Corporation Tax rates
The government has confirmed that the rates of Corporation Tax will remain unchanged, which means that, from April 2024, the rate will stay at 25% for companies with profits over £250,000. The 19% small profits rate will be payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.
Capital allowances
The Full Expensing rules for companies allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is unused and not second-hand. The rules were originally designed to be effective for expenditure incurred on or after 1 April 2023 but before 1 April 2026. Similar rules apply to integral features and long life assets at a rate of 50%. The government announced in the Autumn Statement 2023 that both allowances will be made permanent.
The government is to publish draft legislation for consultation to help consider any potential extension to include plant and machinery for leasing.
The Annual Investment Allowance (AIA) is available to both incorporated and unincorporated businesses. It gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit remains at £1 million.
Transfer of assets abroad - anti-avoidance legislation
The Transfer of Assets Abroad (ToAA) provisions will be amended so that UK resident individuals cannot bypass the legislation, by using a company to transfer assets offshore in order to avoid tax. Transfers of assets by certain companies will be considered a relevant transfer for the purposes of the legislation. The new measure will apply to income arising to persons abroad on or after 6 April 2024.
Creative Industries
The government has announced additional support for UK independent films already eligible for the Audio-Visual Expenditure Credit (AVEC). The AVEC is currently set as a basic credit of 34% of qualifying expenditure. Companies with qualifying UK independent films with a budget of £15 million or less will be able to claim a new UK Independent Film Tax Credit (IFTC) of 53%. Qualifying expenditure will be capped at 80% of the film's total core expenditure. Qualifying films will need to commence principal photography on or after 1 April 2024 and claims can be made from 1 April 2025.
Comment
The maximum IFTC claim will be £6,360,000.
Separately, from 1 April 2025, companies with qualifying visual effects costs will be able to claim an increased AVEC of 39%, a 5% increase on the basic credit. The 80% cap will also be removed for qualifying visual effects costs.
For Theatre Tax Relief, Orchestra Tax Relief and Museums and Galleries Tax Relief, the temporary rates of 40%/45% for non-touring/touring and orchestral productions will be made permanent from 1 April 2025.
Furnished Holiday Lettings
The Furnished Holiday Lettings (FHL) tax regime will be abolished from April 2025. Draft legislation is to be published and will include anti-forestalling measures that will apply from 6 March 2024. The effect of abolishing the rules will be that short-term furnished holiday lets and longer-term residential lets are treated the same for tax purposes and individuals will no longer need to report the two income streams separately.
Research and Development relief
As announced in the Autumn Statement 2023, the existing Research and Development Expenditure Credit (RDEC) and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 being claimed in the merged scheme. The rate under the merged scheme will be set at the current RDEC rate of 20%.
The changes also provide additional relief for loss-making Research and Development (R&D) intensive SMEs through a higher rate of payable tax credit from April 2023, as a feature of the existing SME scheme. Those entitled to this higher rate would, from April 2024, continue to claim under rules similar to the current SME scheme rather than under the new RDEC scheme.
A number of other changes will apply to the new regime from April 2024, including that R&D claimants will no longer be able to nominate a third-party payee for R&D tax credit payments, subject to limited exceptions.
Comment
Further action may be needed to reduce the unacceptably high levels of non-compliance with the R&D rules and HMRC will be publishing a compliance action plan.
Making Tax Digital for income tax
The government has announced the outcome of the review into the impact of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) on small businesses and intends to proceed with implementation from April 2026. The government will also ensure taxpayers who join MTD from 6 April 2024 are subject to the government's new penalty regime for the late filing of tax returns and late payment of tax.
Business Rates
The small business multiplier will be frozen for another year, while the 75% Retail, Hospitality and Leisure relief will be extended for 2024/25. The standard multiplier will be uprated in line with the Consumer Prices Index for September 2023. These changes will take effect from 1 April 2024 in England.
Freeports and Investment Zones
Both regimes allow businesses in specific locations to benefit from a number of reliefs including Stamp Duty Land Tax relief, enhanced capital allowances, structures and buildings allowances and secondary Class 1 NIC relief for eligible employers.
As announced in the Autumn Statement 2023, the government will extend the window to claim the tax reliefs available in Freeport special tax sites from five to ten years. The extension to the sunset dates will be enacted by secondary legislation and have been confirmed as:
- 30 September 2031 for special tax sites in respect of English Freeports
- 30 September 2034 for special tax sites in respect of Scottish Green Freeports and Welsh Freeports.
Other
Other announced changes include:
- Making the cash basis of accounting the default position for the self-employed from 2024/25, with an alternative to opt for the accruals basis, together with technical changes to the regime.
- A number of changes to strengthen the Construction Industry Scheme from April 2024.