Business tax and investment incentives

Changes to corporation tax and other measures for business.

Corporation tax

Corporation tax rates are as follows:

Financial Year from 1 April 2017 1 April 2018 1 April 2019
Corporation tax rate 19% 19% 19%

As previously announced, the corporation tax rate is set to reduce to 17% from 1 April 2020.

Indexation allowance

For disposals of capital assets on or after 1 January 2018, the indexation allowance that is applied in order to determine the amount of the chargeable gain will be calculated up to December 2017, irrespective of the date of disposal of the asset.

Research & Development Expenditure Credit (RDEC)

The rate of RDEC is to increase from 11% to 12%. This will have effect for expenditure incurred on or after 1 January 2018.

Knowledge-intensive companies (KICs)

The annual limit for individuals investing in KICs under the Enterprise Investment Scheme (EIS) will be increased to £2m, provided that anything above £1m is invested in KICs. In addition, the annual EIS and Venture Capital Trust (VCT) limit on the amount of tax-advantaged investments a KIC may receive will be increased to £10m. The permitted maximum age rules will also be amended to allow a KIC to use the date from which its annual turnover exceeded £200,000, instead of the date of its first commercial sale, when determining the date from which the end of the initial investing period is calculated. For EIS the changes will apply to shares issued on or after 6 April 2018 and for VCTs the changes will apply to new qualifying investments made on or after 6 April 2018.

Non-UK resident companies

Legislation will be introduced so that non-UK resident companies that carry on a UK property business or have other UK property income will be charged to corporation tax, rather than being charged to income tax as at present. A non-UK resident company that has chargeable gains on the disposal of UK residential property will also be charged to corporation tax, instead of capital gains tax as at present. The change will have effect on and after 6 April 2020.

Capital allowances

The 100% first year allowance for businesses purchasing zero-emission goods vehicles or gas refuelling equipment is to be extended to 31 March 2021 for corporation tax and to 5 April 2021 for income tax.

First Year Tax Credits (FYTC)

The FYTC scheme will be extended until 31 March 2023 and the rate of eligible claims will be set at two-thirds of the corporation tax rate. This will come into effect on 1 April 2018.

Depreciatory transactions

Legislation will be introduced to remove the time limit of six years within which companies must adjust for any depreciatory transactions when claiming a capital loss on disposal of shares in a group company.

This will have effect for disposals of shares in or securities of a company made on or after 22 November 2017.

Royalties withholding tax

The government will publish a consultation on 1 December 2017 on the design of rules expanding the circumstances in which a royalty payment to persons not resident in the UK has a liability to income tax.

The changes will have effect from April 2019.

Subsistence

Legislation is to be introduced so that employers will no longer be required to check receipts when making payments to employees for subsistence using benchmark scale rates. This applies to standard meal allowances paid in respect of qualifying travel and the overseas scale rates. Employers will only be asked to ensure that employees are undertaking qualifying travel.

This will have effect from April 2019. Abolition of receipt checking does not apply to amounts agreed under bespoke scale rates or industry wide rates.

Employer-provided electricity for an electric car

The government will legislate to exempt employer-provided electricity from being taxed as a benefit in kind from April 2018. This will apply to electricity provided in workplace charging points for electric or hybrid cars owned by employees.

Business rates

Business rates will switch from being increased by RPI to being increased by CPI from April 2018, two years earlier than originally planned. Business rates revaluations will take place every three years, rather than every five years, starting after the next revaluation, currently due in 2022.

The government will also legislate retrospectively to address the so-called 'staircase tax'. Affected businesses will be able to ask the Valuation Office Agency to recalculate valuations so that bills are based on previous practice, backdated to April 2010.

The £1,000 business rate discount for public houses with a rateable value of up to £100,000, subject to state aid limits for businesses with multiple properties, will continue for one year from 1 April 2018.

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