Business tax round-up - Autumn Statement
The good, the bad and the ugly
Research and Development (R&D) tax relief
R&D tax credits potentially offer 230% tax relief to SMEs. From November 2015, HMRC intend to offer an advance clearance procedure to small businesses wanting to make a first claim for R&D tax relief. The advance assurance will focus on first time claimants and provide assurance that HMRC will allow their first three years of R&D tax relief claims without further enquiry.
This provides a welcome level of certainty for many businesses looking at future cash flow and is quite an undertaking by HMRC to ask no further questions in years two and three.
Annual Investment Allowance (AIA)
The AIA is £500,000 until 31 December 2015 when it will reduce to £200,000 (originally threatened to be reduced down to £25,000). Accounting periods straddling this date have a pro-rated entitlement to the allowance, with the relief due for expenditure after 31 December being restricted to a time-based proportion of the £200,000.
Employment Allowance (EA)
From April 2016 the EA will rise to £3,000, benefiting over 1 million employers, and helping many businesses take on their first employee.
Apprenticeship levy and allowance
The apprenticeship levy will be introduced in April 2017 at a rate of 0.5% of the payroll. Each employer will receive an allowance of £15,000 to offset against their levy payment. So effectively the levy will only be paid on any payroll in excess of £3 million – which is good news for smaller employers.
Corporation Tax rate reduction
The rate of Corporation Tax will fall to 19% in 2017 and to 18% in 2020.
Capital Gains Tax Entrepreneurs’ Relief
It is good to see that there have not been any major changes to Entrepreneurs’ Relief despite widespread speculation in the run up to the Autumn Statement!
HMRC’s direct access to bank accounts
HMRC now has the power to collect tax owed direct from the debtor’s account(s). Some of the key points to note are: -
- The debt must be at least £1,000
- Funds of at least £5,000 must be left in the account(s)
- The powers extend to ISAs and joint accounts (presumption is these are 50:50)
HMRC does have to follow due process but this is still a significant power. If nothing else it may make joint accounts a lot less attractive!
Dividend changes from 6 April 2016
The non reclaimable 10% tax credit is scrapped and in its place there will be a new £5,000 tax free dividend allowance and progressive dividend rates which are;
- 7.5% for basic rate taxpayers – up to £32,000 (Nil this year)
- 32.5% for higher rate taxpayers - between £32,000 & £150,000 (25% this year)
- 38.1% for additional rate taxpayers – above £150,000 (30.65% this year)
Shareholders may want to consider accelerating dividend payments before 6 April 2016 to benefit from the current lower rates if they have sufficient distributable profits and cash flow to fund the resulting earlier tax payments.
Real time reporting for businesses and landlords
By 2020 most businesses, self-employed people and landlords will be required to maintain their tax affairs digitally and update HMRC at least quarterly via their digital tax account. Employees and pensioners, unless they have other income of more than £10,000 per year from self-employment or property, will be exempt.
A consultation is promised on aligning payment dates such that taxpayers make a single regular payment that covers all their tax affairs.
According to the Government these changes will make things easier for taxpayers!
The ugly – the fight against tax avoidance
The Government is continuing to promote time and resources to ‘closing the tax gap’. Recent measures include the below:
- There will no longer be a need to prove intent for the most serious cases of failing to declare offshore income and gains to be treated as a criminal offence.
- Civil penalties for deliberate offshore tax evasion will increase, including the introduction of a new penalty linked to the value of the asset on which tax was evaded and increased public naming of tax evaders.
- Additionally, for those who ‘enable’ offshore tax evasion, civil penalties will be charged and those who have enabled the evasion may be publicly named.
- For corporates which fail to prevent their agents from facilitating tax evasion there will be a criminal penalty.
- There will be tough new measures for those who persistently enter into unsuccessful tax avoidance schemes. These include special reporting requirements, surcharges, names being published and restrictions on accessing certain tax reliefs for a period of time.
- There will be a new penalty of 60% of the tax successfully charged under the General Anti Abuse Rule.
Finally (hopefully) the Government will consult on an additional requirement for individuals to correct any past offshore non-compliance with new penalties for failure to do so.
There is plenty to think about, if you would like to discuss any of the matters discussed in this article, please contact Cathy Corns or your usual contact at Mercer & Hole.
Date: 26th November, 2015
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