|Budget 2009 Commentary|
|Temporary return of first year allowances|
|Another year to carry losses back|
|Tipping the cashflow scales|
|Carbon-based company cars|
|Further obligations for internal company accountants|
|Preferring to be part of a group?|
|A simple option for VAT on property|
|2010 - a big year for football and VAT|
|Connected companies' loans|
|Developments on the green horizon|
|Foreign denominated losses|
|Gambling with the rules|
|Rates and limits|
|HMRC becomes more powerful|
In the current climate businesses are watching their cash flows very carefully. The Chancellor's comments today have given with one hand, and taken away with the other, such that businesses need to be carefully organised in order to ensure they benefit and do not fall foul of new measures.
The Chancellor stayed committed to his support for businesses facing financial difficulties by announcing that the Business Payment Support Service introduced in the 2008 Pre-Budget Report will continue for as long as it is needed.
The Budget reported that by 19 April 2009, the service had assisted over 100,000 businesses, who collectively employ over 600,000 people and had provided arrangements for almost £2 billion of tax.
From 22 April 2009, the service will be extended to allow businesses who are expecting to make losses in the current year, to set these against their previous year's profit, and therefore not pay their current tax bill. This will offer welcome cashflow advantages to struggling businesses, where there was previously a timing difference between the due date for payment and the date on which the repayment can be obtained.
It is important to note that the Business Payment Support Service offers protection to businesses from penalties and surcharges on late paid tax, meaning that a business can spread its payments, while only accruing interest on the outstanding payments. This is only available to businesses where the arrangements are agreed in advance of the due date for payment and therefore it is vital that businesses are organised with their affairs and speak to HM Revenue & Customs (HMRC) at an early opportunity.
The Government plans to introduce voluntary payment plans for individuals and companies to spread their tax payments over periods straddling the normal due dates. The Chancellor has, however, indicated that these provisions will not be implemented before April 2011 as they will require amendments to HMRC systems.
Importantly, these payment plans will result in no interest charges accruing on tax not paid at the normal due date.
As announced on 31 March 2009, the Chancellor highlighted in his Budget speech that businesses are able to spread the business rate rises applied this year over the next three years.
The Budget has announced new penalties for the late payment of PAYE, NICs and Corporation Tax which will be introduced over the next few years. This follows a consultation process which addressed the anomalies in penalties across the various taxes.
The aim of the legislation is for 'a penalty regime that is fair, effective and influences behaviour balanced by aligned taxpayer safeguards.'
The first new penalty which will be brought in is in relation to the late payment of in year PAYE payments. The penalties will apply from April 2010 and will be brought in based on a risk based approach. The penalties introduced for the late payment of PAYE are similar to current VAT penalties. The amount of the penalty levied will depend on the number of defaults in any 12 month period. The first time the taxpayer defaults, there will be no penalty raised.
A second late payment and any subsequent failures in the default period will attract a 2% penalty on the unpaid tax. Further penalties of 5% will be applied to any amounts outstanding six and 12 months following their due date.
The other penalty provisions will be brought into effect by a series of Treasury Orders which will specify the dates from which they have effect. In relation to corporation tax penalties, they will be aligned with Income tax self assessment penalties and surcharges for late payments of income tax. Penalties of 5% will be levied on the amount of unpaid tax on the filing date of the return, ie one year following the accounting year end. There will then be further 5% penalties on corporation tax still outstanding six months and 12 months following the first surcharge.
There were specific announcements that these penalties will not apply to any liabilities which are delayed under the Business Payment Support Service and it has been confirmed that this exemption will be included within statute.
Where businesses cannot pay their taxes as they fall due, it will therefore be very important that payment arrangements are agreed in advance to avoid generating further liabilities.
Legislation will be introduced in the Finance Bill 2009 to harmonise the interest regime on all taxes other than corporation tax and petroleum revenue tax, which will be amended in the Finance Bill 2010.
Amendments to interest on corporation tax quarterly instalment payments (QIPs) will be included in Finance Bill 2009.
As an interim measure, the interest rates charged by and received from HMRC will mainly be aligned by Treasury Orders which will specify the date on which they have effect shortly following the Royal Assent of the Finance Bill (usually around the end of July).
The full suite of changes will, however, be brought in over a number of years to allow HMRC to adapt its internal systems. The first change will apply to interest on in year PAYE and will be introduced using a risk based approach, from April 2010.
The new measures will allow for interest rates to be linked to the Bank of England base rate, and will be automatically amended 13 working days following any changes in the base rate. Interest rates on QIPs will be different from interest rates on the other taxes, but will still be linked to the Bank of England base rate. The actual rates to be charged have not yet been announced.