The Budget - Business Tax and Investment Incentives

Davina Cole comments that the Budget this week has highlighted the importance of using a Solicitor when considering making a Will.  

Corporation Tax

Corporation tax rates and bands are as follows:-

Taxable Profits

Financial year to 31st March 2012

First £300,000 - 20%
Next £1,200,000 - 28.75%
Over £1,500,000 - 27%

Financial year to 31st March 2011

First £300,000 - 21%
Next £1,200,000 - 29.75%
Over £1,500,000 - 28%

The main rate of corporation tax will be reduced to 27% for the financial year commencing 1st April 2011 (FY 2011).  There will be further reductions (by1% per annum) to take the rate down to 24% by 1st April 2014.  The small profits rate will be reduced to 20% for FY2011.

Capital Allowances
The rates of writing down allowances (WDAs) for new and unrelieved expenditure on plant and machinery will be reduced from 20% to 18% per annum for expenditure allocated to the main rate pool, and from 10% to 8% per annum for expenditure allocated to the special rate pool.  This will have effect for chargeable periods ending on or after 1st April 2012 for businesses within the charge to corporation tax and on or after 6th April 2012 for businesses within the charge to income tax.
The Annual Investment Allowances (AIA) will be reduced from the current limit of £100,000 to a new limit of £25,000.  This will have effect from April 2012.

Consortium Relief
In certain circumstances, a member of a consortium may transfer its share of the consortium's unused losses to another member of its group.  The member making the transfer is know as the "link company" and under current rules it must be UK resident.  For accounting periods commencing on or after the date the legislation is published, the rules will be extended to allow any company established within the European Economic Area to be a link company.
The legislation will also provide an additional test for determining the maximum amount of losses that may be claimed from a consortium company.  This test will be based on the proportion of voting rights and the extent of control the member holds in the consortium.

Corporation Tax Reform
The Government is to consult on:

  • changes to the rules for foreign branches
  • the reform of the controlled foreign company (CFC) rules
  • the taxation of intellectual property
  • the support research and development (R & D) tax credits provide for innovation

It also intends to simplify the capital gains rules for groups of companies.

In the autumn the Government will set out a more detailed programme for the reform of the whole corporate tax system.

For further information regarding the above please contact Davina Cole on 01743 285868 or email on



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