The rate of corporation tax will reduce to 17% for the financial year commencing 1 April 2020. The planned reduction in corporation tax to 19% from 1 April 2017 remains unchanged.
Loans to participators
In order to keep the tax rate in line with the higher rate of tax on dividend income, the loans to participators tax rate payable will increase from 25% to 32.5% on loans or benefits conferred by close companies on or after 6 April 2016.
Corporation tax reform of loss relief
From 1 April 2017, companies will only be able to use losses carried forward against up to 50% of their profits above £5 million.
If a group, the £5 million allowance will apply per group. With respect to the current streaming rules, the use of losses arising on or after 1 April 2017 will be more flexible so that the losses will be useable, when carried forward, against profits from other income streams or other companies within a group.
Tax deductibility of corporate interest expenses
New rules will be introduced from 1 April 2017 to limit the tax relief that large multinational enterprises can claim for their interest expenses.
Relief on interest payments will be restricted to 30% of UK earnings, with exceptions for groups with legitimately high interest payments.
The government will permanently double the small business rate relief in England from 1 April 2017. At the same time, the government will raise the small business rate relief threshold in England to rateable values of up to £12,000 tapering to £15,000.
Other changes will see the threshold at which business rate bills in England are calculated using the standard multiplier to properties with rateable values of £51,000 and above from 1 April 2017.
The annual uprating of business rates will change from the RPI to the CPI, from 1 April 2020.
Class 2 national insurance for self-employed persons
At present, a self-employed person in business is required to pay class 2 NICs if their profit is over the small profits threshold. From April 2018, class 2 national insurance will be abolished and only class 4 NICs will be payable. As class 2 NICs currently enable self-employed individuals to build entitlement to the state pension and other contributory benefits, class 4 national insurance will be reformed in April 2018 so that self-employed people can continue to build benefit entitlement.
Repeal of the renewals allowance
The renewals allowance for the cost of replacing tools which provides traders and property businesses with tax relief will be withdrawn.
The impact of the change is intended to ensure that tax relief for expenditure on replacement tools will be obtained under the same rules as those which apply to other capital equipment.
This change will see businesses claim tax relief under the capital allowance regime or, in the case of residential landlords, for the cost of replacing domestic items such as appliances or furnishings.
The new measure will repeal the renewals allowance on or after 6 April 2016 for income tax purposes and from 1 April 2016 for corporation tax purposes.
Off-payroll working in the public sector
As from April 2017, public sector bodies and agencies will become responsible for operating the tax rules that apply to off-payroll working through limited companies in the public sector.
The individuals working through their own limited company in the public sector will no longer be responsible for deciding whether the intermediaries legislation applies and then paying the relevant tax and national insurance.
The responsibility for complying with the rules will move to the public sector employer, agency or third party that pays the worker's intermediary and it will become their obligation to decide if the rules apply to the contract and if so, account and pay the liabilities through Real Time Information and deduct the relevant tax and NICs.
Capital allowances for business cars
The 100% first year allowance for businesses purchasing low emission cars will be extended for a further 3 years until April 2021.
From April 2018, the carbon dioxide emission threshold below which cars are eligible for the first year allowance will decrease to 50 g/km from the current threshold of 75 g/km. Similarly, the carbon dioxide emission threshold for the main rate of capital allowances for business cars will reduce from the current rate of 130 g/km to 110 g/km.
Van benefit charge for zero emissions vans
The level of van benefit charge for zero emissions vans will be set at 20% of the charge for conventionally fuelled vans for the 2016/17 and 2017/18 tax years. This measure defers the planned increase to 40% until 2018/19.
Trivial benefits in kind
As previously announced, a statutory exemption from income tax for qualifying trivial benefits in kind costing £50 or less will be introduced from 6 April 2016. The exemption will also remove the charge from class 1A NICs, with a corresponding disregard for class 1 national insurance taking effect later in the year.
Taxation of termination payments
With effect from April 2018 employers will be required to pay NICs on termination payments to an individual above £30,000. This rule applies where income tax is also due.
Employer provided pensions advice
The available exemption from tax and national insurance for employer arranged pension advice will increase from £150 to £500 from April 2017.
Business premises renovation allowance
The business premises renovation allowance will expire on 31 March 2017 for corporation tax and 5 April 2017 for income tax.
Offshore property developers
A new measure will be introduced to ensure that profits from trading in UK land are always subject to UK tax by introducing specific rules to tax the full amount of profits, regardless of whether or not the person to whom they arise is UK resident.
Royalty withholding tax
The government will change the deduction of tax at source regime to bring all international royalty payments arising in the UK within the charge to income tax, unless those taxing rights have been given up under a double taxation agreement or the EU interest and royalties directive.
The reforms seek to:
• apply a wider definition of royalty payments that are subject to UK withholding tax,
• create a domestic anti-treaty abuse provision which will prevent, for example royalty payments being paid to tax havens without deduction of tax
• ensure that UK withholding tax will apply to payments that are attributable to a UK permanent establishment, even where the royalty payment is not made in the UK.
Corporation tax payment dates
Plans to bring forward the corporation tax payment dates for those companies with profits over £20 million are to be delayed.
The rules will now apply to accounting periods starting on or after 1 April 2019 and will require these companies to pay tax in instalments in the third, sixth, ninth and twelfth months of the year.
Corporation tax anti-hybrid rules
New measures will be introduced from 1 January 2017 to address hybrid mismatch arrangements, which will prevent multinational enterprises avoiding tax through the use of certain cross-border business structures or finance transactions.
Patent box compliance with new international rules
The operation of the patent box will be modified to comply with a new set of international rules created by the OECD.
The new rules will make the lower tax rate dependent on, and proportional to, the extent of the research and development expenditure incurred by the company claiming the relief. This change comes into effect from 1 July 2016.
Research and development relief
The way in which a large company obtains research and development relief has changed, and therefore this measure ensures that despite this change SMEs continue to benefit from the calculation which is required by statute. Without introducing these changes, this benefit would not apply for SMEs covering the period after 1 April 2016.
Corporation tax and vaccine research relief
Vaccine research relief will end when its state aid approval runs out on 31 March 2017.
Corporation tax for museums and galleries
A new tax relief for museums and galleries will be introduced from 1 April 2017. Consultation will take place on the new relief over summer 2016.
Corporation tax and orchestra tax relief
As previously announced in Budget 2015, tax relief at a rate of 25% on qualifying expenditure will be available to orchestras from 1 April 2016.
Corporation tax and insurance linked securities
The government is consulting on proposals for a new, competitive framework for insurance linked securities business.
Insurance linked securities are a means of transferring insurance risk to capital market investors.
Detailed regulations will be developed in consultation with stakeholders following the publication of the primary legislation and conclusion of the consultation on general proposals which began on 1 March 2016.
Trading income received in non-monetary form
Legislation will be introduced in Finance Bill 2016 to confirm that trading income and property income received in non-monetary form is fully brought into account in calculating taxable profits for income tax and corporation tax purposes.
The measure will have effect in relation to trading and property business transaction occurring on or after 16 March 2016 and is intended to clarify existing laws on the matter.
Securitisation and annual payments
Legislative changes will amend regulations to clarify the tax treatment of residual payments made by securitisation companies, confirming that they can be paid without withholding tax.
Enterprise zones and capital allowances
Companies investing in plant and machinery in designated enhanced capital allowance sites in enterprise zones are able to invest in new plant and machinery and can qualify for 100% capital allowances for 8 years.
Transfer pricing guidelines
A measure is introduced to amend the references within the relevant legislation to incorporate the most recent revisions to the OECD guidelines which are the internationally agreed standard for application of the arm's length principle for transfer pricing purposes.
This measure is directed toward those who are subject to the transfer pricing rules in respect of a transaction (or series of transactions) with a connected party for purposes of income tax or corporation tax. This is intended to provide certainty for business and minimise the potential for double taxation.
The measure will have effect for corporation tax purposes in relation to accounting periods beginning on or after 1 April 2016 and for income tax purposes in relation to the tax year 2016 to 2017 and subsequent tax years.
Bank losses restriction
The proportion of a banking company's annual profit that can be offset by pre-April 2015 carried forward losses will be further restricted from 50% to 25% from 1 April 2016.
Banking companies excluded entities
To ensure that banking taxes are approximately targeted at banks, the government will amend the excluded entities test.
Soft drinks industry sugar levy
The government will introduce a new soft drinks industry levy to be paid by producers and importers of soft drinks that contain added sugar.
The levy will be charged on volumes according to total sugar content, with a main rate charge for drink above 5 grams of sugar per 100 millilitres and a higher rate for drinks with more than 8 grams of sugar per 100 millilitres. There will be an exclusion for small operators, and the government will consult on the details over the summer, for legislation in Finance Bill 2017 and implementation from April 2018 onwards.