Budget 2016 Corporation Tax changes
The rate of corporation tax was already set to come down to 18% from 1 April 2020 but it has now been further reduced to 17%. This will leave companies with more funds for investment or returns to shareholders.
Flexibility with losses
Historically, the use of corporation tax losses brought forward has been restricted to use against future profits generated by the same company. Use within a group was not allowed and strict rules applied as to which type of income could be offset by which type of loss. A recent tax case challenged this restrictive approach with the taxpayer successfully offsetting losses in a previous business against profits of a business in to which the activities were subsumed. Rules for losses incurred on or after 2017 will be more flexible; in future businesses will be able to use carried forward losses against profits from other income streams or from other companies within the group.
Whilst this sounds like very good news, unfortunately there is currently no detail available to be able to make any further comment on this.
Corporation Tax - large company restrictions
However, it is not such good news for large companies. For these purposes a large company is defined as one with profits on a standalone or group basis of £5 million. The use of losses brought forward will in future be restricted to 50% of profits in any given year.
The Government is also continuing its drive against tax avoidance with further measures proposed on multi-nationals: -
Interest relief in the UK will be capped at 30% of taxable earnings where the interest cost exceeds £2 million
Income tax withholding at 20% will be extended to cover payments on all intangible assets e.g. trademarks and brand names
Date: 17th March, 2016
Articles from this Author
1st November, 2018
Budget 2018 - Changes for businesses
22nd October, 2018
Making the most out of your home? Rent a room relief
3rd May, 2018
Tax changes for non-resident corporate landlords
4th April, 2018
EMI options - a current risk
Contact Business Service Partners
Choose from the drop down menu below to select a Partner to contact.
Sandy Bell, Partner in Rickmansworth considers the merits of Furnished Holiday Lettings in Optima magazine… twitter.com/i/web/status/1…
For the latest Mercer & Hole news, visit our LinkedIn page mercer-&-hole