Overview

The Finance (No. 2) Act 2010 primarily adjusted various tax rates in the United Kingdom, impacting corporation tax, capital gains tax, value-added tax (VAT), and insurance premium tax. It also included provisions related to pensions, MP expenses, and corporation tax regulations concerning accounting practices and insurance business transfers.

Description

The Act made several key changes:

• Corporation Tax: Reduced the main rate for the 2011 financial year from 28% to 27%.
• Capital Gains Tax: Amended the rates of capital gains tax, introducing different rates based on income levels and the type of gain.
• Value Added Tax (VAT): Increased the standard rate from 17.5% to 20% (effective from January 4, 2011) and introduced a supplementary charge to address VAT on supplies spanning the date of the VAT rate change. This supplementary charge applied to supplies over £100,000 with specific conditions.
• Insurance Premium Tax: Increased both the higher and standard rates.
• Pensions: Shifted the application of certain pension rules from age 75 to age 77 for individuals reaching 75 after June 22, 2010.
• MP Expenses: Introduced amendments to the rules concerning taxability of expenses and allowances paid to Members of Parliament (MPs).
• Corporation Tax (Accounting): Amended rules about how companies account for certain transactions.
• Insurance Companies: Introduced new rules for business transfers involving excess assets for non-profit insurance funds.

Government Spending

The increased VAT rate and changes to other tax rates were expected to increase government revenue. Precise figures for the overall impact on government spending were not provided in the act itself. The changes aimed to generate more tax revenue.

Groups Affected

• Businesses: Changes to corporation tax, VAT and insurance premium tax directly affected businesses' tax liabilities. The changes to corporation tax rules regarding accounting practices impact certain company transactions.
• Individuals: Changes to capital gains tax, income tax (MP expenses), and insurance premium tax affected individual tax liabilities. Pension rules changes impact those nearing retirement.
• MPs: New rules on their expenses and allowances altered their tax liabilities.
• Insurance Companies: New regulations for business transfers involving excess assets impacted their tax planning.

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