Corporate tax changes
The Government is looking to restrict relief for travel and subsistence payments for individuals who do 'their work' through an employment intermediary or personal service company. Essentially if the expense amounts to an ordinary home to work commute then the tax deduction will be denied. Legislation is expected to be introduced to bring about the proposed changes from April 2016.
EIS & VCT proposed changes
There will be some technical changes to these particular tax reliefs which apply to the investee company. These are designed to ensure tax incentives apply for individuals investing in genuine new businesses.
- Investments must be made with the intention of growing and developing a business;
- All investors must be independent from the company at the time of the first share issue;
- The qualifying criteria will limit relief to situations where the first commercial sale took place within the previous 12 years;
- The total investment a company may receive under EIS and VCT will be capped at £15 million, or £20 million for knowledge intensive companies; and
- The limit will be increased to 499 employees for knowledge intensive companies.
From 6 April 2015 the requirement that a company must spend 70% of the amount raised under Seed Enterprise Investment Scheme (SEIS) before it can receive EIS or VCT funding will be removed.
Entrepreneur's Relief is to be more closely targeted on genuine disposals of a business.
Relief will no longer be available if there is a disposal of shares in a company which does not trade itself and which has only a small shareholding in an underlying trading company.
Similarly there will no longer be relief for gains on the disposal of personal assets used in the business of a company or partnership unless there is also a simultaneous disposal of at least 5% of the company or partnership.
Creative Industry Tax Reliefs
Changes will be made to certain reliefs for the creative industries from 1 April 2015. In particular;
- An increase in the rate of film tax relief, to 25%
- For high-end television tax relief, the proportion of total expenditure that must be incurred in the UK falls from 25% to 10%; and
- A new children’s television tax relief, which will include programmes such as game shows and competitions.
From 1 April 2016 there will be a new tax relief for orchestras of up to 25% of qualifying expenditure although full details are yet to be announced.
Research & Development (R&D)
Changes to R&D tax credits rates are:
- The ‘above the line’ credit increases from 10% to 11%.
- The SME relief is enhanced from 225% to 230%.
- Expenditure on ‘prototypes’ which are then sold will no longer be eligible for relief.
HMRC will put in place a voluntary advanced assurance service for smaller companies making their first claim for R&D tax credits. Once granted, this assurance will run for three years. This is intended to reduce the time HMRC take to process claims and should apply from Autumn 2015. Further details and guidance are due to be released in the summer
Date: 19th March, 2015
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