I. ICAI Press Release

Strategic Direction of Chancellor's Pre Budget Statement can only assist the Northern Ireland economy – ICAI

The Institute of Chartered Accountants in Ireland (ICAI) said today that the steps outlined by the Chancellor should make a real difference as we all work against the stagnation setting in to the economy.

“Mr Darling's aim seems to be the freeing up of money within the economy to boost consumer confidence and demand, while firmly skewing the benefits towards the lower waged” said Mr Eamonn Donaghy, Chair of the ICAI Northern Ireland Tax Committee. “Equally however, he has not overlooked specific measures to help the corporate sector, which is the engine of employment and economic growth.”

“In particular, the deferral of the increase in the rate of Corporation Tax for small companies along with the spreading of tax payments will be of direct relevance and assistance to Northern Ireland industry” Mr Donaghy continued. “ICAI has long been an advocate of the benefits of a low Corporation Tax rate as a key factor in achieving economic growth and this is certainly a step in the right direction.”

Commenting on the pre Budget Statement, Mr Kevin MacAllister, Chair of the Ulster Society of Chartered Accountants said that it was vital for business to respond positively to the measures introduced, and that his members would not be found wanting in this respect.

“Chartered Accountants will have a key role to play in advising and assisting business in availing of the new tax payment arrangements and funding opportunities which have been announced. Also it is essential to ensure that the reduction in the VAT Rate to 15%, which applies from next Monday, is passed on with immediate effect. Not only will this benefit the consumer, but it will benefit all business because of the positive cashflow implications for purchasers and suppliers alike.”

ICAI has already been in contact with HMRC in connection with the administrative issues arising from the pre Budget Report, and will work with the authorities in implementing the new schemes and arrangements.

II. Commentary on Specific Provisions

(i) Extension of loss relief.

In brief summary, for accounting periods ending between 24 November 2008 and 23 November 2009 it is proposed to extend the carry back to three years, with losses to be set first against profits of most recent years before carry back to earlier years.

No change is proposed to the current one year unlimited carry back of trade losses, however, for the extended relief, the amount of loss that can be carried back to the earliest two years of the extended period is to be capped at £50,000 in total. If a loss making accounting period in question is less than 12 months the £50,000 cap will be reduced pro rata.

Detailed notes on the enhanced relief are available at
http://www.hmrc.gov.uk/pbr2008/loss-relief-583.pdf.

(ii) Business Payment Support Service

In correspondence with the Institute in the week that the Pre Budget Report was made, HMRC have stressed that they want to encourage businesses to use this new service. They comment:

The service will be accessible via our website, with a support line for those businesses that have current or imminent tax debts that they are unable to pay in full and for which there is no existing payment arrangement in force. The Support Line will be open seven days a week (from 8 till 8 on weekdays and 8 till 4 at weekends). This will give businesses a fast and streamlined service for arranging to pay their HMRC tax bill to a timetable they can afford. In addition to this HMRC will offer further practical help by not adding any additional late payment surcharges to these time to pay arrangements.

It is important to note however that this Support Line is for new enquiries only. If we have already contacted the customer about an overdue payment or if they already have a payment arrangement with us they should call the office which originally contacted them.

The number for the Business Payment Support Line is 0845 302 1435.

(iii) Corporation Tax Small Companies’ Rate

The planned increase of the small companies’ rate (SCR) of corporation tax from 21 per cent to 22 per cent from 1 April 2009 has been deferred until 1 April 2010. Further details are available at
http://www.hmrc.gov.uk/pbr2008/pbrn2.pdf.