Numerico Chartered Certified Accountants

The 2011 Budget confirmed that the IR35 rules won’t be scrapped.  Iinstead the administration of the system is to be improved. Spo what does this mean for your business?

The IR35 rules were introduced a decade ago to stop PAYE tax and NI dodging by running businesses through a limited company or partnership. If your company or partnership provides services, anything from property maintenance to staff training, then you need to consider the IR35 rules. These can impose PAYE tax and NI on your freelance income where it’s provided under conditions which would normally be considered an employment.

It was predicted to be a quiet Budget but instead it turned out to be full of surprises. So are they good or bad news for your business?

Corporation Tax cut.  Mr Osborne created a stir by cutting the main rate for Corporation Tax (CT) by an extra 1%. It was due to drop 1% to 27% from April 1, but it will now fall to 26%. It sounds good but in practice it only benefits companies whose profits exceed £300,000 per year. Those with lower profits are left with the pre-announced cut of 1% in the small profits rate to 20%.

Car mileage allowances increased.  From 6th April 2011 the Approved Mileage Allowance Payments (AMAPs) will increase for the first time since 2002/3. Businesses will now be allowed to pay up to 45p per mile tax and NI-free to employees, and directors, who use their own cars for business.
This will increase the tax advantages of employee car ownership schemes and similar arrangements so if you haven’t considered these before, now might be the right time.

Merger of taxes. It’s been announced that income tax and NI will be merged.  It will mean major changes for all employers; however it will be a couple of years or longer before the new all-in-one system will come into force. In any case it may well be a good thing as it will cut red tape for employers. We’ll update you on any future developments.