Overview

The Finance Act 2009 amended UK tax laws, primarily concerning income tax, corporation tax, VAT, and various duties. Key changes included adjustments to tax rates, allowances, thresholds, and anti-avoidance measures across multiple sectors, impacting both individuals and businesses.

Description

Tax Rates and Allowances

The Act set income tax rates for 2009-10 (basic rate 20%, higher rate 40%) and adjusted the basic rate limit and personal allowance. It also introduced a reduction in personal allowance for those earning over £100,000 and abolished personal reliefs for non-residents. Corporation tax rates were set for the financial year 2010 (28% for standard profits, 30% for ring-fenced profits). Changes were also made to dividend and trust tax rates.

Duties

Increases and changes were made to alcohol and tobacco duties, vehicle excise duty (VED), fuel duties, air passenger duty, landfill tax, and gambling duties. Specific rates are detailed in the original bill. The act also included provisions on value-added tax (VAT) changes, such as the extension of reduced standard rate and anti-avoidance provisions.

Business Support and Tax Reliefs

The act provided temporary extensions of loss carry-back provisions, changes to first-year capital allowances for businesses, and reforms to tax relief on business expenditure on cars and motorcycles. The act also addressed the tax treatment of business expenditure on cars and motorcycles, group relief on preference shares, and sales of lessor companies.

International and Other Provisions

Amendments were made regarding the corporation tax treatment of company distributions, the tax treatment of financing costs and income, controlled foreign companies, international movement of capital, and tax treatment of offshore funds. It also included provisions about pensions, and changes to tax administration, including the introduction of an HMRC Charter. Further changes touched upon remittance basis taxation for non-domiciled individuals, employment income and benefits, and anti-avoidance measures. Specific details and dates for the implementation of changes are included in the original bill.

Government Spending

The Act's precise impact on government spending is difficult to quantify without detailed economic modelling. However, the changes to tax rates and allowances, and increased duties, likely resulted in increased tax revenue for the UK government, offset against the costs of administrative changes.

Groups Affected

• Individuals: Changes to income tax rates, allowances, and the introduction of the remittance basis changes directly affected individuals' tax liabilities, especially higher earners and non-domiciled individuals.
• Businesses: Corporation tax rates, VAT, and various duties affected businesses’ tax burden and profitability. Specific support measures were also included for certain businesses.
• Pensioners: The changes in pension scheme rules affected the tax liabilities of high-income individuals and their pension contributions.
• Oil and Gas Industry: The act introduced changes to oil and gas tax allowances, affecting companies operating in this sector.
• Financial Institutions: The act addressed aspects of financial instruments, loans, and corporate distributions, significantly affecting tax rules for banks, insurance companies, and other financial institutions.
• HMRC: The act significantly altered HMRC’s administrative functions and responsibilities.

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