Budget 2011 for businesses (Ltd, VAT)

Budget 2011 presented by the Chancellor, George Osborne, contains several announcements having a significant effect on individuals and businesses. The most important changes happened to:

1. Income Tax Personal Allowance and Income Tax Basic Rate Limit
2. Annual and lifetime allowance for tax relief on pension savings
3. Capital Gains Tax Annual Exempt Amount (AEA) and Entrepreneurs’ Relief
4. Corporation Tax Small Profits and Main Rates
5. VAT registration and deregistration thresholds

The Government’s announcements on Corporation Tax and VAT are of the utmost importance for businesses. In particular, the following changes are significant:

• Corporation Tax: Corporation Tax is an income tax imposed on the limited company’s taxable profits made in the UK and abroad.- The Small Profits Rate has been reduced to 20% from the Financial Year commencing 1.4.2011. The Small Profits Rate of Corporation Tax is applied for company’s profits up to £300,000.- The Main Rate of Corporation Tax will be reduced from 26% for the Financial Year of 2011 to 25% for the Financial Year of 2012. The Corporation Main Tax Rate is applied for company’s profits above £1,500,000. The Government has already reduced the main rate for the Financial Year 2011 from 28% to 26%.

• Capital Allowances: The expenditure on business assets such as machinery, tools, office equipment, building-relating investments as well as qualifying research and development is subject to so called capital allowance. This is a kind of tax relief to reduce the value of business assets by writing off their purchase cost against the taxable income of a business throughout a specific number of years. According to Budget 2011 businesses that sell or scrap their short-life assets before the “cut-off” point are entitled to the total allowances given over the period of ownership.
• Value Added Tax (VAT) Value Added Tax (VAT) is a consumption tax on most goods and services in the UK or imported from other EU and non-EU countries.- VAT Registration threshold: If a business exceeds a specific taxable turnover threshold, it must register with HMRC for VAT. The VAT registration threshold for the tax year 2011-12 has been increased from £70,000 to £73,000. This means that a company must register for VAT if its turnover of the previous 12 calendar months was higher than £73,000.- VAT deregistration threshold: If a VAT registered business exceeds a specific taxable turnover threshold, it may apply for deregistration from VAT. The VAT deregistration threshold for the tax year 2011-12 has been increased from £68,000 to £71,000.
• Excise Duties are taxes charged on certain goods such as alcohol or tobacco products sold in the UK or imported to the UK. The retail price for these goods must include excise duty.- Alcohol Duty: The main alcohol duty rates confirmed by Budget 2011 are set out in the table below:

– Tobacco Duty: The main tobacco duty rates confirmed by Budget 2011 are set out in the table below:

Capital Business Links Ltd offers overall service for limited companies, including all aspects of taxation. Find out more about our services by contacting us on the telephone number 0208 567 99 44 or at our contact form.