Corporation tax rates
As previously announced, the rate of corporation tax will fall to 19% from April 2017 and to 17% in 2020.
Tax treatment of appropriations to trading stock
Businesses with loss-making capital assets will not be able to obtain a tax advantage by converting them into more flexible trading losses. The changes take effect from 8 March 2017.
Tax simplification for cash basis
The entry threshold for the cash basis of assessment will be increased to £150,000 and the exit threshold will rise to £300,000. The rules on capital and revenue expenditure within the cash basis will be simplified to make it easier for businesses to work out whether their expenditure is deductible for tax.
Research and development tax review
There will be administrative changes to the research and development (R&D) expenditure credit to increase the certainty and simplicity around claims and improve awareness of R&D tax credits among SMEs. The competitiveness of the UK environment for R&D will be kept under review.
Withholding tax on interest
The government will renew and extend the administrative simplifications of the Double Taxation Treaty Passport scheme to assist foreign lenders and UK borrowers, and to make it easier for businesses to raise finance. The scheme simplifies access to reduced withholding tax rates on interest available under the UK’s tax treaties with other countries.
After consultation in spring 2017, there will be a new exemption from withholding tax for interest on debt traded on a multilateral trading facility, removing a barrier to the development of UK debt markets.
Patient capital review
The review aims to ensure that high growth businesses can access the long-term capital that they need to fund productivity-enhancing investment. As well as identifying barriers to institutional investment in long-term finance, the review will consider existing tax reliefs aimed at encouraging investment and entrepreneurship.
Reform of the Substantial Shareholding Exemption
The Substantial Shareholding rules will be simplified, as announced at Autumn Statement 2016. The investing company requirement within the Substantial Shareholding Exemption will be removed and there will be a more comprehensive exemption for companies owned by qualifying institutional investors. The changes will take effect from 1 April 2017.
Loss relief reform
The rules governing carried forward losses will be reformed with effect from 1 April 2017, as announced at Budget 2016. The change will give all companies more flexibility by relaxing the way in which they can use losses arising on or after 1 April 2017 when they are carried forward. These losses will be useable against profits from different types of income and the profits of other group companies. The measure will also restrict the use of losses carried forward by companies, so that they cannot reduce their profits arising on or after 1 April 2017 by more than 50%. This restriction will apply to a company’s or group’s profits above £5 million and carried forward losses arising at any time will be subject to the restriction.
Northern Ireland corporation tax
Northern Ireland corporation tax will be amended, as announced at Autumn Statement 2016, to give all SMEs trading in Northern Ireland the potential to benefit from any changes. Other amendments will minimise the risk of abuse.
Corporation tax – hybrids and other mismatches
Two minor changes will be made to the hybrid mismatch regime as announced at Autumn Statement 2016.
Corporation tax relief for museums and galleries
From 1 April 2017, there will be a new tax relief for museums and galleries that develop new exhibitions, including those that are toured. As announced at Autumn Statement 2016, the rates for the relief will be 25% (worth up to £100,000) for touring exhibitions and 20% (maximum £80,000) for non-touring exhibitions.
Corporation tax deduction for contributions to grassroots sport
With effect from 1 April 2017, the circumstances in which companies can get deductions for contributions to grassroots sport will be expanded, as announced at Autumn Statement 2015. The treatment of a sport governing body is extended to its 100% subsidiaries.
Patent Box – cost sharing arrangements
Specific provisions will be added to the revised Patent Box rules introduced in Finance Act 2016. These will cover cases where R&D is undertaken collaboratively by two or more companies under a cost sharing arrangement. The changes, previously announced in Autumn Statement 2016, will take effect from 1 April 2017.
Tax deductibility of corporate interest expense
With effect from 1 April 2017, there will be a limit on the tax deductions that companies can claim for their interest expenses, as announced at Budget 2016. The new rules will restrict each group’s net deductions for interest to 30% of earnings before interest, tax, depreciation and amortisation (EBITDA) that is taxable in the UK. An optional group ratio rule, based on the net-interest to EBITDA ratio for the worldwide group, may permit a greater deduction in some cases. The existing debt cap will be replaced by a modified debt cap, which will ensure that the net UK interest deduction does not exceed the total net interest expense of the worldwide group.
All groups will be able to deduct up to £2 million of net interest expense per year, so groups below this threshold will not need to apply these rules. The draft legislation previously published is being amended so that the rules do not give rise to certain unintended consequences or impose unnecessary compliance burdens.
As announced at Autumn Statement 2016, the government will publish a response document and draft legislation to clarify and improve aspects of partnership taxation.
Large business risk review
HMRC will consult with businesses and interested parties for 12 weeks over the summer on its process for risk profiling large businesses and for promoting stronger compliance.
Plant and machinery leasing
The government will consult in summer 2017 on the legislative changes required following the announcement of the International Accounting Board’s new leasing standard, IFRS16, which comes into effect on 1 January 2019.
Enterprise Management Incentives
The government will seek state aid approval to extend provision of this tax relief beyond 2018.
Insurance premium tax
The standard rate of insurance premium tax (IPT) will rise to 12% from 1 June 2017 as announced at Autumn Statement 2016. Anti-forestalling provisions will be introduced.
The inheritance tax residence nil rate band comes into existence on 6 April. Make sure your estate planning is reviewed to take account of this important change, which could save your beneficiaries up to £140,000 in tax.
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 can qualify and how much it could be worth to you.
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.
National insurance contributions for the self-employed will change from April 2018. Take advice now for possible ways to counter the effects of this reform.