• Corporation tax small companies’ rate
• Extension of trading loss carry back for business
• Loan relationships
• UK real estate investment trusts (REITs)
• Tax relief for business expenditure on cars
• Tax on chargeable gains and stamp duty: stock lending arrangements
• Taxation of foreign dividends
• Lloyd’s corporates
• Qualifying investor schemes (QIS)
• Land remediation relief
• Change of accounting practice regulations: foreign exchange

Corporation tax small companies’ rate

• Planned increase of the small companies’ rate (SCR) of corporation tax from 21% to 22% from 1 April 2009 has been deferred until 1 April 2010 and the marginal small companies’ relief fraction profits will remain at 7/400.
• The SCR in respect of profits from oil extraction and oil rights in the UK and the UK Continental Shelf will remain at 19% from 1 April 2009 and the marginal small companies’ relief fraction for ring fenced profits will remain at 11/400

Extension of trading loss carry back for business

This measure extends the ability of businesses to carry trading losses back against profits of the three previous years (currently one year) to claim repayments of tax.

The amount of losses that can be carried back to the previous year remains unlimited. After carry back to the preceding year, a maximum carry back of £50k of the balance of unused losses is then available for carry back to the earlier two years.

The measure will have effect for company accounting periods ending in the period 24 November 2008 to 23 November 2009 only. For unincorporated businesses, the measure will have effect in relation to trading losses for tax year 2008-09.

Loan relationships

Changes are proposed to the connected party debts rules to neutralise the tax effect of a formal release of connected party trade debt. The debtor company will now not be taxable on the release. Changes to the late paid interest rules are still being considered.

UK real estate investment trusts (REITs)

Amendments will be made to the UK REIT legislation to ensure that groups of companies holding real estate as part of a wider business activity (e.g. pub chains, hotels etc.) cannot artificially split (for tax purposes) the group and place the real estate in a controlled UK REIT.

New conditions and tests to qualify as a UK REIT will be applied to the wider economic group.

Tax relief for business expenditure on cars

• The 2008 Budget announced the abolition of the current rules for ‘expensive cars’ to replace them with an environmentally based pooling system. The rate of allowances will be based on the CO₂ emissions of the car.
• Restrictions in relation to the proportion of car lease rentals that are allowable will also be based on CO₂ emissions.
• The rules will generally apply from 1 April 2009 for corporation tax and 6 April 2009 for businesses within the charge to income tax.
• From these dates the £12,000 existing restriction for purchased cars will be abolished and replaced by new rules. Qualifying expenditure from 1 April/ 6 April will be allocated to one of the two general plant and machinery pools (dependent upon CO₂ emissions).
• Expenditure on cars with emissions over 160g/km will be dealt with in a special rate pool where only 10% allowances will be available.
• Cars with an element of non-business use will continue to be dealt with in a single asset pool to enable private use adjustments but the writing down allowances (WDA) rate will be based on emissions.
• The car leasing restrictions will also be reformed. The restriction will be changed to a flat rate of 15% and will only apply to cars over the 160g/km limit (and will be limited to one lease in a chain of leases). Expenditure under leases that commenced prior to this date will continue to fall within the old rules.

Tax on chargeable gains and stamp duty: stock lending arrangements

The Finance Bill 2009 will introduce relief from tax on gains and stamp duty/ stamp duty reserve tax where, in a stock lending transaction, the lender must sell stock provided as collateral where the borrower becomes insolvent.

Taxation of foreign dividends

Reforms to the taxation of foreign dividends are proposed to be included in Finance Bill 2009. These will include an exemption for foreign dividends and a world wide debt cap. This would represent a move towards a more territorial system of taxing foreign subsidiaries. Draft legislation will be issued in the next few weeks.

Reforms to the controlled foreign companies (CFC) rules are still being considered but are unlikely to be concluded in time for Finance Bill 2010. There is a proposed 24 month transitional period in relation to bringing in an amendment as part of Finance Bill 2009 to remove the exempt activities test for holding companies.

Lloyd’s corporates

Corporate members of Lloyd’s, whose business covers volatile and uncertain risks, will now be able to obtain tax relief on setting aside amounts to cover future payments of such claims. This will be effective for profits arising in the year ended 31 December 2008.

Qualifying investor schemes (QIS)

Measures, effective on and after 1 January 2009, will be introduced to remove the specific tax charge on investors with a 10% or greater holding. All investors in a QIS will benefit from the tax regime applying to authorised investment funds, subject to a condition that investment in the QIS will not be limited to specific individuals or companies.

Land remediation relief

Legislation is to extend land remediation relief to expenditure on remediating land derelict since 1 April 1998.

The relief will be available where the land was already derelict when it was acquired by the claimant.

The relief will be available on specified expenditure such as:

• post tensioned concrete heavyweight construction;
• foundations of buildings or other structures or machinery bases;
• reinforced concrete pilecaps;
• reinforced concrete basements; or
• underground pipes or other apparatus for the supply of electricity, gas, water or telecommunications services or for drainage or sewerage.

In addition contaminated land relief will be extended for the costs of treating land contaminated by Japanese Knotweed, radon and arsenic.

Change of accounting practice regulations: foreign exchange

A measure is being brought in by the Government to adjust for what it considers to be an anomaly in the regulations regarding the taxation consequences of a change in accounting practices for financial instruments.

The measure is intended to prevent the situation arising where a company could suffer double taxation or receive double relief as a result of the amounts which were not taxed prior to a change in accounting practice. The measure will apply from 1 January 2009.