The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald
The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald.
By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.
Our review of Chancellor Philip Hammond’s first (and last) Autumn Statement moves from personal taxation changes to business taxation matters this week.
Here are some of the key areas relevant to business -
Corporation tax rates:
Corporation tax rates have already been enacted for periods up to 31 March 2021.
The main rate of corporation tax is currently 20%.
The rate will then be reduced as follows:
- 19% for the Financial Years beginning on 1 April 2017, 1 April 2018 and 1 April 2019
- 17% for the Financial Year beginning on 1 April 2020.
Currently, a company is restricted in the type of profit which can be relieved by a loss if the loss is brought forward from an earlier accounting period. For example, a trading loss carried forward can only relieve future profits from the same trade. Changes are proposed which will mean that losses arising on or after 1 April 2017, when carried forward, will be useable against profits from other income streams or other companies within a group. This will apply to most types of losses but not to capital losses.
However, from 1 April 2017, large companies will only be able to use losses carried forward against up to 50% of their profits above £5 million. For groups, the £5 million allowance will apply to the group.
The removal of the restrictions on the use of carried forward losses is very welcome. The existing rules can result in losses not being used, particularly where a company closes down a loss making trade. More than 99% of companies will be unaffected by the restrictions imposed on large company losses above £5 million.
Corporate interest expense deductibility:
Rules will be introduced which limit the tax deductions that large groups can claim for their UK interest expenses from April 2017. These rules will limit deductions where a group has net interest expenses of more than £2 million, net interest expenses exceed 30% of UK taxable earnings and the group's net interest to earnings ratio in the UK exceeds that of the worldwide group.
Corporation tax on non-resident companies' UK income:
The government is considering bringing all non-resident companies receiving taxable income from the UK into the corporation tax regime.
The government wants to ensure that all companies are subject to the rules which apply generally for the purposes of corporation tax, including the limitation of corporate interest expense deductibility and loss relief rules.
Research and development:
The Chancellor highlighted that research and development is a key driver for economic growth and has committed to an extra £2 billion a year of additional funding by 2020/21. There are two types of tax reliefs for eligible expenditure. Under one of these, qualifying companies can claim a taxable credit of 11% in relation to eligible research and development expenditure. This is known as an 'above the line' tax credit. The government will review ways to build on this relief.
Class 2 NICs:
Class 2 NICs will be abolished from April 2018, and following this, self-employed contributory benefit entitlement will be accessed through Class 3 and Class 4 NICs. Self-employed people with profits below the Small Profits Limit (£5,965 for 2016/17) will be able to access Contributory Employment and Support Allowance through Class 3 NICs.
Substantial shareholding exemption:
Where qualifying conditions are met, the disposal of a substantial shareholding in a company by a UK company is exempt from tax. From April 2017, the government intends to simplify the rules of this relief, remove the investing requirement and provide a more comprehensive exemption for companies owned by qualifying institutional investors.
The substantial shareholding exemption allows some groups of companies to restructure and make disposals of shareholdings without incurring a tax charge. Currently the qualifying conditions are complicated and restricted to trading groups, so the proposed changes may allow more groups to access this valuable relief.
You can find out more about the Chancellor’s Autumn Statement on our website –
You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) -
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