9 March 1999 Budget

Business Taxes

10% rate of corporation tax

For the year beginning 1 April 2000, corporation tax rates will change as follows:

• There will be a 10% tax rate on profits up to £10,000.
• Between £10,000 and £50,000, there will be an effedive marginal tax rate of 22.5%.
• Where profits are between £50,000 and £300,000, the tax on all profits (including profits up to £50,000) will be 20%.
• Between £300,000 and £1,500,000, there will be an effedive marginal rate of 32.5%.
• The 30% full rate of corporation tax will apply where profits exceed £1,500,000.

Capital gains of companies

There will be no changes to the way company gains are computed or taxed. However, consultation will continue on whether or not the capital gains group rules need to be updated.

Reinvestment in EIS companies

Investors in enterprise investment scheme (EIS) companies will be able to reinvest the proceeds of EIS investments in further EIS investments and benefit from cumulative taper relief will be based on both periods of ownership. Any disincentive against moving from one EIS investment to another is removed. The new relief will apply where shares in the first EIS company were issued after 5 April 1998 and are disposed of after 5 April 1999.

Capital Allowances

The period for 40% first year capital allowances for small and medium-size businesses investing in machinery or plant has been extended to 1 July 2000.

PAYE

From 6 April 1999, employers whose average monthly payments to the Inland Revenue of PAYE and NIC are less than £1,000 can pay them quarterly rather than monthly.

Taxation of reverse Premiums

Reverse premiums (ie, the sums landlords pay to induce potential tenants to take on a lease) will be taxable as income in respect of agreements made on or after 9 March 1999. This reverses a recent Privy Council decision. The tax charge will be spread over the period in which the reverse premium is recognised in the recipient's accounts. Guidance on the Inland Revenue's view on the treatment of reverse premiums for periods before 9 March 1999 will be issued shortly.

Landfill tax

The standard rate of landfill tax will rise by £1 a tonne each year from 2000 until at least 2004.

Tax credits for research and development

New tax credits will be introduced for expenditure on research and development by small and medium-size companies. The new plans will be introduced in 2000 and the Inland Revenue will be publishing a further technical note.

Corporate investment incentives

It is proposed to introduce a tax incentive in the next Budget to promote corporate venture capital investment. The Inland Revenue is issuing a technical note setting out the proposal in more detail.