Budget 2020 – Business taxes

Fewer Business taxes were announced in the Budget than we were expecting.

Corporation Tax – As expected from the election manifesto the legislated reduction in corporation tax rates from 19% to 17% due to be effective from the 1 April 2020 is removed. Corporation tax rates will remain at the current level of 19% which is still a low rate for a G20 country, with only Switzerland at 18% and Singapore at 17% lower than the UK.

Business will see changes reflected in accounts as the deferred tax provisions reflect the 2% increase.

Additional funds received by the Treasury by keeping the level at 2% have been used to promote further tax relief on structures and buildings allowance, research and development and the employers’ allowance.

Capital Allowances – As anticipated the new relief for structures and buildings allowance (SBA) has been increased from 2% to 3% from 1 April 2020 for corporation tax and 6 April 2020 for income tax. It was also widely predicted that the annual investment allowance which is due to reduce from £1,000,000 to £200,000 on the 1 January 2021 would remain at the £1,000,000 but sadly this has not materialised.

Research and Development Relief (R&D) – A welcomed increase in the tax credit for R&D from 12% to 13% was announced today. However, in the detail we also see a consultation on whether qualifying R&D should include investments in data and cloud computing and further work to ensure the claim is not being abused are proposed.

Employers Allowance (EA) – The employers’ allowance will increase from £3,000 to £4,000 for businesses with under £100,000 charge per annum for employer’s national insurance contributions.

Enterprise Management Incentives Scheme (EMI) – The government is to launch a review into the scheme to ensure it provides support for high growth companies to recruit and retain talent by allowing them to have a stake in the business. Although a popular approved HMRC scheme, it is not always taken up due to employees having to fund the exercise of the options or the income tax charge without sometimes the proceeds from the sale of shares.

Entrepreneurs Relief (ER) – During recent weeks there has been a lot of speculation as to what will happen with entrepreneur’s relief, from scrapping completely to lowering the lifetime limit and increasing the rate of tax. The only change announced today has been to lower the lifetime limit for the 10% rate of tax from £10 million to £1 million. Although for those retiring this will not be welcomed news, the fact that is was not scrapped altogether is seen as a bonus and would save £100,000 in tax for the individual.

Digital Services Tax (DST) – Previously announced has been a 2% rate of tax on revenues on certain digital businesses from 1 April 2020.

Tax Avoidance – It seems now that measures to tackle tax avoidance are a guarantee component of any budget and todays Budget was no exception. With an estimated £200 billion of tax collected since the introductory measures began in 2010 it is easy to see why is it a high priority on all Chancellors agendas.  More measures have been announced to tackle tax abuse in construction, illicit tobacco, big business and promoters of tax avoidance schemes.

For the construction industry, the new legislation will see non- compliant businesses being unable to claim CIS refunds, as well as the introduction of the reverse charge which will now be introduced from 1 October 2020 after being delay 12 months.

HMRC is also recruiting additional compliance officers and bringing in new technology is to bring in an additional £4.4 billion in tax by 2024/25.

The main focus of HMRC is seen to be directed at the promoters of tax avoidance schemes to enable HMRC to shut down the promoters in the first place.

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