Standard rate VAT is reduced from 17.5% to 15% from 1 December 2008 until 31 December 2009 when it reverts to 17.5%.

There is no requirement to pass the VAT decrease onto customers.

Scant account seems to have been taken of the administrative cost to businesses of changing all the prices on all standard rated goods within their IT systems etc. to cope with the temporary 15% rate, only to re-incur those costs when it has been changed back just 13 months later.

The VAT fraction used to calculate the amount of VAT included in a VAT inclusive price is now 3/23rds.

LB Group will issue detailed, practical guidance on how this will affect VAT registered businesses shortly.

A temporary Small Business Finance Scheme ´worth £1 billion´ will offer credit to firms struggling to access loans, a £4 billion deal with the European Investment Bank to provide money to the banks to pass on to businesses has also been agreed.

If you need assistance in this area your usual LB Group contact will be able to put you in touch with our corporate finance team.

A new HMRC business payment support service will allow businesses in temporary financial difficulty to pay their tax bills ´on a timetable they can afford´.

According to basic information released at this stage, HMRC ´advisors´ will only ask for information they need to make a decision and businesses will only have to provide ´basic´ details of the businesses income and outgoings.

If proved to be an accurate description, this will provide a welcome relief for many businesses who have in the past found the agreement of ´time to pay´ arrangements both cumbersome and in most cases unhelpful.

HMRC have also agreed not to charge additional late penalty surcharges on payments that form part of new arrangements – interest, of course, will continue to apply automatically.

Businesses who are already the subject of a time to pay arrangement however, will have to continue to liaise with their original HMRC point of contact.

The proposed increase in the small companies rate of corporation tax from 21% to 22%, due to take place on 1 April 2009, has been deferred until 1 April 2010.

Currently, trading losses can only be carried back and set against profits that arose in the preceding year.

For one year only, any trading losses that are incurred for an accounting period ending between 24 November 2008 and 23 November 2009 can be carried back for a maximum of 3 years.

The actual amount of the loss that can utilised in this earlier period is capped at £50,000.

The lifetime allowance for pension schemes will increase to £1.8m and the annual allowance will increase to £255,000 from 2010/11 and remain the same up to and including the 2015/16 tax year.

From 16 December 2008 bonds issued by Multilateral Institutions (Includes bodies such as the International Monetary Fund, the World Bank, the United Nations, and the regional development banks) will become qualifying investments for stock and shares ISA´s.

In line with other recent legislation regarding cars, the capital allowances rates will, from 1 April 2009 (or 6 April 2009 for unincorporated businesses), now be determined be reference to the Co2 emissions value.

Expenditure on cars with Co2 emissions over 160g/km will be dealt with in the special rate pool and will attract a writing down allowance of 10% per year. All other cars will continue to attract writing down allowances of 20% with no restriction.

From April 2009 the rules that restrict the amount of lease rental payments that can be relived for a car costing more than £12,000 will cease.

The restriction will be changed to a flat rate of 15%, but will only apply to cars with Co2 emissions over 160g/km

Expenditure on leases that commence prior to April 2009 will continue to be subject to the previous rules.

Motorcycles will not be subject to the above rules and expenditure on or after 1 April (or 6 April) 2009 will qualify for the annual investment allowance, which entitles firms to 100% capital allowances on the first £50,000 of qualifying capital expenditure.

Draft legislation is to be issued on earlier reporting of tax avoidance schemes, with the scheme now likely to have to be reported in the tax return in which the scheme is implemented rather than in the year in which a tax advantage is gained.

There are no changes in tax or national insurance rates for the 2009/10 tax year.

The personal allowance for those aged 65 and under has increased from £6,035 in the current year to £6,475 for 2009/10.

The basic rate of tax band has increased from £34,800 in the current year to £37,400 for 2009/10.

For 2009/10 the upper earnings limit for primary Class 1 NIC will (again) be aligned with the level at which higher rate tax becomes due. From 2011/12 the NIC primary threshold will be aligned with the basic personal allowance.

Major changes to personal tax rates are planned for 2010/11 and beyond:

• From 2011/12 the main rate of Class 1 and Class 4 NIC will increase by ½% (to 11.5% and 8.5%). The higher rate of Class 1 and Class 4 will also increase correspondingly by ½%.
• From 2010/11 the basic personal allowance for income tax will be reduced, in two stages, for those with gross incomes above £100k and £140k.
• 45% income tax will apply to gross income above £150,000 from 6 April 2011.
• From 2011/12 there will be 3 rates of tax for dividends. Dividends received in the basic rate band will continue to attract no further tax liability. Dividends received that fall into the 40% tax bracket will continue to attract tax at an effective rate of 25% of the net amount received over this bracket. Dividends received that exceed the new £150,000 tax bracket will attract an effective rate of tax of 30.56% of the net dividend.