Corporation tax rates
Corporation tax rates have already been enacted for periods up to 31 March 2021.
The main rate of corporation tax is 19%. The rate for the Financial Year beginning on 1 April 2020 was due to fall to 17% but the Chancellor has announced the rate will remain at 19%.
Capital Allowances: Structures and Buildings Allowance
The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax.
Enhanced Capital Allowances in Enterprise Zones
The government has announced the 100% first year allowance for investment in new plant and machinery within designated assisted areas within Enterprise Zones will remain available for expenditure incurred in relation to all areas, whenever designated, until at least 31 March 2021.
First year allowances for business cars from April 2021
The government has announced an extension to 100% first year allowances for zero-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations by four years from April 2021. CO2 emission thresholds will also be amended from April 2021. These determine the rate of capital allowances available through which the capital expenditure for business cars can be written down. The thresholds will be reduced from 50g/km to 0g/km for the purpose of the first year allowances for low CO2 emission cars and from 110g/km to 50g/km for the purpose of WDAs for business cars.
The reduction in thresholds will mean that only business cars acquired with CO2 emissions of 0g/km will be eligible for first year allowances. Ultra-low emission vehicles which currently qualify for first year allowances if 50g/km or less will no longer qualify. They will be eligible for WDAs at the main rate (18%). Cars with CO2 emissions exceeding 50g/km will be eligible for WDAs at the special rate (6%).
Research and Development (R&D) tax relief
The rate of tax credit for companies falling within the Research and Development Expenditure Credit (RDEC) scheme will rise by 1% to 13% from 1 April 2020. This relief is given as an above the line credit for companies undertaking qualifying R&D.
Budget 2018 announced that, from 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company's total PAYE and NICs liability for that year. The government has now announced the implementation of the restriction will be delayed to 1 April 2021.
The increase in the RDEC rate along with the announcements on additional funding for various R&D projects continues to show the governments commitment to assisting innovative companies in their activities. It is also welcoming to see that the proposed PAYE Cap has been delayed as well as a further consultation on the Cap to ensure that it catches abusive behaviour but doesn’t impact on eligible businesses claiming the relief that they are entitled too.
Corporation tax loss relief
Draft legislation has been issued to extend the rules that potentially limit the use of brought forward losses to include brought forward capital losses. Companies (and corporate groups) will continue to have a £5 million 'deductions allowance' before restrictions apply.
The changes will have effect where carried forward capital losses are used to offset chargeable gains accruing from 1 April 2020.
Intangible fixed assets
The government has announced an extension to corporation tax relief for intangible fixed assets. All pre-Finance Act 2002 intangible assets acquired from 1 July 2020 will come within the intangible fixed asset regime, subject to certain transitional provisions.
This measure removes a restriction that exists in relation to pre-Finance Act 2002 intangible assets that prevents some companies from claiming relief for older, well-established intellectual property rights. The change will mean that corporate intangible assets will now be relieved and taxed under a single regime for acquisitions from 1 July 2020.
Digital Services Tax
The government has confirmed a new 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. The tax only applies when the group's worldwide revenues from these digital activities are more than £500 million and more than £25 million of these revenues are derived from UK users.
The tax will apply from 1 April 2020.
The government is consulting on proposals to create up to ten freeports across the UK which would have different customs rules to those which apply in the rest of the UK.
The government is considering a UK freeport model which would include multiple customs zones located within or away from a port, as well as a type of special economic zone (SEZ) designated over or around the customs zones. The government intends to work with the devolved administrations to develop proposals to allow freeports to be created in Scotland, Wales and Northern Ireland, in addition to those in England.
The proposals include the following customs and tariff benefits for businesses bringing goods into a freeport site:
- duty suspension, with no tariffs, import VAT or excise to be paid on goods brought into a freeport from overseas until they leave the freeport and enter the UK's domestic market
- duty inversion, if the duty on a finished product is lower than that on the component parts, allowing businesses to import components duty free, manufacture the final product in the freeport, and then pay the duty at the rate of the finished product when it enters the UK's domestic market
- duty exemption for re-exports, allowing businesses to import components duty free, manufacture the final product in the freeport and pay no tariffs when the final product is re-exported
- simplified customs procedures for businesses accessing freeports.
Freeports are secure customs zones located at ports where business can be carried out inside a country's land border, but where different customs rules apply. Typically, goods brought into a freeport do not attract a requirement to pay duties until they leave the freeport and enter the domestic market. No duty is payable at all if the goods are re-exported.
Business rates have been devolved to Scotland, Northern Ireland and Wales. The government has already announced that, for one year from 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England will increase from one third to 50% and will be expanded to include cinemas and music venues. To support small businesses in response to COVID-19, the retail discount will be increased to 100% and expanded to include hospitality and leisure businesses for 2021.
The government previously committed to introducing a £1,000 business rates discount for pubs with a rateable value below £100,000 in England for one year from 1 April 2020. To further support pubs, in response to COVID-19 the discount for pubs will be increased to £5,000.
The government is launching a fundamental review of business rates to report in the autumn. A call for evidence will be published in the spring.
Time to Pay
The government will ensure that businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs.
HMRC has set up a dedicated COVID-19 helpline to help those in need, and they may be able to agree a bespoke Time to Pay arrangement. Time to Pay gives businesses a time-limited deferral period on HMRC liabilities owed and a pre-agreed time period to pay these back.
Statutory Sick Pay
The government will support small and medium-sized businesses and employers to cope with the extra costs of paying COVID-19 related SSP by refunding eligible SSP costs. The eligibility criteria for the scheme include:
- the refund will be limited to two weeks per employee
- employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020
- employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
- employers should maintain records of staff absences, but should not require employees to provide a GP fit note
- the eligible period for the scheme will commence from the day on which the regulations extending SSP to self-isolators come into force.