Budget summary

More Budget points.

Business tax

First-year allowances for small businesses
The temporary 50% rate of first-year capital allowances on plant and machinery is extended for a further 12 months so as to have effect in relation to expenditure up to and including 31 March 2008 for corporation tax or 5 April 2008 for income tax. This enhanced rate continues to apply to small businesses only.

Capital allowances for cars
In response to business representations, a consultation update document has been published giving further detail on the options for simplifying the rules for capital allowances for cars. The Government proposes replacing the expensive car rules with a simpler system of writing down allowances based on cars' carbon dioxide emissions.

General insurers' reserves
General insurers, including general insurance companies, firms carrying on general insurance business operating through a branch, controlled foreign companies that carry on general insurance business, and members of Lloyd's and syndicate managing agents will be subject to new rules regarding the tax treatment of general insurers' reserves. These new rules, which will replace the current rules, will limit the amount of the general insurers' reserves that are allowed for tax purposes to an 'appropriate amount'. The precise definition of 'appropriate amount' will be the subject of further consultation with the industry. The existing rules will be repealed and the new rules will apply from the date of Royal Assent to the Finance Bill.

Corporation tax

Life insurance companies
Following consultation on the taxation of life insurance companies, measures will be included in the Finance Bill which:

• set out the circumstances in which profits of a life insurance company will be charged to corporation tax under Case I of Schedule D, rather than under the 'I minus E' basis;
• modify the treatment of structural assets held by life insurance companies;
• remove restrictions on the utilisation of allowable losses where a life insurance company disposes of units in authorised investment funds (AIFs) to a connected AIF manager; and
• allow tax exemption to be retained after the transfer of existing tax exempt business which is not life assurance business from friendly societies to life insurance companies.

The transfer of friendly society business measures will have effect for transfers which take place on or after the date that the Finance Bill receives Royal Assent. The remaining measures will take effect for periods of account beginning on or after 1 January 2007.
Consultation will continue on the detail of these measures, as well as on the measures announced at the 2006 Pre-Budget Report and on other issues identified by the consultation process.

Life insurance companies financing arrangements
Life insurance companies have requirements for capital which cannot normally be met by ordinary borrowing and consequently enter into financing arrangements such as contingent loans and financial reinsurance contracts. Legislation will be introduced to reform the treatment of contingent loans by imposing a tax charge only when arrangements are used to generate a transfer of surplus to shareholders which would not have existed without the arrangements, or, where the transfer of surplus exceeds 125% of the mean of transfers in the three previous periods. Where such a surplus is generated and brought into account for tax purposes under the new rules, a compensating adjustment may need to be made in later periods.
The new rules will apply for periods of account beginning on or after 1 January 2007 and there will also be consultation on giving other types of financing arrangements, e.g. financial reinsurance and capital contributions, the same tax treatment proposed for contingent loans.

Securitisation companies
The Finance Bill will introduce legislation, to take effect from Royal Assent, to amend FA 2005, ss 83 and 84 (relating to the taxation of securitisation companies). The changes will allow for the s 83 regime (concerning the application of accounting standards) to be extended by regulation, and modify the regulation-making power under s 84 (concerning the introduction of permanent tax rules) to cover a wider range of securitisations.

Capital gains

Investment managers' exemption: carbon trading
Regulations will be introduced to extend the type of business that investment managers can undertake on behalf of non-residents, without bringing them into the UK tax net, to include trading in carbon emission credits and similar instruments. The regulations are intended to take effect from 12 April 2007.

Charities

Charitable lottery tax relief
The Finance Bill will introduce legislation, to take effect from 1 September 2007, to ensure that charities continue to benefit from the existing relief from tax on the profits from certain lotteries following the replacement of the relevant provisions of the Lotteries and Amusements Act 1976 by the Gambling Act 2005.

Secondments to charities and educational institutions
The Finance Bill will amend ITTOIA 2005, with effect from 6 April 2007, 'to ensure that the correct amount of salary costs are deducted when an employer seconds an employee to a charity or educational institution'. The changes are intended to 'prevent an employer from making a deduction for remuneration where such costs are not paid within nine months of the end of the relevant accounting period'.

Stamp taxes

Surplus school land
Obsolete stamp duty and stamp duty land tax reliefs for transfers of surplus school land are to be repealed with effect from the date of Royal Assent to the 2007 Finance Bill. Such transfers are instead to be brought within the general stamp duty land tax relief for statutory reorganisations from 25 May 2007.

Indirect taxes

Landfill communities fund: Increase in value and simplification package
With effect from 1 April 2007, the maximum credit that landfill site operators may claim against their annual landfill tax liability, for contributions made to bodies with objects concerned with the environment, enrolled under the landfill communities fund, will be reduced from 6.7% to 6.6%.
A number of simplification measures will also apply from the same date.

Auctions of emission allowances under the EU Emissions Trading Scheme
The EU Emissions Trading Scheme is a scheme for trading allowances of carbon dioxide (being the main greenhouse gas) from permitted installations. In August 2006, the Government published its intention to auction 7% of allowances as well as allowances from closures and surplus allowances from the new entrants reserve. Legislation will be introduced in the Finance Bill to put in place the legislative basis for auctioning.

Aggregates levy: Exemption for aggregate from the improvement, maintenance and construction of railways, etc.
With effect from a date to be appointed, aggregate removed from the ground along the line, or proposed line, of any railway, tramway or monorail for the purposes of improving, maintaining or constructing it, will be exempt from aggregates levy providing the aggregate was not removed for the purpose of extracting the aggregate.

Climate change levy: Simplification
From autumn 2007, the requirement on a customer to provide a certificate of entitlement before receiving a supply which qualifies for relief from climate change levy will be removed, allowing relief to be provided where the certificate is submitted after the supply. From Royal Assent, liability to a penalty for incorrect certification will be extended to include circumstances where a certificate becomes incorrect after its initial submission. The requirement for a separate notification for 'exported and onward supplies' will be removed.

Gaming duty rates and bandings
For six-month accounting periods starting on or after 1 April 2007, the gaming duty rates and the gross gaming yield (GGY) bandings will be amended as follows:

First £1,836,500 of GGY Issue: 4102 / Categories: Home > Budget summary Budget summary © Copyright LexisNexis 2024. All rights reserved. 04 April 2007 More Budget points. Business tax First-year allowances for small businesses The temporary 50% rate of first-year capital allowances on plant and machinery is extended for a further 12 months so as to have effect in relation to expenditure up to and including 31 March 2008 for corporation tax or 5 April 2008 for income tax. This enhanced rate continues to apply to small businesses only. More Budget points. Business tax First-year allowances for small businesses The temporary 50% rate of first-year capital allowances on plant and machinery is extended for a further 12 months so as to have effect in relation to expenditure up to and including 31 March 2008 for corporation tax or 5 April 2008 for income tax. This enhanced rate continues to apply to small businesses only. Capital allowances for cars In response to business representations, a consultation update document has been published giving further detail on the options for simplifying the rules for capital allowances for cars. The Government proposes replacing the expensive car rules with a simpler system of writing down allowances based on cars' carbon dioxide emissions. General insurers' reserves General insurers, including general insurance companies, firms carrying on general insurance business operating through a branch, controlled foreign companies that carry on general insurance business, and members of Lloyd's and syndicate managing agents will be subject to new rules regarding the tax treatment of general insurers' reserves. These new rules, which will replace the current rules, will limit the amount of the general insurers' reserves that are allowed for tax purposes to an 'appropriate amount'. The precise definition of 'appropriate amount' will be the subject of further consultation with the industry. The existing rules will be repealed and the new rules will apply from the date of Royal Assent to the Finance Bill. Corporation tax Life insurance companies Following consultation on the taxation of life insurance companies, measures will be included in the Finance Bill which: set out the circumstances in which profits of a life insurance company will be charged to corporation tax under Case I of Schedule D, rather than under the 'I minus E' basis; modify the treatment of structural assets held by life insurance companies; remove restrictions on the utilisation of allowable losses where a life insurance company disposes of units in authorised investment funds (AIFs) to a connected AIF manager; and allow tax exemption to be retained after the transfer of existing tax exempt business which is not life assurance business from friendly societies to life insurance companies. The transfer of friendly society business measures will have effect for transfers which take place on or after the date that the Finance Bill receives Royal Assent. The remaining measures will take effect for periods of account beginning on or after 1 January 2007. Consultation will continue on the detail of these measures, as well as on the measures announced at the 2006 Pre-Budget Report and on other issues identified by the consultation process. Life insurance companies financing arrangements Life insurance companies have requirements for capital which cannot normally be met by ordinary borrowing and consequently enter into financing arrangements such as contingent loans and financial reinsurance contracts. Legislation will be introduced to reform the treatment of contingent loans by imposing a tax charge only when arrangements are used to generate a transfer of surplus to shareholders which would not have existed without the arrangements, or, where the transfer of surplus exceeds 125% of the mean of transfers in the three previous periods. Where such a surplus is generated and brought into account for tax purposes under the new rules, a compensating adjustment may need to be made in later periods. The new rules will apply for periods of account beginning on or after 1 January 2007 and there will also be consultation on giving other types of financing arrangements, e.g. financial reinsurance and capital contributions, the same tax treatment proposed for contingent loans. Securitisation companies The Finance Bill will introduce legislation, to take effect from Royal Assent, to amend FA 2005, ss 83 and 84 (relating to the taxation of securitisation companies). The changes will allow for the s 83 regime (concerning the application of accounting standards) to be extended by regulation, and modify the regulation-making power under s 84 (concerning the introduction of permanent tax rules) to cover a wider range of securitisations. Capital gains Investment managers' exemption: carbon trading Regulations will be introduced to extend the type of business that investment managers can undertake on behalf of non-residents, without bringing them into the UK tax net, to include trading in carbon emission credits and similar instruments. The regulations are intended to take effect from 12 April 2007. Charities Charitable lottery tax relief The Finance Bill will introduce legislation, to take effect from 1 September 2007, to ensure that charities continue to benefit from the existing relief from tax on the profits from certain lotteries following the replacement of the relevant provisions of the Lotteries and Amusements Act 1976 by the Gambling Act 2005. Secondments to charities and educational institutions The Finance Bill will amend ITTOIA 2005, with effect from 6 April 2007, 'to ensure that the correct amount of salary costs are deducted when an employer seconds an employee to a charity or educational institution'. The changes are intended to 'prevent an employer from making a deduction for remuneration where such costs are not paid within nine months of the end of the relevant accounting period'. Stamp taxes Surplus school land Obsolete stamp duty and stamp duty land tax reliefs for transfers of surplus school land are to be repealed with effect from the date of Royal Assent to the 2007 Finance Bill. Such transfers are instead to be brought within the general stamp duty land tax relief for statutory reorganisations from 25 May 2007. Indirect taxes Landfill communities fund: Increase in value and simplification package With effect from 1 April 2007, the maximum credit that landfill site operators may claim against their annual landfill tax liability, for contributions made to bodies with objects concerned with the environment, enrolled under the landfill communities fund, will be reduced from 6.7% to 6.6%. A number of simplification measures will also apply from the same date. Auctions of emission allowances under the EU Emissions Trading Scheme The EU Emissions Trading Scheme is a scheme for trading allowances of carbon dioxide (being the main greenhouse gas) from permitted installations. In August 2006, the Government published its intention to auction 7% of allowances as well as allowances from closures and surplus allowances from the new entrants reserve. Legislation will be introduced in the Finance Bill to put in place the legislative basis for auctioning. Aggregates levy: Exemption for aggregate from the improvement, maintenance and construction of railways, etc. With effect from a date to be appointed, aggregate removed from the ground along the line, or proposed line, of any railway, tramway or monorail for the purposes of improving, maintaining or constructing it, will be exempt from aggregates levy providing the aggregate was not removed for the purpose of extracting the aggregate. Climate change levy: Simplification From autumn 2007, the requirement on a customer to provide a certificate of entitlement before receiving a supply which qualifies for relief from climate change levy will be removed, allowing relief to be provided where the certificate is submitted after the supply. From Royal Assent, liability to a penalty for incorrect certification will be extended to include circumstances where a certificate becomes incorrect after its initial submission. The requirement for a separate notification for 'exported and onward supplies' will be removed. Gaming duty rates and bandings For six-month accounting periods starting on or after 1 April 2007, the gaming duty rates and the gross gaming yield (GGY) bandings will be amended as follows: First £1,836,500 of GGY Issue: 4102 Categories: SourceURL: Links: READERS' FORUM Read All Practice tip: Increase the perceived value of your services Readers’ forum: Possibility of mixed-use relief claim Readers’ forum: Do I need to inform HMRC of ex clients’ death? Readers forum: Why can’t HMRC get the simple things right Readers’ forum: VAT problem created by disbursement mark-up? FIVE WAYS TO MAKE ACCOUNTS PRODUCTION AND TAX EASIER. Download the exclusive Xero free report here. New queries Please email any questions you might have to: taxation@lexisnexis.co.uk. 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