Business tax

Corporation tax rate

The main rate of corporation tax will be 20% from 1 April 2015, as previously announced, and will stay at 20% for the financial year starting on 1 April 2016.

Annual investment allowance

The temporary £500,000 annual investment allowance comes to an end on 31 December 2015. The Chancellor said that a reduction to £25,000 from 1 January 2016 “would not be remotely acceptable” and it would be set “at a much more generous rate” in the Autumn Statement 2015.

Farmers’ averaging

The government will extend the period over which self-employed farmers can average their profits for income tax from two years to five years from April 2016. The details will be subject to consultation.

Research and development (R&D) tax credits

The above-the-line R&D credit will rise from 10% to 11% and the rate of relief for the SME scheme will rise from 225% to 230%. Qualifying expenditure for R&D tax credits will be restricted so that the costs of materials incorporated in products that are sold are not eligible for the relief. These measures were announced in the Autumn Statement 2014 and will take effect from 1 April 2015.

The government will introduce a facility for smaller businesses to receive voluntary advanced assurances lasting three years when making a first claim from autumn 2015 and will reduce the time taken to process a claim from 2016.

Television, film and orchestra corporation tax reliefs

The government will ‘modernise’ the cultural test for high-end television tax relief and reduce the minimum UK expenditure requirement for all television tax reliefs from 25% to 10% from 1 April 2015. As announced in the Autumn Statement 2014, there will be a new tax relief for the production of children’s television programmes from 1 April 2015. The rate of film tax relief will increase to 25% for all qualifying expenditure from 1 April 2015 subject to state aid clearance. Tax relief for orchestras at 25% will be provided from 1 April 2016.

Goodwill

Corporation tax relief will be restricted on goodwill associated with a business that a company acquires from a related individual or partnership from 3 December 2014, as announced in the Autumn Statement 2014.

Diverted profits tax

A new tax on diverted profits (which some refer to as the ‘Google tax’) will be introduced from 1 April 2015, as announced in the Autumn Statement 2014. The draft legislation has been revised to narrow the notification requirement and some other changes have been made.

Consortium relief

All requirements relating to the location of the link company for consortium claims to group relief are being removed with effect from 10 December 2014, as previously announced.

Banks

The amount of banks’ annual profits that can be offset by carried-forward losses will be restricted to 50% from 1 April 2015, as announced in the Autumn Statement 2014. Following consultation, there will be a change to the measure’s targeted anti-avoidance rule and a £25 million allowance for affected building societies.

The rate of Bank Levy will rise from 0.156% to 0.21% from 1 April 2015. A future Finance Bill will prevent banks’ compensation payments being deductible for corporation tax.

Country-by-country reporting

Legislation will be introduced to give the UK power to implement the Organisation for Economic Cooperation and Development (OECD) model for country-by-country reporting. Multinational enterprises will have to provide high level information to HMRC on their global allocation of profits and taxes paid, as well as indicators of economic activity in a country.

Flood defence relief

Business contributions to Flood and Coastal Erosion Risk Management projects will be tax deductible for corporation tax and income tax from 1 January 2015, as announced in the Autumn Statement 2014.

Simplified expenses

The simplified expenses regime will be amended to ensure that partnerships can fully access the provisions in respect of the use of a home or where business premises are also a home.

Late paid interest

The rules concerning loans made to UK companies by a connected company in a non-qualifying territory will be repealed.

Loan relationships

The legislation on corporate debt and derivative contracts will be updated, simplified and rationalised. The changes will include a clearer and stronger link between commercial accounting profits and taxation. There will be a new tax relief for companies in financial distress and new rules to protect the regime against tax avoidance.

Corporation tax loss refresh prevention

Anti-avoidance legislation, effective from 18 March 2015, will prevent companies obtaining a tax advantage by entering into contrived arrangements to turn historic tax losses whose use is restricted into more versatile in-year deductions.

Capital allowances

A new measure will clarify, from 26 February 2015, when it was first announced, the effect of anti-avoidance rules for capital allowances where there are transactions between connected parties or sale and leaseback transactions.

VAT thresholds

The VAT registration threshold will rise from £81,000 to £82,000 and the deregistration threshold will increase from £79,000 to £80,000. Both changes take effect from 1 April 2015.

Deductible VAT relating to foreign branches

Businesses will not be able to take account of foreign branches when calculating how much VAT on overhead costs they can reclaim in the UK. The measure will affect partially exempt businesses and they will have to implement the change from the beginning of their next partial exemption tax year falling after 31 July 2015.