Budget Summary 2004

Budget 2004

Introduction

Personal Income Tax

Tax Credits

National Insurance Contributions

Employees

Pensioners

Savings

Trusts

Capital Gains Tax

Inheritance Tax

Stamp Duty / Stamp Duty Land Tax

Corporation Tax

Business Tax

Value Added Tax

Other Measures

Tax Tables

National Insurance

Value Added Tax

Registration thresholds

From 1 April 2004, the level of taxable turnover at which a business is required to register for VAT increases by £2,000 to £58,000. The level of predicted future turnover at which a business can deregister also rises by £2,000 to £56,000.

Flat rate scheme

The flat rate scheme was introduced in 2002 to simplify the affairs of small businesses. It is now available to those with taxable turnover of up to £150,000, and total turnover of up to £187,500. A flat rate trader claims no input tax on expenses (except for fixed assets costing at least £2,000 gross), but accounts for less than the usual 7/47 on receipts from customers - the lower "flat rate" depends on the type of business.

To encourage more businesses to register for this scheme, the flat rates were all reduced from 1 January 2004. This means that a flat rate trader can still receive the same amount from customers, but will pay less of it to Customs. There is a further discount for a trader who is within the first 12 months of VAT registration.

Tax Tip

Have you thought about the flat rate scheme?

Annual and cash accounting schemes

These two schemes for small companies are extended from 1 April 2004 by increasing the maximum turnover level for entry from £600,000 to £660,000. Traders within the scheme will not have to leave until turnover exceeds £825,000. The effect of leaving cash accounting - having to pay over all the VAT on debtors - will also be deferred for six months, easing cash flow for the business.

Demonstrator vehicles

Car dealers can recover the input tax on the purchase of cars to use as demonstrators. A scale rate will be introduced from a date to be announced after Royal Assent to the Finance Act (probably July 2004) to require output tax of up to £140 a year if the business allows employees to have private use of these demonstrator vehicles.

Groups of companies

Customs have redefined the conditions of eligibility for group registration. This is aimed at artificial structures established by VAT-exempt traders to obtain services without paying VAT on them, but it may also affect some joint ventures which are purely commercial in nature. The new rules only allow group registration where the companies could be consolidated in the same set of group accounts under UK accounting principles.

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