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Budget 2011: Business tax updates

The headline change for businesses in the 2011 Budget was the two per cent reduction in corporation tax, which was 1 per cent higher than the cut already announced.

Corporation tax will therefore fall by 2 per cent from April 2011, and there will be further cuts of one per cent in each of the next three years, eventually bringing the rate down to 23 per cent. There was no announcement on the small profits rate (previously known as the small companies rate) of corporation tax, so the assumption must be that the previously announced cut from 21 per cent to 20 per cent will go ahead as planned in April 2011. This may affect your decision about whether to operate as a company rather than as a sole trader or partnership.

There were no announcements on VAT, and duties on alcohol have been frozen. Duties on tobacco will rise by two per cent more than inflation. In addition, the previously announced 1p rise in fuel duty has been cancelled and there will also be no inflation-linked rise. Both rises have instead been replaced by a 1p cut in fuel duty from 18:00 on 23 March 2011.

The temporary relief from business rates through the small business rate relief scheme has been extended to October 2012. This means that firms with premises whose rateable value is up to £6,000 will pay no rates. Up to a £12,000 rateable value, there will be a tapered reduction.

The research and development tax credit for small firms has been increased from 100% to 200% from April 2012.

There will be an inflationary increase in road tax, but no increase in vehicle excise duty for HGVs from April 2011.

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