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Budget 2009: business tax – help for loss-making firms

The Chancellor has extended a scheme aimed at helping loss-making firms ease their cashflow worries by enabling them to reclaim taxes paid on profits during the last three years.

The scheme was introduced in the pre-Budget Report, and it has now been extended to November 2010 (from 24 November for companies and for the 2008/09 and 2009/10 tax years for unincorporated businesses). Mr Darling said that average repayments could be worth up to £4,000.

In an effort to encourage business investment in new equipment, the Chancellor announced a temporary 40 per cent first-year capital allowance rate for expenditure on plant and machinery. This is a doubling of the level of tax relief available and takes effect from April 2009.

The Business Payment Support Service, set up in the pre-Budget Report to allow firms that are struggling with their tax bills to arrange more manageable payment timetables with HM Revenue and Customs, is being extended.

Where a viable business is due to pay tax on the previous year’s business profits and is likely to make a trading loss in the current year, those losses can be taken into account when agreeing the level of payments to be made.

As expected, the planned increase in the rate of corporation tax for companies with profits of less than £300,000 – from 21 per cent to 22 per cent – has been delayed until April 2010.

The Treasury confirmed an announcement made by the Chancellor in March that firms can spread the latest 5 per cent increase in business rates over three years. Businesses that have been affected by sudden increases in their rates as a result of the ending of the transitional relief scheme will also be able to spread the rise in their payments over three years.

The Chancellor did announce, however, that fuel duty will increase by 2p per litre in September and by 1p a litre above inflation each April for the next four years.

The standard rate of VAT will return to its old level of 17.5 per cent on 1 January 2010, while the registration threshold will rise to £68,000 as of 1 May 2009.

With CO2 emissions now falling in many newer cars, the emissions thresholds for the main company car tax bands are to be shifted down by 5g CO2 per km. The £80,000 cap on company car list prices, used for calculating company car benefit, is to be scrapped.