Business - R&D expenditure credit raised
The annual investment allowance will remain at £200,000 for 2018/19 and 2019/20. The main rate and special rate writing down allowance on plant and machinery will be 18% and 8%, respectively.
The 100% first-year allowance for businesses purchasing zero-emission goods vehicles or gas refuelling equipment will be extended for a further 3 years.
For zero-emissions goods vehicles, the scheme will end on 31 March 2021 for corporation tax and 5 April 2021 for income tax.
For gas refuelling equipment, the scheme will end on 31 March 2021 for both corporation tax and income tax.
The list of technologies and products covered by the energy saving first-year allowances has been updated. It adds 3 new products, which include evaporative air coolers, saturated steam to electricity conversions and white LED lighting modules to the list. The measure also modifies 9 and removes 2 items from the list.
The scheme allows 100% of the cost of an investment in qualifying plant and machinery to be written off against the taxable income of the period in which the investment was made.
R&D expenditure credit
From 1 January 2018, the rate of tax relief available to companies that carry out qualifying R&D and claim the research and development expenditure credit (RDEC) will increase from 11% to 12%.
The RDEC is a standalone and above the line credit that is brought into account as a receipt in calculating profits, which allows companies to claim an enhanced corporation tax deduction or payable credit on their R&D costs.
Company van benefit and fuel benefit charge
From 6 April 2018, the van benefit charge will increase from £3,230 to £3,350 and the van fuel benefit charge will increase from £610 to £633.
Company car fuel benefit and company car diesel supplement
Employees provided with fuel for private mileage in a company car will see the value of the multiplier used for calculating the cash equivalent of the fuel benefit increase from £22,600 to £23,400. This measure will apply on and after 6 April 2018.
The diesel supplement used to calculate the company car benefit and company car fuel benefit will increase from 3% to 4% for all diesels cars registered on or after 1 January 1998 that do not meet real driving emissions step two standards.
The maximum appropriate percentage applied for cars, including any diesel supplement, will remain at 37%.
Annual tax on enveloped dwellings
The annual chargeable amounts for the annual tax on enveloped dwellings (ATED) will increase in line with inflation for the 2018/19 chargeable period, which begins on 1 April 2018.
The increase will see the annual chargeable amount for a property with a value in the range of £500,001 to £1m rise from £3,500 a year to £3,600 a year.
Corporation tax rate
The main rate of corporation tax will remain at 19% from 1 April 2018.
Removal of capital gains indexation allowance
For a capital gain made on or after 1 January 2018, the indexation allowance which is applied in order to determine the amount of the chargeable gain will only be calculated up to December 2017.
This change means that for disposals made after this date, the indexation will no longer be calculated up to the month in which the disposal of the asset occurs.
Amendments to corporate interest restriction rules
The corporate interest restriction rules for large companies which incur net interest expense and other financing costs above £2m a year will be amended.
A number of technical changes will be made, with some having effect from 1 April 2017 when the corporate interest relief restriction rules commenced. The remainder will have effect from 1 January 2018.
Some of these measures include amendments to:
- the calculation of group-EBITDA to align the treatment of R&D expenditure credits with the approach taken in the calculation of the tax-EBITDA
- the infrastructure rules to ensure insignificant amounts of non-taxable income do not affect their operation
- the definition of a group to align it with accounting standards and to ensure asset managers do not cause unrelated businesses to be grouped together.
- Double taxation relief and permanent establishment losses
- Legislation will be introduced to restrict the amount of credit allowed or deduction given for foreign tax where the company has received relief for losses against non-permanent establishment profits in the foreign jurisdiction.
The purpose of the policy is to ensure that relief for foreign tax is only given where profits have been taxed both in the UK and the foreign jurisdiction.
The measure will have effect for accounting periods ended on or after 22 November 2017 with a transitional rule applying for accounting periods that straddle 22 November 2017.
A variety of other complex corporation tax changes were introduced which legislate to ensure:
- technical changes are made to the hybrid and other mismatches regime
- license arrangements between a company and a related party in respect to intangible fixed assets are subject to the market value rule
- all activities by UK petroleum license holders that give rise to tariff income in relation to UK oil and gas assets are subject to ring fence corporation tax and supplementary charge
- the time limit of 6 years within which companies must adjust for any depreciatory transactions is removed when claiming a capital loss on disposal of shares in a group company
- an anomaly is corrected whereby a postponed tax charge may become payable when a new holding company is inserted directly above an overseas company to which a UK company has previously transferred trade and assets of a foreign branch in return for shares.
Partnership taxation: proposals to clarify tax treatment
To provide more clarity over aspects of the taxation of partnerships, a number of measures have been proposed, affecting:
- partners in nominee or bare trust arrangements
- partnerships with partnerships as partners
- investment partnerships
- partnerships that are partners in another partnership.
- off-payroll working reform
- the government will consult in 2018 on tackling non-compliance with the intermediaries' legislation (commonly known as IR35) in the private sector.
The purpose of the legislation is to ensure individuals who effectively work as employees, but structure their work through a company, are taxed as employees.
The consultation will explore the possibility of extending the recent public sector reforms to the private sector.
The government will not extend disincorporation relief beyond the current 31 March 2018 expiry date.
Employer-provided electricity at workplace charging points for electric and hybrid cars owned by employees will be exempt from being taxed as a benefit in kind from April 2018.
From 6 April 2018, the government will allow employees on maternity and parental leave to take a pause of up to 12 months from saving into their save-as-you-earn employee share scheme, which is an increase from the current limit of 6 months.
With effect from April 2019, employers will no longer be required to check receipts when making payments to employees for subsistence using benchmark scale rates.
Employers will still be required to ensure employees are undertaking qualifying business travel.
Major reforms were announced to business rates worth approximately £9bn by the end of this parliament. There are a number of measures, which include:
- bringing forward the planned switch in indexation from RPI to CPI to 1 April 2018
- continuing the £1,000 business rate discount for public houses with a rateable value of up to £100,000, subject to state aid limits for businesses with multiple properties, for 1 year from 1 April 2018
- legislating retrospectively to address the so-called ‘staircase tax' to enable affected businesses to ask the Valuation Office Agency to recalculate valuations so bills are based on previous practice backdated to April 2010
- moving to revaluations every 3 years following the next revaluation, which is currently due in 2022.
Withholding tax: royalties
From April 2019, withholding tax obligations will be extended to royalty payments, and payments of certain other rights, made to low or no tax jurisdictions in connection with sales to UK customers. This measure will apply regardless of where the payer is located.
Investment through venture capital trusts
A series of measures are announced which are intended to ensure that tax-advantaged venture capital trusts (VCTs) continue to focus on long-term investment in higher-risk companies.
These measures change certain rules on investments made by VCTs that will:
- insert a final date of 6 April 2018 in relation to the applicability of certain ‘grandfathering' provisions
- double the time VCTs have to reinvest gains from investments from 6 to 12 months
- require 30% of funds raised in an accounting period to be invested in qualifying holdings within 12 months after the end of the accounting period
- require qualifying loans to be unsecured and ensure returns on loan capital above 10% represent no more than a commercial return on the principal
- increase the proportion of VCT funds that must be held in qualifying holdings from 70% to 80%.
Venture capital schemes relevant investments
The definition of a ‘relevant investment' is amended to ensure that all investments, including all risk finance investments made before 2012, are counted towards the lifetime funding limit for companies receiving investment under tax advantaged venture capital schemes.
The limit is £12m for most companies and £20m for knowledge-intensive companies.
This measure will affect companies, social enterprises, fund managers and individuals using the enterprise investment scheme (EIS), VCTs and social investment tax relief. The changes will apply to qualifying investments made on or after 1 December 2017.
Contact us to discuss how Autumn Budget 2017 may affect you.