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The following is a summary of the 2018 Autumn Budget in relation to Business Taxes

To return to the full summary of facts, click here.

Annual investment Allowance (AIA)

The Annual Investment Allowance has been increased temporarily for two years from 1 January 2019 to 31 December 2020. Businesses will receive an increased incentive to invest in qualifying expenditure in plant and machinery up to £1 million per year during this period. The AIA is currently £200K per year.

This was one of the few surprises of today’s Budget. It will encourage businesses to invest in their future as well as stimulating investment in the economy. It is also a potential planning opportunity as the timing of purchases may need to be considered, to avail of this valuable relief.

 

Capital Allowances –special rate pool writing down allowance

Capital allowances allow businesses to write off the cost of investing in capital assets, such as plant and machinery, against their taxable income. Special rate expenditure includes expenditure on long-life assets, thermal insulation, integral features and expenditure on cars with co2 emissions greater than 110 grams per kilometre after 1 April 2018. Writing down allowance on these special rate pool assets will reduce from 8% to 6%.

Reducing this rate will mean that businesses will continue to receive the full tax relief to reflect the depreciation of these assets but over an extended time frame.

 

First year allowance for electric charge points

Businesses incurring qualifying expenditure on the acquisition of new and unused electric charging points, will be able to claim 100% first year allowances (FYA) on the expenditure. This measure has been extended from the previous announcement.

This is a welcome announcement as it will encourage the use of electric vehicles by supporting development and installation of electric charging equipment. It will help promote the use of cleaner vehicles by making the charging points more ready available. It complements the 100% FYA for expenditure on cars with low carbon dioxide emissions and 100% FYA for expenditure on zero-emission goods vehicles.

 

Enhanced allowances for energy and water efficient plant and machinery

Businesses purchasing qualifying plant and machinery, as listed on the Energy Technology List (ETL) and Water Technology List (WTL), will no longer be able to claim first year allowances from April 2020 onwards. The scheme currently allows businesses to claim 100% of the cost of investment in qualifying plant and machinery and write it off against their taxable income in the period of investment. This measure will end the first year allowances of assets on the ETL and WTL from April 2020 onwards.

 

Structure and Building Allowance (SBA)

This is a new initiative for new non-residential structures and buildings which will be eligible for 2% capital allowances. Relief will be provided on eligible construction costs incurred on or after 29 October 2018. This new incentive will address the current gap in the capital allowance system where previously no relief was available for most structures and buildings. The SBA will ensure expenditure on the new commercial structure and buildings will be relievable over time through the tax system.

 

This incentive will encourage investment in construction of new structures and buildings that are intended for commercial use. It will include: the necessary work to bring them into existence; improvement of already existing structures and buildings; and the cost of converting existing premises for use in a qualifying activity.

This is similar to the previously phased out Industrial Buildings Allowances (IBAs).

 

Corporate Tax Loss restriction

The 50% restriction which applies to income losses brought forward for large companies will now also apply to capital losses brought forward for large companies.

 

Research and Development

The Research & Development (R&D) tax credit that small and medium sized loss-making companies can claim is to be restricted. Currently businesses can claim a payable credit of 14.5% of the value of the R&D claim and from 1 April 2020 this is to be restricted to three times the company’s total PAYE & NIC liability for that year.

This may be an unwelcome announcement for small companies investing in their future.

 

Non-UK Resident companies

From 6 April 2020, non-UK resident companies carrying on UK property business will be charged to Corporation Tax in the UK rather than Income Tax. Any Income Tax losses will be available to carry forward against their profits now chargeable to Corporation Tax.

 

New Business Tax

A new 2% digital services tax on UK revenues of big technology companies has been announced to take effect from April 2020. It applies to profitable companies with global sales of more than £500m and will apply to revenue generated from UK digital users. This tax is expected to generate £400m tax per year.

 

Private Finance Initiative (PFI)

Private Finance Initiative (PFI) contracts, which have historically been used to finance school and hospital builds are to be abolished.

 

To return to the full summary of facts, click here.

A PDF version is available to download here.

 

 

 

 

 

 

 

Rates and Allowances tables are available to download here.