Business taxation

Employment related securities

Anti-tax avoidance legislation will be introduced in relation to share incentive plans (SIPs) and company share option plans (CSOPs), effective immediately. In relation to SIPs, corporation tax deductions will not be allowed where companies pay money into a SIP as part of a tax avoidance scheme. In relation to CSOPs, new grants of CSOP options over unlisted shares in a company which is under the control of a listed company will not be permitted.

 

During 2010, there will also be a consultation in relation to the taxation of employment related “geared growth arrangements”, e.g. hurdle shares. The government has also announced that it intends to take action to tackle avoidance of tax through employee benefit trusts and other vehicles, effective 6 April 2011.

SDLT and partnerships
Rules are being introduced in relation to SDLT applying to transactions between members of a partnership. Existing anti-avoidance rules currently apply SDLT in respect of ‘notional land transactions’ and these rules are being extended to prevent the special partnership rules from applying to such transactions.

Disclosure of Tax Avoidance Schemes (DOTAS or TAD)
Legislation will be introduced to revise the DOTAS rules to increase penalties for non-compliance and to “fine-tune” some of the notification requirements. The revised regulations will extend the DOTAS “hallmarks” and similar provisions relating to National Insurance will be aligned with these changes.

Loans to participators
Legislation effective from 24 March 2010 will deny a corporation tax deduction for the amount of the release, or write-off, of a loan made by a close company to a relevant person (participator). The release or write-off will continue to be treated as a distribution in the hands of a relevant person.

Corporate taxes

Capital distributions
It was confirmed that new legislation will be introduced (“as soon as possible in the next parliament”) confirming that company distributions will not be prevented from falling within the UK dividend exemption because they are capital in nature. The legislation will be retrospective and there will also be an option for companies to elect for the retrospective application to be disapplied.

Worldwide debt cap legislation

Following consultation with UK businesses, a number of changes have been made to the debt cap legislation to clarify areas of uncertainty and so the rules work as originally intended.

Annual investment allowance (AIA)

From 1 April 2010, the AIA for capital expenditure on items qualifying for capital allowances becomes £100,000. The relief will be increased for income tax purposes from 6 April 2010. However, a new anti-avoidance rule will be introduced that will disallow property losses to the extent that they are due to AIA, if the losses arise as a result of relevant tax avoidance arrangements. It is worth noting that the current 40 per cent FYA rules have not been extended.

Tax breaks for zero and low emission vehicles
As announced in Pre-Budget Report 2009 (PBR), 100 per cent first year allowances will be available on the purchase of new goods vehicles that are not capable of producing CO2 emissions. The relief will be available for companies incurring such expenditure on or after 1 April 2010 and before 1 April 2015 (6 April 2010 and 6 April 2015 for individuals).

Similarly, there will no taxable benefit for an employee that is provided with a zero emission van or car and a reduced taxable benefit percentage of 5 per cent for an employee provided with a car that produces less than 75g/km of CO2. These reductions will apply from 6 April 2010 to 5 April 2015.