The corporation tax rate is to be held at 19%, rather than falling to 17% from April 2020 as originally planned. The 19% rate is set for the tax years 2020/21 and 2021/22 as well. This rate of corporation tax does not apply to ring fenced profits of oil and gas companies, which remain subject to different corporation tax rates.
Deferred tax assets and liabilities will need to be recalculated at 19% for companies with balance sheets dates on or after the date that Finance Bill 2020 is substantively enacted.
CAPITAL ALLOWANCES
Structures and buildings allowance (SBA)
Tax relief is given for the costs of qualifying non-residential structures and buildings at a rate of 2% per annum under the current SBA. This rate is increasing to 3% per annum from 1 April 2020 for corporation tax purposes and 6 April 2020 for income tax purposes, shortening the time it takes to fully relieve qualifying expenditure from 50 years to 33 years and 4 months.
Zero and low emission cars
First year allowances on ultra-low emission vehicles has been extended from 1 April 2021 to 31 March 2025, with the emissions threshold reducing from 50g/km to 0g/km.
The level of CO2 emissions for business cars to attract writing down allowances within the main pool at 18% pa has been reduced from 110g/km to 50g/km, effective from 1 April 2021. Business cars with emissions exceeding 50g/km will be eligible for writing down allowances at 6% per annum within the special rate pool.
The lease rental restriction will also be based on emissions of 50g/km with effect from 1 April 2021 (currently 110g/km).
Enhanced capital allowances in enterprise zones
100% first year capital allowances will continue to be available for companies investing in new plant and machinery within designated assisted areas within enterprise zones until at least 31 March 2021.
RESEARCH AND DEVELOPMENT (R&D)
R&D expenditure credits for corporation tax
The R&D expenditure credit is increased from 12% to 13% with effect for expenditure incurred on or after 1 April 2020. This means that the effective cash value of the R&D expenditure credit post tax increases from 9.72% to 10.53%.
R&D PAYE cap
The amount of payable R&D tax credit that can be claimed by a company under the SME scheme was due to be limited to 300% of the company’s total PAYE and employee’s Class 1 NIC payment for the period, with effect from 1 April 2020. The budget has delayed this measure until 1 April 2021. Furthermore, a £20,000 threshold will be introduced below which a R&D claim will not be subject to the cap.
LARGE BUSINESSES
Notification of uncertain tax positions
From April 2021, businesses with turnover above £200 million per annum or a balance sheet total of more than £2 billion will be required to notify HMRC where they take a tax treatment that is reliant on an uncertain legal interpretation which HMRC is likely to challenge.
Corporate capital loss restriction
The 2018 budget announced that from 1 April 2020, chargeable gains that can be relieved by brought-forward capital losses may be restricted to 50%. This measure applies where the utilisation of brought forward capital and income losses exceeds £5 million per annum, with this threshold being shared between members of a corporate group.
The 2020 budget introduces an exemption from these rules for companies under insolvent liquidation, with effect from April 2020.