UK: The Pre-Budget Report 2009

Last Updated: 19 January 2010
Article by James Kidgell, Ben Grist and Jon Sutton

The Chancellor announced his Pre-Budget Report on 9 December 2009. It was an opportunity for the introduction of far-reaching measures to tackle the UK deficit. Instead, there were very few changes of note and Mr Darling's approach certainly appeared to be one of caution, deferring the decisions on future tax rises with an eye on the impending general election in 2010.

Here is an overview of the announcements that are likely to be relevant to our clients.

Little change to rates

Some of the most interesting points arising from the Report were the areas on which the Chancellor remained silent or did not take up the opportunity to make a change. The capital gains tax rate remains unchanged at 18%. The threshold for the 40% rate of income tax will be frozen until 2012/13. The standard rate of VAT, which will revert back to 17.5% from 15% on 1 January 2010, will not be increased any further. The small companies' rate of corporation tax will remain at 21% rather than increase to 22% as originally proposed. Perhaps surprisingly, no specific measures were introduced to prevent income being accelerated ahead of 6 April 2010 to avoid the 50% tax rate.

The only change of note in relation to rates was to National Insurance. With effect from 6 April 2011 the main rates will each increase by a further 0.5% to 13.8% for employers, 12% for employees and 9% for the self employed (which includes those trading in partnership). This represents an additional increase to the 0.5% increase already announced in the 2009 Budget.

Bankers' bonuses

The Chancellor announced a much anticipated tax on bankers' bonuses. The tax will be levied at 50% on any non-contractual bonus in excess of £25,000 paid by a bank to an employee. The tax will be payable by the bank itself rather than by the employee. The definition of bank for these purposes includes building societies and any UK- resident investment company in a banking group or financial trading company in a banking group. The definition also extends to UK branches of foreign banks. The definition may catch more institutions than might first appear to be the case and potentially includes any person authorised for the purposes of the Financial Services and Markets Act 2000 (FSMA).

The tax will take effect immediately, and may prevent banks paying bonuses to employees ahead of the introduction on 6 April 2010 of the new 50% higher rate of income tax. Interestingly, the Report indicates that the tax is effective only until 5 April 2010. Beyond that date, the Government will "consider" extending the period of charge.

Restriction of pension relief

In the 2009 Budget the Chancellor announced restrictions in relation to higher rate tax relief available on pension contributions made before 6 April 2011 by individuals earning in excess of £150,000, and to prevent abuse the Finance Act 2009 introduced anti-forestalling legislation. The Pre-Budget Report effectively extends the anti-forestalling restrictions to those individuals with gross income between £130,000 and £150,000 (excluding employer pension contributions). As detailed in the Budget, relief will only be restricted where the individual makes annual contributions in excess of the Special Annual Allowance of £20,000 (up to £30,000 in certain circumstances) and where the pattern of contributions is irregular.

Furnished Holiday Lettings

As expected, the Chancellor confirmed that the Furnished Holiday Letting legislation will be removed with effect from 6 April 2010.

Inheritance tax

The Chancellor confirmed that the current Nil Rate Band would remain at £325,000 for 2010/11, rather than increase to £350,000 as proposed in the Finance Act 2007. Furthermore, anti-avoidance legislation will be introduced to counter two specific schemes which have exploited loopholes in the current legislation.

Research & Development tax relief

Previously a company was only eligible to claim full tax relief on its research & development expenditure if the intellectual property vested in the company itself. However, with immediate effect this condition is being relaxed so that it is no longer relevant who owns the intellectual property. This should assist those companies who currently carry out qualifying work but where the intellectual property is held elsewhere, whether it be offshore or in another group company, and have not historically been eligible for the relief, other than as a contractor.

Worldwide debt cap amendments

Further to lengthy consultation with businesses it has been announced that a measure will be introduced to prevent UK companies in a worldwide group from claiming excessive tax relief on UK financing costs where these exceed the financing costs of the worldwide group. This measure will take place with effect for group accounting periods commencing on, or after, 1 January 2010.

Disclosure of anti-avoidance schemes

It was announced that the requirements to disclose anti-avoidance schemes will be extended to include Stamp Duty Land Tax (SDLT) with effect from 1 April 2010. The new rules will apply to the purchases of residential property from £1million upwards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

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.