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Business Tax Changes for 2011

The main rate of VAT was increased to 20 per cent from 4 January 2011. Rates and thresholds for the flat-rate scheme were also increased.

The zero-rate categories (basic foods, children’s clothes, books, etc) and the reduced 5 per cent rate on domestic fuel are unchanged.

The Annual Investment Allowance (AIA) will be increased to £100,000 for expenditure from 6 April 2010, but is being reduced to £25,000 from 6 April 2012.

Also from April 2012, capital allowance writing down allowances are being cut to 18 per cent for your main pool (currently 20 per cent) and 8 per cent for your special rate pool (currently 10 per cent). There have been some changes to the items eligible for 100 per cent first-year capital allowances for environmentally beneficial spending (see www.eca.gov.uk).

A 100 per cent first-year allowance was introduced for new zero-emission goods vehicles purchased between 6 April 2010 and 5 April 2015 inclusive, but firms in the fisheries, aquaculture and waste management industries are excluded.

From October 2010, there is a temporary (one-year) relief from business rates through the small business rate relief scheme. 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.

From April 2011, employers operating PAYE with a history of serious non-compliance can be asked to put up security and face criminal fines of up to £5,000 if they refuse.

The small profits rate (previously known as the small companies rate) of corporation tax will be cut to 20 per cent from 21 per cent in April 2011. This may affect your decision about whether to operate as a company rather than a sole trader or partnership. The main rate of corporation tax will also be reduced from 28 per cent to 27 per cent.

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