UK Budget 2020 – business tax measures

Mar 16, 2020

 

The Chancellor made a number of announcements in this area, most of which were signposted in advance of Budget day. It was also confirmed that the UK’s digital services tax is proceeding as planned from 1 April 2020.

Meeting the Conservative Party’s manifesto promise not to reduce the rate of corporation tax to 17 per cent from 1 April 2020, instead the rate will stay at 19 per cent from that date. The 17 per cent rate has already been enacted in legislation via the Finance Act 2016, and therefore an amendment will be required in the next Finance Bill.

The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings (known as the structures and buildings allowance (“SBA”)) will increase from 2 per cent to 3 per cent. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax. The SBA was introduced at Budget 2018.

The Government will also increase the Employment Allowance from £3,000 to £4,000 from April 2020. The Employment Allowance can be used against the employers’ National Insurance (“NIC”) bill of a business but only where, from April 2020, the total employer’s NIC liability in the previous tax year was under £100,000.

Legislation will also be included in Finance Bill 2020 to remove the pre-2002 exclusion from the Intangible Fixed Assets regime for investments in intellectual property and other intangible assets. According to the publications, this means tax relief for the cost of acquiring corporate intangible assets on or after 1 July 2020 will be provided under a single regime, subject to restrictions to prevent tax avoidance. A policy paper has now been published setting out this measure in more detail.

And finally, the rate of the taxable Research & Development (“R&D”) expenditure credit for companies claiming under the “large” R&D tax relief regime will increase from 12 per cent to 13 per cent from 1 April 2020. As the corporation tax rate will stay at 19 per cent from this date, the net tax saved from every £1 of qualifying R&D under this scheme will now be 10.53 pence.