The Chancellor announced the government’s plans to continue to consult on corporation tax reform.
The recent consultation document:
Special arrangements have been in place under the CIS since 1972. The rules were revised in 1999 but the current scheme retains the structure of its predecessor, relying on paper vouchers to evidence payments between contractors and sub-contractors. The government is seeking views on a series of new proposals to reform the CIS. The main proposals are:
Legislation has been introduced to stop businesses from exploiting the rules on capital allowances (for example on industrial buildings). The legislation takes effect immediately. The legislation is aimed at businesses that have entered into artificial transactions which depress the market value of certain assets on a sale. The effect of the device has been to accelerate the remaining capital allowances relating to those assets so that the business may obtain a tax advantage. The device will no longer be effective.
Currently employers are not guaranteed a corporation tax deduction for their employee share schemes. To encourage employee share ownership, a statutory corporation tax deduction will be introduced for the cost of providing shares for employee share schemes. The new rules will apply to accounting periods starting on or after 1 January 2003.
The statutory deduction will be available to schemes where the employees are subject to UK tax on award of shares or would be but for the fact that the shares are obtained under a Revenue approved scheme or Enterprise Management Incentives.
EBTs are vehicles through which remuneration and other benefits are indirectly provided by employers to employees. The Revenue have been concerned for some time that in some cases EBTs have been used to avoid tax and national insurance. New legislation, which will apply to all contributions made to EBTs from 27 November, will only give the employer a corporation tax deduction for contributions when a payment is made out of the EBT in a form that gives rise to a liability to income tax and national insurance.
The legislation will not adversely affect companies contributing to trusts that qualify for relief under the proposed statutory corporation tax deduction for employee share schemes.
The Pre-Budget Report and ‘Enterprise Britain: a modern approach to meeting the enterprise challenge’ published by the Treasury and the Small Business Service set out a series of measures to:
R&D tax credits were introduced in 2000 and further extended in 2002. The Chancellor announced a review of the credits to examine how they can be strengthened to the benefit of the British economy.
There has been exemption from stamp duty since 30 November 2001 on all property transactions up to £150,000 if the property is in a ‘disadvantaged area’. Almost 2,000 such areas have been announced and details can be found on http://www.inlandrevenue.gov.uk/so/disadvantaged.htm
The Chancellor confirmed in his Pre-Budget Report that stamp duty for all transactions in non-residential property within the designated areas will be abolished. This will take effect once EU state aid approval is received.
In addition, a new regime for stamp duty on land and buildings will be introduced late in 2003.