The new corporate tax year began on Wednesday 1 April with a number of changes to the tax system coming into force. These include Scotland taking charge of its first tax for 300 years, as existing UK stamp duty and landfill tax are disapplied in Scotland and two devolved levies – the land and buildings transaction tax and Scottish landfill tax – are introduced in their place. The new legislation also gives Holyrood the power to set a Scottish rate on income tax, expected to take effect this time next year.
Significant tax changes coming into effect, and which businesses are likely to welcome, include:
a cut in the main rate of corporation tax, which drops from 21% to 20% (taking it to among the lowest of the G20 countries);
an extension of the 2% cap on the RPI increase in the business rates multiplier for another year from 1 April;
changes to the research and development tax regime, which are a 1% increase in the above the line research and development tax credit, rising from 10% to 11%; and
increasing the relief available to small and medium-sized enterprises (SMEs) from 225% to 230% of qualifying expenditure.
And some measures from 1 April likely to be less welcomed by business are:
the new diverted profits tax at a rate of 25%;
the amount of a bank’s annual profit that can be offset by carried forward losses will be limited to 50%; and
the increase in the bank levy announced in the Budget, which rises from 0.156% to 0.21%.
The drop in the headline rate of corporation tax and the changes to the R&D tax regime are very welcome measures. Banks, though, take a hit from restrictions on their use of carried forward losses and a rise in the bank levy as the new corporate tax year commences. Additionally, the lack of precise definition around the new diverted profits tax means it is likely to create uncertainty for companies and leave too much discretion to HMRC in the way it is applied.
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Changes for the new corporate tax year
The new corporate tax year began on Wednesday 1 April with a number of changes to the tax system coming into force. These include Scotland taking charge of its first tax for 300 years, as existing UK stamp duty and landfill tax are disapplied in Scotland and two devolved levies – the land and buildings transaction tax and Scottish landfill tax – are introduced in their place. The new legislation also gives Holyrood the power to set a Scottish rate on income tax, expected to take effect this time next year.
Significant tax changes coming into effect, and which businesses are likely to welcome, include:
a cut in the main rate of corporation tax, which drops from 21% to 20% (taking it to among the lowest of the G20 countries);
an extension of the 2% cap on the RPI increase in the business rates multiplier for another year from 1 April;
changes to the research and development tax regime, which are a 1% increase in the above the line research and development tax credit, rising from 10% to 11%; and
increasing the relief available to small and medium-sized enterprises (SMEs) from 225% to 230% of qualifying expenditure.
And some measures from 1 April likely to be less welcomed by business are:
the new diverted profits tax at a rate of 25%;
the amount of a bank’s annual profit that can be offset by carried forward losses will be limited to 50%; and
the increase in the bank levy announced in the Budget, which rises from 0.156% to 0.21%.
The drop in the headline rate of corporation tax and the changes to the R&D tax regime are very welcome measures. Banks, though, take a hit from restrictions on their use of carried forward losses and a rise in the bank levy as the new corporate tax year commences. Additionally, the lack of precise definition around the new diverted profits tax means it is likely to create uncertainty for companies and leave too much discretion to HMRC in the way it is applied.
