PRE-BUDGET REPORT - The Small Print

The Pre-Budget Report on 24th November 2008 was probably the most important in recent times. Bold fiscal intervention was required and only time will tell whether the radical measures announced will be enough to kick-start the economy.

Most of the policies announced have already received substantial press coverage, but there are one or two points to which we would like to draw to your attention and these concern the new measures announced for loss relief.

From 24th November 2008, all companies (and from 2008/09 all unincorporated businesses, i.e. sole traders and partnerships), will be able to carry back losses (up to a cap of £50,000) to relieve taxable profits of the previous three years.

This relief presently applies for one year only, after which the current one year carry back rule will be reinstated.

It is also worth mentioning that the proposed increase in the small companies' rate of corporation tax to 22% from next year has been postponed for one year.

The current 21% rate will, therefore, apply for the 12 months to 31st March 2010. The main rate remains unchanged at 28%.

The above measures represent a significant shift in tax planning and we, as your business advisors, will ensure that any losses are used in the most tax efficient manner.

CHANGES TO CAPITAL ALLOWANCES

With effect from 6th April 2008 (1st April 2008 for companies) the annual writing down allowance, on most capital expenditure, was reduced from 25% to 20%.

But it's not all bad news. From the same dates, an Annual Investment Allowance (AIA) has been introduced for small and medium sized businesses (see below for definition), giving an allowance of 100% for the first £50,000 of qualifying expenditure in each year. Non qualifying capital purchases include motor cars and long-life assets (i.e. assets with a life expectancy in excess of 25 years).

Needless to say, there are exceptions to the above rules and, as always, we would encourage clients to contact us before committing to any significant purchases.

The timing of purchasing new plant and machinery is now more important than ever. You will appreciate that delaying or advancing payments by even a single day can have a massive impact on the timing in which relief is obtained.

A word of warning! Where 100% relief has been claimed on a capital item which is subsequently sold, the excess relief will have to be repaid to the Revenue via a balancing charge.

To qualify for AIA, 'small and medium-sized businesses' are, broadly, those satisfying any two of the following conditions:

(a) Annual turnover of £22,800,000 or less
(b) Net assets of £11,400,000 or less
(c) Not more than 250 employees

LANDLORDS - PLEASE NOTE

As you are aware, new government legislation was introduced earlier this year requiring a Home Improvement Pack before a property could be marketed for sale. From 1st October 2008, landlords are also required by law to provide an Energy Performance Certificate (EPC) for each property, which is let or re-let after that date.

The purpose of an EPC is to give prospective tenants information on the energy efficiency and carbon emissions of a building and includes a recommendation report giving suggestions on improvements, which could save money and energy.

An EPC on a let property will be valid for ten years unless any major renovation work is carried out, for example, installation of double glazing, roof insulation etc. Therefore, if you are planning to let a property or are aware that there will be a change in tenancy, consider undertaking any such renovation work before arranging an EPC for your property.

The landlord is responsible for ensuring that there is an EPC available for the property being let and that any agents acting on his or her behalf are complying with the regulations.

Failure to comply will incur a penalty. This is usually fixed at 12.5 % of the rateable value of the building, subject to a minimum penalty of £500 and a maximum of £5,000.

REMINDER...

31st January 2009 - is the online filing deadline for your 2007/08 Tax Return - if you have yet to let us have the information to prepare your Return, time is now running out!

MAKING LIFE (A LITTLE!) EASIER

Previously, if a company paid professional subscriptions on behalf of an employee, it was necessary to report this on a form P11D. From 2008/09 onwards, the Revenue have stated that this will no longer be necessary, provided the subscription is on their approved list, which can be obtained from the Revenue website (www.hmrc.gov.uk).

If in any doubt as to whether a subscription qualifies for this dispensation, please contact us.