Autumn Budget 2017 – Business Tax Implications

Since the budget statement in November, a number of further details have been released. This week, we have a look at the tax implications for small business in Stockport.

1. Corporation Tax – Reduction

Corporation Tax rates that were previously announced were confirmed in the budget statement. 19% for three years from 1st April 2017, then 17% from 1st April 2020.

2. Corporate Capital Gains

Since 1998, there has been a difference in the way capital gains has been computed between companies and individuals or trusts. Relief is given to companies for the effect of inflation by means of “indexation allowance”, which adjusts the cost of an asset for the rise in the Retail Prices Index between acquisition and the disposal of the asset.

In the Autumn Budget, the Chancellor announced that he has decided to freeze this allowance with effect from January 2018. This means that companies will pay increasing amounts of corporation tax on gains realised after that date, as the benefit of the relief reduces.

Doing this is budgeted to bring in a substantial sum to the treasury – over half a billion pounds a year by the end of Parliament.

3. Research and Development

In an attempt to encourage further R&D investment, the rate of Research and Development Expenditure Credit will increase from 11% to 12% from 1st January 2018.

4. Capital Allowance on Cars

New cars that are classed as “low emission” cars can now attract 100% first year allowance. For expenditure from 1st April 2018, the CO2 emissions threshold for qualifying cars reduces to 50g/km. Good news for low emission car owners, however, for higher emission car owners the news is not the same. The threshold for “high emissions” also falls down to 11g/km.

High emission cars only qualify for reduced writing down allowances at 8% per annum in the “special rate pool” rather than the 18% rate of allowance that applies to general plant.

If your business is considering buying a car, it might be better to advance the purchase to enjoy the better treatment of expenditure before these changes take effect.

5. Enhanced Capital Allowances

The list of designated technologies that currently qualify for 100% relief on capital expenditure will be updated in the coming weeks. This is to increase the support of investment into energy saving plant and machinery.

6. Royalties

As a way of addressing UK Tax avoidance, from multinational groups paying royalties on UK sales a withholding tax will be introduced from April 2019.

7. Business Rates

Previous Budgets have included measure to relieve the impact of business rates by £9.5billion over the life of this parliament. Further measures have been added, intended to support businesses affected by business rates increases with a total benefit of another £2.3 billion:

●     Consumer Prices Index will be used to measure inflation instead of the Retail Prices Index. This is being brought forward to April 2018.

●     Legislating retrospectively to reverse the effect of a Supreme Court judgement in a case in which two floors of an office building occupied by the same business had to be treated as separate properties for rating purposes.

●     Continuing the discount for public houses with a rateable value up to £100,000, subject to restrictions for businesses with multiple properties.

●     Increasing the frequency of revaluations by the Valuation Office from five years to three years after the next revaluation, which is scheduled for 2022.

Local government will be fully compensated for the loss of income as a result of these measures.

Any Questions?

Have any questions or business issues that might arise out of these measures? Contact us, and let us help you navigate the minefields of business tax issues.

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