UK Autumn Budget 2017 – business as usual

Nov 27, 2017

No significant new tax changes were announced in this Budget which affect UK business. The corporation tax rate modifications enacted previously are unchanged. The main rate fell to 19 percent for three consecutive financial years from 1 April 2017.  From 1 April 2020, the rate falls a further two percentage points to 17 percent. 

However significant changes to the rules for corporation tax losses and restrictions on the deduction of corporate interest were contained in the Finance (No. 2) Act 2017 and took retrospective effect from 1 April 2017.

The R&D expenditure credit (“RDEC”)

From 1 January 2018, the RDEC for companies claiming under the large company scheme is to be increased from 11 percent to 12 percent. A new Advanced Clearance Service for R&D expenditure credit claims is also to be introduced.

Corporate indexation allowance

To bring the UK in line with other major economies, the corporate indexation allowance will be frozen from 1 January 2018. Accordingly, no relief will be available for inflation accruing after this date in calculating chargeable gains made by companies. 

UK Income and gains of non-resident companies’

From April 2020, income that non-resident companies receive from UK property will be chargeable to corporation tax rather than income tax. Also from that date, gains that arise to non-resident companies on the disposal of UK property will be charged to corporation tax rather than CGT.

Corporate capital gains

The government will amend the Substantial Shareholding Exemption legislation and the Share Reconstruction rules to avoid “unintended chargeable gains” being triggered where a UK company incorporates foreign branch assets in exchange for shares in an overseas company.

Hybrid mismatch rules

Some aspects of corporation tax rules which apply to arrangements involving hybrid structures and instruments from differences in tax treatment between two jurisdictions – will be amended to clarify how and when the rules apply, and to ensure that the rules operate as intended. HMRC has published further details of these amendments alongside the Budget.

Corporate intangibles regime

The UK’s corporate intangibles will be celebrating its sweet sixteenth birthday in April 2018. As it comes of age, the government is planning to consult on the tax treatment of intellectual property. Part of this will consider whether there is an economic case for targeted changes to this regime aimed at better supporting UK companies investing in intellectual property.