Corporation tax rates
From 1 April 2015 the main rate of corporation tax is 20% and it is proposed that this rate will continue for the Financial Year beginning on 1 April 2016. The main rate of corporation tax will then be reduced as follows:
- 19% for the Financial Years beginning on 1 April 2017, 1 April 2018 and 1 April 2019
- 18% for the Financial Year beginning on 1 April 2020.
Annual Investment Allowance (AIA)
The AIA provides a 100% deduction for the cost of most plant and machinery (not cars) purchased by a business, up to an annual limit and is available to most businesses.
The maximum amount of the AIA was increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015. However it was due to return to £25,000 after this date. The level of the maximum AIA will now be set permanently at £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2016.
Where a business has a chargeable period which spans 1 January 2016 there are transitional rules for calculating the maximum AIA for that period. The maximum amount for the transitional period is the total of the time apportioned maximum AIA of £500,000 from the start of the chargeable period to 31 December 2015 plus the time apportioned maximum AIA of £200,000 from 1 January 2016 to the end of the chargeable period. However any AIA available on expenditure in the second period would be limited to the time apportioned maximum in that period.
Corporation tax relief for business goodwill
Where a company acquires goodwill or intangible assets, which are recognised in the accounts, a corporation tax deduction is available for the charge to profit and loss when the assets are written off. This deduction is only available on the acquisition of a business and not on the acquisition of shares in a company.
For acquisitions of goodwill and customer related intangibles made on or after 8 July 2015 this relief will no longer be available. In addition, there will be restrictions on the treatment of any allowable losses realised on subsequent disposals of goodwill or customer related intangibles which were acquired on or after 8 July 2015. There are no restrictions where a profit is made on a subsequent disposal.
Corporation tax payment dates
The government will introduce earlier dates for the payment of corporation tax for larger companies and groups, for accounting periods starting on or after 1 April 2017. For companies with annual taxable profits of £20 million or more, tax will be payable in quarterly instalments in the third, sixth, ninth and twelfth months of their accounting period. For groups the threshold is divided by the number of companies in the group.
Tax-advantaged venture capital schemes
This Budget also announces that the government will make amendments to the tax-advantaged venture capital schemes to ensure that the UK continues to offer significant and well-targeted support for investment into small and growing companies, with a particular focus on innovative companies.