Given that the Spring Budget in March of this year contained a multitude of Corporate and Business Tax announcements, it is, perhaps, unsurprising that there was little in the way of major change revealed in the Autumn Speech. There were, however, a few key points that may be of relevance to your business.
R&D Tax Reliefs
There were two reforms to R&D Tax Reliefs announced in the Budget, one of which is a welcome change, whilst the other will see a reduction in the amounts that some companies are able to claim. The good news, is that from 1 April 2023, the definition of Qualifying Expenditure is being expanded to include data and cloud computing costs, whilst the bad news is that, from the same date, there is likely to be a restriction on relief to only include expenditure incurred in the UK.
Cultural Tax Reliefs
The ‘cultural tax reliefs’ provide welcome tax breaks for companies operating as Theatres, Orchestras, Museums and Galleries. The tax relief for qualifying companies in the museum and gallery sectors was originally due to expire in March 2022, but this has now been extended for a further two years until 31 March 2024, and the headline rates for all cultural reliefs will be increased significantly, albeit temporarily, with effect from Budget Day.
Residential Property Developers Tax
This new measure was first announced in February as a means of ensuring that the largest property developers make a fair contribution to help pay for building safety remediation. Coming into effect on 1 April 2022, property developers will see an additional tax charged at 4% on residential property development profits exceeding an annual allowance of £25 million. It is, however, important to note that this limit is not per company – if your property development business is part of a larger group, the group will only have one annual allowance to be allocated between its companies as it chooses.
Shipping
The UK’s Tonnage Tax regime allows qualifying companies to choose to pay tonnage tax on a fixed notional profit, based on the net tonnage of their ships, rather than on their actual profits arising from shipping activities. Under the existing rules, companies that elect into the regime must do so for a minimum of ten years, meet various conditions and must comply with ‘flagging’ rules. The reforms announced in the Budget, will, amongst other minor changes, remove the EU flagging rules now that the UK has left the EU, and will reduce the minimum ‘lock-in’ period from 10 years to 8 years to align more closely with shipping cycles.
Capital Allowances
The annual investment allowance (AIA), which provides 100% tax relief in the year of acquisition for eligible assets, had previously been increased temporarily from £200,000 to £1 million, but this was due to end on 31 December 2021. The increase will now extend for a further 15 months until 31 March 2023 for both Income Tax and Corporation Tax. As always when the AIA changes, there will be transitional rules to determine the AIA available for accounting periods spanning the date of change.
