Business tax and investment incentives

Corporation tax

Corporation tax rates are as follows:

Financial Year to 31 March 2018 31 March 2017
Corporation tax rate 19% 20%

The corporation tax rate will be 19% for the financial years beginning 1 April 2018 and 1 April 2019 and 17% for the financial year beginning 1 April 2020.

Cash basis

The entry and exit thresholds for cash basis accounting will increase to £150,000 and £300,000, respectively. These increases will have effect on and after 6 April 2017. The government will also simplify the rules on capital and revenue expenditure within the cash basis, to make it easier for businesses to work out whether the expenditure is deductible for tax.

Profits from trading in and developing UK land

Legislation will be introduced to ensure that all profits from trading in or developing land in the UK, that are recognised in the accounts on or after 8 March 2017, are brought into the charge to corporation tax or income tax, regardless of the date the contract was entered into.

Substantial Shareholdings Exemption (SSE)

The government will legislate to simplify the SSE rules, remove the investing company requirement, and provide a more comprehensive exemption for companies owned by qualifying institutional investors. The changes will take effect from 1 April 2017.

Employer provided accommodation

A consultation document will be published on 20 March 2017 with proposals to bring the tax treatment of employer provided living accommodation and board and lodgings up-to-date. This will include proposals for when accommodation should be exempt from tax and support taxpayers during any transition.

Benefits-in-kind

It was announced that the government will publish a call for evidence on 20 March 2017 on exemptions and valuation methodology for the income tax and employer NICs treatment of benefits-in-kind. This is in order to better understand whether their use in the tax system can be made fairer and more consistent.

Image rights

HMRC will publish guidelines in spring 2017 for employers who make payments for image rights to their employees in order to improve the clarity of the existing rules.

Plant and machinery leasing

The government will consult in summer 2017 on the legislative changes required following the announcement of the International Accounting Board's new leasing standard, IFRS16, which comes into effect on 1 January 2019. The government intends to maintain the current system of lease taxation by making legislative changes which enable the rules to continue to work as intended.

Research and development (R&D)

It was announced that administrative changes will be made to R&D tax credits. These will increase the certainty and simplicity around claims, and will take action to improve awareness of R&D tax credits among SMEs.

Appropriation to trading stock

Legislation will be introduced to remove the ability for businesses to convert capital losses into trading losses where an asset is appropriated to trading stock. This will have effect for appropriations made on or after 8 March 2017.

Contributions to grassroots sports

As previously announced, the government will extend the circumstances in which companies can get corporation tax deductions for contributions to grassroots sports. Following consultation, the legislation has been amended to extend the treatment of a sport governing body to its 100% subsidiaries. This measure will have effect from 1 April 2017.

Withholding tax on interest

An exemption from withholding tax will be introduced for interest on debt traded on a multilateral trading facility. This will remove a barrier to the development of UK debt markets. The government will consult on implementation from spring 2017.

Double Taxation Treaty Passport Scheme (DTTPS)

The government will renew and extend the administrative simplifications of the DTTPS to assist foreign lenders and UK borrowers. For overseas lenders, the scheme simplifies access to reduced withholding tax rates on interest that are available within the UK's tax treaties with other territories. The DTTPS is currently restricted to corporate lenders and corporate UK borrowers but from 6 April 2017 this restriction will be removed and it will now apply to all types of overseas lenders and UK borrowers.

Master trust pension schemes

The government will amend the tax registration process for master trust pension schemes to align with the Pensions Regulator's new authorisation and supervision regime. This will help to boost consumer protection and improve compliance. The legislation will apply to all master trust pension schemes from October 2018.