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Public interest entities

The government wants to encourage businesses to be the wealth generators and so has announced small, but helpful, future reductions in the headline rate of corporation tax and a smaller than previously announced increase in employer NIC. The expected reductions in tax reliefs are less than expected – the only big change being lower rates of capital allowances, and not until 2012. This section gives more detail on these and other changes that will affect larger businesses.

Corporation tax rate

Year by year reductions have been announced in the corporation tax rates as follows:

Capital allowances

To offset some of the benefit of the reductions in corporation tax rates, the rate at which capital allowances are given will be reduced from April 2012.

VAT changes

The standard rate of VAT is set to rise to 20% with effect from 4 January 2011.

Corporation tax – changes to consortium relief

Two changes have been announced in the Emergency Budget to the group relief available to consortia of companies.

Company Anti-Avoidance / Loan Relationships

HMRC have been aware that some large companies have been using certain accounting peculiarities of UK GAAP (generally accepted accounting practice) in relation to accounting for financial instruments in such a way as to avoid paying corporation tax.

Life insurance companies transfers of business

The following measures were announced with reference to transfers of business by life insurance companies:

The new bank levy will have wide applications and may impact on the non-banking business of banks

A levy will apply from 1 January 2011 to the balance sheets of banks and banking groups with liabilities of at least £20bn.

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