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BARNES ROFFE LLP

BARNES ROFFE LLP. BUDGET SEMINAR 2009 SINGLEWELL MANOR HOTEL 23 APRIL 2009. BARNES ROFFE LLP. KEITH MASON BSc FCA ATII Partner. ECONOMIC BACKDROP. Most serious global economic turmoil for over 60 years ! Won’t repeat the 1930’s inadequate response.

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BARNES ROFFE LLP

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  1. BARNES ROFFE LLP BUDGET SEMINAR 2009 SINGLEWELL MANOR HOTEL 23 APRIL 2009

  2. BARNES ROFFE LLP KEITH MASON BSc FCA ATII Partner

  3. ECONOMIC BACKDROP • Most serious global economic turmoil for over 60 years! • Won’t repeat the 1930’s inadequate response. • Predict contraction in world economy for the first time since World War II. • … but world economy to double in the next 20 years.

  4. ECONOMIC BACKDROP • UK exports down 14% (Germany 21%, China 26%, Japan 45%). • G20 fiscal support globally at £5 tn • We began the recession with all time high employment & low inflation, public debt and interest rates. • 2009 – fiscal easing @ 0.5% GDP in 2009, followed by tightening @ 0.8% GDP. • Tax rate – 1.2% as proportion of GDP compared with a year ago.

  5. ECONOMIC BACKDROP • Inflation projected to fall to 1% in 2009. (last year predicted 2% in 2009!) (target still 2%) • RPI (-0.4%) to fall to -3% by September 2010 (CPI Stubborn @ 3%) • In final Qtr 2008 – output fell by 1.6%. Similar expected in first Qtr 2009. • Contraction of 3.5% forecast in 2009. • Growth of 1.75% forecast in 2010 • Growth of 3.5% pa from 2011, then to a trend rate of 2.75%.

  6. ECONOMIC BACKDROP • At Budget 2008: 2010 growth forecast ~ 2.5% to 3.0% • Unemployment @ 4.5% (Up 137,000 in February, 74,000 in March).

  7. ECONOMIC BACKDROP • 2008 Observations:- • Balanced budget (+£8bn over this economic cycle ~ 1st Golden Rule). • Current budget deficit - £8bn and then -£10bn (2008), - £4bn (2009), then in surplus of £4bn (2010), £11bn (2011), £18bn (2012) • Borrowing forecast at £36bn for 2008. Rising to £43bn in 2009, falling to £23bn in 2013 (2.4% National income, rising to 2.9%, falling to 1.3%). • National debt @ 36.6% of national income (2007: 38.2%). {1997: 44%}.

  8. ECONOMIC BACKDROP • At Budget 2008:- Borrowing projected to rise to 39.7% over next four years - 40% is limit per 2nd Golden rule • Public sector employment falling, private sector rising at Budget 2008.

  9. ECONOMIC BACKDROP • 2009 Projections:- • Borrowing forecast at £175bn for 2009. Then £173bn,£140bn, £18bn & £97bn (11.9% national income falling to 5.5% in 2013/14). • National debt @ 59% of national income, rising to 68%, 74%, 78% & 79% but stabilising and beginning to fall in 2015/16. (1997: 44%!!)

  10. BUDGET 2007 The Irrelevant Budget

  11. BUDGET 2007 ‘I did maths for a year at university. I don’t think I was very good at it. And some people would say it shows’ (Gordon Brown)

  12. KEY FEATURES • Income Shifting rules delayed beyond FA 2009 in 2008 Pre Budget Report, but to be kept under review. • Naming & shaming for tax avoiders (> £25,00 tax) – projected to raise £60m pa – a cultural revolution! • Extended support for jobseekers. Guaranteed job/training/work placement for 18-24 year olds unemployed for 12 months or more. • Extension of 3 year loss carry back to 2010.

  13. KEY FEATURES • FYA 2009/10 @ 40% for main pool qualifying additions. • ISA limit up to £10,200 (£5,100 in cash) • SDLT holiday up to £175,000 (residential) extended to the end of the year. • 2011/12 Highest tax rate increases (to 45%) brought forward to 2010/11 and increased to 50%. • Withdrawal of higher rate pension relief for income tax where earnings exceed £150,000 (down to 20% where income exceeds £180,000) (& measures to combat high contributions before effective date of April 2011).

  14. KEY FEATURES • Public spending growth (1.1% pa) to reduce to 0.7% by 2013/14 (worse than opposition 2005 manifesto pledges (BBC)). • £750,000 strategic investment fund (£250,000 for low carbon investments) • Help for recovery of UK oil/gas reserves (+ 2bn barrels). • Savings disregard for pension credit increased from £6,000 to £10,000.

  15. KEY FEATURES • £600m fund for stalled housing developments. • Public spending efficiency savings - £156m identified. • 2011 - £80,000 company car cap abolished. • VAT @ 15% to 01.01.10 remaining the case. • Car scrappage scheme - £2,000 discount on trade in of a car > 10 years old (until March 2010).

  16. Pre Budget Report ~ Misc. • New Rates of Air Passenger Duty

  17. Air Passenger Duty ~ 2008/09

  18. Air Passenger Duty ~ Future

  19. Pre Budget Report ~ Misc. • Trading loss carry back extension: • Corporation tax ~ CAP ending in period 24.11.08 to 23.11.09 (extended to 23.11.10) • Income tax ~ Tax year 2008/09 (extended to 2009/10) • After one year carry back, a further £50,000 may be carried back a further 2 years. • Two amounts of £50,000 available but not an aggregate of £100,000 if available amount in either is less than £50,000.

  20. Pre Budget Report ~ Misc. • Corporation tax ~ Loan relationship rules • Connected companies ~ write off not allowed in debtor company, and no taxable amount in creditor company. • Previously certain trade balance write offs could give an unequal result, taxing creditor company. • Late interest rules largely abolished.

  21. Pre Budget Report ~ Misc. Pension Schemes:- • Lifetime Allowance rises to £1.8m in 2010/11. • Annual Allowance rises to £255,000 in 2010/11. • Frozen up to and including 2015/16.

  22. Pre Budget Report ~ Misc. • HMRC Business Payment Support Service ~ arrange affordable tax payment schedule. • 150% Corporation tax relief on brown-field land remediation extended to land derelict since 1.4.1998, and clearance of Japanese Knotweed. • Can’t have caused it yourself!

  23. Pre Budget Report + ~ Misc. • Up to £5,000 subsidy on acquisition of electric / hybrid cars. • £2,000 “scrappage” allowance on cars more than 10 years old. • Extension on relief from tax on foreign dividends. • VAT reduced from 17.5% to 15% between 1.12.08 and 1.1.10. • VAT retail scheme t/o limit up from £100m to £130m.

  24. Pre Budget Report + ~ Misc. • All rates of NIC up 1/2 % from 6th April 2011. • From 6th April 2010 income tax at 50% on income over £150,000 (42.5% on dividends increases effective rate on net from 25% to 36.11%). • Personal allowance reduced on incomes over £100,000 from 6th April 2010 @ £1 per £2 of income, down to nil (small band with 60% effective rate!)

  25. Pre Budget Report + ~ Misc. • Current regime (from April 2008!): • No AIA (100% FYA on cars with low emissions {110g/km}). • WDA 20% (was 25%) • WDA restricted to £3,000 on cars costing over £15,000 (was £12,000), and all cars costing over £12,000 in own pool, else main pool (unless private use ~ non companies)

  26. Pre Budget Report + ~ Misc. • New regime (from April 2009): • Cars emitting > 160g/km ~ 10% pool • Other cars ~ 20% pool • Cars with private use ~ single asset pool • Motorcycles ~ main pool for AIA. • From 1st/6th April 2009 ~ FYA @ 40% on main rate pool expenditure.

  27. Pre Budget Report + ~ Misc. • Leased Cars • Currently disallow:- P x (OMV – 12000)/2 x OMV • P is premium, excluding maintenance. • New regime is a flat rate disallowance of 15% x P if car emits > 160g/km. • Old regime continues for old leases.

  28. Pre Budget Report ~ Reminder. • ITSA de minimis for payments on account increased from £500 to £1,000 total IT liability. • Operative after 6.4.09 (i.e. for 09/10) and first POAs affected will be on 31st January 2010 and 31st July 2010. • Announced PBR 2008

  29. INCOME TAX • 10% band abolished from 2008/09 • Basic rate reduced from 22% to 20% from 2008/09. • Higher rate threshold : £37,400 for 2009/10 (£34,800 in 2008/09). • From 2010/11 incomes over £100,000, personal allowance reduced by £1 for each £2 income, until nil. • From 2010/11, income > £150,000 ~ tax rate 50%.

  30. Income Tax Bands ~ 2010/11

  31. INCOME TAX ~ PENSIONS • From 2010/11 higher rate relief to be withdrawn. • Begins @ income > £150,000. • Relief tapered down to 20% by incomes @ £180,000. • Anti forestalling provisions operative immediately.

  32. INCOME TAX ~ MISC • Tax credits on foreign dividends available to individuals with immediate effect (10% + holdings). • Non residents entitled to allowances only by merit of being commonwealth citizens to lose entitlement from 06.04.10.

  33. INCOME TAX ~ MISC • Anti avoidance to prevent avoiding living accommodation BIK on rented property by substituting rent with upfront “premium” and peppercorn rent. • Enhanced 100% CA’s (income & corporation tax) extended to uninterruptible power supplies, air to water heat pumps and close control air conditioning systems.

  34. INCOME TAX 2008/09 2009/10 • Personal Allowance 6035 6475 • Personal Allowance(old) 9030 9490 • Personal Allowance(v.old) 9180 9640 • Married Couple’s All’ce* 0 0 • “ “ “ (old) 6625 6965 • *Rate of Relief 10% 10%

  35. INCOME TAX 2008/09 2009/10 • Income £50,000 £50,000 • Personal Allowance (6,035) (6,475) • Taxable 43,965 43,525 • Chargeable @ :- - 20% 34,800 37,400 - 40% 9,165 6,125 • Tax Due £10,626 £9,930

  36. INCOME TAX • 2008/09 Taxable Income:- • 10% band abolished (unless non saving income • below £2,320 in which case can get £2,320 for savings) • First £34,800 taxable @ 20% • Balance taxable @ 40%

  37. INCOME TAX • 2009/10 Taxable Income:- • 10% band abolished (unless non saving income • below £2,440 in which case can get £2,440 for savings) • First £37,400 taxable @ 20% • Balance taxable @ 40%

  38. INCOME TAX • Child tax credits et al (commenced 2003). • Abatement of credits based on 39% income over prescribed limit. • Payment of pension contribution can reduce abatement of credit entitlement by 39% x £Contribution. • Personal tax relief at (up to) 40%. • That’s 79% relief altogether.

  39. INCOME TAX • Childcare: In-house nursery provision is tax/NIC exempt. • From 6.04.05 this has applied to direct provision of external care &/or vouchers where contract is with employer. • Need registered carer, available to all staff. • £55 per week limit from 6.4.06. No details of changes from 6.4.09.

  40. NATIONAL INSURANCE (EMPLOYEES) • 2008/09 • - 1st £105 per week 0% • - next £665 per week 11% • - thereafter 1% • 2009/10 • - 1st £110 per week 0% • - next £734 per week 11% • - thereafter 1%

  41. NATIONAL INSURANCE (EMPLOYERS) (CONT) • 2008/09 - charged at 12.8% on “earnings” above £105 per week and nearly all taxable benefits • 2009/10 - charged at 12.8% on “earnings” above £110 per week and on nearly all taxable benefits

  42. National Insurances - Planning

  43. National Insurance Other Classes

  44. Mr Average ~ Employee

  45. Mr Average ~ Self Employed

  46. Corporation Tax • New rates as previously announced. • 22% small companies rate applies from 1.4.10 ~ deferred a year in PBR.

  47. CORPORATION TAX - RATES

  48. CORPORATION TAX - RATES

  49. CORPORATION TAX • Foreign dividends to be largely exempted from corporation tax, along with other distributions (from 01.07.09) • Large companies ~ restriction in finance costs in group situations. • Group relief ~ inadvertent interference with group control conditions via issuance of certain types of preference shares to external investors not to prohibit availability of group relief.

  50. CORPORATION TAX • 100% FYA on low emission cars (now 110g/km) extended to 31.3.2013

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