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13 April 2011

What’s Changed?

A wealth of material was released following on from the Budget on 23 March 2011 but here are a few changes that you might not be aware of:

Spotlight on Plumbers

Plumbers, gas fitters and heating engineers who fail to declare their earnings are being targeted by the tax authorities.

Later this year, using information gained from various sources (including lists of members registered with certain plumbing federations, gas safe certifiers and other such institutions), HMRC will carry out targeted investigations aimed at those who have not disclosed their income.

The Revenue are encouraging these individuals to come forward now and register under the Plumbers Tax Safe Plan.  Under the plan, plumbers, gas fitters, heating engineers and members of associated trades who have not notified HMRC of their income have until 31 May to tell the Revenue of their intention to disclose what they owe.  Provided they then arrange for returns to be submitted and the relevant tax paid, their penalties will be limited to 20%. 

Those who continue to evade tax will face substantially more significant penalties and possibly criminal prosecution.

Disappearing ESCs

In the past, HMRC have issued Extra Statutory Concessions (ESC) on a variety of tax issues.  These ESC’s are now being phased out by either withdrawing the statement altogether or bringing it formally within the legislation.

Late Filing Concession

The previous 7 day grace period (under ESC B46), whereby HMRC would not seek to levy late filing penalties on company, employer or contractor end of year returns submitted within 7 days of their due dates, has been withdrawn with effect from 1 April 2011.  An automatic penalty will now therefore be charged where the tax return is just 1 day late.

Informal Winding up of a Company

On cessation of business, in order to avoid high professional costs, many companies opt to apply to Companies House to have their company informally struck off the Register of Companies, rather than going through a formal liquidation process. 

On the informal wind up of a company, under ESC C16, distributions issued on the striking off of a company were taxed as capital distributions (possibly attracting a tax rate of just 10%) rather than dividend distributions (which are often taxed at upwards of 25% for higher rate taxpayers).  The concession is now to be formally legislated.  However, as part of this process, it’s proposed that the distributions will only be taxed as capital if the total distributions are less than £4,000.

Distributions made under a formal liquidation process will still qualify for capital treatment.

Corporation Tax Returns and Payments

From 1 April 2011, all corporation tax liabilities must be settled electronically.  You will no longer be able to post cheques to HMRC, although it will still be possible to pay at your bank or post office or through telephone or internet banking. 

Also, all corporation tax returns must now be submitted electronically and in the correct “iXBRL” format (Word and Excel accounts will no longer be accepted). 

Where tax returns are submitted without accounts in the correct iXBRL format, HMRC will reject the tax return as ‘incomplete’, which could give rise to late filing penalties and surcharges. 

Springfords have already heavily invested in ensuring our accounts and tax software will be compliant with the new regulations.  In the first year, some manual tagging of information will be required but every effort has been made to limit the effect of this on our clients and minimise any additional costs.

Other Changes


  • The income tax personal allowance (tax free amount) is £7,475 from 5 April 2011 and this is set to increase to £8,105 from 5 April 2012.
  • There’s a new penalty regime for late filing and late payment of Income Tax.  A return filed 6 months late could now attract a penalty of more than £1,300!
  • ISA subscription limit for 2011/12 is £10,680 (of which up to 50% may be in a cash ISA)
  • From 6 April 2012, Enterprise Investment Scheme relief is rising from 20% to 30% (where qualifying individuals subscribe for new shares in qualifying trading companies).  Individuals will be able to claim relief on investments of up to £1m per annum (currently only £500,000).  The definition of a qualifying company is also to change to increase the thresholds for the size of a qualifying company (to less than 250 employees and to the company having no more than £15million of gross assets before the investment)
  • Tax relief on pension contributions is, broadly, limited to £50,000 per annum from April 2011, with charges potentially applying to those who pay more.  However, there are rules that can allow unused relief to be carried forward in certain circumstances.  Anyone expecting to make contributions of more than £50,000 should seek advice.


National Insurance

  • Class 2 National Insurance is now payable on 31 January and 31 July each year, to bring it into line with Income Tax and Class 4 National Insurance.
  • National Insurance rates have increased by 1% for employees, employers and self employed individuals.  Employers may wish to consider salary sacrifice schemes to help mitigate this.


Employment Taxes

  • A range of minor tax reliefs are being abolished, these include exemptions relating to late night taxis, luncheon vouchers and meals on “cycle to work” days.
  • Tax free mileage allowance rates have increased to 45p per mile for the first 10,000 business miles and 10p per mile thereafter.
  • The company car fuel benefit will now be calculated on the appropriate percentage of £18,800 (formerly £18,000)
  • Changes have been made to Employer Supported Childcare schemes.



  • Corporation tax rates from 1 April 2011 are 26% (main rate) and 20% (small company rate).  The main rate is falling by 1% per year to 23% by 2014.
  • Land Remediation Relief (for cleaning up contaminated ground) is expected to be withdrawn in 2012.



  • VAT registration limit increased from £70,000 to £73,000.
  • VAT scale rates (for VAT on fuel used for private motoring in business cars) are changing on 1 May 2011.
  • Capital allowances on plant and machinery are reducing from 20% to 18% from April 2012.  The Annual Investment Allowance is also reducing from £100,000 to £25,000.
  • Research & Development relief for small and medium sized enterprises is up from 175% to 200% and is set to increase to 225% from April 2012.
  • Business Premises Renovation Allowances have been extended to allow claims for expenditure incurred before 5 April 2017.
  • Allowances for industrial buildings, hotels and agricultural buildings have been phased out over the last few years and have now been abolished altogether.


HMRC are also considering

Legislation that would remove the block on the recovery of VAT charged on business entertaining where the entertaining is provided to an overseas customer and is of a kind and on a scale reasonable to the circumstances.

  • Merging income tax and national insurance into one single regime.
  • A statutory residence test to give a clear definition of tax residence for individuals.
  • Plans to introduce changes to the capital allowances fixtures regime, in particular, that businesses must claim allowances on fixtures in a building within a short period of acquiring the building.


If you would like any further advice on any of the above, or on any other tax matter, please contact Pamela Berry,, or any member of the tax team at Springfords.

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