Business & Taxation

Corporation tax

• Principle rate – The Government will reduce the principle rate of corporation tax from 28 per cent to 26 per cent from April 2011. The rate will then be reduced by a further 1 per cent in each of the following three years, and as a result will be 23 per cent by 2014.

• Small profits rate – As announced in the June Budget 2010, from 1 April 2011 the small profits rate of corporation tax will fall from 21 per cent to 20 per cent.

This means that if you run an incorporated property business then you should benefit from these changes.

• Drop existing proposals for specific regulations which would have cost business over £350 million a year;

• Introduce a moratorium exempting micro-business and start-ups from new domestic regulation for three years from the 1st April 2011;

More help for all businesses in managing their businesses and reducing the barriers of entry for small and start-ups, good news for all business-owners.
Research and Development (R&D) tax credits

• Following consultation on the effectiveness of the schemes, the Government will increase the SME scheme rate of relief to 200 per cent from April 2011 and 225 per cent from April 2012, subject to EU State aid approval. It will simplify the schemes, including removing the Pay As You Earn (PAYE)/NICs cap on the amount of payable credit that can be claimed, removing the minimum expenditure rules and allowing relief through the large company scheme for subcontracted activity which forms part of a wider R&D project.

Often an unexploited tax benefit, if you own a business or have clients who own businesses who do or have done the following:

product development; R&D budget/department; Created new product(s); created a new process; changed a process for a customer and/or product variation; manufacturing; printing;

Our preferred accountant, Stephen Fay can provide detailed, specialist advice in this area (click on his name for his contact details

Housing & Property

Planning

• Government will introduce a number of measures to streamline the planning applications and related consents regimes removing bureaucracy from the system and speeding it up. This will include a 12 month guarantee for the processing of all planning applications, including any appeals;

Although local autonomy will need to be assessed as and when any changes in legislation come into play there may be opportunity for speculative planning applications….Planning Officers have often interpreted new legislation to suit local planning policy, it may therefore take some time for these changes to prove themselves/

• Government will consult on proposals to make it easier to convert commercial premises to residential.

Due to the large numbers of currently empty commercial properties available, change of use may be easier to come by. Local to us there are plenty of empty shops that would lend themselves to being converted to ground and first floor flats at relatively low expense.

Stamp Duty Land Tax (SDLT)

• The Government will introduce changes to the SDLT rules for bulk purchases of residential properties. If the buyer chooses, the rate of SDLT on purchases of multiple residential properties will be determined by the mean value of the dwellings purchased (subject to a minimum rate of 1 per cent), rather than their aggregate value as is currently the case. [The Government suggests that...] This will reduce a barrier to investment in residential property, promoting private rented housing supply.

This appears to be good news for buyers and sellers of portfolios.

• The Government will announce the outcome of its review of the stamp duty land tax relief for first time buyers in autumn 2011

• The Government will introduce legislation, with effect from 24 March 2011, to address three SDLT avoidance risks. The changes cover avoidance techniques that use the sub-sales rules, the Alternative Finance reliefs and the rules for exchanges of land. These techniques have been used to attempt to avoid tax on both residential and non-residential property transactions, including on high value property transactions.

Market Stimulation for First-Time Buyers

• The Government will provide £250 million to support first time buyers to purchase a new-build property. The First Buy programme will assist over 10,000 households with equity investments jointly funded with house-builders;

Could kick-start the market…after all it is first-time buyers who ultimately fuel the housing market…no doubt there will be strict rules for qualification for any such assistance.

Local Housing Allowance (LHA)

• As announced in the June 2010 Budget, LHA rates will be set at the 30th percentile of local market rents and LHA rates will be capped at £250 per week for a one bedroom property, £290 per week for a two bedroom property, £340 per week for a three bedroom property and £400 per week for four bedrooms or more. As announced by DWP in November 2010, these measures will now come into effect from April 2011 for new claimants, and January 2012 for existing claimants.

So, this one is all about timing, and should come as no surprise given previous announcements. John Paul, one of the UK’s leading property experts on LHA recently spoke at the Northern Property Tribe gathering, contact us to be put in touch directly with John.

Furnished holiday lettings (FHL)

• From April 2011, new tax rules for FHL will take effect, so that loss relief may only be offset against income from the same FHL business. Letting and availability thresholds will be increased from April 2012.

Future Abolishing of Reliefs [Relevant to property...]

• The Government intends that the following reliefs will be abolished after 2012 in future Finance Bills or other legislative vehicles, with a final date set out after the consultation:
  • Capital allowances – flat conversion allowances;
  • Disadvantaged area relief (Stamp Duty);
  • Transfers to registered social landlords;
  • Disadvantaged area relief (SDLT);

So, watch-out…these could be abolished or formally announced to be abolished as early as the 2012 Budget, so if you rely on any of these reliefs, now is the time to start planning for their abolition. For up-to-the-minute advice, get in touch with Stephen Fay or one of his team

Personal & Indirect Taxation

Fuel Duty

• Government has immediately cut fuel duty by 1 penny per litre. The fuel duty escalator will be replaced with a fair fuel stabiliser that increases tax on North Sea oil production when oil prices are high. The April 2011 inflation-only increase will be delayed to January 2012. The April 2012 increase will be delayed to August 2012. The Government will increase the Supplementary Charge on oil and gas production to 32 per cent from 24 March 2011;

Personal Allowances…

• From April, the personal allowance for under 65s increases by £1,000 to £7,475. This Budget announces that the personal allowance for under 65s will increase by a further £630 to £8,105 in 2012-13, with an equivalent £630 reduction in the basic rate limit to leave the higher rate threshold unchanged.

As widely reported, there has been a slight reduction in Income Tax liabilities across the board.