The Summer Budget changes formally completed their progress through the legislative process and received royal assent on 18 November 2015.
We have summarised in this posting the main changes to business tax that are now enacted:
- Corporation tax rates will be reduced to 19% from 1 April 2017 and 18% from 1 April 2020.
- A new clause, not included in the Summer Budget, was added to the finance act. Any restitution interest paid by HMRC after 21 October 2015 will be taxable at a special 45% tax rate. No reliefs, such as losses, can be set off against this tax. It is likely that this new tax charge will be challenged in the courts.
- Tax relief is no longer available for the amortisation of goodwill acquired or created by a company on or after 8 July 2015.
- The annual investment allowance has been set at a new permanent level of £200,000. This new limit will apply from 1 January 2016.
Business tax measures that were not in the act, but will likely be introduced in future finance bills include:
- Large businesses will be required to publish their tax strategy and a voluntary code of practice will be introduced setting the standards that need to be observed.
- Larger companies, turnover in excess of £20m, will be required to speed up the payment of their corporation tax. Payment will need to be made in the third, sixth, ninth and twelfth months of their accounting period. Legislation is expected to introduce this change for all accounting periods starting after 1 April 2017.
Finally, there are a number of measures that were included in the summer finance bill that have been withdrawn and are now subject to consultation. They are:
- The abolition of the £8,500 threshold for benefits in kind.
- The introduction of a payrolling facility so employers can report and pay tax from benefits in real time.
- The replacement of the benefits in kind dispensation with an exemption for certain expenses.
- HMRC is also exploring changes to the IR35 legislation to make it more effective from the exchequer’s point of view.
This week, 25 November, George Osborne will be outlining his plans in the autumn statement.