How will business tax changes affect your business?

In the recent emergency budget there have been various changes in the business tax world - some good and some bad. Overall we’d say “phew!” it could have been a lot worse.

It is proposed to cut the main corporation tax rate from 28% to 24% by reduced it at 1% each year over the next four years. This is clearly a positive step.

Manufacturing businesses will no doubt, have to make significant purchases of plant and machinery in order give their business a competitive advantage. The news on changes to the capital allowances rules is not so good for businesses which invest significant resources into plant and machinery.

The 100% annual investment allowance expenditure limit is to be reduced from £100K to £25K from April 2012.

The rates of writing down allowances will also be reduced from April 2012.

Both these changes mean that it will take longer for businesses to gain relief. For example, for general plant the relief will be spread over 12 year (previously 10).

On a positive note, these changes only take effect from April 2012 so there is plenty of time to plan ahead and make any significant purchases sooner rather than later.

From our experience of working with businesses in the manufacturing sector, the general feeling is that they want certainty and stability. Let’s hope that the government bears this in mind over the next five years.