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CORPORATION TAX |
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Capital allowances: rates and allowances See ¶369, ¶413 Two significant changes are to be implemented. Firstly, for periods ending on or after 1 April 2012 (6 April 2012 for income tax purposes) the rates of allowances on plant and machinery are to be reduced. The allowance that is currently applicable to most qualifying plant of 20% will become 18%, with the special rate dropping from 10% to 8%. As these changes happen on a fixed date it will be necessary to calculate a hybrid rate for any period straddling the change.
Secondly, from April 2012 the annual investment allowance will be reduced to £25,000. The method for allocating expenditure against this in any period straddling this date will be detailed in legislation nearer the time. Rates See ¶1342, ¶ 9962 Both the main rate and the small companies’ rates have been announced for financial year 2011. The main rate is set to drop by 1% to 27%. It is the current intention that this will continue to drop by 1% each financial year until it reaches 24% for financial year 2014. The small companies’ rate will similarly be reduced by 1% to 20% for financial year 2011. Consortium relief See TM ¶1580, ¶1587 The link company rules are to be amended by the next Finance Bill and these changes will come into force for accounting periods beginning on or after the date of publication of the legislation. In order to comply with its EU obligations the Government will replace the condition that the link company has to be UK resident with one that ensures the company is EEA resident. The general rules will also be amended to introduce a further potential restriction to the amount of losses a consortium company can claim. Presently the percentage that can be claimed is limited to the lower of the company’s holding of ordinary share capital, entitlement to assets on a winding up or entitlement to profits on distribution. The further limit will be the proportion of voting rights and control the company holds in the consortium. AS PREVIOUSLY ANNOUNCED Zero-emission goods vehicles See TM ¶298, ¶327 For expenditure incurred on zero-emission goods vehicles on or after 1 April 2010 (6 April 2010 for income tax purposes), and for the following 5 years, a first year allowance is to be introduced. Where a business purchases a new, unused vehicle that is designed primarily for the carriage of goods and it cannot under any circumstances produce CO2 emissions, it will be able to claim 100% capital allowances on the item in the period it is purchased. This expenditure will then be excluded from the annual investment allowance. In order to comply with State Aid rules the following businesses will not qualify: » those that are considered to be in difficulty; » those who are yet to repay State Aid that has been deemed illegal; » those engaged in the fisheries or aquaculture sectors; and » those managing waste for others. Further, there will be an overall cap on the amount of expenditure that a business (along with associated businesses) can claim over the life of the relief which will be set at €85 million. Changes to research and development criteria See TM ¶798 The next Finance Bill after the summer recess will introduce legislation to remove the necessity for a small or medium-sized enterprise to own any intellectual property arising from its research in order to secure additional relief for qualifying expenditure. This will apply for expenditure incurred in an accounting period ending on or after 9 December 2009. Further changes to worldwide debt cap rules See TM ¶877 Previously announced changes that were not included in Finance Act 2010 are to be enacted as follows. Firstly, in looking at the assets and liabilities in the net debt calculation, long-term arrangements that, while not being in the legal form of a loan, have similarities to a loan, including an interest-like return, will be included. Secondly, the rules will be clarified to put beyond doubt that a limited liability partnership cannot be the ultimate parent of a group for these purposes. Finally, distributions made by industrial and provident societies will not be included as finance expenses, even though they are normally treated as interest payments for tax purposes. Changes to dividend exemption rules See TM ¶953 The exemption that previously only applied to distributions of an income nature is to be extended for companies receiving dividends of a capital nature. This will be coupled with a widening of the definition of distribution to include a return of a reserve arising from a reduction in share capital. Real Estate Investment Trusts See TM ¶985 The rules on the distribution level that a REIT must make in order to retain its status are to be changed in the first Finance Bill of the next Parliament. From the date the Bill receives Royal Assent a REIT will be able to count any stock dividends it makes towards the 90% requirement. The recipients of such dividends will still be taxed in the same way as if they had received a cash dividend from the REIT. |
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Example A company has an accounting period ending on 31 December 2012. 91 days would fall under the old rate and 277 under the new.
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