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Corporation tax rate
As previously confirmed, the planned increase in the corporation tax rate to 25% for companies with profits in excess of £250,000 will go ahead from 1 April 2023. It is worth noting that the corporation tax rise will, however, only affect the most profitable companies with small companies with profits up to £50,000 continuing to pay corporation tax at 19%. Those with profits between these two figures will be subject to a tapered rate.
Super deduction for capital allowances
As predicted, the once generous 'super deduction' will come to an end on 31 March 2023 following the main rate of corporation tax increase.
Transfer pricing
From 1 April 2023, the OECD best practice requirements will be implemented. This will require large multinational businesses operating in the UK to keep and retain transfer pricing documentation in a prescribed and standardised format, set out in the OECD’s Transfer Pricing Guidelines (Master File and Local File).
Whilst providing certainty to businesses on the appropriate documentation to retain, it will allow HMRC to effectively identify risks and conduct transfer pricing investigations more efficiently through the standardisation of approach.
Pillar 2 rules – UK implementation of global minimum corporate tax reforms
For companies with an accounting period beginning on or after 31 December 2023, the Pillar 2 rules of the OECD corporate tax reforms will be implemented. These rules will ensure that multinational enterprises pay a minimum 15% tax rate on profit in every country in which they operate.
The rules will, however, only apply to large businesses operating in the UK with global revenues over €750 million.
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