UK: Budget 2009 - Part 2 of 2

Last Updated: 23 April 2009
Article by Sandy Bhogal, Michael Cashman, James Hill, Andrew Stanger and Peter Steiner
This article is part of a series: Click Budget 2009 - Part 1 of 2 for the previous article.

Originally published 23 April 2009

Please click here to read Part 1 of Budget 2009

Keywords: Budget 2009, Green tax, enhanced capital allowances, energy-saving, landfill tax, Finance Bill 2009, HM Revenue & Customs, climate change levy, penalties, late payment of tax, personal tax accountability, senior accounting officers, income tax, capital gains tax, corporation tax, overpayments, extra statutory concessions, ESCs, tax rates, allowances, personal pension schemes, National Insurance contributions, inheritance tax, taxable bands, corporation tax, Stamp taxes and duties

Other

"Green" tax measures

Budget 2009 includes a number of measures which attempt to promote a green and carbon efficient economy.

Enhanced Capital Allowances for Energy-Saving and Water Efficient (Environmentally Beneficial) Technologies

Businesses investing in certain plant and machinery that is energy efficient, reduces water use, or improves water quality are entitled to 100 per cent. first year capital allowances in respect of capital expenditure on such items. The lists of technologies covered is being expanded from a date to be appointed.

CHANGES TO THE LANDFILL TAX REGIME

The standard rate of landfill tax will increase by £8 to £48 per tonne. This will affect business registered for landfill tax that make any standard rated disposal on or after 1 April 2010.

Additional provisions included in the Finance Bill 2009 and associated secondary legislation will result in certain uses of material on landfill sites being subject to tax. These measures are a reaction to the Court of Appeal decision in Waste Recycling Group. These reforms also protect the investigative position of HM Revenue & Customs by providing for the introduction of secondary legislation, which would ensure that where appropriate, HM Revenue & Customs is provided with sufficient information to enable it to determine whether a taxable disposal has taken place. These arrangements will take effect from 1 September 2009.

CLIMATE CHANGE LEVY

Legislation will be introduced in the Finance Bill 2009 to entitle manufacturers of certain plastic products to claim some relief from climate change levy in respect of supplies of electricity and liquefied petroleum gas, in return for an associated reduction in their emissions and/or energy consumption. Although these measures will take effect from the date of Royal Assent of the Finance Bill 2009, they must be implemented via a climate change agreement between the relevant sector association and the Department of Energy and Climate Change. Such an agreement can only be entered into by the sector association once regulations laid by the Department of Energy and Climate Change are in force.

Reforms introduced by the Finance Bill 2009 will enable HM Revenue & Customs to recover climate change levy from any facility that has claimed relief on the basis of an anticipated reduction in its emissions and/or energy use but has failed to meet its target provided that the facility in question is in a sector that has failed to meet its sector level target for that same period. The ability of HM Revenue & Customs to reclaim climate change levy in this way will apply to climate change agreement certification periods commencing on or after 1 April 2009.

Draft regulations laid before Parliament in the Autumn will extend the climate change levy to supplies of low value solid fuel made on or after 1 January 2010.

HM Revenue & Customs – powers and processes

HM Revenue & Customs Charter

Legislation will be introduced in the Finance Bill 2009 requiring HM Revenue & Customs to prepare and maintain a Charter setting out the standards of behaviour and values to which HM Revenue & Customs will aspire in dealing with taxpayers and others, and require HM Revenue & Customs to report annually on the extent to which they meet the standards of that Charter. A number of consultation documents have been published on this area, with the latest being issued on 3 February 2009. Previous consultation documents and draft Charters have excited a great deal of debate; however, HM Revenue & Customs hopes to issue the Charter in Autumn 2009 and it is stated that this must be in place by 31 December 2009.

HM Revenue & Customs powers, deterrents and safeguards: - penalties for late filing of returns and late payment of tax

Following HM Revenue & Customs' recent consultation on penalties for the late filing of returns and the late payment of tax, the Finance Bill 2009 will introduce a new penalty regime comprising both fixed and tax-geared penalties which is broadly applicable to income tax, corporation tax, national insurance contributions, stamp duty land tax, stamp duty reserve tax, inherent tax, pensions schemes and petroleum revenue tax (similar penalties will be imposed in relation to PAYE and the Construction Industry Scheme (CIS), although these will be modified to take into account the particular circumstances relating to PAYE and the CIS). Where there is an annual or occasional obligation to file a tax return, penalties will be:

  • £100 immediately after the due date (whether or not tax has been paid);
  • daily penalties of £10 per day for a maximum of 90 days for returns that are more than three months overdue (this only applies to annual obligations);
  • penalties of 5 per cent. of tax due for the return period for prolonged failures (due at 6 months, and again at 12 months); and
  • higher penalties of 70 per cent. of the tax due where a person fails to submit a return for over 12 months and deliberately withholds information necessary for HM Revenue & Customs to assess the tax due.

Where the obligation to make a payment is annual or occasional, a penalty of 5 per cent. of the unpaid tax will be due generally one month after the payment due date, and further penalties of 5 per cent. will be due at 6 months and again at 12 months after the due date. However, as announced in the Pre Budget Report 2008, these penalties can be suspended where the taxpayer makes an arrangement with HM Revenue & Customs. The introduction of such flexibility, and the ability of HM Revenue & Customs to waive penalties, is to be welcomed at a time when an increasing number of businesses are facing difficulties in the current economic climate.

Prior to payment of the penalties, taxpayers will have the right to appeal on the basis of "reasonable excuse" although further clarification will be required on the circumstances in which HM Revenue & Customs will accept that there is a "reasonable excuse".

Publishing the names of deliberate tax defaulters

Legislation is to be included in the Finance Bill 2009 which will allow HM Revenue & Customs to publish the name and details of individuals, businesses and companies who are deemed "deliberate tax defaulters" – specifically, those who are penalised for deliberately understating tax due, or overstating claims or losses, of more than £25,000; or deliberately failing to notify HM Revenue & Customs when required to do so or deliberately committing certain VAT and excise wrongdoings, leading to a loss of tax of more than £25,000. The new legislation will not apply to deliberate defaults committed prior to the legislation becoming effective; and going forward, those who make an unprompted disclosure or a full prompted disclosure within the required timeframe in respect of a deliberate tax default will not be affected.

HM Revenue & Customs powers, deterrents and safeguards – compliance checks

Following the sweeping changes introduced in the Finance Act 2008, under which HM Revenue & Customs aligned record-keeping requirements, information and inspection powers and assessment time limits across income tax, capital gains tax, corporation tax, VAT and PAYE, a raft of measures relating to HM Revenue & Customs' powers and compliance have been included in this year's Budget. These changes further extend the 2008 framework to the environmental taxes (aggregates levy, climate change levy and landfill tax), insurance premium tax, stamp duty land tax, stamp duty reserve tax, inheritance tax and petroleum revenue tax. It is anticipated that the record keeping requirement, information and inspection powers will be brought into effect from 1 April 2010, and the time limits for assessments and claims will have effect from 1 April 2011.

The normal assessment time limits by which the amount of tax due can be changed will be reduced to, broadly, 4 years for mistakes and 20 years for deliberate understatements.

Corporate transparency – personal tax accountability of senior accounting officers of large companies

With effect for accounting reference periods beginning on or after the date that the Finance Bill 2009 receives Royal Assent, legislation will be introduced which will require large companies (or large groups of companies) which are subject to UK taxation to notify HM Revenue & Customs of the identity of their "senior accounting officer". This measure is based on the US 2002 Sarbanes Oxley Act which placed similar obligations on senior officers of US corporations. The senior accounting officer will have to take reasonable steps to establish accounting systems within his company that are adequate for the purposes of accurate tax reporting (and monitor such systems); certify annually that the accounting systems in operation are adequate for the purposes of accurate tax reporting; and specify the nature of any inadequacies and confirm that those inadequacies have been notified to the company's auditors. Where there is a careless or deliberate failure to meet these obligations, or a carelessly or deliberately incorrect certificate or notification is given, penalties (HM Revenue & Customs has suggested a penalty of £5,000) may be imposed both on the senior accounting officer personally and the company.

Reclaiming income tax, capital gains tax and corporation tax overpayments

Legislation will be introduced in the Finance Bill 2009 which will allow taxpayers to reclaim overpayments of income tax, capital gains tax and corporation tax where no other statutory route is available.

Under the new measures, there will no longer be a requirement that the overpayment must have arisen from a mistake in a tax return and have been made under an assessment; and the claimant will determine the amount to be repaid rather than HM Revenue & Customs deciding what is " just and reasonable" in the circumstances. Whilst the relaxation of the rules is to be welcomed, taxpayers should also note that the time limits for claiming a repayment will be reduced to four years from April 2010.

Interest harmonisation

Following HM Revenue & Customs' consultation documents ("Interest – Working Towards a Harmonised Regime", published in June 2008 and November 2008) and draft legislation, the rates of interest applied to overdue payments, overpayments and repayments are to be aligned for all taxes and duties administered by HM Revenue & Customs. This will take effect for all taxes from the date after the Finance Bill 2009 receives Royal Assent (with the exception of corporation tax and petroleum revenue tax, which will be addressed by legislation in the Finance Bill 2010). Due to the changes required to HM Revenue & Customs' computer systems, implementation is to be staged over a number of years.

Withdrawal of ESCs

Following the House of Lords decision in R (on the application of Wilkinson) v Inland Revenue Commissioners which made it clear that the scope of HM Revenue and Customs' administrative discretion to make concessions that depart from the strict statutory position was not as wide as was previously thought, HM Revenue & Customs has been reviewing the existing extra statutory concessions (ESCs) with a view to either withdrawing or legislating on those which are deemed to fall outside its administrative discretion (it is understood that the majority will continue to exist as ESCs as they are within HM Revenue & Customs' administrative discretion).

The Technical Note issued with the Budget 2009 materials sets out a list of ten ESCs that will be withdrawn. Nine of these are to be withdrawn on the grounds that they are obsolete, either because they are used so infrequently, or they address issues which no longer need to be addressed; however, one ESC (relating to use of the margin scheme when incomplete records have been kept) is being withdrawn on the basis that it has no basis in UK or EU VAT law and therefore must be withdrawn. Whilst this particular withdrawal will be of limited practical significance to most taxpayers, it is a reminder that HM Revenue & Customs' review of ESCs is ongoing and further withdrawals are possible.

Tax rates and allowances 2009/10

 

2009/10
£

Personal allowance (age under 65)

6,475

Personal allowance (age 65-74)

9,490

Personal allowance (age 75 and over)

9,640

Blind Person's Allowance

1,890

Married Couple's allowance*
(age less than 75 and born before 6 April 1935)

6,865

Married Couple's allowance* (age 75 and over)

6,965

Married Couple's allowance* - minimum amount

2,670

Income limit for age-related allowances

22,900

* Married Couple's allowance is given at a rate of 10%

Personal Pension Schemes

 

2009/10
£

Pension scheme earnings cap (1989 cap)

 

Pension scheme annual allowance (from 6 April 2008)

245,000

Pension scheme lifetime allowance (from 6 April 2008)

1,750,000

National Insurance Contributions

 

2009/10
£

Primary Class 1 contributions

 

Lower earnings limit (per week)

95

Upper earnings limit (per week)

844

Primary threshold (per week)

110

Secondary threshold (per week)

110

Class 2 annual small earnings exception

5,075

Class 2 rate (per week)

2.40

Class 3 rate (per week)

12.05

Class 4 contributions

 

Lower annual earnings limit

5,715

Upper annual earnings limit

43,875

Capital gains tax annual exempt amount

 

2009/10
£

Individuals etc

10,100

Most trustees

5,050

Inheritance Tax

 

2009/10
£

Individual allowance

325,000

Income tax: taxable bands*

£ per year

2009/10 £

Basic rate: 20%

0-37,400

Higher rate: 40%

Over 37,400

* The basic and higher rate income tax rates remain at 20% and 40% for 2009/2010. For 2010/2011, incomes over £150,000 will be subject to a new 50% income tax rate and the personal allowance will be gradually reduced to nil for those with an income over £100,000.

Corporation tax on profits

 

2009/10 £

Small companies' rate: 21% 1

0-300,000

Marginal relief

300,001-1,500,000

Main rate: 28%

Over 1,500,001

Stamp taxes and duties

Transfers of land and buildings (considerations paid)

Rate

Residential in disadvantaged areas

Residential outside disadvantaged areas

Non-residential

Total value of consideration

Zero

£0 - £150,000

£0 - £175,000*

£0 - £150,000

1%

Over £150,000
- £250,000

Over £175,000
- £250,000

Over £150,000
- £250,000

3%

Over £250,000
- £500,000

Over £250,000
- £500,000

Over £250,000
- £500,000

4%

Over £500,000

Over £500,000

Over £500,000

* The band for SDLT was temporarily increased to £175,000 for residential transactions falling between 3 September 2008 and 2 September 2009 and this measure was extended in the Budget 2009 to residential transactions up to and including 31 December 2009. From 1 January 2010, the band will revert to £125,000.

Footnote

1. Planned increase to 22% has been deferred until 2010.

Visit us at www.mayerbrown.com.

Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Copyright 2008. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

This article is part of a series: Click Budget 2009 - Part 1 of 2 for the previous article.
Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.