A summary of the Chancellor's statement
from Wednesday 17 April 2002

Gordon Brown delivered the first Budget of this Labour government’s second parliamentary term on Wednesday 17 April 2002. Unusually, the Budget took place after the start of the new tax year. This certainly gave plenty of time for intense speculation as to its contents!

The wait is over and all has now been revealed. The Chancellor made it clear that his task was to address the three challenges of enterprise, family prosperity for all and renewing public services. We have produced this summary with you in mind and outlined the issues that may affect you, your family and your business. To help you make some sense of what was said we have also included informative comment.

Please contact us for advice or to discuss any action you may need to take.
Main budget proposals Contents

Income tax

Employment issues

Corporate & business tax

Capital taxes

Excise & other duties

Value added tax & miscellaneous matters

Starting rate of corporation tax cut from 10% to 0%. Small companies rate of corporation tax cut from 20% to 19%

  • National Insurance increases announced to take effect in 2003
  • Business assets taper relief for capital gains improved
  • Introduction of VAT flat rate scheme for smaller businesses
  • Inheritance tax threshold increased to £250,000
  • Measures to prevent avoidance of stamp duty
  • Improvements to the charitable giving Gift Aid Scheme
  • New Child Tax Credit rates for 2003 announced

At a glance


Some of the tax changes taking effect this April were the subject of earlier announcements. Here is a reminder of some of them.

    • New company car regime
    • Car fuel scale charge increases
    • Mileage allowance payments
    • The ‘baby credit’
    • Intellectual property and goodwill
    • R&D expenditure
    • Substantial shareholding exemption
Income Tax

Tax rates

Despite a certain amount of speculation to the contrary, there has been no change to the income tax rates. The starting rate remains at 10%, the basic rate at 22% and the higher rate at 40%. As usual the bands have been extended so that for 2002/03, the 10% starting rate applies to the first £1,920 of taxable income and the basic rate applies to taxable income from £1,921 up to the new higher rate threshold of £29,900.
Comment

Remember that the system is not quite as simple as this because savings income falling into the basic rate band is taxed at only 20% rather than 22%. Dividend income falling into the basic rate band is charged at only 10% and at 32.5% on a higher rate taxpayer.

Allowances

The personal allowance has risen to £4,615 for 2002/03 in line with inflation. For those aged 65-74 the allowance is £6,100 and £6,370 for those aged at least 75. The income limit for age related allowances has been increased to £17,900.

The income tax personal allowance for those aged under 65 and the NICs thresholds will be frozen at their 2002/03 levels in 2003/04, except for the pensioners’ age-related allowances which will be increased by more than inflation.

The married couple’s allowance, on which tax relief is given at only 10%, remains available only to couples where at least one spouse was aged 65 or over before 6 April 2000.

Children’s tax credit

The Children’s Tax Credit was introduced in April 2001. It takes the form of an allowance on which tax relief is given at 10% and can be claimed by families who have one or more qualifying children resident with them. For 2002/03 the amount is £529 ie £5,290 at 10%. The credit is gradually withdrawn for higher rate taxpayers.

Comment

Just as the Children’s Tax Credit was introduced, the government announced that it would be short-lived. It will be abolished in 2003 and replaced with a new ‘Child Tax Credit’ – see below.

From April 2002, for one year only, the maximum Children’s Tax Credit is increased by a further £5,200 for families with a child born in 2002/03.
Comment

The ‘baby credit’ is designed to recognise the costs of having a baby. For some families the credit is worth a total of £1,049 in 2002/03.

New Child Tax Credit

The government intends to introduce a new Child Tax Credit in 2003. The credit (for families with children) will draw together in one tax credit all of the existing income-related strands of support for families with children - the child elements in Income Support, income-based Jobseeker’s Allowance, Working Families’ Tax Credit and Disabled Person’s Tax Credit, as well as the Children’s Tax Credit.

The new Child Tax Credit will be made up of a number of elements, recognising the differing needs of families. The full credit will be paid for all families with income less than £13,000. Thereafter there will be a gradual withdrawal.
Comment

Many families with children, whether or not the adults in the family are in work, will be eligible for the new Child Tax Credit.

New Working Tax Credit

A Working Tax Credit will be introduced in 2003 to reward the work of people on low incomes, whether or not they have children. It will build upon the elements of adult support in the Working Families’ Tax Credit and Disabled Person’s Tax Credit and the New Deal 50+ Employment Credit. It will also provide working families with assistance to meet the costs of childcare.

Pensions

The maximum earnings for which tax allowable pension contributions can be made is increased from £95,400 to £97,200 from 6 April 2002.

Pensioners
  • As first announced in last year’s Pre-Budget Report, the government plans to introduce a Pension Credit from October 2003 to reward pensioners with low and modest incomes.
  • The winter fuel payment, which was increased to £200 in 2000, will be maintained at this level for the remainder of this parliament.
  • The government guarantees that the annual basic state pension will rise by £100 for a single pensioner and £160 for pensioner couples in 2003/04. Subsequently the basic state pension will rise each year by 2.5% or the increase in the September Retail Price Index, whichever is higher.

Charitable giving

Where a donation to charity is made by an individual under the Gift Aid Scheme, basic rate tax relief is given at the time of payment and higher rate relief claimed on the self assessment return. New measures will:

  • enable the taxpayer to relate the higher rate relief back to the previous tax year
  • allow the taxpayer to nominate a charity to receive all or part of a resulting tax repayment.
Comment

This change comes after the minimum limit for donations under the Gift Aid Scheme was abolished in 2000 and is part of the
government’s drive in encouraging donations to charity.


A new income tax relief is introduced from 6 April 2002 when an individual donates land and buildings to charity.

Other measures

  • The government has announced that they will be undertaking a review of the complex rules on residence and domicile.
  • Investors’ tax reliefs in Venture Capital Trusts (VCTs) will be safeguarded if VCTs merge or a VCT is wound up.
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Employment Issues

National Insurance Contributions (NICs)

In 2002/03, the starting point for employees’ NICs continues to be aligned with that for employers and the income tax personal allowance, so that no NICs are payable until earnings exceed £89 per week.
Comment

Although employees’ NICs only become payable once earnings exceed £89 per week, any earnings between £75 and £89 per week in 2002/03 protect an entitlement to basic state retirement benefits without incurring a liability to NIC. Consider whether you are making full use of this rule.

The rate of employers’ NIC was reduced from 11.9% to 11.8% with effect from 6 April 2002. This is at least partly a quid pro quo for the introduction of the Aggregates Levy.

Changes for 2003/04

The Chancellor announced a 1% increase in the rate of NICs for employees, employers and the self-employed from 6 April 2003. The government intend these increases to fund improvements in the NHS. The details are shown in the table below.
Comment

These changes, coupled with the freezing of the personal allowance for 2003/04 at £4,615, will lead to large increases in business and personal NIC liabilities.

National insurance rates
Employees’ threshold
 2002/03 2003/04
£89 pw £89 pw
Employers’ threshold
 £89 pw £89 pw
Employees’ Class 1 rate on earnings between threshold and upper earnings limit
 10% 11%
Employees’ Class 1 rate on earnings above upper earnings limit
 - 1%
Employers’ Class 1 rate on earnings above threshold
 11.8% 12.8%
Lower profit limit (for self-employed Class 4 contribution)
 £4,615 £4,615
Class 4 rate on profits between lower and upper profits limit
 7% 8%
Class 4 rate on profits above upper profits limit - 1%

Company cars and fuel

The much heralded and well documented changes to the company car regime have been in force since 6 April 2002. The starting point for the new system is still the car’s list price. However the percentage of list price chargeable to tax is now dependent on the car’s carbon dioxide emissions measured in grams per kilometre. The charge builds from 15% for low emission cars to a maximum charge of 35%. Discounts apply to certain environmentally friendly cars and special rules apply to cars registered before 1 January 1998.
Comment

Under the new regime, the age of the car and the level of business mileage are no longer relevant in determining the tax charge. Consequently it may be appropriate to review your position if you have not already done so. Those likely to be hardest hit are those who drive a high number of business miles in an older company car. In 2001/02 their tax charge may have been as low as 11.25% of the list price. In 2002/03 it could be as high as 35%.

As expected, for the fifth year in a row, the tax charges relating to the provision of free fuel for private use in a company car have been substantially increased. The increases are designed to discourage the provision of free fuel.
Comment

The government has announced that, from 6 April 2003, the percentage figure used in computing the company car benefit will also be used to calculate the fuel scale charge. It will be applied to a set figure, yet to be announced, each year.

Mileage allowance payments

The authorised mileage rates for employees who use their own cars (or indeed vans, motorcycles or bicycles!) for business travel have been changed with effect from 6 April 2002. The old system of rates geared to the car’s engine size has been replaced by a single rate for all cars and vans.

Comment

For 2002/03, the new single, statutory, tax-free rate for cars and vans is 40p per mile for the first 10,000 miles and 25p per mile thereafter. Employees can no longer claim tax relief on actual business motoring costs. The rates are not necessarily designed to bear much relationship to true motoring costs but to encourage employees to use smaller, more fuel efficient vehicles for business trips. Perhaps a bicycle is the answer. The tax-free rate is 20p per mile and there is no reduction once business miles exceed 10,000!

Works buses

The exemption that allows employees to travel from home to work, tax and NIC free, on local bus services subsidised by employers has been extended. From 6 April 2002, where an employer pays such a subsidy, and employees travel free or at a discounted rate, there is no tax or NIC due.

Payroll services

In the summer of 2001, the government announced a review of the provision of payroll services for new and small businesses. The review concluded that greater use of information technology is the key to enabling businesses to deal with the complexity of payroll obligations.

The government now proposes:
  • employers with 250 or more employees will be required to file electronically from 2004/05

  • employers with 50 or more employees will be required to file electronically from 2005/06
  • employers with fewer than 50 employees will have to file electronically from 2009/10, with financial incentives from 2004/05 to encourage earlier adoption of the new regime.
Comment

Whilst the review is to be welcomed it does seem a little harsh to suggest that someone employing say a nanny or a full-time carer will need to file end of year returns electronically. This may mean that they need to invest in a computer and software or pay someone else to do the payroll work.
Corporate and Business Tax

Corporation tax rates

The rates of corporation tax from 1 April 2002 will be as follows:
  • companies with taxable profits of up to £10,000 will now pay no corporation tax
  • companies with taxable profits between £10,000 and £50,000 continue to benefit from a lower average rate
  • the small companies’ rate has been reduced to 19% on profits between £50,000 and £300,000
  • the main rate of corporation tax will remain at 30% until 30 March 2004
  • the profits limits may be reduced for a company which is part of a group or has associated companies.

Enhanced capital allowances

Further enhanced capital allowances are planned. These will build on the provisions introduced last year which give 100% allowances for expenditure on energy saving plant and machinery. The new proposals will extend allowances in three areas:

  • energy saving technologies (over and above the ones already introduced)
  • improving water use and water quality
  • cleaner vehicles and fuels.

Cleaner cars are those registered on or after 17 April 2002 with CO2 of not more than 120gm/km or which are electrically propelled. In addition 100% first year allowances will be given on the expenditure incurred on plant and machinery for refuelling vehicles with natural gas or hydrogen.
Comment

There are very few cars that have this low a level of CO2 or use alternative fuels. Therefore these measures can be taken as an encouragement for the fuel and motor manufacturing industry to develop more environmentally friendly technologies.

Intellectual property, goodwill and other intangible assets

From 1 April 2002, a new regime has been introduced to give relief to companies for the costs of intellectual property, goodwill and other intangible assets. The regime:
  • provides relief for the costs of acquiring intangible assets where no relief has previously been available
  • ensures that relief for future acquisitions will be given on a consistent basis, following, as far as possible, the deductions reflected in companies' accounts.

The tax relief will, in most cases, be based on the amortisation reflected in the accounts. There is also provision for annual tax allowances at 4% of cost in the case of indefinite or longer-life assets.

Intangible assets that companies acquired prior to 1 April 2002 will generally not qualify for relief under the new regime. Disposals of intangible assets will be taxed as income rather than as a capital profit under the new regime. However a rollover relief will apply where disposal proceeds are reinvested in new intangible assets within the regime.

This is a separate rollover regime to the existing capital gains rollover relief. It will therefore no longer be possible to roll over a gain on goodwill by reinvestment in a capital asset outside the regime, for example, freehold property.
Comment

The aim of the reform is to align the taxation of such assets with the accountancy treatment as far as possible, to simplify the system and provide relief for a wider range of business expenses.

Research and development (R&D) expenditure

In 2000, an R&D tax credit was introduced for small and medium-sized companies. This enabled them either to claim tax relief on 150% of the R&D cost or, for loss making companies to surrender the relief for a cash payment from the Inland Revenue.

A new R&D tax credit, effective for expenditure on or after 1 April 2002, applies to large companies spending at least £25,000 a year on R&D. The effect of the new credit will be to give tax relief on 125% of the R&D expenditure. The credit will reduce the cash cost of R&D by 7.5% for a company paying corporation tax at 30%.

Substantial shareholdings

When a company disposes of a shareholding in another company, corporation tax is generally payable on the capital gain. Some time ago, the government announced its intention to allow such gains to be brought within the rollover relief regime provided certain conditions were met. In other words the relief would have allowed the gains to be deferred by rolling them over against the cost of replacement assets for example other shareholdings and land and buildings. However, following consultation, the government has decided to exempt gains arising when a company disposes of a substantial shareholding in another company.

More specifically, for disposals on or after 1 April 2002, gains are exempt, and losses not allowable, where:
  • a trading company or a member of a trading group disposes of shares in a trading company or the holding company of a trading group (or sub-group)
  • a substantial shareholding (10% or more) has been held throughout a 12 month period ending not more than 12 months before the disposal.
Comment

The aim of this legislation is to ensure that important business decisions on corporate restructuring and reinvestment are made for commercial, rather than tax, reasons.

Originally, it was suggested that ‘substantial’ should mean shareholdings of 20% or more. The reduction to 10% is in response to representations by business.

Note that the exemption only applies to corporate shareholdings and will not therefore benefit individuals.

In addition to introducing the above exemption, the government has also amended the way the so-called ‘degrouping charge’ operates when a company leaves a group. This will facilitate commercial restructuring and reinvestment.

Charitable giving
  • A new corporation tax relief is introduced from 1 April 2002. This will apply to the donation of land and buildings to a charity by a company.
  • Companies manufacturing, distributing or selling medicines and related supplies will not suffer a tax charge on the market value of stock donated for humanitarian purposes.

Further reforms of the corporate tax system

A consultation document will be issued in the summer. This will:

  • consider the case for bringing taxable gains of companies into an income regime, including an approach for land and buildings that might mirror that for intellectual property
  • examine the merits of rationalising the schedular system
  • review the scope for greater alignment between the treatment of investment and trading companies.

Community amateur sports clubs (CASCs)

Qualifying sports clubs will from 1 April 2002 not have to pay corporation tax on:

  • interest

  • any trading income over £15,000
  • income from property up to £10,000
  • capital gains on disposals of assets.

From 2002/03 donors to CASCs will be able to give using the following reliefs:

  • Gift Aid for individuals
  • inheritance tax relief on gifts
  • gifts of assets to be treated on a no gain/no loss basis for capital gains for both individuals and businesses
  • gifts of trading stock and plant and machinery by businesses.

To qualify a club must be:

  • open to the whole community
  • organised on an amateur basis
  • provide facilities for, and promote participation in, eligible sports.
Comment

The Chancellor announced his intention in the last Budget to help community sports clubs. These changes should boost income to sports clubs and at the same time give them ‘parity with charity’.

Construction Industry Scheme

The government has introduced changes to the Construction Industry Scheme effective from 6 April 2002. Companies that do not have certificates receive payment net of 18% tax when acting as a subcontractor. This tax can then be set against corporation tax.

The changes allow the tax to be set off against PAYE, NIC and CIS liabilities of the company.
Comment

This change may improve the cash flow of such companies because PAYE, NIC and CIS liabilities are paid during the year as opposed to corporation tax which is generally paid nine months after the end of the company’s accounting period.

Other

Other changes have been introduced to amend and clarify certain business measures. These include:
  • amendments to ensure a business cannot take a tax deduction for a payment which would be a criminal payment if made in the UK
  • rules to ensure that if, as a result of a change in either law or practice, a company changes the basis on which its profits are computed, all income is taxed only once and all expenses are relieved only once
  • reforms and anti-avoidance legislation relating to corporate debt, financial instruments and foreign exchange gains and losses
  • companies paying royalties abroad will be able to pay amounts gross or at a reduced rate of tax deduction in certain circumstances.
Capital Taxes

Capital gains tax (CGT): annual exemption

The annual exemption for 2002/03 is £7,700. For most trusts the exempt limit rises to £3,850.

CGT rates of tax

Capital gains continue to be treated as the top slice of income. For 2002/03, rates continue to be aligned with those applying to savings income. Tapered gains are charged at 10% where gains plus total income do not exceed £1,920; 20% between £1,921 and £29,900; and 40% on any balance.

CGT taper relief

CGT taper relief was introduced in 1998. It reduces the CGT charge the longer an asset has been held prior to disposal. Different rates of taper apply to business and non-business assets. Maximum taper relief reduces the effective CGT rates for a higher rate taxpayer to 10% for business assets and 24% for non-business assets.

Business assets include assets used for trading purposes as well as certain shareholdings.

The definition of business assets was extended with effect from 6 April 2000 to include:
  • all shareholdings in unquoted trading companies (including AIM)
  • all shareholdings held by employees (both full and part-time) in quoted trading companies
  • shareholdings in quoted trading companies where the holder is not an employee but can exercise at least 5% of the voting rights.

Many businesses are treated as trading but investment companies and property investment companies are not. Companies that are mainly trading but have more than an insubstantial amount of non-trading activities are also treated as non-trading.

Business assets taper is also available to employees of certain non-trading companies with shares in their employer company. The change took effect on 6 April 2000. However, employees can only benefit so long as they do not (together with their relatives and other ‘connected persons’) own more than 10% of the company.
Comment

Gordon Brown has now made the CGT regime so attractive for holders of business assets that some are asking why he hasn’t simply done away with CGT on business assets altogether.

From 6 April 2002, the effective rate of CGT on business assets falls to a maximum of 10% after just two years rather than the previous four. The proposals are summarised below:
Proposed new rates (disposals from 6 April 2002)
Whole years asset held Percentage of gain charged to tax Effective rate of tax for higher rate taxpayer (%)
Less than 1 100 40
1 50 20
2 or more 25 10
Previous rates
Less than 1 100 40
1 87.5 35
2 75 30
3 50 20
4 or more 25 10

Example

Gordon acquired a business asset in June 2000. Under the previous regime he would have had to wait until June 2004 to be eligible for maximum 75% taper on any gain. Under the new proposals, Gordon is eligible for 75% taper from June 2002.

Comment

Clearly these changes make an already generous regime more generous still. The gap between rates of taper relief on business and non-business assets has therefore been widened further. The government said that they were considering whether changes to the regime for non-business assets should also be made to improve incentives for investment and help businesses attract finance. No changes have been announced therefore maximum taper relief on non-business assets will generally continue to require ten years of (post-1998) ownership.

CGT incorporation relief

When an individual incorporates a business CGT incorporation relief is given where appropriate. It is proposed that, for transfers of a business on or after 6 April 2002, a person will be able to elect that incorporation relief does not apply. Electing to opt out of the relief means that CGT will be chargeable on the disposal of the assets to the company. This could be advantageous for those who dispose of the shares in the new company less than two years after it was formed.

CGT simplification

A number of measures are proposed to simplify the CGT regime. These include changes to the rules on use of losses as well as clarification of certain definitions.

Inheritance tax (IHT) threshold

The IHT nil rate band is extended, above the amount required by inflation, from £242,000 to £250,000. The new figure applies from 6 April 2002.
Comment

The increase, whilst in excess of inflation, will not help the increasing number of individuals who, particularly as a result of rising house values, find themselves potentially within the IHT net.

Powers over trusts

Capital gains can be deferred whenever an asset is gifted so long as either:
  • the asset is a ‘business’ asset or
  • broadly the asset is gifted to a special type of trust known as a ‘discretionary’ trust.

A recent Court of Appeal case involved a complex scheme whereby a very significant capital gain was successfully deferred through the use of a discretionary trust. Any inheritance tax liability that would normally have arisen on the creation of a discretionary trust was avoided by the use of what is known as a ‘revocable’ trust and the creation of ‘powers over trusts’. From 17 April 2002, such powers will be disregarded for IHT purposes.

Excise and Other Duties

Alcoholic drinks

Duty on spirits, beer and wine has been frozen. Spirit-based ‘coolers’, the duty on which has, until now, been set at a concessionary low rate will be brought into line with spirits. The duty on cider will be cut by 2%. These changes come into effect from midnight on 27 April 2002.

Duty on beer produced by small brewers will be cut in half from 1 June 2002.

Tobacco products

Tobacco duties are increased in line with inflation with effect from 6pm on Budget day.

Haulage industry

The government will introduce a distance-based road-user charge for lorries from 2005 or 2006. This will make foreign lorry operators pay their fair share towards the cost of using UK roads.

Bingo stakes

Following the successful reforms of betting and pools tax, the government will consider the abolition of tax on bingo stakes and replace it with a gross profits tax on bingo companies.

Fuel duties

Rates of duty on petrol and diesel are frozen. From the date of Royal Assent, a new rate for biodiesel of 25.82p per litre will be introduced. Further incentives to encourage the production and use of ‘green’ fuel will be introduced in the future.

Vehicle Excise Duty (VED)

There are several changes to VED:
  • VED rates on all vehicles are frozen
  • from May 2002, a new VED band for low CO2 emission cars registered from March 2001 will be introduced. This will reduce VED rates for those cars
  • from March 2003, new low CO2 emission vans will qualify for a reduced VED rate of £105
  • from May 2002, there will be new rates for motorcycle VED based on engine size.
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Value Added Tax and Miscellaneous Matters

VAT thresholds

The VAT registration limits increase, in line with inflation, with effect from 25 April 2002 as follows:
  • the threshold for compulsory registration is £55,000
  • the threshold for voluntary deregistration is £53,000.

Flat rate scheme

Following consultation, the government has decided to introduce a new optional flat rate scheme for businesses with a tax exclusive annual taxable turnover of up to £100,000. Traders who join the scheme can avoid having to account internally for VAT on all the individual goods they buy and sell. Instead they can simply calculate their net VAT liability as a percentage of their total turnover (including their exempt income). The flat rate percentage will depend upon the trade sector into which a business falls for the purposes of the scheme and will be between 5% and 14.5%. The new scheme will come into effect on 25 April 2002.

VAT annual accounting scheme

This scheme allows businesses with a turnover of up to £600,000 a year to file their VAT returns annually rather than quarterly, improving their cash flow and reducing their compliance costs.

The scheme is to be amended with effect from 25 April 2002 to:

  • simplify the payment patterns for participants in the scheme
  • remove the existing 12 month qualifying period for businesses with annual turnover of up to £100,000.

VAT: other measures

  • The arrangements for VAT bad debt relief will be simplified, removing the requirement for the supplier business to write to their customer notifying them that they are claiming relief.
  • The reduced 5% VAT rate introduced for certain residential conversions and renovations in 2001 will be extended with effect from 1 June 2002.
  • Businesses with turnover of up to £150,000 will no longer suffer automatic VAT penalties but instead are to be offered help and advice when they are late with their VAT payments.
  • A targeted scheme will be introduced next year to allow approved importers to delay accounting for VAT.

Stamp duty on UK land and buildings

A package of measures has been announced to tackle current avoidance of stamp duty on high-value property deals. In particular, provisions will be introduced to discourage the use of companies set up to avoid stamp duty on UK property.

In addition, legislation will be introduced next year to reform stamp duty in order to update the framework of the tax and support the introduction of paperless electronic conveyancing.
Comment

The anti-avoidance measures introduced were widely expected. However, the predicted increases in stamp duty rates have not materialised.

Stamp duty: goodwill

Transfers of goodwill will be exempt from stamp duty. This measure puts goodwill on the same footing as intellectual property. It will apply to all documents executed on or after 23 April 2002.

Stamp duty: disadvantaged areas

With effect from 30 November 2001, there has been exemption from stamp duty on all property sales up to £150,000 if the property is in a ‘disadvantaged area’. Almost 2,000 disadvantaged areas have been announced and details can be found on www.inlandrevenue.gov.uk/so

A further change, expected to take effect once state aid approval is obtained, will be the abolition of stamp duty for all transactions in non-residential property within the designated disadvantaged areas. As might be expected there will be a detailed and technical definition of ‘non-residential property’.
Comment

These measures are designed to make investment in these areas more attractive and hence promote regeneration of towns and inner cities.

Landfill tax

Landfill tax is increased from £12 per tonne to £13 per tonne with effect from 1 April 2002.

Community Investment Tax Credit (CITC)

The proposed CITC is designed to encourage private investment by enterprises in under-invested communities. A tax credit worth 25% of the investment, spread evenly over five years, will be available to the individuals or companies providing capital to intermediaries called Community Development Finance Institutions (CDFIs). CDFIs will provide capital and technical assistance to enterprises excluded from mainstream finance. To increase access and draw maximum benefit from the tax credit, there will be no overall cap on the amount of tax credits that can be awarded in any year.

Aggregates levy

As announced in the 2001 Budget, a levy of £1.60 per tonne applies from 1 April 2002 to sand, gravel or crushed rock extracted in the UK or imported into the UK. For aggregates used in processed products in Northern Ireland, the levy will be phased in over five years.

This summary is published for the information of clients. It provides only an overview of the main proposals announced by the Chancellor of the Exchequer in his Budget Statement, and no action should be taken without seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.