In his debut Budget speech, Alistair Darling paid much attention
to the UK’s tax competitiveness and asserted that the UK had a
“stable tax regime”. Following his speech, with the Budget mantra
of “stability” still ringing in our ears, HM Revenue & Customs
published a plethora of Budget notes and supplementary documents
for us to digest.This article will focus on the areas of particular
interest to the leasing industry. At the time of writing, the
Finance Bill 2008 has not been published. Most of the measures set
out below had been announced in the October 2007 Pre-Budget
Report.
As previously announced, the corporation tax rate will reduce
from 30 per cent to 28 per cent with effect from April 1 2008.
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The main rate of writing-down allowances (WDAs) for new and
unrelieved expenditure on general plant and machinery will fall
from 25 per cent to 20 per cent. The rate of WDA on longlife assets
will increase from 6 per cent to 10 per cent. Any unrelieved
expenditure in the long-life asset pool for chargeable periods
ending on or after April 1 2008 will be allocated to a new 10 per
cent “special rate” pool. This pool will also include expenditure
on integral features and thermal insulation. For companies whose
chargeable period spans April 1 2008 a hybrid rate will have effect
for unrelieved expenditure in any pool.
From April 1 2008, the integral features regime attracting WDAs
of 10 per cent per annum will be introduced. A list of assets has
been published and includes items such as electrical systems
(including lighting systems), lifts, escalators and moving
walkways. From April 2009, carbon dioxide emissions of company cars
will affect the tax relief available for businesses as well as the
tax charge on the individual. Two rates of tax relief will apply
(20 per cent or 10 per cent) for cars with CO2 emissions of 160g/km
or less/more than 160g/km.The existing 100 per cent first-year
allowance for the cleanest cars (from April 1 2008, 110g/km and
below) will continue.
The lease rental restriction for “expensive cars” will be
replaced by a new 15 per cent restriction for leased cars with CO2
emissions more than 160g/km. Some transitional measures apply.
The Budget confirmed a number of leasing-related anti-avoidance
provisions that were introduced by the Pre-Budget- Report on
October 9 2007 and in a subsequent technical note on December 13
2007.The Budget also made some further changes, which have effect
from March 12 2008. Broadly, the provisions are intended to plug
some gaps in both the non-and long-funding lease rules to ensure
the receipt of premia, or advance rentals, on the grant of a
long-funding lease fall to be taxed either as income or through the
capital allowances’ pool.
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By GlobalDataFrom April 1 2008 (for companies), the First Year Allowances (FYA)
for small-and medium-sized businesses (“SME”) at 50 per cent and 40
per cent respectively is replaced with the Annual Investment
Allowance (AIA) up to a maximum amount of £50,000 (per group) for
all businesses. The new allowance is simpler, but the new ‘blanket’
expenditure capping approach will be less beneficial for some SMEs.
The extension of this allowance for lessors is a welcome
development.
The Government will introduce legislation that will allow the
surrender of losses attributable to 100 per cent First Year
Allowance on qualifying energy saving or environmentally friendly
plant and machinery (ECAs) for a cash payment from the Government,
subject to a number of restrictions. Additionally the list of
technologies covered by the ECA schemes will be extended.
