Autumn Statement 2016 – Business Taxes
November 29th, 2016
Corporation tax rates
The Chancellor reconfirmed the planned reductions in the rate of corporation tax to 17% in 2020. The rate of corporation tax from 1 April 2017 will be 19%.
Tax deductibility of corporate interest
From April 2017, there will be limits on the tax deductions that large groups can claim for their UK interest expenses. These rules will apply where a group has net interest expenses of more than £2m, net interest expenses exceed 30% of UK taxable earnings and the group’s net interest to earnings ratio in the UK exceeds that of the worldwide group. The provisions originally proposed will be amended to protect investment in public benefit infrastructure.
Reform of loss relief
The profit that businesses can offset against carried-forward losses will be restricted to 50% from April 2017, while greater flexibility will be allowed on the types of profit that can be relieved by losses incurred after that date. The restriction will be subject to a £5m allowance for each standalone company or group.
The government is considering bringing all non-resident companies receiving taxable income from the UK into the corporation tax regime. A consultation will be launched in Budget 2017.
Substantial shareholding exemption (SSE)
The rules for the SSE will be changed from April 2017. The SSE provisions allow a gain on a disposal of shares by a company to be exempt from corporation tax. The investing requirement will be removed and there will be a wider exemption for companies owned by qualifying institutional investors.
Authorised investment funds
The rules on the taxation of dividend distributions to corporate investors will be amended to allow exempt investors, such as pension funds, to obtain credit for tax paid by authorised investment funds. Draft legislation will be issued in early 2017.
Museums and galleries tax relief
The scope of the museums and galleries tax relief announced in the 2016 Budget will be extended to include permanent exhibitions. The rates of relief will be set at 25% for touring exhibitions and 20% for non-touring exhibitions, and the relief will be capped at £500,000 of qualifying expenditure per exhibition. The relief will take effect from 1 April 2017, and there will be a sunset clause under which the relief will expire in April 2022 if it is not renewed after a review scheduled for 2020.
Employee shareholder status
The tax advantages linked to shares awarded under employee shareholder status will be abolished for arrangements entered into on or after 1 December 2016. The status itself will be closed to new arrangements at the next legislative opportunity.
The rural rate relief will be doubled to 100% from 1 April 2017 in order to remove the inconsistency between rural rate relief and small business rate relief.
Insurance premium tax (IPT)
The standard rate of insurance premium tax will rise from 10% to 12% from 1 June 2017.
Value added tax
The government will consult on VAT grouping and provide funding with a view to digitising fully the Retail Export Scheme to reduce the administrative burden to travellers.