Mixed news for corporation tax payers in today’s Budget
The Chancellor’s announcements in today’s Budget bring a mixture of good news for the short term and bad news in the longer term for corporation tax payers.
Following the recent press speculation it is no real surprise that the rate of corporation tax will be increased. The new 25% rate will apply from 1 April 2023 for companies with profits over £250,000. For companies with profits of below £50,000 the current 19% rate will continue to apply, and the rates will taper where profits are between the £50,000 and £250,000 thresholds. This 6% increase will clearly have a significant impact on companies’ tax costs in the longer term. The rate of diverted profits tax (currently 25%) will correspondingly rise to 31% to maintain its deterrent effect.
Before the tax rate increase takes effect, corporation tax payers can benefit from temporary changes to the loss carry back rules and capital allowances rules.
Greater flexibility in the use of trading losses should provide extra tax repayments for some loss making businesses. Under the current rules trading losses can be carried back and set off against profits in the previous 12 months. For accounting periods ending between 1 April 2020 and 31 March 2022, the loss carry back rules are extended, allowing trading losses to be carried back for three years. This will give companies with losses as the result of the pandemic an opportunity to claim repayments of tax paid in previous years. There will be some restrictions on the use of carried back losses. The loss carry back for the first 12 months is unlimited, but losses carried back more than 12 months are subject to a cap of £2 million for each accounting period. Also, losses should be carried back to be used against the most recent profits.
The new “Super Deduction” capital allowances will be very welcome to taxpayers looking to invest in plant and machinery during the period from 1 April 2021 to 31 March 2023. Purchases of plant and machinery that would usually qualify for the 18% allowance will instead qualify for the new first year allowance at 130%. Plant and machinery that would qualify for the 6% allowance will also benefit from a new first year allowance at 50%. In addition, the Annual Investment Allowance (which provides a 100% allowance for purchases of plant and machinery) will be increased from £200,000 to £1 million for qualifying expenditure from 1 January 2021 to 31 December 2021.
The extraordinary economic situation has given us a somewhat strange budget: giving to corporation tax payers in the short term and taking away in the longer term. It will be interesting to see what future developments there will be as the government looks to repay the borrowing that has funded the response to the pandemic.
For more information, please contact Helen Coward.
Victoria Younghusband, Jessica Arrol Caws and Giulia Brunello write for The Bahamas Financial Services Board 's GATEWAY Magazine on the role of IFC's in the post-Brexit environment
Victoria and Jessica consider the changing role for IFCs following the approval of the Trade and Cooperation Agreement.
Residential property developer tax: Draft legislation published and technical consultation launched
While a number of important issues have been addressed in the legislation, there is still a lot outstanding.
Strategic Planning for Modern Landed Estates
The second in our series of articles on succession planning for landed estates covering a wide variety of matters.
When can you set off claims against different elements of a project
The Court’s decision raises important drafting considerations for construction contracts involving multiple elements of a project.
Drafting terms and conditions or negotiating a contract? Be wary of "unusual" and "exorbitant" exclusion clauses
When drafting a set of terms and conditions, companies must adhere to the requirements contained in the Unfair Contract Terms Act 1977
Stop, collaborate and listen: Top 10 Tips with Collaboration Agreements
Providing you with the top ten tips on collaboration agreements - what should you know?
Phase out of temporary restrictions on use of winding up petitions
Hannah takes a look at the recent UK Government announcement on statutory demands and the presentation of winding up petitions
Preparing your company for sale
We set out here some initial steps to consider in anticipation of a sale.
ESG investment and the challenges for trustees
What challenges does the ESG revolution present for trustees of private family trusts?
The impact of COVID-19 on commercial and residential tenancies
What impact has COVID-19 had on commercial and residential tenancies? Read more here.
Overhaul of London's stock market listing regime set to significantly boost capital raising opportunities for founder led UK tech businesses
Charles Russell Speechlys advises discoverIE on its acquisition of Antenova
discoverIE is a leading international designer, manufacturer and supplier of customised electronics to industry.
Q&A: Separate blocks, common parts and enfranchisement
Miriam Seitler and Lauren Fraser answer queries relating to leaseholders seeking to acquire the freehold.
Coded messages for landlords and tenants
“What does the code of practice mean for landlords and tenants? Read more here”
The family court’s role in micro managing 'trivial' disputes
The recent decision has dealt with the family court’s role in micro managing “trivial” disputes in relation to children
Taxing horizons and fiscal black holes
A super-massive black hole at the centre of the nation’s finances means that tax reform and rates rises look increasingly likely.
Charles Russell Speechlys advises Acora on acquisition of Westgate IT
Westgate IT specialises in providing IT support to businesses in the South West.
Q&A: Wrestling with restrictive covenants
Camilla Lamont (barrister at Landmark Chambers) and Real Estate Disputes Partner Emma Humphreys answer a pair of covenant queries
Charles Russell Speechlys advises Grape Paradise on the acquisition of a fine wine business
Charles Russell Speechlys has advised Grape Paradise on the acquisition of the Sarment Group in the China Mainland territories.