Corporation Tax rates
There are no changes to the Corporation Tax rates previously announced: the present 19% rate continues for the year commencing 1 April 2019, then will fall to 17% from 1 April 2020.
Capital Allowances on plant
The Annual Investment Allowance, on which a business can claim 100% relief on the cost of purchasing plant and machinery, will increase to £1 million from its current £200,000 for two years from 1 January 2019. There are complex rules where a period of account straddles the change of AIA rate, so those planning to spend more than £200,000 per year on plant should take advice to make sure that they qualify for the best relief.
The rate of writing down allowance on the ‘special rate pool’ (mainly ‘long life assets’, integral fixtures in buildings and cars with emissions ratings over 110g/km purchased since April 2018) will be reduced from 8% to 6% from April 2019. The main rate of writing down allowance remains 18%.
Enhanced Capital Allowances (currently 100% First Year Allowances) were introduced in 2001 for expenditure on qualifying plant which uses energy efficiently or is environmentally beneficial. As is common, the list of qualifying technologies is being updated for 2019/20; however, the scheme is being abolished with effect from 1 April 2020 for companies and 6 April 2020 for unincorporated businesses. It will clearly be beneficial to consider advancing planned expenditure before those dates, if total expenditure on plant would otherwise exceed the Annual Investment Allowance for the period. However, Enhanced Capital Allowances for electric vehicle charge points will continue to 31 March 2023.
Capital Allowances on buildings
A new Structures and Buildings Allowance is to be introduced for expenditure on new non-residential structures and buildings where the contracts for the construction works are entered into on or after 29 October 2018. Relief will not be available for the cost of land or dwellings. The allowance will be 2% on a flat rate basis to write off the cost of construction (including demolition and land alterations necessary for construction) over 50 years. There will be no balancing adjustment on a sale – the purchaser will take over the remainder of the allowances and the writing down period.
Expenditure on integral features and fittings of a building that currently qualify for allowances on plant and machinery will continue to qualify in the same way, including being eligible for the Annual Investment Allowance up to its annual limit.
New rules will apply from April 2020 to restrict the offset of companies’ brought forward capital losses in a similar way to the recently-introduced treatment of trading (and some other) losses. Only 50% of gains will be eligible to be relieved by brought forward losses, but there will be unrestricted use of the first £5 million of income or capital losses each year, which means that 99% of companies will not be affected.
The Government intends to introduce a targeted relief for the cost of goodwill in the acquisition of businesses with eligible intellectual property from April 2019. With effect from 7 November 2018, the Government will also reform the de-grouping charge rules which apply when a group sells a company that owns intangibles, so that if the share sale is exempt the de-grouping gain on the intangibles will also be exempt.
Offshore receipts in respect of intangible property
To address the avoidance of UK tax by multinational groups paying royalties on UK sales – a deductible expense for UK Corporation Tax – to group companies based in low-tax jurisdictions, a new tax charge will be introduced. Following consultation, the original proposal has been considerably amended, in particular imposing a direct charge on the recipient rather than a withholding tax on the payer. The introduction of the measure has been confirmed with a threshold for UK sales of £10 million, an exemption for income that is taxed at appropriate levels, and an exemption for income relating to intangible property that is supported by sufficient local substance. It will apply from 6 April 2019, with anti-avoidance provisions operating from 29 October 2018.
Digital Services Tax
To address the perceived avoidance of profit taxes by multinational technology companies, the Government proposes to introduce a 2% tax on the revenues of certain digital businesses that derive value from their UK users. The tax will target search engines, social media platforms and online marketplaces. It will only apply to revenue above £25 million per year in businesses with global revenues above £500 million, and there will be rules to protect businesses with very low profit margins or losses.
The Chancellor announced a number of measures to extend further the relief from business rates for struggling retailers. The most significant of these is that, for the two years until the next revaluation in April 2021, retailers who operate from premises with a rateable value of up to £51,000 will be entitled to a one-third cut in their rates.