Having already reviewed the provisions of the recent Budget in respect of private clients, in this post we’ve focussed on the measures outlined in respect of Business Tax.
Corporation tax rates
Corporation tax rates have already been enacted for periods up to 31 March 2021.
The main rate of corporation tax is 19%. The rate for the Financial Year beginning on 1 April 2020 was due to fall to 17% but the Chancellor has announced the rate will remain at 19%.
Structures and Buildings Capital Allowances
The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax.
Enhanced Capital Allowances in Enterprise Zones
The government has announced the 100% first year allowance (FYAs) for investment in new plant and machinery within designated assisted areas within Enterprise Zones will remain available for expenditure incurred in relation to all areas, whenever designated, until at least 31 March 2021.
First year allowances for business cars from April 2021
The government has announced an extension to 100% FYAs for zero-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations by four years from April 2021. CO2 emission thresholds will also be amended from April 2021. These determine the rate of capital allowances available through which the capital expenditure for business cars can be written down. The thresholds will be reduced from 50g/km to 0g/km for the purpose of the first year allowances for low CO2 emission cars and from 110g/km to 50g/km for the purpose of writing down allowances (WDAs) for business cars.
Ultra-low emission vehicles which currently qualify for FYAs if 50g/km or less will no longer qualify. They will be eligible for WDAs at the main rate (18%). Cars with CO2 emissions exceeding 50g/km will be eligible for WDAs at the special rate (6%).
Van benefit charge nil-rating for zero emission vans
From April 2021, the government will apply a nil rate of tax to zero-emission vans within the van benefit charge.
Research and Development (R&D) tax relief
The rate of tax credit for companies falling within the Research and Development Expenditure Credit (RDEC) scheme will rise by 1% to 13% from 1 April 2020. This relief is given as an above the line credit for companies undertaking qualifying R&D.
Budget 2018 announced that, from 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year. The government has now announced the implementation of the restriction will be delayed to 1 April 2021.
Corporation tax loss relief
Draft legislation has been issued to extend the rules that potentially limit the use of brought forward losses to include brought forward capital losses. Companies (and corporate groups) will continue to have a £5 million “deductions allowance” before restrictions apply.
The changes will have effect where carried forward capital losses are used to offset chargeable gains accruing from 1 April 2020.
The inclusion of capital losses will mean that it will be more likely that the deductions allowance will be exceeded.
Tax treatment of welfare counselling provided by employers
The government will extend the scope of non-taxable counselling services to include related medical treatment, such as cognitive behavioural therapy, when provided to an employee as part of an employer’s welfare counselling services. The changes will take effect from April 2020.
National Insurance holiday for employers of veterans in the first year of civilian employment
To support the employment of veterans, the government is meeting their commitment to introduce a National Insurance holiday for employers of veterans in their first year of civilian employment.
A full digital service will be available to employers from April 2022. However, transitional arrangements will be in place in 2021/22 which will effectively enable employers of veterans to claim this holiday from April 2021.
The holiday will exempt employers from any NICs liability on the veteran’s salary up to the Upper Earnings Limit. The government will consult on the design of this relief.
Increasing the flat rate deduction for homeworking
The government will increase the maximum flat rate income tax deduction available to employees to cover additional household expenses from £4 per week to £6 per week where they work at home under homeworking arrangements. This will take effect from April 2020.
Review of Enterprise Management Incentives (EMI) scheme
The government will review the EMI scheme to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme.
Since the Budget in March, the Government has also announced a series of measures to support businesses through the current economic crisis caused by Covid 19. You can find further details of these measures here.
If you’d like to discuss the contents of this post and how it may affect you, please contact us today.