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Business faces raft of tax changes

10 December 2012
Issue: 4383 / Categories: News , autumn statement 2012 , Business , Companies , Income Tax
AIA up tenfold for plant and machinery

A number of business tax changes are to be instigated following the autumn statement from the chancellor, George Osborne

The main corporation tax rate for 2014 will be reduced by a further one percentage point to 21%. The rate for 2013 is 23% and the small profit rate is 20%.

The bank levy has been confirmed at 0.130% from 1 January 2013.

As part of the government’s wish to reduce administrative burdens on small businesses, the chancellor said a simpler income tax scheme for small unincorporated businesses will be introduced from 2013/14 to allow:

  • eligible self-employed taxpayers and partnerships to calculate their profits on the basis of the cash that passes through their business with no requirement to distinguish between revenue and capital expenditure; and
  • all unincorporated businesses to be able choose to deduct certain expenses on a flat rate basis.

A temporary increase was announced to the annual investment allowance (AIA) from £25,000 to £250,000 for qualifying investment in plant and machinery for two years from 1 January 2013.

HMRC explained where a business has a chargeable period that straddles either or both the operative date of the increase on 1 January 2013, or the operative date of the decrease, or reversion, to the current threshold of £25,000 on 1 January 2015, after the two-year period of the increase has elapsed, transitional rules will apply.

The new measures will be included in the draft legislation published tomorrow.

Andrew Gotch, chairman of the Chartered Institute of Taxation’s owner-managed business subcommittee, said the increase was “an open invitation to almost all businesses to invest and get a 20% (or more) subsidy for all their plant and machinery investment”.

He regretted the lack of stability in this area: “In recent years the allowance has fallen from £100,000 to £25,000. Now it will rise to £250,000 before, apparently, coming back down to £25,000. Businesses like certainty above everything and the chopping and changing of AIA has been a problem.”


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