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Autumn Budget - Impact on Companies

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22 November 2017
Removal of capital gains indexation allowance

Companies currently benefit from an inflationary allowance on qualifying assets they sell, which is known as indexation. For all other taxpayers indexation was abolished in 2008.

From 1 January 2018 companies are to be brought more in line with other taxpayers as indexation to that date will be frozen for companies.

The rate for capital gains made by companies, however, is already 19% as compared to 20% for higher rate taxpayers (for non-residential assets). This will fall further to 17% in 2020 for companies so this should compensate to some degree.

Interest rules for large companies

For companies that incur interest and other financing costs of more than £2m per annum there are some technical amendments to the Corporate Interest Restriction (CIR) rules. These are intended to ensure that the rules operate as intended, which suggests the initial drafting may well not have been perfect!

Anti-avoidance measures

There are a couple of measures specifically targeted at tax avoidance by corporates. One is to prevent tax relief in the UK for losses of an overseas permanent establishment (PE) when those losses have already been relieved in that overseas country. The others step-up avoidance for intangible assets by ensuring non-cash disposals and related party licensing arrangements are taxed in line with cash transactions.

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