Business announcements – England
Corporation tax rates and bands
As previously announced, the main rate of corporation tax will be reduced to 21 per cent from April 2014 and further reduced to 20 per cent from April 2015. The small profits rate remains unchanged at 20 per cent.
Capital allowances: Annual Investment Allowance (AIA)
From April 2014, the AIA for businesses investing in plant or machinery will be doubled from the temporary limit of £250,000 to £500,000 until 31 December 2015, after which it will return to £25,000. Transitional rules will apply for a chargeable period spanning the changes to the AIA limits.
Seed Enterprise Investment Scheme (SEIS)
It was announced that the SEIS would be made permanent along with the associated capital gains tax relief for re-investing chargeable gains in SEIS shares.
Research and development (R&D) tax credit
There will be an increase in the rate of the R&D tax credit for loss making small and medium sized enterprises (SMEs) from 1 April 2014. The rate of the cash credit payable to SMEs conducting qualifying R&D activities will increase from 11 per cent to 14.5 per cent from 1 April 2014.
Enhanced capital allowances in enterprise zones
A measure was introduced to extend the period in which 100 per cent enhanced capital allowances are available through investing in plant or machinery in designated enterprise zones by three years to 31 March 2020.
Enhanced capital allowances: energy saving and environmentally beneficial technologies
The list of technologies and products covered by the energy saving and water efficient enhanced capital allowances schemes was amended. Two new technologies will be introduced in the form of active chilled beams and desiccant air dryers with energy saving controls. Qualifying criteria for current technologies will also be revised. The water efficient scheme will be amended to clarify qualifying criteria for several technologies and to incorporate changes to technical standards.
Business Premises Renovation Allowance (BPRA)
The scope of expenditure that qualifies for relief under the BPRA will be clarified in the Finance Bill 2014. From April 2014, this will mean that relief is only available for the actual costs of construction and building work, and for certain specified activities such as architectural and surveying services. Certain associated but unspecified activities (such as project management services) will qualify for relief, although limited to five per cent of the actual costs.
Transfer of corporate profits
A new measure was announced to block tax avoidance arrangements where profits are transferred between companies in the same group for tax avoidance purposes. Where the profits of a group company are transferred to a different group company and a main purpose of the arrangements is to secure a tax advantage then for tax purposes the transfer will be regarded as not having taken place. These rules will apply to payments made on or after 19 March 2014 arising from arrangements entered into on any date.
Loss buying anti-avoidance rules: Research and Development Allowances (RDAs) exclusion
Targeted loss buying anti-avoidance rules will be amended to exclude expenditure that crystallises as RDAs. The current rules had an adverse impact where a company completed preliminary capital work in the furtherance of research and development, but did not reach the point of trading before it is sold on to trading groups. This measure will have effect for qualifying changes on or after 1 April 2014.
Corporate debt and derivative contracts
Legislation will be introduced in Finance Bill 2014 to amend the ‘de-grouping’ provisions that apply when a company to which a loan relationship or derivative contract has been transferred ceases to be a member of the group. This measure will apply on or after 1 April 2014 and will have the effect of restricting the de-grouping charge to only bring into account credits and certain debits in very limited circumstances.
Video games and television tax relief
Legislation will be set out in Finance Bill 2014 amending the video games tax relief legislation to make it compliant with state aid approval, and to clarify that only those games on which relief is claimed are to be treated as separate trades. These changes will have effect once state aid approval has been received. Similarly, legislation will also be introduced to amend the television tax relief to clarify that only television programmes on which relief is claimed are to be treated as separate trades.
Corporation tax relief for theatrical production
A new corporation tax relief for theatrical productions and touring theatrical productions will be introduced during the passage of Finance Bill 2014. The design of the relief will be subject to consultation.
Annual Tax on Enveloped Dwellings (ATED)
The rules on the ATED will also be revised in Finance Bill 2014 to reduce the threshold down of £2 million down to £500,000. From 1 April 2015, a new band will come into effect for properties valued at more than £1 million but not more than £2 million with an annual charge of £7,000. From 1 April 2016 a further band will come into effect for properties with a value greater than £500,000 but not more than £1 million with an annual charge of £3,500. There will be transitional rules for the £1 million to £2 million band requiring returns to be filed on 1 October 2015 and payment by 31 October 2015.