Budget Highlights 2013 – Corporate Highlights

Here are the highlights for corporates from today’s Budget:

Budget 2013 – A Budget for the ‘Aspiration Nation’

Chancellor Osborne hailed the UK an ‘aspiration nation’ and his Budget was designed to help those who wanted to work hard and encourage employment in the UK.

The economics in brief:

  • Chancellor confirmed the debt targets had been missed and he would be borrowing more than planned, although public sector net borrowing is forecast to fall by one third over the three years from 2009/10 to 2012/13.
  • Growth forecast was revised down for 2013 from 1.2% to 0.6% and 2% to 1.8% for 2014.
  • More subdued and uneven recovery than expected.
  • Budget designed to help those who want to aspire and work hard.

Corporation tax

It is a long-held commitment of the Chancellor (and Chancellors before him) to make the UK one of the most competitive tax regimes in the G20 and today he announced a reduction in the main rate of corporation tax to 20% from 2015. The measures are designed to attract overseas investment and will align with the small companies’ rate, simplifying the tax calculation process and save administration time. However, as large companies pay their tax on account, (as opposed to small companies who pay after the year-end), the detail on how this anomaly will be ironed out has yet to come to light. Watch this space.

Employers National Insurance Savings

In a welcome and headline-grabbing measure, the Chancellor introduced an ‘Employment Allowance’ of £2,000 pa for all businesses and charities to be offset against their employer’s NIC bill from April 2014. It was hailed as a ‘tax off jobs’ designed to encourage further employment and remove further burden for small businesses.

The measure is expected to benefit up to 2.5m employers with 450k of the country’s smaller businesses no longer paying contributions.

Employment-related loans

From April 2014 employers who provide their employees with loans either low-cost or interest free will see the threshold increase from £5,000 to £10,000 before they are treated as earnings and taxable on the employee. To ensure there is no tax charge, the total outstanding loan balance must not exceed the new £10,000 threshold at any point during the tax year.

And a bonus for employers is that they don’t have to report the amounts on P11D forms or pay Class 1A on the loans.

Research & Development ‘Above the line (‘ATL’) R&D credit’

The coalition has continued its commitment to encouraging R&D investment in the UK and today announced a 10% tax credit ‘above the (profit) line’ for large companies. The measure is designed to help larger businesses realise a cash benefit immediately and is mandatory from April 2016. This initiative was announced in the 2011 Autumn Statement followed by consultation to June 2012 and will provide a huge boost to large companies, specifically those making losses.

Businesses need to prepare for the ATL credit before it is introduced in order to obtain it as quickly as possible and can do this by seeking robust advise from an R&D tax specialist.

General Anti-Abuse Rules – ‘GAAR’

Never before has tax avoidance made the headlines so much as in the last few months and as expected, today’s Budget delivered measures to counteract tax advantages arising from abusive tax avoidance arrangements. The GAAR will apply to income tax, NIC, corporation tax, capital gains tax, stamp duty land tax and petroleum revenue tax.

The rules are effective for arrangements entered into or after Royal Assent by the Finance Bill 2013 and provide additional means for HMRC to tackle tax avoidance schemes. In line with HMRC’s recent stance, Chancellor Osborne announced that tax avoiders would be ‘named and shamed’.

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