Research and development (R&D)
The rate of the tax credit for (R&D) expenditure will rise from 11% to 12% from 1 January 2018. A new advance clearance service will be piloted for claims for R&D expenditure credit, to provide pre-filing agreement for three years.
Your business might be entitled to a valuable R&D tax credit – even if it doesn’t make a taxable profit. Check out the position; you might be surprised what expenditure can qualify and how much it could be worth to you.
Corporate indexation allowance
The indexation allowance for corporate chargeable gains will be frozen for disposals from 1 January 2018 at the amount based on the retail prices index (RPI) for December 2017.
Substantial shareholding exemption
The substantial shareholding exemption legislation and the share reconstruction rules will be amended to avoid unintended chargeable gains being triggered where a UK company incorporates foreign branch assets in exchange for shares in an overseas company.
Gains on branch incorporation
An anomaly is being corrected whereby a postponed tax charge may have become payable when a new holding company was inserted directly above an overseas company, to which a UK company had previously transferred the trade and assets of a foreign branch in return for shares. The change applies to disposals from 22 November 2017.
Legislation effective from 2018/19 will clarify the circumstances where the current rules for partnerships are seen as creating uncertainty. It will reduce the scope for non-compliant taxpayers to avoid or delay paying tax. The draft legislation published on 13 September 2017 has been revised to be more compatible with commercial arrangements for allocating profit, and to avoid additional administrative burdens.
Check that you are still trading through the most appropriate vehicle for your circumstances. Incorporation makes sense for some people – but changes to dividend tax rules and NICs are altering the picture.
The disincorporation relief introduced in 2013 for five years will not be extended beyond the 31 March 2018 expiry date.
Corporate tax and the digital economy
The government has published a position paper setting out its proposed approach to addressing the challenges posed by the digital economy.
Withholding tax: royalties
Withholding tax obligations will be extended to royalty payments and payments for certain other rights that are made to low tax or no tax jurisdictions in connection with sales to UK customers. The rules will take effect from April 2019 and will apply regardless of where the payer is located.
Hybrid mismatch rules
Some aspects of the corporation tax rules that apply to arrangements involving hybrid structures and instruments – because of differences in tax treatment between two jurisdictions – will be amended to clarify how and when they apply and ensure they operate as intended.
First year tax credits
The first year tax credit scheme will be extended until the end of this parliament to encourage loss-making companies to invest in energy-efficient technology. The credit rate will be set at two-thirds of the rate of corporation tax.
Zero-emission goods vehicles
The government will extend the first year allowances for zero-emission goods vehicles and gas refuelling equipment to March/April 2021.
Company cars and vans
The company car benefit in kind diesel supplement will rise from 3% to 4% with effect from 6 April 2018, except for cars that meet the real driving emissions step 2 (RDE2) standards. The fuel benefit charge and van benefit charge will increase by the September 2017 RPI from 6 April 2018.
Air passenger duty
Short-haul air passenger duty rates for 2019/20 will remain frozen. The long-haul rate for economy passengers will be frozen at the 2018/19 levels. The charges for premium economy, business and first class will increase by £16 and will increase by £47 for those travelling by private jet.
National insurance contributions employment allowance
From 2018, HMRC will require upfront security from employers with a history of avoiding paying NICs by abusing the employment allowance, often by using offshore arrangements.
Disguised remuneration avoidance schemes used by closely held companies will be countered by the introduction of the close companies’ gateway from April 2017. All employees and self-employed individuals who have received a disguised remuneration loan will be required to provide information to HMRC by 1 October 2019.
Intangible fixed assets: related party step-up schemes
The intangible fixed asset rules will be updated with immediate effect, so that a licence in respect of intellectual property between a company and a related party is subject to the market value rule. The market value rule will also apply where consideration is not in cash.
The six-year time limit within which companies must adjust for transactions that have reduced the value of shares being disposed of in a group company, has been removed for disposals of shares or securities in a company from 22 November 2017. This is intended to ensure that any losses claimed are in line with the actual economic loss to the group.
The transitional commencement provisions have been removed with immediate effect to prevent avoidance of the legislation designed to ensure that asset managers receiving carried interest pay CGT on their full economic gain.
Corporate interest restriction
Technical amendments will be made to the corporate interest restriction rules to ensure that the regime works as intended. Some of these amendments will be backdated to 1 April 2017 and the remainder will have effect from 1 January 2018.
Extension of security deposit legislation
Existing security deposit legislation will be extended to corporation tax and construction industry scheme deductions from 6 April 2019.
Double taxation relief
From 22 November 2017, a restriction has been introduced to the relief for foreign tax incurred by an overseas branch (permanent establishment) of a company, where the company has already received relief overseas for the losses of the branch against profits that are not those of the branch. This ensures that the company does not get tax relief twice for the same loss. The double taxation relief targeted anti-avoidance rule will also be amended to remove the requirement for HMRC to issue a counteraction notice, and extend the scope to ensure it is effective.
With effect from Royal Assent to the Finance (No 2) Act 2017 on 16 November 2017, the powers giving effect to double taxation arrangements have been amended to allow implementation of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS).
Automatic enrolment pension minimum contributions increase significantly from 6 April 2018. Make certain you – and anyone you employ – are aware of the consequences.