Welcome to the May 2010 Newsletter from Connolly Accountants Ltd

Following a period of political turmoil, which was finally resolved with a coalition agreement between the Conservatives and Liberal Democrats, the new Government has outlined its priorities for the coming years. These include a raft of changes to business and personal taxation, as well as plans to make £6 billion worth of spending cuts during this financial year. In the wake of this month's historic power-sharing deal, business leaders have urged the Prime Minister David Cameron to make tackling the UK's fiscal deficit a top priority.

Meanwhile, the newly appointed Chancellor of the Exchequer, George Osborne, has promised to lower the headline rate of corporation tax as part of a major reform of the regime. He revealed that the coalition was committed to creating the most competitive corporate tax regime in the G20. The five-year plan for reform will be outlined in the Chancellor's 'emergency Budget', which will take place on 22 June.

We will be publishing a comprehensive summary of the Budget – please visit our site regularly for all the latest announcements.


Business urges new Government to reduce the deficit

As the Prime Minister David Cameron began the process of shaping his Cabinet, business leaders called on the new Government to concentrate its efforts on reducing the deficit.

The Confederation of British Industry (CBI) welcomed the news of a coalition agreement between the Conservatives and Liberal Democrats.

CBI Director-General Richard Lambert commented: 'Business wants to see a stable Government with the authority to take the tough decisions that will be required to keep the economic recovery on track and to get a grip on the fiscal deficit'.

Meanwhile, the British Chambers of Commerce (BCC) echoed the CBI's call for the Government to make restoring fiscal stability its top priority.

Reiterating the BCC's request for the Government to deliver a 'clear and achievable plan for business' within 90 days, BCC Director-General David Frost said: 'The Conservative-led coalition must be absolutely clear about where spending cuts will fall, and about the need to curb relentless growth in the size and cost of the public sector'.

As part of the coalition agreement a number of proposed measures affecting business and personal taxation have been outlined. These include:

  • over £6bn of spending cuts for the financial year 2010/11, as part of a bid to reduce the structural deficit
  • the scrapping of part of the planned rise in national insurance contributions
  • plans to increase the income tax threshold for lower and middle income earners, with the long-term aim of increasing the personal allowance to £10,000
  • plans to tax non-business capital gains at rates similar to those applied to income
  • restoring the earnings link from April 2011, with pensions being raised by the higher of earnings, prices, or 2.5%. The default retirement age is also set to be phased out.
  • the scrapping of plans to introduce a 'mansion tax.'

Other plans include replacing Air Passenger Duty with a per-flight duty, introducing transferable tax allowances for married couples, scrapping the Child Trust Fund and reducing tax credits for higher earners. Plans to increase the IHT threshold look set to be put on hold.

The newly appointed Chancellor George Osborne will hold an emergency Budget on 22 June. The new Office for Budget Responsibility will also provide the forecasts for the economy and public finances alongside next month's statement, which will be the first Budget of the new coalition Government.

The full coalition agreement can be viewed here.


Osborne pledges corporate tax reform

Chancellor George Osborne has pledged to cut the headline rate of corporation tax in an effort to tempt multinational businesses back to the UK.

Speaking at the CBI's annual dinner, Osborne revealed that he will set out a 'five year road for a big reform of corporation tax' in the emergency Budget next month.

He added that the coalition was committed to creating the most competitive corporate tax regime in the G20.

'We will reform the corporate tax system by simplifying reliefs and allowances, and tackling avoidance, in order to reduce headline rates,' he said. 'And I want to help new businesses by abolishing employers' national insurance contributions on the first ten jobs they create.'

Osborne concluded his speech by declaring that 'Britain is once again open for business.'

Experts have calculated that a 3% reduction in the corporation tax rate would cost the Treasury some £4.5 billion a year, revenue that the Chancellor hopes to recoup through allowance cuts and a crack down on tax avoidance.

Responding to the speech, Miles Templeman, Director-General of the Institute of Directors, said: 'To cut the headline rate of corporation tax by reducing capital allowances is a sensible simplification of the tax system and would support the broad business interest, all at little or no cost to the Exchequer.'

We can provide advice on how you may be able to minimise your tax liability – please contact us for more information.


ESSENTIAL TAX DATES AND DEADLINES

31 May: Last day to issue 2009/10 P60s to employees.

30 June: End of CT61 quarterly period.

Last day for UK businesses to reclaim EC VAT chargeable in 2009.

Annual adjustment for VAT partial exemption calculations (March VAT year end).

For more information on key tax dates and deadlines, visit our 2010/11 Tax Calendar.


QUOTE OF THE MONTH

'[This coalition] can be an historic and seismic shift in our political landscape. It can demonstrate in Government a new progressive partnership, believing in enterprise, markets and fiscal responsibility'.

Prime Minister David Cameron outlines the significance of the coalition agreement at a joint press conference with Deputy Nick Clegg.


WEBSITE OF THE MONTH

www.number10.gov.uk

The official site of the Prime Minister's Office, including the latest news and speeches from the coalition Government.


ON OUR WEBSITE

Essential information for business owners

For advice on all aspects of owning and running a business, visit our Business Guides.

The latest tax information

View the 2010/11 tax rates and allowances, plus a host of other tax information here.

Business reacts to £6bn spending cut plans
The new Government has set out details of the public spending cuts it intends to implement in the current financial year, in order to begin reducing the budget deficit.
Click here for the full story

CGT hike would hit an 'extra one million investors'
Proposals by the new Government to increase capital gains tax (CGT) in line with income tax rates could mean that more than a million extra people will be liable to pay the tax, according to some financial experts.
Click here for the full story

Study reveals 'fall in company pension scheme membership'
The proportion of people with an employer-provided pension scheme has fallen significantly in recent years, according to data from the Office for National Statistics.
Click here for the full story

New Government 'set to increase VAT'
The rate of Value Added Tax is set to increase under the new Government, according to a recent study.
Click here for the full story

Boiler scrappage scheme 'proves a success'
The Government's boiler scrappage scheme has proved to be a popular measure, with all of the vouchers available to English households having been claimed by 26 March.
Click here for the full story