3 to 5 years.Software that is needed to carry out work for one client and may be used for other clients over the next few years is also very hard to know how to account for. So we have a capital spend of a few thousand a year that lead to very complex and misleading accounting and tax.

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02nd Mar 2010 20:22

Pity the self employed

Loss of AIA and no compensatory reduction in tax rate.

Partnerships too.

Mark Lee

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By Anonymous
04th Mar 2010 18:39

What about the other changes made at the same time?

Will the WDA rate be put back to 25%? The Integral Features pool scrapped? etc. 

These changes no doubt helped to pay for the AIA.

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05th Mar 2010 11:13

I agree, Mark

Do you think it's because government fails to appreciate that your self-employed freelancer / contractor / jobbing gardener is in business, not a job?

M

Emily Coltman ACA, Support Accountant, FreeAgent Central 

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By Anonymous
07th Apr 2010 14:42

first ye need profits

If this government gets voted in again, I rather think the problem will not be corporation tax rates, as even 90% of nothing is still nothing !

The extreme cash flow planning techniques used by this government to fund their excessive spending has left no flexibility.

They have even outsourced debt ! my daughters school has been on a spending spree, new plastic cards with anti bullying messages, new reception area with TV screens, new finger printing technology, etc etc and now find they have a defict of £.75M. Well what a surprise !

Labour voters; teachers, civil servants and the unemployable have never had it so good ! but they have forgotten who has to pay for it all, yes !  the workers: Small business owners, and we are nearly broken !

I need not elaborate on what happens next !

At least the conservatives have some idea of how the multiplier principle works ! Although why big business should benefit more I am not sure about !

 

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