Budget 2005 Introduction Personal Income Tax Tax Credits National Insurance Contributions Employees Pensioners Savings Trusts Capital Gains Tax Stamp Duty Land Tax Inheritance Tax Corporation Tax Business Tax Value Added Tax Other Measures Tax Tables National Insurance

Corporation Tax Rates The rates of Corporation Tax are unchanged for the year commencing 1 April 2005 at 30% for companies with profits over £1.5m, 19% for companies with profits between £50,000 and £300,000, and zero for companies with profits up to £10,000. The same marginal rates as before apply to those with profits between £300,000 and £1.5m, and between £10,000 and £50,000. Income derived from a small company Last year, the Chancellor introduced a rule to limit the tax advantage that can be obtained by running a small business through a company, rather than through a partnership or a sole trade. He promised that this area would be kept under review, because there still is a substantial advantage for the small company. Although a consultation on possible changes was announced in December 2004, no changes were announced in the Budget, so presumably those advantages will continue at least for the next year. This means that the minimum corporation tax rate on distributed profits remains 19%. Change to IFRS Many large companies have to change their accounting policies in 2005 to comply with International Financial Reporting Standards. A change of accounting policies will affect the amount of the profits disclosed in a company's accounts. A large number of technical provisions were announced in December to deal with the tax effect of these accounting adjustments, and the Budget confirmed these rules and announced some more. Dealing with the accounting change to IFRS will be difficult enough for companies affected, and the tax rules add a further layer of complexity. Research and development In the Budget speech, the Chancellor announced an intention to improve the tax incentives available for medium-sized businesses for carrying out research and development work. At present, small and medium companies enjoy a 50% uplift in R&D expenditure for tax purposes - in effect, a tax subsidy for incurring the right sort of expenditure. Large enterprises only receive a 25% uplift. No further details of the intended improvement were given in the supporting press releases, but it appears that a consultation will be conducted to take this forward.