- An additional 1% cut (on top of the 1% already announced) in corporation tax from April 2011. From April 2011, the main rate of corporation tax will be 26%, and it will drop by a further 1% for each of the three following years, until it reaches 23% from April 2014;
- the rate of income tax relief under the Enterprise Investment Scheme is to be increased from 20% to 30% with effect from April 2011;
- the CGT Entrepreneur's relief lifetime limit is to be doubled to £10million from April 2011.
Corporation Tax Rates
Legislation will be introduced in Finance Bill 2011 to reduce the main rate of corporation tax ("CT") to 26% for the financial year commencing 1 April 2011 and then to 25% for the year commencing 1 April 2012, 24% for the year commencing 1 April 2012 and 23% for the year commencing 1 April 2014. The main rate applies to companies and groups whose annual profits exceed £1.5 million.
As announced in the June 2010 Budget, Finance Bill 2011 will also contain legislation reducing the small companies rate of CT to 20% (from 21%) for the year commencing 1 April 2011. This will apply to companies and groups whose annual profits do not exceed £300,000.
Changes to Eneterprise Investment Scheme / Venture Capital Trusts
The Finance Bill 2011 will contain legislation to increase the rate of income tax relief for Enterprise Investment Scheme ("EIS") investments from 20% to 30%. An increase in the EIS annual investment limit from £500,000 to £1 million for shares issued on or after 6 April 2012 will be included in the Finance Bill 2012.
Also to be included in the Finance Bill 2012, and applying to shares issued after 6 April 2012, will be the following changes:
- an increase in the gross assets test from £7million immediately before the share issue and £8million immediately after, to £15million immediately before the share issue;
- an increase in the employee limit from 50 employees to 250 employees;
- an increase in the annual amount that can be invested in an individual company from £2million to £10million.
These measures are subject to State aid approval.
The Government is to consult pm further changes, including consulting on proposals to give support to companies through EIS for seed investment.
CGT Entrepreneur's Relief
With effect from 6 April 2011, the lifetime limit for entrepreneur's relief will double from £5 million to £10 million. The increased limit will apply to disposals on or after 6 April 2011. To the extent that any gains realised by the taxpayer before that date exceed the lifetime limit of entrepreneur's relief in force at the date of disposal, CGT will remain payable at the full rate of 18% / 28% on the excess, but only the £5 million of relief claimed will be set against the increased limit for future qualifying disposals.
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