UK: Budget 2009 - Part 2 of 2

Last Updated: 23 April 2009
Article by Sandy Bhogal, Michael Cashman, James Hill, Andrew Stanger and Peter Steiner
This article is part of a series: Click Budget 2009 - Part 1 of 2 for the previous article.

Originally published 23 April 2009

Please click here to read Part 1 of Budget 2009

Keywords: Budget 2009, Green tax, enhanced capital allowances, energy-saving, landfill tax, Finance Bill 2009, HM Revenue & Customs, climate change levy, penalties, late payment of tax, personal tax accountability, senior accounting officers, income tax, capital gains tax, corporation tax, overpayments, extra statutory concessions, ESCs, tax rates, allowances, personal pension schemes, National Insurance contributions, inheritance tax, taxable bands, corporation tax, Stamp taxes and duties


"Green" tax measures

Budget 2009 includes a number of measures which attempt to promote a green and carbon efficient economy.

Enhanced Capital Allowances for Energy-Saving and Water Efficient (Environmentally Beneficial) Technologies

Businesses investing in certain plant and machinery that is energy efficient, reduces water use, or improves water quality are entitled to 100 per cent. first year capital allowances in respect of capital expenditure on such items. The lists of technologies covered is being expanded from a date to be appointed.


The standard rate of landfill tax will increase by £8 to £48 per tonne. This will affect business registered for landfill tax that make any standard rated disposal on or after 1 April 2010.

Additional provisions included in the Finance Bill 2009 and associated secondary legislation will result in certain uses of material on landfill sites being subject to tax. These measures are a reaction to the Court of Appeal decision in Waste Recycling Group. These reforms also protect the investigative position of HM Revenue & Customs by providing for the introduction of secondary legislation, which would ensure that where appropriate, HM Revenue & Customs is provided with sufficient information to enable it to determine whether a taxable disposal has taken place. These arrangements will take effect from 1 September 2009.


Legislation will be introduced in the Finance Bill 2009 to entitle manufacturers of certain plastic products to claim some relief from climate change levy in respect of supplies of electricity and liquefied petroleum gas, in return for an associated reduction in their emissions and/or energy consumption. Although these measures will take effect from the date of Royal Assent of the Finance Bill 2009, they must be implemented via a climate change agreement between the relevant sector association and the Department of Energy and Climate Change. Such an agreement can only be entered into by the sector association once regulations laid by the Department of Energy and Climate Change are in force.

Reforms introduced by the Finance Bill 2009 will enable HM Revenue & Customs to recover climate change levy from any facility that has claimed relief on the basis of an anticipated reduction in its emissions and/or energy use but has failed to meet its target provided that the facility in question is in a sector that has failed to meet its sector level target for that same period. The ability of HM Revenue & Customs to reclaim climate change levy in this way will apply to climate change agreement certification periods commencing on or after 1 April 2009.

Draft regulations laid before Parliament in the Autumn will extend the climate change levy to supplies of low value solid fuel made on or after 1 January 2010.

HM Revenue & Customs – powers and processes

HM Revenue & Customs Charter

Legislation will be introduced in the Finance Bill 2009 requiring HM Revenue & Customs to prepare and maintain a Charter setting out the standards of behaviour and values to which HM Revenue & Customs will aspire in dealing with taxpayers and others, and require HM Revenue & Customs to report annually on the extent to which they meet the standards of that Charter. A number of consultation documents have been published on this area, with the latest being issued on 3 February 2009. Previous consultation documents and draft Charters have excited a great deal of debate; however, HM Revenue & Customs hopes to issue the Charter in Autumn 2009 and it is stated that this must be in place by 31 December 2009.

HM Revenue & Customs powers, deterrents and safeguards: - penalties for late filing of returns and late payment of tax

Following HM Revenue & Customs' recent consultation on penalties for the late filing of returns and the late payment of tax, the Finance Bill 2009 will introduce a new penalty regime comprising both fixed and tax-geared penalties which is broadly applicable to income tax, corporation tax, national insurance contributions, stamp duty land tax, stamp duty reserve tax, inherent tax, pensions schemes and petroleum revenue tax (similar penalties will be imposed in relation to PAYE and the Construction Industry Scheme (CIS), although these will be modified to take into account the particular circumstances relating to PAYE and the CIS). Where there is an annual or occasional obligation to file a tax return, penalties will be:

  • £100 immediately after the due date (whether or not tax has been paid);
  • daily penalties of £10 per day for a maximum of 90 days for returns that are more than three months overdue (this only applies to annual obligations);
  • penalties of 5 per cent. of tax due for the return period for prolonged failures (due at 6 months, and again at 12 months); and
  • higher penalties of 70 per cent. of the tax due where a person fails to submit a return for over 12 months and deliberately withholds information necessary for HM Revenue & Customs to assess the tax due.

Where the obligation to make a payment is annual or occasional, a penalty of 5 per cent. of the unpaid tax will be due generally one month after the payment due date, and further penalties of 5 per cent. will be due at 6 months and again at 12 months after the due date. However, as announced in the Pre Budget Report 2008, these penalties can be suspended where the taxpayer makes an arrangement with HM Revenue & Customs. The introduction of such flexibility, and the ability of HM Revenue & Customs to waive penalties, is to be welcomed at a time when an increasing number of businesses are facing difficulties in the current economic climate.

Prior to payment of the penalties, taxpayers will have the right to appeal on the basis of "reasonable excuse" although further clarification will be required on the circumstances in which HM Revenue & Customs will accept that there is a "reasonable excuse".

Publishing the names of deliberate tax defaulters

Legislation is to be included in the Finance Bill 2009 which will allow HM Revenue & Customs to publish the name and details of individuals, businesses and companies who are deemed "deliberate tax defaulters" – specifically, those who are penalised for deliberately understating tax due, or overstating claims or losses, of more than £25,000; or deliberately failing to notify HM Revenue & Customs when required to do so or deliberately committing certain VAT and excise wrongdoings, leading to a loss of tax of more than £25,000. The new legislation will not apply to deliberate defaults committed prior to the legislation becoming effective; and going forward, those who make an unprompted disclosure or a full prompted disclosure within the required timeframe in respect of a deliberate tax default will not be affected.

HM Revenue & Customs powers, deterrents and safeguards – compliance checks

Following the sweeping changes introduced in the Finance Act 2008, under which HM Revenue & Customs aligned record-keeping requirements, information and inspection powers and assessment time limits across income tax, capital gains tax, corporation tax, VAT and PAYE, a raft of measures relating to HM Revenue & Customs' powers and compliance have been included in this year's Budget. These changes further extend the 2008 framework to the environmental taxes (aggregates levy, climate change levy and landfill tax), insurance premium tax, stamp duty land tax, stamp duty reserve tax, inheritance tax and petroleum revenue tax. It is anticipated that the record keeping requirement, information and inspection powers will be brought into effect from 1 April 2010, and the time limits for assessments and claims will have effect from 1 April 2011.

The normal assessment time limits by which the amount of tax due can be changed will be reduced to, broadly, 4 years for mistakes and 20 years for deliberate understatements.

Corporate transparency – personal tax accountability of senior accounting officers of large companies

With effect for accounting reference periods beginning on or after the date that the Finance Bill 2009 receives Royal Assent, legislation will be introduced which will require large companies (or large groups of companies) which are subject to UK taxation to notify HM Revenue & Customs of the identity of their "senior accounting officer". This measure is based on the US 2002 Sarbanes Oxley Act which placed similar obligations on senior officers of US corporations. The senior accounting officer will have to take reasonable steps to establish accounting systems within his company that are adequate for the purposes of accurate tax reporting (and monitor such systems); certify annually that the accounting systems in operation are adequate for the purposes of accurate tax reporting; and specify the nature of any inadequacies and confirm that those inadequacies have been notified to the company's auditors. Where there is a careless or deliberate failure to meet these obligations, or a carelessly or deliberately incorrect certificate or notification is given, penalties (HM Revenue & Customs has suggested a penalty of £5,000) may be imposed both on the senior accounting officer personally and the company.

Reclaiming income tax, capital gains tax and corporation tax overpayments

Legislation will be introduced in the Finance Bill 2009 which will allow taxpayers to reclaim overpayments of income tax, capital gains tax and corporation tax where no other statutory route is available.

Under the new measures, there will no longer be a requirement that the overpayment must have arisen from a mistake in a tax return and have been made under an assessment; and the claimant will determine the amount to be repaid rather than HM Revenue & Customs deciding what is " just and reasonable" in the circumstances. Whilst the relaxation of the rules is to be welcomed, taxpayers should also note that the time limits for claiming a repayment will be reduced to four years from April 2010.

Interest harmonisation

Following HM Revenue & Customs' consultation documents ("Interest – Working Towards a Harmonised Regime", published in June 2008 and November 2008) and draft legislation, the rates of interest applied to overdue payments, overpayments and repayments are to be aligned for all taxes and duties administered by HM Revenue & Customs. This will take effect for all taxes from the date after the Finance Bill 2009 receives Royal Assent (with the exception of corporation tax and petroleum revenue tax, which will be addressed by legislation in the Finance Bill 2010). Due to the changes required to HM Revenue & Customs' computer systems, implementation is to be staged over a number of years.

Withdrawal of ESCs

Following the House of Lords decision in R (on the application of Wilkinson) v Inland Revenue Commissioners which made it clear that the scope of HM Revenue and Customs' administrative discretion to make concessions that depart from the strict statutory position was not as wide as was previously thought, HM Revenue & Customs has been reviewing the existing extra statutory concessions (ESCs) with a view to either withdrawing or legislating on those which are deemed to fall outside its administrative discretion (it is understood that the majority will continue to exist as ESCs as they are within HM Revenue & Customs' administrative discretion).

The Technical Note issued with the Budget 2009 materials sets out a list of ten ESCs that will be withdrawn. Nine of these are to be withdrawn on the grounds that they are obsolete, either because they are used so infrequently, or they address issues which no longer need to be addressed; however, one ESC (relating to use of the margin scheme when incomplete records have been kept) is being withdrawn on the basis that it has no basis in UK or EU VAT law and therefore must be withdrawn. Whilst this particular withdrawal will be of limited practical significance to most taxpayers, it is a reminder that HM Revenue & Customs' review of ESCs is ongoing and further withdrawals are possible.

Tax rates and allowances 2009/10



Personal allowance (age under 65)


Personal allowance (age 65-74)


Personal allowance (age 75 and over)


Blind Person's Allowance


Married Couple's allowance*
(age less than 75 and born before 6 April 1935)


Married Couple's allowance* (age 75 and over)


Married Couple's allowance* - minimum amount


Income limit for age-related allowances


* Married Couple's allowance is given at a rate of 10%

Personal Pension Schemes



Pension scheme earnings cap (1989 cap)


Pension scheme annual allowance (from 6 April 2008)


Pension scheme lifetime allowance (from 6 April 2008)


National Insurance Contributions



Primary Class 1 contributions


Lower earnings limit (per week)


Upper earnings limit (per week)


Primary threshold (per week)


Secondary threshold (per week)


Class 2 annual small earnings exception


Class 2 rate (per week)


Class 3 rate (per week)


Class 4 contributions


Lower annual earnings limit


Upper annual earnings limit


Capital gains tax annual exempt amount



Individuals etc


Most trustees


Inheritance Tax



Individual allowance


Income tax: taxable bands*

£ per year

2009/10 £

Basic rate: 20%


Higher rate: 40%

Over 37,400

* The basic and higher rate income tax rates remain at 20% and 40% for 2009/2010. For 2010/2011, incomes over £150,000 will be subject to a new 50% income tax rate and the personal allowance will be gradually reduced to nil for those with an income over £100,000.

Corporation tax on profits


2009/10 £

Small companies' rate: 21% 1


Marginal relief


Main rate: 28%

Over 1,500,001

Stamp taxes and duties

Transfers of land and buildings (considerations paid)


Residential in disadvantaged areas

Residential outside disadvantaged areas


Total value of consideration


£0 - £150,000

£0 - £175,000*

£0 - £150,000


Over £150,000
- £250,000

Over £175,000
- £250,000

Over £150,000
- £250,000


Over £250,000
- £500,000

Over £250,000
- £500,000

Over £250,000
- £500,000


Over £500,000

Over £500,000

Over £500,000

* The band for SDLT was temporarily increased to £175,000 for residential transactions falling between 3 September 2008 and 2 September 2009 and this measure was extended in the Budget 2009 to residential transactions up to and including 31 December 2009. From 1 January 2010, the band will revert to £125,000.


1. Planned increase to 22% has been deferred until 2010.

Visit us at

Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Copyright 2008. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

This article is part of a series: Click Budget 2009 - Part 1 of 2 for the previous article.
In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions