Capital expenditure on plant and machinery will enjoy a 40% first year allowance, instead of the normal 20% annual writing down allowance, if incurred in the year to 31 March 2010 (companies) or 5 April 2010 (unincorporated businesses). Businesses already enjoy a 100% annual investment allowance on purchases of plant, but this is limited to £50,000 a year.. The new first year allowance will therefore benefit businesses which spend more than £50,000 a year on plant.
If you spend more than £50,000 a year on plant, buy before April 2010.
In the Pre-Budget Report, Mr Darling announced that businesses would be allowed to carry back losses and set them against profits for the last three years instead of only the last 12 months. This has now been extended to losses which are incurred in the accounting periods ending in the period from 24 November 2008 to 23 November 2010 for companies or the two tax years 2008/09 and 2009/10 for unincorporated businesses. Losses can be carried back one year without limit. The extended carry back is restricted to £50,000. For example, £50,000 can be carried back three years from a company's accounting period to 31 December 2008 and £50,000 can be carried back three years from the accounting period to 31 December 2009.
There are important changes to the capital allowance rules for cars from April 2009. Up to now, cars which cost up to £12,000 have been put in a pool with other fixed assets and receive 20% writing down allowances; cars costing over that figure have been kept separate and the maximum WDA has been £3,000. Cars with a CO2 emissions rating up to 110g/km currently enjoy a 100% first year allowance.
For new cars bought from 1 April 2009 (companies) or 6 April 2009 (unincorporated traders) onwards, the allowances on all cars will be related to the CO2 rating of the car. Very low rated cars will still enjoy the 100% allowance. Cars with a rating up to 160g/km will go into the general pool and receive 20% allowances. Cars with higher ratings will no longer have a £3,000 restriction, but they will go into the special rate pool and will only receive 10% allowances. There will no longer be a balancing allowance when an expensive car is sold.
There are detailed rules for "expensive" cars bought under the old regime and for cars with an element of private use.
Time to pay
The Business Payment Support Service, announced in November, will negotiate "time to pay" arrangements for businesses which are temporarily unable to pay their corporation tax, income tax or VAT. As long as the schedule of payments is agreed before the date on which the liability would have been due and is then adhered to, no default surcharges on VAT or surcharges on income tax will apply, although interest will accrue.
The BPSS has been extended to cover the situation where a business expects to make a loss in its current period which it will set off against profits of previous periods. The expected current loss can be taken into account in agreeing the level of payments which will be required.
If you want to negotiate time to pay, do so before the due date.
The threshold for including simple three-line accounts on the tax return will in future be linked to the VAT registration threshold, so it will be set at turnover of £68,000 for the tax year 2009/10.