Chancellor Alistair Darling this week presented the 2009 Pre-Budget (some would say pre-election) report to the House of Commons and the wider business community.

As always, the financial press will have done their bit to analyse the impact on the economy as a whole but at A4G we have concentrated on how it affects our client base, namely owner managers. With that in mind, measures included:

Deferral of the planned 1% increase in corporation tax for small firms
Indefinite extension of the ‘time to pay’ scheme
Empty property relief will be extended from 2010/11 for business properties with a rateable value below £18,000
Enterprise Finance Guarantee Scheme will also be extended for one year
National insurance contributions to rise by a further 0.5% from April 2011, although the starting point will be raised so that those earning less than £20,000 will not be affected.
Many allowances and thresholds unchanged
Temporary cut in VAT will end on 1 January 2010 as planned, with the standard rate reverting to 17.5%.
So-called stamp duty 'holiday' will come to an end at the same time
Individual inheritance tax allowance frozen at £325,000 until 2011
10. Plans to reduce pension tax relief for those earning over £150,000 confirmed

This guide is for general information only.  No responsibility is taken for any action taken or refrained from in consequences of its contents.  Always seek professional advice before acting.

If you would like further advice and you are not a client of A4G please contact our office on 01474 853856.

It was thought amongst many commentators that the rate of Capital Gains Tax was to be increased to 25% or even 40% as a flat rate from 18%. In addition, it was rumoured that Entrepreneur’s Relief (which restricts the tax on gains on business based assets to approximately 10%) was to be abolished.

Both of these changes would have reduced (but by no means removed) the advantages of using a hybrid LLP structure, in which the members of the LLP include a mix of individuals and at least one limited company. However, as again no changes were made to either of these areas, this tax planning retains all of its advantages.

Therefore, business owners earning over approximately £50,000 individual per annum (or who wish to draw sums from the business higher than this), may wish to consider using this type of business structure. Other business owners who are considering starting a second business or investing in property will also find that this type of structure can make significant tax savings.

If you would like to investigate the possibility of using a hybrid LLP further, please contact your Principal Adviser or email wes@a4gsolutions.co.uk

Conspicuous by its absence was any reference to one of the current hot topics of the tax planning world – EFRBS (standing for Employer Financed Retirement Benefit Schemes).

It was widely thought that anti-avoidance measures were to be introduced to lessen the appeal of these schemes which enable the removal of profits from a business (albeit without immediate tax relief) into a trust where the beneficiaries (usually the business owners) can use the money personally without personal income tax, national insurance or capital gains tax liabilities being levied. As the EFRBS is also a trust, any assets held within the trust are outside the scope of UK inheritance tax.

No anti-avoidance legislation was introduced however, and so business owners who are individually earning above £200,000 per annum may wish to consider the use of an EFRBS in the future, especially given the incoming 50% tax rate.

If you would like to investigate the possibility of using an EFRBS, please contact your Principal Adviser or email wes@a4gsolutions.co.uk

Over 160,000 businesses have taken advantage of the HM Revenue and Customs’ (HMRC) Business Payment Support Service.

HMRC will continue to offer this service as part of its time to pay arrangements. In order to qualify for payments of Corporation tax, VAT, Income Tax or PAYE tax and National Insurance to be paid in instalments, you must apply before the tax is due and you must genuinely believe that you will have difficulty paying the bill but may be able to resolve this if HMRC were to allow you extra time.

Leave it until after a due date has passed and the benefit of frozen charges and a payment plan to fit around your specific circumstances could be jeopardised.  You may also be asked for evidence to prove that you would suffer genuine hardship should you be required to pay by the due date and so can not apply for the service purely to defer payment for any other reason.

If you have a tax bill approaching that you feel you may have difficulty in meeting, please contact your Client Manager, or contact the HMRC Business Payment Support Line directly on 0845 302 1435.

In March 2009, the Government announced that businesses could spread payment of the April 2009 inflation up-rating to business rates over three years, helping ratepayers for an estimated 1.8 million properties in Britain. The Government also temporarily increased the threshold at which empty properties are liable for business rates to £15,000, exempting an estimated 70% of empty properties. On 18 September 2009, the Government removed the requirement for businesses receiving small business rate relief to reapply for relief at revaluation.

The Government is maintaining for a further year the temporary increase in the threshold at which an empty property becomes liable for business rates. For the financial year 2010/11, empty properties with a rateable value of less than £18,000 will be exempt from business rates. This higher threshold reflects the effects of business rates revaluation and is still expected to apply to 70% of empty properties.

The Government is deferring, for an extra year, the planned increase in the Small Companies’ Rate of Corporation Tax. The rate will remain at 21% during 2010/11.

Since the introduction of the R&D tax credit schemes, according to the Government, over 36,000 claims have been made for R&D tax credits with over £3 billion of relief claimed, supporting over £32 billion of research and development activity by companies.

The Chancellor has now announced the removal of the condition that any intellectual property (IP) deriving from the research and development must be owned by the company making the claim. Therefore, if your business is involved in Research and Development, but it is not the owner of the IP, you will now be able to claim 175% of any expenditure on Research and Development provided that the minimum expenditure is above £10,000 per annum. It will have effect for any qualifying expenditure incurred in an accounting period ending on or after 9 December 2009.

If you think that your business is involved in Research and Development and you would like advice on whether you might qualify for the extra tax relief available, please email wes@a4gsolutions.co.uk

Company cars propelled solely by electricity will be free of benefits in kind tax for five years and there were a number of increases in tax on cars and vans although none that will make any significant difference to the advice that we give on the best way of owning cars. The more tax-efficient way of owning vehicles will still be in a hybrid LLP and for those running limited companies will still probably be to hold the car outside the company and claim mileage allowances (although each case must be judged on its merits).

If you would like further advice on your particular situation, please contact your Client Manager, or email janice@a4gsolutions.co.uk

The tax thresholds and personal allowances for 2010/11 can be accessed via our website, but effectively remain unchanged from 2009/10 with the exception of the introduction of the new 50% rate on income above £150,000.

The lower earnings limit for 2010/11 will increase by £2 to £97 per week. All other main NIC rates and thresholds are unchanged for 2010/11.

In his 2008 Pre-Budget Report the Chancellor announced that the main NIC rates would be increased by 0.5% for 2011/12. In his 2009 Report he announced a further 0.5% increase effective from 6 April 2011, taking rates to:

With effect from 6 April 2011, the primary threshold and lower profit limits were to be broadly aligned with the income tax personal allowance. It has been announced that these thresholds will be increased by a further £570 to compensate the lowest earners (up to £20,000) for the increase in Class 1 and 4 rates.

The inheritance tax allowance will be frozen at £325,000 for individuals and therefore a maximum of £650,000 for married couples and civil partners in 2010/11. There is no change in the annual exempt amount for Capital Gains Tax which remains at £10,100 for individuals and £5,050 for most trustees.