2011 Budget: key business tax announcements
Our summary of the key business tax announcements in the 23 March 2011 Budget.
70 leading tax practitioners told us what they thought of the Budget. We have published an article incorporating their views: 2011 Budget: Keep calm and carry on.
Key tax measures in the Budget
The key tax announcements in the 23 March "fiscally neutral" Budget were:
A further 1% cut in corporation tax from April 2011. From April 2011, the rate will be 26% and it will drop 1% each year to 23% from April 2014.
Increase in the rate of income tax relief under the Enterprise Investment Scheme from 20% to 30% from April 2011.
CGT entrepreneurs' relief lifetime limit doubled to £10 million from 6 April 2011.
References to "Overview" are to the HMRC/HM Treasury Overview of Tax Legislation and Rates published on 23 March 2011; references to "TIIN" are to HMRC/HM Treasury Tax Information and Impact Notes published on 23 March 2011.
Anti-avoidance strategy published
In December 2010, as part of its new approach to tax policy making, the government launched its new "strategic" approach to tackling tax avoidance and promised, at Budget 2011, to set out a programme of work to review areas that have been subject to repeated avoidance attempts (see, Legal update, Tax policy making: response to consultation and draft framework and protocol: Response to June 2010 consultation (www.practicallaw.com/5-504-2219)).
The joint HMRC and HM Treasury report on tackling tax avoidance published on Budget day sets out HMRC's new anti-avoidance strategy and details the first two areas of tax legislation that are to be subject to a complete review.
HMRC's new anti-avoidance strategy involves four legislative strands:
Reducing the cash flow benefit of using tax avoidance schemes. The will involve listing the relevant schemes in regulations and users of those schemes either paying the disputed tax before the dispute is resolved or facing an additional charge for late payment of tax if the dispute is resolved in HMRC's favour. A consultation document will be published in May 2011 with a view to draft legislation being published in the Finance Bill 2012.
Rolling programme of review of high risk areas. There will be a rolling programme of work to identify the areas of greatest risk where policy reform is not already providing the opportunity for review. The first two areas identified for review are income tax losses and unauthorised unit trusts. Consultation documents on these will be published in the summer 2011. An announcement on progress will be made at Budget 2012 and draft legislation published later in the autumn with a view to introducing legislation in the Finance Bill 2013. At Budget 2012, the government will announce the next areas identified for review.
Considering a general anti-avoidance rule (for details, see Legal update, General anti-avoidance rule study programme established (www.practicallaw.com/5-504-1432)).
Implementing targeted tax measures to address specific schemes.
Capital allowances: anti-avoidance legislation
The government has announced that it will consult on the reform of the anti-avoidance provisions contained in Chapter 17 of Part 2 of the Capital Allowances Act 2001 (CAA 2001), applicable to the obtaining of plant and machinery allowances.
The announcement refers specifically to the proposed reform of the "sole or main benefit" test. It is therefore thought that the amendments will affect section 215 of CAA 2001 in particular. Further (as yet unspecified) changes will also be made to clarify the legislation and improve its effectiveness.
A consultation document is expected in May 2011, with legislation contained in the Finance Bill 2012.
DOTAS regime: further changes to hallmarks
As announced in the June 2010 Budget (see Legal update, June 2010 Budget: key business tax announcements: DOTAS regime: inheritance tax on trusts and other changes (www.practicallaw.com/5-502-5267)), the government has confirmed that it will consult on substantive changes to the descriptions of schemes ("hallmarks") that must be disclosed to HMRC under the disclosure of tax avoidance schemes regime. The changes will address known avoidance risks, primarily:
Schemes that seek to avoid income tax and NICs on employment income.
Schemes that incorporate offshore transactions to avoid corporation tax.
Artificial loss schemes.
These changes will be implemented in 2011-12. The government has also confirmed that the disclosure regime will be extended to include inheritance tax, as it applies to transfers of property into trust, with effect from 6 April 2011.
For further detail on the direct tax disclosure regime, see Practice note, Direct tax disclosure regime (www.practicallaw.com/1-107-4933).
Finance leasing: double tax deduction
The government has confirmed that the Finance Bill 2011 will contain legislation to counter arrangements designed to obtain a double tax deduction for lessees of plant and machinery under long-funding finance leases. The arrangements enabled lessees to claim tax relief twice on amounts paid in relation to guarantees.
The measure was announced on 9 March 2011 and will apply to arrangements entered into, or payments made, on or after that date. Draft legislation was also published on 9 March 2011. (See further Legal update, Immediate end to finance leasing tax avoidance scheme (www.practicallaw.com/9-505-0716).)
For more information on the calculation of capital allowances under finance leases, see Practice note, Equipment leasing: tax: Lessee's tax position (www.practicallaw.com/7-107-3737).
Functional currency of investment companies: revised draft legislation
On 9 December 2010, the government published draft legislation aimed at countering avoidance involving changes in the functional currency of companies with investment business. The legislation also allows such companies to elect, in certain circumstances and prospectively, for a different functional currency for tax purposes than the currency used in their accounts (see Legal update, Functional currency of investment companies: draft Finance Bill 2011 clauses (www.practicallaw.com/5-504-2120)).
The government has announced that, following consultation, the draft legislation will be amended to make it clear that the ability to elect for a functional currency is limited to companies whose main purpose is to make investments. The draft legislation will also make provision for newly incorporated companies.
The government has confirmed that the Finance Bill 2011 will contain measures to prevent tax losses arising through the asymmetrical tax treatment of loans and derivatives (group mismatches).
Draft legislation effecting this measure was published on 6 December 2010 (see Legal update, Draft legislation on group mismatches (www.practicallaw.com/2-504-1382)). As part of the 2011 Budget, the government announced that the following amendments would be made to the draft legislation:
The legislation will clarify that only UK-to-UK transactions will be affected by the rules.
The rules will only apply if:
there is "no practical likelihood" that the scheme will fail to give rise to a relevant tax advantage of at least £2 million, assuming that the scheme is carried out and nothing prevents a relevant tax advantage arising; or
(one of) the main purpose(s) of any group member in entering into the scheme is to obtain the chance of securing such an advantage and the scheme is more likely to produce a tax advantage than a tax disadvantage.
This measure is to have effect for group mismatch schemes to which a company is party on or after the date of Royal Assent to the Finance Bill 2011.
Loan relationships and derivatives: derecognition
The government has confirmed that the Finance Bill 2011 will include provisions to block schemes that take advantage of the loan relationships and derivative contracts rules on amounts not fully recognised for accounting purposes.
The previous draft of this legislation was published on 6 December 2010 (see Legal update, Revised draft legislation on derecognition of loan relationships and derivatives (www.practicallaw.com/2-504-1481)). As part of the 2011 Budget, the government stated that the legislation would be further amended to:
Deny debits on creditor loan relationship and derivative contracts.
Clarify that the legislation only applies if a company remains party to a loan relationship or derivative contract.
Require a company to bring in any difference between the accounts carrying value and the fair value of a derivative as a credit for the period in which tax avoidance arrangements are entered into. This provision will have effect from 23 March 2011.
Sale of lessors
The government has announced measures, having immediate effect, designed to prevent abuse of the sale of lessor companies legislation in Part 9 of the Corporation Tax Act 2010.
The sale of lessor companies legislation seeks to prevent profitable groups from extracting (for example, by way of group relief) the benefit of capital allowances on plant and machinery owned by group companies that carry on leasing activities and then selling the leasing companies to loss-making groups when the leasing companies begin to make taxable profits as capital allowances amortise away. Under the legislation, a charge for deferred profits arises immediately before the sale, with a matching relief applying immediately after the sale. In 2009, an option to elect for alternative treatment was introduced in response to the economic climate.
As a result of disclosures made to HMRC, changes to this legislation will be included in the Finance Bill 2011 to:
Ensure that, in deciding whether the rules apply, all plant and machinery that is leased out (by the lessor or one of its associates) in the preceding 12 months is taken into account (not, as present, only that qualifying for capital allowances).
Withdraw the option to elect for alternative treatment.
Ensure that if the legislation imposes a tax charge by reference to the market value of an asset, this is the higher of the value ignoring the lease and the value taking account of the present value of the lease (ascribed value).
Specify that, if a valid election for alternative treatment has been made and the lessor company disposes of an asset, the ascribed value is substituted for the disposal value for capital allowances purposes if the former is higher.
Clarify that the charge to tax cannot be reduced by transferring plant and machinery carrying unrelieved expenditure into the lessor company on the date of sale unless the transfer is by an associated company. This will include expenditure incurred on the day of sale in relation to plant and machinery acquired by the lessor company before then.
Extend the anti-avoidance provisions that allow balance sheet adjustments to be ignored for the purposes of the legislation if they have been manipulated for tax purposes. The extended provisions will apply to amounts such as asset values, disposal values, income and amounts used to calculate such figures.
These changes, which will have effect from 23 March 2011, apply equally to partnerships carrying on leasing business.
Treaties: measures to combat avoidance
The government has announced that it will be drawing up measures to combat the avoidance of UK tax using double taxation treaties (www.practicallaw.com/8-107-6151) (DTTs). The measures will target both UK residents (individuals, trustees and companies) who use tax avoidance schemes and overseas residents who claim benefits to which they are not entitled under the UK's DTTs. The draft legislation will be released for comment in the autumn of 2011 and will be included in the Finance Bill 2012.
Bank levy rates increased
The government has confirmed that the bank levy will be introduced in the Finance Bill 2011. For details of the bank levy including rates for 2011, see Practice note, Bank levy (www.practicallaw.com/7-503-7740).
However, the Chancellor announced as part of the 2011 Budget that the rates of the bank levy (see Practice note, Bank levy: Rate of levy (www.practicallaw.com/7-503-7740)) from 1 January 2012 will be higher than previously announced. The rates from that date will be:
0.078% for short-term liabilities.
0.039% for long-term equity and liabilities.
This will obviously be disappointing news for banks. It is intended to provide funds for other, more taxpayer-friendly measures, but it remains to be seen whether this will deter banks from establishing themselves (or continuing to be established) in the UK. The 2011 Budget report also states that 200 banks have now adopted the Code of Practice on Taxation for Banks (see Legal update, 2009 Pre-Budget Report: key business tax announcements: Code of Practice on Taxation for Banks (www.practicallaw.com/4-500-9404)), including the top 15 banks operating in the UK.
Capital allowances: short life assets
The government has announced that legislation will be introduced in the Finance Bill 2011 to extend the period over which expenditure on plant or machinery can be treated as short life assets (SLAs).
Businesses incurring expenditure on certain items of plant and machinery may make an election to remove an asset from the general pool and include it in a single asset pool in order to write off the cost over the period of ownership. Currently, if an elected asset has not been sold or scrapped by the fourth anniversary of the end of the chargeable period in which the expenditure on the asset was incurred, then the asset is transferred to the general pool. An election will be beneficial if the asset depreciates faster than the rate at which capital allowances are given, and is sold before the cut-off date. For further detail on SLAs, see Practice note, Capital allowances on property transactions: Short life assets (SLAs) (www.practicallaw.com/6-362-6968).
The proposed measure will increase the cut-off period for future expenditure to eight years from the end of the chargeable period in which the expenditure is incurred. This is a positive change, extending the benefit of the SLA regime to businesses acquiring assets with a longer useful life. The measure will have effect for expenditure incurred:
On or after 1 April 2011 for businesses within the charge to corporation tax.
On or after 6 April 2011 for businesses within the charge to income tax.
CFCs: full reform
Reform of the UK's controlled foreign companies (www.practicallaw.com/7-107-6340) (CFC) legislation has long been on the agenda (see Practice note, Foreign profits of companies: tax reform: Controlled foreign companies (www.practicallaw.com/8-369-8105).) Following on from measures announced in November 2010 (see Legal update, CFC interim improvements proposals (corporate tax reform) (www.practicallaw.com/6-504-0663)), the government has confirmed in the 2011 Budget that it will be consulting in May 2011 on draft legislation to be published in the autumn and to be included in the Finance Bill 2012.
The new regime will bring within the charge to UK corporation tax only the proportion of the profits of controlled foreign companies that have been artificially diverted elsewhere. There will be a partial exemption for finance companies, resulting in a charge of only one-quarter of the full rate of UK corporation tax (equivalent to a minimum debt-to-equity ratio of 1:3). By 2014, this will equate to an effective rate of tax of 5.75%, the main corporation tax rate having been reduced to 23%, taking account of the extra 1% reduction also announced in the 2011 Budget, see Corporation tax rates further reduced from 2011-12. (This is an improvement on the government's indication in November 2010 that it would consider the case for a minimum debt-to-equity ratio of 1:2. Under this formula, if the finance company were fully equity funded, 66.6% per cent of the CFC’s finance income would be excluded from the CFC charge. When the UK main rate of corporation tax reduced to 24% in 2014 (as was then anticipated), the finance income would be taxed at an effective rate of 8%, that is, 33.4% of its finance income would attract the CFC charge at the corporation tax rate of 24%).
CFCs: interim reform
As announced in the June 2010 Budget (see Legal update, June 2010 Budget: key business tax announcements: CFCs and foreign profits (www.practicallaw.com/5-502-5267)), the Finance Bill 2011 will contain legislation improving (on an interim basis) the controlled foreign company (CFC) rules before full reform in 2012. The government published for consultation the draft Finance Bill 2011 legislation on 9 December 2010 (see Legal update, Interim CFC reform: draft Finance Bill 2011 clauses (www.practicallaw.com/5-504-1880)). The government states that, following consultation, it has changed the new exemptions to make them more accessible.
The Finance Bill 2011 will amend the CFC rules to:
Exempt certain intra-group trading transactions where there is little connection with the UK and, therefore, it is unlikely that UK profits have been artificially diverted.
Exempt CFCs with a main business of intellectual property (IP) exploitation where the IP and the CFC have minimal connection with the UK.
Introduce a statutory exemption which runs for three years for foreign subsidiaries that, as a result of a reorganisation or change to UK ownership, come within the scope of the CFC regime. Unlike the December 2010 proposal, this will include those that are not currently CFCs but have previously been so, making the exemption available to previously UK-headed groups if they return to the UK.
Introduce an alternative to the current de minimis exemption, which will increase the limit to £200,000 profits per year (the December 2010 proposal stated that the increased limit would apply to large groups), and replace the need to calculate chargeable tax profits with an accounts-based measure.
Extend the transitional rules for superior and non-local holding companies until July 2012.
The interim changes will have effect for accounting periods beginning on or after 1 January 2011 (not 1 April 2011, as set out in the December 2010 draft legislation). However, the extension to the transitional rules for holding companies will be treated as always having had effect.
Corporate chargeable gains degrouping rules
Simplification of degrouping charges
The government has been consulting for several months on draft legislation intended to simplify the operation of degrouping charges when a company leaves a group owning an asset that has been transferred to it by another group company within the period of six years ending on the date on which the company leaves the group (see Practice note, Groups of companies: tax: Leaving the chargeable gains group (www.practicallaw.com/6-107-3728)). Following an initial consultation that ended in December 2010, amended draft legislation was published (see Legal update, Responses to consultation on simplification of chargeable gains for corporate groups (www.practicallaw.com/3-504-2296).)
In the 2011 Budget it was confirmed that amendments to the legislation, aimed at simplifying the application of the charge, will be included in the Finance Bill 2011, including in relation to companies leaving a group in consequence of a share for share exchange. A revised draft has not, as yet, been published.
Anti-avoidance measures introduced with immediate effect
Anti-avoidance measures, intended to stop the exploitation of a perceived loophole in the current legislation, will apply to any company leaving a group on or after 23 March 2011. Draft legislation, which was released without prior consultation alongside other budget announcements, amends section 179 of TCGA 1992 by adding a further occasion on which a degrouping charge can arise. It will come into play only where advantage has been taken of the exemption that applies when, in relation to an asset that has been transferred between group companies, the transferor and transferee companies leave a group together. If there is a connection between the group that the companies have left and the group that they join, a charge will arise if there subsequently ceases to be a connection between the two groups.
Corporation tax rates further reduced from 2011-12
Legislation will be introduced in the Finance Bill 2011 to reduce the main rate of corporation tax (CT) to 26% for the financial year commencing 1 April 2011 and then to 25% for the year commencing 1 April 2012. The main rate applies to companies and groups whose annual profits exceed £1.5 million. These changes represent an additional 1% reduction on top of the four annual reductions announced in the June Budget 2010 (see Legal update, June 2010 Budget: key business tax announcements: Corporation tax rates reduced from 2011-12 (www.practicallaw.com/5-502-5267)), which will take the main rate of CT to 24% for the year beginning April 2013 and 23% for the year beginning April 2014. The CT rate for companies with ring-fenced profits from oil extraction in the UK and UK continental shelf (ring-fenced profits) will remain at 30%.
As announced in the June 2010 Budget (see Legal update, June 2010 Budget: key business tax announcements: Corporation tax rates reduced from 2011-12 (www.practicallaw.com/5-502-5267)), the Finance Bill 2011 will also contain legislation reducing the small companies rate of CT to 20% (from 21%) for the year commencing 1 April 2011. This will apply to companies and groups whose annual profits do not exceed £300,000.
Debt cap: further amendments
The government has announced further possible changes to the debt cap rules (as to which, see Practice note, Limits on tax deductions for interest: the debt cap (www.practicallaw.com/7-386-4223)). As part of the 2011 Budget, the government stated that ongoing consultation on the rules had identified practical issues with their application that need to be addressed. The government gives the example of the "de minimis provisions", although it is not clear to what this relates; for example, it could be a company's "net debt amount" (see Practice note, Limits on tax deductions for interest: the debt cap: UK net debt (www.practicallaw.com/7-386-4223)), "net financing income" or "net financing deductions" (see Practice note, Limits on tax deductions for interest: the debt cap: Tested expense amount (www.practicallaw.com/7-386-4223) and Tested income amount (www.practicallaw.com/7-386-4223)), or even the "gateway test" (see Practice note, Limits on tax deductions for interest: the debt cap: Gateway test (www.practicallaw.com/7-386-4223)).
The government is to hold a consultation in June 2011, followed by draft legislation in autumn 2011 with a view to including the legislation in the Finance Bill 2012. The stated aim of this exercise is to allow businesses to apply the debt cap more easily. However, this is the latest in a long line of amendments made to the debt cap rules since their introduction in 2009, demonstrating the complexity of those rules and, potentially, adding yet further complexity (depending on the nature of any changes).
Distribution rules: clarification
The government is to clarify certain aspects of the rules on the taxation of distributions (as to which, see generally Practice note, Dividends: tax (www.practicallaw.com/1-366-8036)).
The Finance (No.3) Act 2010 introduced rules relating to the tax treatment of distributions of a capital nature (see Practice note, Dividends: tax: Is a dividend (or other distribution) capital or revenue? (www.practicallaw.com/1-366-8036)). During the passage of that Act, the government stated that HMRC would set up a joint working group with representatives of the tax profession to improve understanding of the distributions legislation more generally and improve guidance in this area (see Legal update, Finance (No.3) Bill 2010: Public Bill Committee (19 October) (www.practicallaw.com/8-503-6679)).
As part of the 2011 Budget, the government commented that, during consultation on the Finance (No.3) Act 2010 provisions, areas of uncertainty were identified in other parts of the distributions legislation (although these have not yet been specified). The government has announced that a joint working group has been formed with interested tax professionals and will assist HMRC in identifying and resolving points of uncertainty this financial year. These issues will be addressed by publishing comprehensive guidance or enacting legislation in the Finance Bill 2012. If legislation is required, the government intends to consult on draft clauses in the autumn.
Enterprise Zones: enhanced capital allowances
The government has announced the creation of 21 enterprise zones across the UK. Ten zones, which are in Local Enterprise Partnership (LEP) areas, have been announced and a competitive process has been launched to establish ten more. London will also have an enterprise zone and it is able to choose its site. The government will consider introducing enhanced capital allowances in the enterprise zones in the LEP areas, where there is a strong focus on high value manufacturing. It will also consider the use of tax incremental finance, a method of borrowing funds to pay for infrastructure, to support the long-term viability of the zones.
Foreign branch tax exemption
The 2011 Budget announced that the new corporation tax regime for overseas branches will have effect for accounting periods beginning on or after Royal Assent to the Finance Bill 2011. As stated in the June 2010 Budget (see Legal update, June 2010 Budget: key business tax announcements: CFCs and foreign profits (www.practicallaw.com/5-502-5267)), the Finance Bill 2011 will include an irrevocable, opt-in exemption from corporation tax (CT) for the profits of foreign branches of UK resident companies. The government published the draft Finance Bill 2011 clauses for consultation on 9 December 2010 (see Legal update, Foreign branch exemption: draft Finance Bill 2011 clauses (www.practicallaw.com/3-504-1824)).
Following the consultation, a number of changes have also been made to the draft legislation, including capital allowances provisions, allowing some life insurance businesses to benefit from the exemption, ensuring that the transitional rule is workable and ensuring that the anti-diversion rules are more targeted and proportionate.
More generally, the Finance Bill 2011 legislation will:
Where there is a treaty with a non-discrimination article, direct that the exempt income be the UK measure of the profits of the branch that are taxable by the other state in accordance with the treaty. Otherwise, the measure will be based on the OECD Model Tax Convention.
Include in exempt profits any capital gains attributable to the foreign branch and taxable under the treaty.
Contain restrictions to prevent profits that would otherwise remain within the charge to CT from being diverted to an exempt branch.
Deny relief for foreign branch losses.
Contain a transitional rule to ensure that any outstanding loss relief which has been claimed in the last six years is recaptured by the Exchequer (except in the case of very large losses, which will remain in the scope of the transitional rule indefinitely).
Not extend the exemption to international air transport and shipping, to the extent that these activities may not be taxed by the foreign jurisdiction due to a specific treaty restriction.
Investment trust companies: modernisation
The Finance Bill 2011 will contain legislation providing for a new definition of an investment trust company (ITC) and for powers to make regulations setting out the rules of the regime. Draft regulations will be published for consultation during April 2011.
This follows the launch of a consultation on the modernisation of the tax rules for ITCs on 27 July 2010 (see Legal update, Consultation on tax treatment of investment trusts (www.practicallaw.com/9-502-9094)) and the release for comment of draft legislation on 9 December 2010 (see Legal update, Investment trusts modernisation: draft Finance Bill 2011 clauses and response to consultation (www.practicallaw.com/3-504-2531)). The aim was to provide greater certainty for ITCs and their investors and to ensure that the rules are capable of facilitating modern investment practice and a wider range of investment strategies. No further comments were received on, and only minor technical changes have been made to, the consultation draft.
Leasing and tonnage tax
The government has confirmed that the Finance Bill 2011 will include legislation addressing writing down allowances for ships leased to tonnage tax companies. (In relation to tonnage tax, see generally Practice note, Tonnage tax (www.practicallaw.com/1-200-9362).)
Under this measure, for expenditure incurred on or after 1 January 2011, a lessor will be able to claim writing down allowances at the applicable rate (most likely to be 10%, rather than the current rate of 20%, as ordinarily ships would be assessed as long-life assets) on the first £40 million of expenditure, and at 10% on the second £40 million of expenditure. This is intended to align the treatment of the first £40 million of expenditure with that for ships in general.
Draft legislation effecting this measure was published on 9 December 2010 (see Legal update, Tax policy updates and draft Finance Bill 2011 legislation: Corporate tax (www.practicallaw.com/7-504-1803)). As part of the 2011 Budget, the government stated that this legislation will be extended to expenditure incurred on after 1 January 2011 under an agreement preceding that date.
New bank capital instruments
HMRC is to hold an informal consultation in April 2011 on the tax treatment of new capital instruments that banks may create as a result of Basel III (see PLC Finance, Practice note, Basel III: an overview (www.practicallaw.com/7-504-1959)), certain features of which make such treatment currently uncertain. No further details have been provided as part of the 2011 Budget.
Offshore funds amendments
The government has confirmed that it is currently consulting on amendments to the Offshore Funds (Tax) Regulations 2009 (SI 2009/3001).
Draft amendment regulations were published in December 2010 and February 2011 (see Legal update, Draft legislation on offshore funds equalisation arrangements (www.practicallaw.com/2-504-3183) and Legal update, Draft Offshore Funds (Tax) (Amendment) Regulations 2011 published (www.practicallaw.com/4-504-9645)). It is intended that the amendment regulations will cater for equalisation arrangements, allow offshore funds to access the trading and investment white list and effect changes to the genuine diversity of ownership rules.
For further detail on the taxation of offshore funds, see Practice note, Offshore funds: tax (www.practicallaw.com/8-382-5472).
Reducing exposure to foreign exchange movements
The rules on taxing loan relationships and derivatives in accordance with economic reality, rather than in accordance with their accounting treatment, are to be expanded.
Under the Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2004 (SI 2004/3256) (disregard regulations), in certain circumstances, companies may be taxed in relation to financial instruments hedging assets or liabilities in accordance with the economic reality rather than (as is usually the case) in accordance with the accounting treatment. This can be useful if, for example, a derivative is accounted for on a fair value basis (giving rise to credits and debits for foreign exchange movements) but the hedged item is not. (See further Practice note, Derivatives: tax: The Disregard Regulations (www.practicallaw.com/6-204-7955).)
As part of the 2011 Budget, it was proposed that the disregard regulations be expanded to cover foreign exchange gains and losses of companies:
Issuing foreign currency preference share capital to raise foreign currency finance. This will allow companies to ignore exchange gains and losses on financial instruments that reduce the company’s foreign exchange exposure in relation to its own foreign currency preference shares if the shares are issued to non-connected entities and are accounted for as liabilities. Wider matching will also be allowed in limited circumstances through an elective clearance procedure. These measures will apply for accounting periods beginning on or after 1 July 2011.
Investing directly in foreign currency partnerships or in foreign currency assets through a partnership. This will allow a company to defer exchange gains and losses on its financial instruments that reduce the company’s foreign exchange exposure in relation to the underlying foreign currency assets in the partnership until either:
the partnership disposes of the assets; or
the company disposes of its interest in the partnership.
This measure will apply for accounting periods beginning on or after 1 January 2012.
Agreeing to sell foreign currency shares and receive the proceeds at some future date. This will allow a company to match the full disposal proceeds and defer the resulting exchange gains and losses until the company receives the proceeds. This measure will apply for accounting periods beginning on or after 1 January 2012.
The government is to hold an informal consultation on these proposals in May 2011 before producing the enacting secondary legislation for comment "in the first half of 2011". These changes, while adding to the complexity of this already difficult area of the UK tax code, should make the UK tax system more attractive to businesses.
Securitisation: further remedy for adverse effects of amended "specified investment" definition
The Finance Bill 2011 is to include legislation providing a further remedy for the potential adverse tax and regulatory consequences for some types of debt securities that resulted from amendments made to article 77 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) by the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2010 (SI 2010/86) (see Legal update, Securitisation: adverse effects of amended "specified investment" definition to be remedied (www.practicallaw.com/2-504-0434)).
The 2010 Order had the inadvertent consequences that certain debt securities might have been unable to qualify for the loan capital exemption from stamp duty (see Practice note, Bond issues: tax: Exempt loan capital (www.practicallaw.com/9-202-2637)) and that issuers of such securities might have been excluded from the UK securitisation tax regime (see Practice note, Securitisation: tax: The SPV: tax treatment as a securitisation company (www.practicallaw.com/6-107-4445)).
These unintended consequences have been already been remedied under an Order having effect from 16 February 2011 (see Legal update, Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2011 published (www.practicallaw.com/1-504-6097)). The Finance Bill 2011 will provide that this remedying Order will be treated for all tax purposes as having effect from 24 February 2010 (when the issue first arose). However, taxpayers will be able to opt out of this remedying treatment (so as to avoid any disadvantage of relying on the 2010 Order).
Sharia-compliant variable loan arrangements
The government will make regulations introducing direct tax rules for sharia-compliant variable loan arrangements and derivatives in 2011, following formal consultation with industry. (In relation to the UK direct tax treatment of sharia-compliant transactions, see Practice note, Sharia-compliant transactions: tax (www.practicallaw.com/4-201-9755).)
No further details of this measure were provided as part of the 2011 Budget. However, this does signify that the government is continuing to seek to tax sharia-compliant transactions in the same way as their "conventional" counterparts.
Tax transparent fund: consultation
Legislation will be introduced in the Finance Bill 2012 to establish a tax transparent fund vehicle. The government will consult on this measure in June 2011.
This new vehicle is intended to support the competitiveness of the UK fund industry following European regulatory changes in the Undertakings for Collective Investment in Transferable Securities (www.practicallaw.com/5-107-7430) (UCITS IV) directive (Directive 2009/65/EC). This was proposed as a consultation topic as part of the March 2010 Budget and, again, in the June 2010 Budget (see Legal update, June 2010 Budget: key business tax announcements: Investment funds tax rules (www.practicallaw.com/5-502-5267)).
Taxation of index-linked gilt-edged securities
Legislation will be introduced in the Finance Bill 2011 to tax index-linked gilt-edged securities whose return is not based on the retail prices index (RPI) in the same way as gilts whose return is based on the RPI. This will mean that companies investing in non-RPI gilts will benefit from a tax-free inflationary uplift in the return.
The government has confirmed that legislation will be introduced in the Finance Bill 2011 that gives HMRC new powers to collect data from a broad range of third parties (for the draft legislation, see Legal update, HMRC's data gathering powers: draft Finance Bill 2011 legislation (www.practicallaw.com/1-504-2339). One change to the draft legislation is announced, namely that a new safeguard has been added, which ensures that a data-handler need only provide data if it is in his possession or power. The government has also confirmed that a response to the consultation will be published alongside the Finance Bill on 31 March 2011.
Dishonest tax agents: consultation
The government will consult on its previous proposals (including draft legislation) allowing HMRC, with appropriate safeguards, to obtain the working papers of dishonest tax agents, penalise them and publish their details on HMRC's website (see Legal update, Draft legislation on deliberate wrongdoing by tax agents published (www.practicallaw.com/6-501-4697)). The government will continue to informally consult stakeholders and will issue a consultation document and revised draft legislation in July 2011.
Mutual Assistance Recovery Directive: implementation
Legislation will be introduced in the Finance Bill 2011 to implement in UK law the Mutual Assistance Recovery Directive. The Directive expands the situations in which a member state may obtain assistance from another member state in recovering taxes owed to the first member state. For further details, see Legal update, Increased powers for cross-border tax recovery (www.practicallaw.com/7-501-7501). The Directive must be implemented by 31 December 2011. The legislation transposing the Directive will come into force on 1 January 2012.
Protocol for announcing immediate changes to tax law
The government has published the final text of its protocol on tax announcements outside the Budget. A number of changes have been made to the draft protocol that was published for consultation on 9 December 2010 (see, Legal update, Tax policy making: response to consultation and draft framework and protocol (www.practicallaw.com/5-504-2219)). The changes:
Make clear that retrospective changes that take effect from a date earlier than the announcement will be wholly exceptional.
Ensure that announcements will be accompanied by a detailed technical explanation of the change and timings.
Confirm that announcements will usually take the form of a Written Ministerial Statement to Parliament before 2pm.
Ensure that changes are confined to addressing the tax risk that has been identified.
Confirm that a change in HMRC's interpretation of legislation will not, unless prompted by a Court ruling, be considered "significant new information" (one of the grounds for making an announcement outside the Budget).
Confirm that consideration will be given to consulting on the announcement informally and in confidence before the announcement is made.
It is noted in the joint HMRC and HM Treasury report on tackling tax avoidance, that where draft clauses for anti-avoidance measures are published for consultation, the protocol is not intended to prevent changes from taking effect from the date the draft clauses are published.
Some previous anti-avoidance measures have been introduced to the employment-related securities tax legislation (Part 7 of the Income Tax (Earnings and Pensions) Act 2003) with retrospective effect from 2 December 2004. This was the date specified by the previous government from which employment income anti-avoidance measures might take retrospective effect (see Paymaster General's statement on Finance Bill 2005 measures regarding anti-avoidance legislation in relation to employment taxes (www.practicallaw.com/5-500-7193)). Given the pledge in the draft protocol that "retrospective changes that take effect from a date earlier than the announcement will be wholly exceptional", it now seems unlikely that future anti-avoidance measures will be given retrospective effect back to 2 December 2004 in reliance on this earlier ministerial statement.
(See Overview, para 3.60: Tax Policy Making (draft protocol on announcements outside fiscal events), page 30 and Tackling tax avoidance, page 17: Protocol on unscheduled announcement of changes to tax law.)
Simplification of regulatory penalties
The government will consult on the range of penalties that HMRC can impose for failure to comply with regulatory obligations across the tax and duty regimes (see Legal update, HMRC consults on simplification of regulatory penalties (www.practicallaw.com/1-504-6747)). It will publish a consultation document to consider options for simplification in June 2011.
Tax consultation framework
The government has announced that it will shortly publish the final version of its Tax Consultation Framework together with a summary of responses to the consultation on the draft framework. For details of the consultation, see Legal update, Tax policy making: response to consultation and draft framework and protocol (www.practicallaw.com/5-504-2219).
Time to pay to continue
The government has announced that HMRC will continue to operate the "time to pay" scheme for viable businesses that are experiencing temporary financial difficulties. For further details about the "time to pay" scheme, see Checklist, Tax-related measures to consider in a downturn: checklist: Consider time to pay arrangements (www.practicallaw.com/8-385-5794).
Employment and pensions
Approved mileage allowance: increase in higher rate from 2011/12
The 2011 Budget confirms that the higher rate mileage allowance for employees using their own cars for business mileage will be increased to 45p per mile from 6 April 2011. The new rate will also apply to claims for mileage allowance relief where the employer pays less than the maximum permitted amount per mile. A statutory instrument was laid before Parliament on 23 March 2011 to effect this change.
Company car fuel benefit charges increased from 2011/12 and VAT fuel scale charges revalorised
The 2011 Budget confirms that fuel benefit charges will increase from 6 April 2011. A statutory instrument was laid before Parliament on 23 March 2011 to effect this change. A statutory instrument to revalorise the VAT scale charges will also be laid on the 23 March 2011 and will take effect from the 1 May 2011.
Company car tax rates reduced from 2013/14
Legislation will be introduced in Finance Bill 2011 to reduce by one percent the company car tax rates for all vehicles with carbon emissions between 95g and 220g. The reduced rates will come into force on 6 April 2013. The rates for zero emissions and low emissions cars will remain the same.
Consultation on merger of income tax and NICs
The government will consult on a proposed merger of income tax and National Insurance contributions (NICs).
The Chancellor explained in his budget statement that the operation of two separate systems created unnecessary costs and complexity for employers and HMRC. He did not propose to alter the contributory principle of the NICs system or to extend NICs to those over the state pension age or to other types of income currently not subject to NICs. The consultation document will be published later this year and the Chancellor anticipates that any merger would take several years to complete.
The Office of Tax Simplification (OTS) recommended that the government consider merging the income tax and NICs regimes in its March 2011 interim report on the simplification of the tax treatment of small businesses (see Legal update, Small business tax review: OTS interim report: Merging income tax and NICs (www.practicallaw.com/2-505-0946)).
Draft disguised remuneration legislation to be amended to exclude arrangements not used for avoidance
The 2011 Budget confirms that draft Part 7A of the Income Tax (Earnings and Pensions) Act 2003 will be amended to exclude certain arrangements that are not used for avoidance purposes. The draft legislation will be amended to include exclusions from the new rules for:
Group company transactions.
Deferred remuneration arrangements.
Certain types of short-term loan.
Car ownership schemes.
Employment related securities schemes.
Legacy pensions savings.
HMRC published draft legislation on 9 December 2010 (see Legal update, Draft anti-avoidance provisions to tax disguised remuneration (including EBT benefits and EFRBS) (www.practicallaw.com/3-504-1876) to tackle certain arrangements for providing benefits to employees using trusts (including employee benefit trusts) or other intermediaries in a way which sought to avoid or defer liabilities to income tax and NICs. Practitioners raised concerns that the draft legislation was very broadly drawn and could potentially catch many straightforward arrangements that had no tax avoidance purpose. In response to these concerns, HMRC published guidance on 21 February 2011 in the form of frequently asked questions (FAQs) (see Legal update, HMRC publishes FAQs on draft anti-avoidance legislation on disguised remuneration (www.practicallaw.com/5-504-8928)). The FAQs confirmed that HMRC intended to amend the legislation to create safe harbours for certain types of arrangement.
The revised draft legislation is not yet available, and HMRC notes that it will be published in the Finance Bill 2011 on 31 March 2011. The legislation applies from 6 April 2011 (although anti-forestalling provisions apply to certain transactions between 9 December 2010 and 5 April 2011).
For analysis of all the main announcements relating to share schemes and incentives, tax and non-tax, see PLC Share Schemes & Incentives: 2011 Budget e-mail (www.practicallaw.com/6-505-3759).
From 6 April 2011, higher rate or additional rate taxpayers who are new joiners to certain employer-supported childcare schemes will have the value of income tax and NICs relief on these benefits limited to the relief available for basic rate taxpayers. The affected types of employer-supported childcare are schemes:
To pay for qualifying childcare contracted by the employee or employer.
To provide vouchers to pay for qualifying childcare.
will have the value of income tax and NICs relief on these benefits limited to the relief available for basic rate taxpayers. Existing scheme participants and new joiners who are basic rate taxpayers (and tax relief for workplace nurseries) will not be affected. This change has been expected since December 2009 and the 2011 Budget introduces only a minor technical change to the proposals. For more information, see Legal updates, April 2011 changes to employer-supported childcare (www.practicallaw.com/7-501-5371) and Guidance on changes to employer-supported childcare (www.practicallaw.com/3-503-7841).
Indexation for NICs
From 2012-13, the consumer prices index (CPI) will replace the retail prices index (RPI) as the default for indexation of the following features of the National Insurance contributions (NICs) system:
Class 1 lower earnings limit and primary threshold.
Class 2 small earnings exception.
Class 4 lower profits limit.
Rates of Class 2 and 3.
However, the NICs secondary threshold will continue to rise by the equivalent of RPI until 2015-16.
IR35: response to OTS review
The government has responded to the OTS' proposals for reforming IR35 (www.practicallaw.com/9-200-3356). Unsurprisingly, the proposal to suspend IR35 with the intention of abolishing it has been rejected. Instead, the government will retain IR35 but seek to achieve simplification by:
Providing greater pre-transaction certainty, including a dedicated helpline staffed by specialists.
Publishing guidance on arrangements that HMRC view as outside the scope of IR35.
Restricting reviews to high risk cases and ensuring those reviews are carried out by specialist teams.
Establishing an IR35 forum to monitor HMRC's approach.
The OTS considered retention with simplification a viable short term measure, provided the government committed to the integration of income tax and NICs. The government has announced a consultation on this issue (see Consultation on merger of income tax and NICs).
For a summary of the OTS' IR35 proposals, see Legal update, Small business tax review: OTS interim report: IR35 (www.practicallaw.com/2-505-0946) and for an explanation of IR35, see Practice note, IR35 (www.practicallaw.com/9-201-7626).
PAYE and NICs: security
Legislation will be included in Finance Bill 2011 to give HMRC power to make regulations to seek security from employers for PAYE and NICs which is at serious risk of non-payment.
The measure was originally announced in the March 2010 Budget. Draft Finance Bill clauses and regulations were published for consultation in December 2010 (see PLC Tax, Legal update, Financial security for PAYE and NICs: draft Finance Bill 2011 legislation (www.practicallaw.com/8-504-2473)). The government has confirmed that changes will be made to the draft regulations to take account of comments received during the consultation. The government will publish a consultation response document on 31 March 2011.
Compared to 2010, the budget announced by the Chancellor of the Exchequer on 23 March 2011 contained few surprises in relation to pensions. The key points of interest are that:
The DWP will shortly publish a green paper consulting on the reform of the state pension. This will include a proposal for a single-tier pension, estimated to be worth £140 a week.
Indication of the possible end of contracting out for defined benefit pension schemes, if the single-tier state pension is introduced.
The recommendations in the Hutton report have been accepted in full. Consultation proposals will be published in the autumn to set out plans to implement the proposals.
The discount rate applied to public-sector pension contributions will be set at 3 per cent above CPI for future valuations, using a methodology based on the long-term expectation of GDP growth.
A change to the tax treatment of employer asset-backed pension contributions to more accurately reflect the value of the transactions.
The effect of the proposed disguised remuneration changes will be altered to limit the impact on employers and individuals where it is possible to identify arrangements that cannot be used for tax avoidance purposes
The government is looking at ways to create an "automatic" mechanism for future rises in the State pension age to track increases in longevity.
Several changes to the pensions tax regime, such as the revised lifetime and annual allowances, have been confirmed.
For more detail on the Budget pensions announcements, see PLC Pensions, Legal update, Budget 2011: key pensions issues (www.practicallaw.com/6-505-3783).
For analysis of all the main environment-related announcements, tax and non-tax, see PLC Environment, Legal update, 2011 Budget: environmental announcements (www.practicallaw.com/8-505-3616).
Intellectual property and R&D
Film tax relief
The government has announced that it will re-notify film tax relief to the European Commission in 2011. The existing state aid approval expires in 2012.
For further detail on film tax relief, see Practice note, Film tax relief (www.practicallaw.com/7-385-1193).
As announced in the 2009 Pre-Budget Report (see Legal updates, 2009 Pre-Budget Report: key business tax announcements: Intellectual property (www.practicallaw.com/4-500-9404) and Research and development and IP tax consultation (corporate tax reform): Patent box (www.practicallaw.com/5-504-0814)), the government has confirmed that it will consult on the introduction of a lower rate of corporation tax (10%) for income from patents. It is intended that a consultation document will be published in May 2011 and that legislation will be contained in the Finance Bill 2012.
For a general discussion on the taxation of intangible property, see Practice note, Intangible property: tax (www.practicallaw.com/1-107-5008).
Research and development tax credits and vaccine research relief
Increase in rate of deduction for SMEs claiming R&D relief
The government has announced two future increases in the rate of additional deduction given to companies that are small or medium sized enterprises (SMEs) which claim research and development (R&D) relief. Both increases are subject to State aid approval. They comprise:
From 1 April 2011, an increase in the rate of additional deduction from 75% to 100%, giving a total deduction of 200%. The relevant legislation will be contained in the Finance Bill 2011.
From 1 April 2012, an increase in the rate of additional deduction from 100% to 125%, giving a total deduction of 225%. The relevant legislation will be contained in the Finance Bill 2012.
For more detail on R&D relief, see Practice note, R&D tax reliefs: practical aspects (www.practicallaw.com/9-385-2182) and Practice note, Intangible property: tax: Research and development (www.practicallaw.com/1-107-5008).
Decrease in rate of deduction for SMEs claiming vaccine research relief
To allow for the increases in rates of R&D relief described above, the government has announced a decrease in the rate of deduction given to companies that are SMEs which claim vaccine research relief. Specifically:
From 1 April 2011, a decrease in the rate of vaccine research relief available to SMEs from 40% to 20%. The relevant legislation will be contained in the Finance Bill 2011.
From 1 April 2012, SMEs will be prevented from claiming vaccine research relief at all. The relevant legislation will be contained in the Finance Bill 2012.
For further detail on vaccine research relief, see Practice note, R&D tax reliefs: practical aspects: Vaccine research relief (www.practicallaw.com/9-385-2182).
Response to consultation and simplification of rules relating to R&D relief
The government has announced that it will respond in May 2011 to the research and development consultation paper published in December 2010. For further detail on the consultation, see Legal update, Research and development and IP tax consultation (corporate tax reform) (www.practicallaw.com/5-504-0814).
The government has also announced that it intends to simplify the legislation relating to R&D tax credits in the Finance Bill 2012 by:
Abolishing the rule limiting a SME company's payable R&D tax credit to the amount of PAYE and national insurance contributions it pays.
Abolishing the £10,000 minimum expenditure condition for all companies.
Amending the rules governing the provision of relief for work done by subcontractors under the large company scheme.
The changes will have effect from 1 April 2012 and will be effected by provisions contained in the Finance Bill 2012.
Oil and gas
Increase in supplementary charge and restriction of decommissioning expenses
The Finance Bill 2011 will contain legislation, effective from 24 March 2011, to increase the supplementary charge payable on ring-fenced profits on UK and North Sea oil and gas activities from 20% to 32%. As part of the fair fuel stabiliser, if, in the future there is a sustained fall in the oil price below a set level, the government will reduce the supplementary charge towards 20% while the price remains low. The government considers that US$75 per barrel is an appropriate trigger price but will set a final level and mechanism after consulting oil and gas companies and motoring groups.
The Finance Bill 2012 will contain legislation, effective from Budget 2012, to restrict tax relief for decommissioning expenses to the 20% rate of supplementary charge. There will be no restrictions to decommissioning relief beyond this level for the lifetime of this Parliament.
The government will work with the industry with the aim of announcing further, longer-term certainty on decommissioning at Budget 2012. Recognising the importance of continuing investment in the North Sea including in marginal gas fields, the government will also consult industry on the case for introducing a new category of field that would qualify for field allowance. For background on oil taxation see Practice note, Oil taxation (www.practicallaw.com/2-200-9267).
Oil licence exclusion from intangible fixed assets rules extended
The Finance Bill 2011 will introduce legislation, effective from 23 March 2011, to ensure a deduction is not available under the corporation tax intangible fixed asset (IFA) rules (in Part 8 of the Corporation Tax Act 2009) for goodwill or any intangible asset which relates to, derives from or is connected with an oil licence or an interest in an oil licence. The government states that the legislation is needed because, despite not being intended by the IFA rules, some companies have interpreted accountancy practice so that goodwill is recognised on the acquisition of an oil licence or an interest in an oil licence.
The government has published draft legislation amending the IFA rules, which it will discuss with industry before publication of the Finance Bill 2011. The draft extends the exclusion from the IFA rules for an "oil licence or an interest in an oil licence" so that it applies to all goodwill and any intangible asset which relates to, derives from or is connected with an oil licence or an interest in an oil licence. The change applies for accounting periods beginning on or after 23 March 2011 and, in relation to those accounting periods, the amendments are treated as always having had effect. For accounting periods straddling that date, the legislation treats a new period as having started on that date.
Other minor oil and gas measures
The Finance Bill 2011 will make minor changes to the taxation of UK and North Sea oil and gas ring-fenced trades. One of these measures extends the scope of the chargeable gains ring fence reinvestment relief to allow the relief to apply, for disposals made on or after 24 March 2010, when proceeds are reinvested in exploration and development expenditure. As a result of the consultation on the draft clauses published on 9 December 2010 (as to which, see Legal update, Tax policy updates and draft Finance Bill 2011 legislation: Corporate tax: Oil and gas: minor measures (www.practicallaw.com/7-504-1803)), the legislation will now explicitly apply when proceeds are reinvested in exploration, appraisal and development expenditure.
These measures were first announced in the 2009 Pre-Budget Report and the March 2010 Budget but none of them were enacted in the Finance Act 2010. The June 2010 Budget announcement consolidated the 2009 Pre-Budget Report and March 2010 Budget announcements and was virtually identical to them (see Legal update, June 2010 Budget: key business tax announcements: Oil and gas fiscal regime: extension of certain reliefs (www.practicallaw.com/5-502-5267)).
Changes to venture capital schemes
The Chancellor announced welcome changes to the enterprise investment scheme (www.practicallaw.com/9-107-6532) (EIS) and the venture capital trust (www.practicallaw.com/0-107-7480) (VCT) scheme (all of which are subject to state aid approval):
An increase in the rate of income tax relief for EIS investment from 20% to 30% for shares issued on or after 6 April 2011. This measure will be in the Finance Bill 2011.
An increase in the EIS annual investment limit from £500,000 to £1 million for shares issued on or after 6 April 2012. This measure will be in the Finance Bill 2012.
The following changes in the qualifying conditions relating to the EIS or VCT investee company (these measures will be in the Finance Bill 2012 and will apply to shares issued on or after 6 April 2012):
An increase in the gross assets test from £7 million immediately before the share issue and £8 million immediately after to £15 million immediately before investment.
An increase in the employee limit from 50 employees to 250 employees.
An increase in the annual amount that can be invested in an individual company from £2 million to £10 million.
The government also promises to consult on further changes to the schemes, including consulting on proposals to give support to companies through EIS for seed investment.
For more information about EIS and VCTs, see Practice notes, Enterprise Investment Scheme (www.practicallaw.com/2-375-9154) and Venture Capital Trusts (www.practicallaw.com/8-375-8156).
Rollover relief restored for farmers receiving SPS payments
Entitlements to receive payments under the EU Single Payment Scheme (SPS) are treated as business assets within the charge to capital gains tax. In 2005, there was inserted into section 155 of TCGA 1992 (the section which lists the categories of asset eligible for rollover relief) a new class 7A for payment entitlements under the SPS in pursuance of Title III of Council Regulation (EC) No. 1782/2003.
In the 2011 Budget, it was recognised that as SPS payments are now received pursuant to Council Regulation (EC) No. 73/2009, they currently fall outside the rollover provisions. Legislation will be introduced in the Finance Bill 2012 to restore the position following informal consultation in June or July 2011. For more detail on business assets rollover relief, see Practice note, Tax on chargeable gains: general principles: Rollover relief on replacement of business assets (www.practicallaw.com/1-205-7008).
Small business tax review
The government has confirmed that it will be looking at improving tax administration for small businesses as part of its response to the OTS reviews and recommendations. Announcements can be expected in the 2012 Budget. For details of the OTS interim report published in March 2011, see Legal update, Small business tax review: OTS interim report (www.practicallaw.com/2-505-0946).
Other announcements of particular interest to OMBs
Confirmation of extension of the business rates exemption for small businesses for another year from 1 October 2011 and a five year discount on business rates for businesses locating in Enterprise Zones, see PLC Property, Legal update, 2011 Budget: property implications: Business rates (www.practicallaw.com/8-505-3353).
Immediate 1 penny per litre cut in fuel duty and replacement of the fuel duty escalator with a fuel duty stabiliser. Under the fuel duty stabiliser, fuel duty will increase only by inflation when oil prices are high. The 2011-12 inflation-only increase (due to take effect on 1 April 2011) is also deferred to 1 January 2012. If the oil price falls below a trigger price, fuel duty will increase by RPI plus 1 penny per litre. (See Overview, para 1.26: Fuel duty rates, page 5 and HM Treasury: 2011 Budget report, paras 1.144 to 1.151, pages 38 and 39.)
IR35 review, see IR35: response to OTS review.
Doubling of CGT entrepreneurs' relief lifetime limit, see CGT entrepreneurs' relief limit doubled.
Increase in R&D tax credit for SMEs, see Increase in rate of deduction for SMEs claiming R&D relief.
Cut in main corporation tax rate, see Corporation tax rates further reduced from 2011-12.
Increase in VAT registration and deregistration thresholds (see VAT registration and deregistration thresholds) and extension of mandatory online registration, payment and filing for VAT (see Mandatory online registration and filing).
Personal tax and investment
Capital gains tax annual exempt amounts
For the tax year 2011-12, the annual exempt amount will increase to £10,600, in line with changes in the retail price index (RPI) for the 12 months to September 2010 in accordance with section 3 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). As required by current legislation, the new exempt amount will be introduced by Treasury order.
It was announced in the Budget that legislation will be introduced in the Finance Bill 2012 to amend section 3 of TCGA 1992 to refer to the Consumer Price Index (CPI) in place of the RPI. The change will have effect for the tax year 2012-13 and, from 2013-14 onwards the increase will be automatic, with no need for a Treasury order, although the government retains the right to override the CPI index figure. The change from RPI to CPI is in line with similar indexation changes to personal allowances and national insurance contributions. For background on capital gains tax, see Practice note, Tax on chargeable gains: general principles (www.practicallaw.com/1-205-7008).
CGT entrepreneurs' relief limit doubled
The Chancellor announced in the 2011 Budget that, with effect from 6 April 2011, the lifetime limit for entrepreneurs' relief (www.practicallaw.com/4-383-5915) will increase from £5 million to £10 million. The relief is available to individuals and trustees who dispose of qualifying business assets and shares and meet certain other conditions (see Practice note, Entrepreneurs' relief (www.practicallaw.com/4-381-1491)). This means that the first £10 million of qualifying gains will be taxed at a rate of 10%, with gains in excess of that figure being taxed at the individual's marginal rate. The increased limit will apply in relation to disposals on or after 6 April 2011. To the extent that any gains realised by the taxpayer before that date exceeded the lifetime limit of entrepreneurs' relief in force at the date of disposal, CGT will remain payable at the full rate of 18%/28% on the excess, but only the £5 million of relief claimed will be set against the increased limit for future qualifying disposals. There are no other changes to entrepreneurs' relief in this Budget.
Future of the additional (50%) rate of income tax
In his budget statement, the Chancellor said he regarded the additional (50%) rate of income tax as temporary, as it would harm the economy if permanent. However, it could not be repealed while those on lower incomes were being asked to make sacrifices. He announced that HMRC would analyse how much revenue the additional rate actually raised, based on returns for the first year of its application (2010-11). Presumably he hoped to please those who want the additional rate reduced or repealed, and to convey a serious intention to repeal it, without making concrete proposals to do so. The point does not appear to be mentioned elsewhere in the 2011 Budget documents.
IHT rate reduction for charitable testators
The government will consult before summer 2011 on the detail of a new proposal to apply a reduced rate of inheritance tax (IHT) to the estates of deceased individuals who leave 10% or more of their net estate to charity.
At present, an IHT rate of 40% is applied to the balance of an individual's death estate after deduction of any available exemptions or reliefs and the nil rate band (www.practicallaw.com/1-382-5649) (see PLC Private Client, Practice note, Inheritance tax: overview: The rate of tax (www.practicallaw.com/3-383-5652)).
In a proposal aimed at stimulating charitable giving in line with the government's Big Society agenda, the IHT rate will be reduced from 40% to 36% where the deceased has left 10% or more of his net estate (after deduction of exemptions, reliefs and the nil rate band) to charity. The new rate would apply to the estates of individuals dying on or after 6 April 2012.
Inheritance tax nil rate band to increase with inflation from 2015-16?
From 2015-16, the consumer prices index (www.practicallaw.com/3-378-7892) (CPI) will be used as the "default indexation assumption" for the inheritance tax nil rate band (www.practicallaw.com/1-382-5649). It is not clear whether this means that the nil rate band will rise in line with the CPI each year, or whether the government will make a decision each year about whether it should rise by this amount. No draft legislation has been published, and the measure is listed as one of those to be included in future legislation rather than in Finance Bill 2011. We will report when more information is available.
The nil rate band has been frozen at £325,000 for the tax years 2009-10 to 2014-15 inclusive (see PLC Private Client, Practice note, Tax data: inheritance tax: Nil rate band (www.practicallaw.com/6-385-5460)).
Non-dom tax rules: consultation on reforms
The government will consult in June 2011 on the detail of three specific proposals for reform of the remittance basis (www.practicallaw.com/0-382-5800) of taxation applying to non-domiciled individuals, with the aim of implementing the reforms from April 2012. The government confirmed that there would be no other substantive changes to these rules for the remainder of this Parliament.
The proposed reforms aim to:
Remove the charge to UK tax where a non-domiciled individual remits his foreign income or capital gains to the UK for the purpose of commercial investment in UK businesses. The government is concerned that the present rules provide a disincentive to non-domiciled individuals investing in the UK. (For an overview of the remittance basis of taxation, see Practice note, The remittance basis: What individuals need to know: overview (www.practicallaw.com/8-500-4602).)
Retain the existing £30,000 remittance basis charge, but increase it to £50,000 for individuals who have been UK resident for twelve or more years. (For an explanation of the remittance basis charge, see Practice note, The remittance basis: The remittance basis charge (www.practicallaw.com/3-500-4609).)
Simplify some aspects of the current rules to remove undue administrative burdens.
Personal allowance and basic rate changes for 2011-12 and 2012-13
As announced in the June 2010 Budget, the 2011-12 personal allowance for under-65s will be increased by £1,000 to £7,475. At the same time, the basic rate limit will be reduced by £2,400 to £35,000. As a result, the higher rate threshold will be £42,475 (compared to £43,875 in 2010-11) and more people will pay income tax at the higher rate from 6 April 2011. In the 2011 Budget, the Chancellor announced that the personal allowance for under-65s would be increased again in 2012-13, by £630 to £8,105. However, at the same time the basic rate limit will be reduced by only £630 (to £34,370), so in 2012-13 the higher rate threshold will be unchanged and the increase in the personal allowance will benefit basic rate taxpayers and those higher rate taxpayers who enjoy the personal allowance (that is those with income of up to £116,210 in that year).
Statutory residence test
The government will consult on the introduction of a statutory definition of residence as it considers the current rules determining tax residence for individuals are unclear and complicated. The government will issue a consultation document in June 2011 and intends to implement the provision from April 2012. For information on the current rules on residence and for links to further information on the UK tax implications of the concepts of residence, ordinary residence and domicile, see Practice note, Residence and ordinary residence: definitions for UK tax purposes (www.practicallaw.com/0-385-8051).
Tax transparency for individuals
The government has announced that it will issue a consultation in the autumn of 2011 to consider improvements to administration and transparency of the personal tax system for individuals. To assist individuals in calculating their income tax and NICs liabilities, HMRC will also develop online and downloadable tax and NICs calculators by April 2012.
UCITS residence: passport system
An undertaking for collective investment in transferable securities (UCITS) may be resident in the UK for tax purposes if it has a UK resident fund manager. (For details of UCITS, see Practice note, Unit trusts and open-ended investment companies: tax: box, What is an undertaking for collective investment in transferable securities? (www.practicallaw.com/2-382-5451).) As part of the 2011 Budget, the government has announced that this will no longer be the case, so that a UCITS will not be resident in the UK for tax purposes if the UCITS is established and regulated in another EEA state.
This measure is to be included in the Finance Bill 2011 and will have effect from the date on which that Bill receives Royal Assent. This move will be welcomed by the funds industry, as it will allow UK-based fund managers to manage non-UK UCITS without the UCITS suffering unintended or undesirable tax consequences.
Withholding from qualifying time deposits
At present, interest on "qualifying time deposits" is not subject to UK withholding tax (see Practice note, Withholding tax: bank deposits (www.practicallaw.com/8-201-9956)). However, the government announced as part of the 2011 Budget that, from 6 April 2012, tax will be withheld from taxable interest on new qualifying time deposits. This is intended to bring the withholding treatment of such interest into line with that of other interest paid by banks, building societies and other deposit takers. The government will hold an informal consultation on this change in May 2011 and intends to include the enacting provisions in the Finance Bill 2012.
Other private client and charity announcements
For analysis of all the main announcements relevant to private client and charity practitioners, tax and non-tax, see PLC Private Client, Legal update, 2011 Budget: key private client tax announcements (www.practicallaw.com/1-505-3530).
Capital allowances: fixtures mandatory pooling
The government is to consult on plans to introduce changes to the capital allowances fixtures rules that businesses must pool their expenditure on fixtures in a building within a short period of acquiring the building, in order to qualify for capital allowances. (In relation to capital allowances on property, see generally Practice note, Capital allowances on property transactions (www.practicallaw.com/6-362-6968).)
It is not clear exactly what this measure entails. This should become clearer when a consultation document on the proposal is published, which is due to happen at the end of May 2011.
Furnished holiday lettings rules
Legislation will be introduced in Finance Bill 2011 to revise the tax rules for furnished holiday lettings (FHLs) and to extend the regime on a permanent statutory basis to cover FHLs situated anywhere in the European Economic Area (EEA).
Following a public consultation on changes to the taxation of FHLs that closed on 22 October 2010, HM Treasury published its response on 9 December 2010 alongside draft legislation that was open for comment until 9 February 2011 (see Legal update, Furnished holiday lettings rules: consultation responses and draft legislation (www.practicallaw.com/7-504-2082)). We have been these tracking these developments in Tax legislation tracker: property, energy and environment: Furnished holiday lettings: reform (www.practicallaw.com/6-503-0975).
The main changes contained in the draft legislation published on 9 December 2010 will be carried through into the Finance Bill 2011, and these include:
Permanent extension of the FHL regime to EEA FHLs.
Restriction of loss relief from April 2011 so that losses from a UK or EEA FHL business can only be offset against income from the same business. UK losses will be able to relieve UK FHL income only and similarly with EEA losses.
Extension from April 2012 of the minimum periods for which an FHL property must be:
Available for letting to the public each year (the availability threshold) to 210 days (30 weeks) (currently 140 days (20 weeks)); and
Actually let to the public each year (the occupancy threshold) to 105 days (15 weeks) (currently 70 days (10 weeks)).
Minor amendments will be made to the draft legislation published on 9 December 2010 to ensure that the "period of grace" provisions apply from 2010/11. Where certain criteria are satisfied, these provisions allow an FHL business which meets the occupancy threshold in one year, to elect to be treated as having met the occupancy threshold in each of the following two years, even though it does not in fact meet the threshold in those years.
The announcement on FHLs states that a Tax Information and Impact Note (TIIN) for the measure is available at Annex A of the Overview of Tax Legislation and Rates. However, Annex A does not include a TIIN on the FHL measures and we are not aware that a new TIIN has been published since the one that accompanied the draft legislation of 9 December 2010.
REITs: informal consultation
The government has announced that an informal consultation with the industry and the representative body on the REITs legislation will start shortly. The aim is to reduce the barriers to entry and investment and to reduce the regulatory burden for REITs. Legislation will be included in the Finance Bill 2012. The consultation invites views on:
A diverse ownership rule for institutional investors, which will allow them to set up a REIT.
Allowing cash to be a qualifying asset for the purpose of the REIT balance of business asset test, allowing REITs to make decisions to acquire assets on a purely commercial basis.
Extending the time limit for complying with the distribution requirement in relation to stock dividends, reducing the administrative burden on those REITs that pay dividends every six months.
Clarifying the meaning of financing costs for the purposes of the interest cover test to provide certainty.
Abolishing the conversion charge (removing a disincentive to joining the REIT regime).
A fixed grace period for new REITs to meet the non-close company requirement, enabling start ups to build sufficient reputation to attract shareholders.
Relaxing the requirement for a listing on a recognised stock exchange (www.practicallaw.com/2-200-8362), encouraging start-ups.
Technical changes to the REITs legislation.
For more information on REITs, see Practice note, UK REITs: questions and answers (www.practicallaw.com/7-201-8033).
The government has published draft legislation, to be included in the Finance Bill 2011, to counter avoidance through use of alternative finance reliefs combined with the transfer of rights provisions in section 45 of the Finance Act 2003 and avoidance that engineers a reduction of the market value of properties when the exchange provisions in paragraph 5 of Schedule 4 to the Finance Act 2003 apply. The changes will apply to transactions with an effective date (www.practicallaw.com/3-107-6200) on or after 24 March 2011, subject to detailed transitional rules. For more information on the alternative finance reliefs, see Practice note, SDLT reliefs for the public sector and other bodies: Alternative property finance (www.practicallaw.com/6-107-4817). For more information on transfers of rights, see Practice note, SDLT and contracts for the transfer of land: Transfers of rights: sub-sales, assignments and other transactions (www.practicallaw.com/2-107-4838). For more information on exchanges, see Practice note, SDLT and contracts for the transfer of land: Exchanges (www.practicallaw.com/2-107-4838).
Section 45(3) is amended so that there is no disregard of the substantial performance or completion of the original contract where any of the alternative finance reliefs in sections 71A to 73B of the Finance Act 2003 would exempt the transaction arising from the secondary contract. Currently, this is only the case for the alternative finance relief in section 73, which is concerned with sales by the institution. The new legislation includes section 71A, which concerns the grant of a lease by the institution, and sections 72 and 72A, which concern sales and grants of leases by the institution.
The definition of "financial institution" for the purposes of the alternative property finance reliefs is amended. From 24 March 2011, it will no longer be possible to qualify as a "financial institution" merely by holding a consumer credit licence (relatively easy to acquire). This is achieved by dropping the definition of financial institution in section 46 of the Finance Act 2005 and replacing it with the definition in section 564B of the Income Tax Act 2007, but omitting paragraph (d).
The SDLT regime applies a market value charge to SDLT on exchanges of land, where at least one "major interest" is exchanged (section 47 and paragraph 5, Schedule 4, FA 2003). The chargeable consideration for exchanges involving a major interest in land will be changed to the greater of the market value of the interest acquired and what the chargeable consideration would be ignoring the exchange provisions.
SDLT relief for multiple residential purchases
Finance Bill 2011 will provide relief for buyers of residential property who acquire more than one dwelling from the same seller. The relief will apply to transactions with an effective date (www.practicallaw.com/3-107-6200) on or after the date of Royal Assent of the Finance Bill 2011. The relief operates by fixing the rate of SDLT chargeable on each dwelling by reference to the mean consideration, that is, the aggregate consideration attributable to the dwellings divided by the number of dwellings. Therefore, if B buys three residential properties from S each for a price of £200,000, B will pay SDLT on each property at the rate of 1% instead of 4%. The minimum rate of SDLT will be 1%.
For the purposes of this relief, section 116(7) of the Finance Act 2003, which treats the acquisition of six or more dwellings as non-residential property, is disapplied so that this new relief will also be available for purchases of six or more dwellings. The relief is also to apply to "off-plan" purchases where a contract is substantially performed before construction of the dwellings begins.
This relief will be of particular value to investors and should provide a welcome boost to the private rented sector. For background on SDLT on residential property, see (Practice note, SDLT and residential property: the new 5% top rate (www.practicallaw.com/8-505-0670)).
Other property tax announcements
The outcome of the review of the SDLT relief for first time buyers will be announced in autumn 2011 (see Overview, para 3.48: SDLT for first time buyers, page 28 and Practice note, SDLT reliefs for residential property: The reliefs (www.practicallaw.com/6-107-4822).
George Osborne stated in his speech that further work will be done in the coming months to combat widespread avoidance and evasion of tax on very high value property by the wealthiest (see HM Treasury: 2011 Budget statement by the Chancellor of the Exchequer, the Rt Hon George Osborne MP).
Business premises renovation allowances will be extended for a further five years (see Overview, para 3.21: Business premises renovation allowance, page 23 and Practice note, Capital allowances on property transactions: Business premises renovation allowance (BPRA) (www.practicallaw.com/6-362-6968)).
For analysis of all the main property-related and construction-related announcements, tax and non-tax, see Legal updates, 2011 Budget: property implications (www.practicallaw.com/8-505-3353) and 2011 Budget: construction industry implications (www.practicallaw.com/3-505-3666).
The government has announced that it will continue to consult on the implementation of the EU cost-sharing exemption, which some other member states have brought in. The absence of the exemption impairs organisations such as charities, housing associations and others in the not-for-profit sector from forming groups to share expenses, such as staff costs (see March 2010 Budget: key business tax announcements: EU cost sharing exemption to be implemented (www.practicallaw.com/4-501-6433)), as the re-charge of those costs creates irrecoverable VAT for those organisations.
ESC on grouping to be legislated
The government has announced that in May 2011 it will commence a technical consultation on draft legislation to put extra-statutory concession (ESC) 3.2.2 on a statutory footing. This ESC permits the value of an anti-avoidance charge on UK VAT groups to be capped at the value of services purchased by an overseas group member and recharged to the UK. For the full text of the concession, see Legal update, List of VAT concessions updated (www.practicallaw.com/8-504-4245).
Low value consignment relief threshold reduced
Finance Bill 2011 will include provisions to reduce the low value consignment relief (LVCR) threshold from £18 to £15. The reduced threshold will apply from 1 November 2011. The LCVR is a simplification measure designed to avoid collection of small amounts of VAT on goods imported from outside the UK. The reduction in the threshold is a belated attempt to reduce the inflow of imports of CDs and similar items (largely bought on-line), which have provided unfair competition for UK retailers.
The government has also announced that it will engage with the European Commission to explore options to prevent LCVR from being exploited, including a derogation from Article 23 of Council Directive 2009/132, which contains the current minimum exemption threshold of EUR10. The LCVR will be re-visited in Budget 2012.
Mandatory online registration and filing
The government has announced that businesses wishing to register or deregister for VAT will have to do so online from 1 August 2012. In addition, online filing and payment for VAT periods beginning on or after 1 April 2012 for those with a VAT exclusive turnover of under £100,000 will be compulsory. (Electronic filing and payment for taxpayers with a VAT exclusive turnover of £100,000 or over and newly registered taxpayers has been compulsory since 1 April 2010: see Legal update, Compulsory on-line filing of VAT returns from 1 April 2010 (www.practicallaw.com/2-500-7123).)
In addition, the government has announced the removal of the VAT registration threshold for businesses not established in the UK (see Practice note, Value added tax: Compulsory registration (www.practicallaw.com/2-107-3725)), although on the face this announcement, this could raise questions of compatibility with EU law.
A consultation document on these measures will be issued in June 2011.
VAT registration and deregistration thresholds
From 1 April 2011, the registration threshold will be increased from £70,000 to £73,000 and the deregistration threshold will be increased from £68,000 to £71,000. The registration and deregistration thresholds for acquisitions from other member states (www.practicallaw.com/1-107-6833) will be increased from £70,000 to £73,000. For background on VAT, see Practice note, Value added tax (www.practicallaw.com/2-107-3725).)
VAT status of public bodies
The government is to introduce amendments to UK VAT legislation (which are not yet specified) to ensure that EU agreements relating to the VAT treatment of public bodies carrying out their statutory duties in competition with the private sector are clearly transposed into domestic law. The government will issue draft legislation in the autumn with a view to introducing the legislation in the Finance Bill 2012.
Abolition of tax reliefs following OTS report
Following the recommendations of the Office of Tax Simplification (OTS) review on tax reliefs (see Legal update, Final report on tax reliefs (www.practicallaw.com/7-505-0109)), the government intends to abolish 43 reliefs. The Chancellor confirmed that community investment tax relief (see Practice note, Income Tax: exemptions and reliefs: community investment tax relief (www.practicallaw.com/8-385-1244)) will not be abolished, even though the OTS recommended its abolition.
The government announced that the Finance Bill 2011 will abolish the following seven reliefs (see Overview, para 1.45):
Charities – transitional relief on distributions (see TIIN: Charities: Transitional Relief on Distributions: Repeal of Redundant Relief.)
Millennium Gift Aid (see TIIN: Millennium Gift Aid: Repeal of Redundant Relief.)
National Savings Bank ordinary account interest (TIIN: National Savings Bank Interest: Repeal of Redundant Relief.)
Payroll giving 10 per cent supplement (TIIN: Payroll Giving supplement: Repeal of Redundant Relief).
Stamp duty exemptions for certain assignments by seamen, instruments relating to National Savings and transfers relating to ships and vessels (TIIN: Stamp Duty: Repeal of Redundant Reliefs and Exemptions).
The government intends to abolish a further 36 reliefs in 2012 and in subsequent years, following consultation. These include:
Late night taxis.
Deeply discounted securities – incidental expenses.
Capital allowances – flat conversion allowances.
Stamp duty relief for land in disadvantaged areas.
Stamp duty exempt instruments regulations (SI 1987/516).
Partial stamp duty relief for company acquisitions.
Stamp duty on shared ownership transactions relating to land.
Stamp duty on transfers of land to registered social landlords.
Land remediation relief.
Measures unchanged following earlier consultation
The following measures will be introduced in the Finance Bill 2011 with no changes to the consultation drafts or the TIINs published in December 2010:
Income tax rates, rate limits and personal allowances for 2011-12 (see Legal update, Basic rate income tax band for 2011-12 reduced by £2,400 (www.practicallaw.com/6-504-1158) and HM Treasury: Income Tax Rates, Rate Limits and Personal Allowances for 2011-12).
Employer-supported childcare: changes to the "open generally" condition (see Legal update, Tax policy updates and draft Finance Bill 2011 legislation: Personal tax (www.practicallaw.com/7-504-1803)).
Expenses paid to MPs (see HM Treasury: Expenses Paid to MPs).
Tax relief for Protection of Vulnerable Groups Scheme fees paid or reimbursed by employers (see HM Treasury: Tax Relief for Protection of Vulnerable Groups Scheme Fees Paid or Reimbursed by Employers). (Note that this measure currently only affects employees involved in regulated work in Scotland who apply for registration under the Scheme.)
Pensions taxation: enabling retirement savings programme (see Legal update, Finance Bill 2011: pensions provisions: Tax aspects of NEST (www.practicallaw.com/3-504-1819)).
Reduction in the small profits rate of corporation tax and reform of associated company rules as they apply to the small profits rate (see Legal update, Tax policy updates and draft Finance Bill 2011 legislation: Corporate tax (www.practicallaw.com/7-504-1803)).
Reduction of annual investment allowance to £25,000 and reduction of writing down allowances, both from April 2012 (see Legal update, Tax policy updates and draft Finance Bill 2011 legislation: Corporate tax (www.practicallaw.com/7-504-1803)).
Corporate capital gains (simplification): capital losses after a change of ownership and value shifting rules (see Legal update, Responses to consultation on simplification of chargeable gains for corporate groups (www.practicallaw.com/3-504-2296)).
Reform of stamp duty reserve tax on collective investment schemes (see Legal update, SDRT: collective investment schemes: draft Finance Bill 2011 (www.practicallaw.com/9-504-2533)).
OECD transfer pricing guidelines (see Legal update, Tax policy updates and draft Finance Bill 2011 legislation: Corporate tax (www.practicallaw.com/7-504-1803)).
Changes to accounting standards for leases (see Legal update, Taxation of leases: draft Finance Bill 2011 clauses (www.practicallaw.com/5-504-2304)).
Life insurance apportionment rules (see HM Treasury: Life Insurance Apportionment Rules).
Exceptional rates of Vehicle Excise Duty for certain heavy goods vehicles (see HM Treasury: Exceptional rates of Vehicle Excise Duty for certain heavy goods vehicles).
Refunding irrecoverable VAT costs incurred by Academies (see Legal update, Tax policy updates and draft Finance Bill 2011 legislation: VAT and stamp duties (www.practicallaw.com/7-504-1803)).
Tax rates and allowances
Tables of tax rates and allowances for 2011-12 have been published in Overview, Annex B: Rates and allowances.