Corporation tax (CT)
The small profits rate of CT will remain at 20% from April 2013. From April 2015 the main rate and small profits rate of CT will be unified at 20%. The main rate will fall from 24% to 23% in April 2013 and to 21% in April 2014. The rate of bank levy will increase to 0.142% from 1 January 2014 to offset the main rate reduction.
From April 2013, under the Patent Box a reduced 10% CT rate will apply to profits from patents.
SAVER: You may save tax by trading through a company
Profits retained in a company may be taxed at only 20% – compared with up to 45% income tax plus NICs.
National insurance contributions (NICs)
From April 2014 businesses and charities will be entitled to a £2,000 employment allowance towards their employer’s Class 1 NIC bill, which will be delivered as part of the normal payroll process through Real Time Information (RTI).
The government will consult on using self-assessment to collect flat-rate Class 2 NICs from self-employed people.
Employee shareholder status
A new employee shareholder status will be introduced from 1 September 2013, under which employee shareholders will have different employee rights. They will need to hold shares in their employer worth a minimum of £2,000. Gains on up to £50,000 of qualifying shares acquired by employee shareholders will be exempt from CGT. The first £2,000 of share value received under the new status will be free from income tax and NICs, achieved by deeming employee shareholders to have paid £2,000 for the shares they receive.
Employee ownership and social enterprises
Finance Bill 2014 will introduce a CGT relief on the sale of a controlling interest in a business to an employee ownership structure. There will also be a tax relief to encourage private investment in social enterprises.
Research and development (R&D) incentives
The rate of the new ‘above the line’ (ATL) credit for large company R&D investment to be introduced from April 2013 will now be 10% instead of the 9.1% proposed in 2012.
Annual investment allowance (AIA)
The AIA limit is increased from £25,000 to £250,000 for two years for all qualifying investments in plant and machinery made on or after 1 January 2013.
THINK AHEAD: Get the timing right for your investment in new business equipment
The annual investment allowance generally gives businesses of any size immediate tax relief on the purchase of most types of equipment. The allowance ceiling has been increased from £25,000 to £250,000 for two years from 1 January 2013. But take care – complex apportionment rules apply where your business year straddles that date.
Capital allowances for business cars
The 100% first year allowance for businesses that buy vehicles with the lowest CO2 emissions will be extended until 31 March 2018. From April 2013, the eligibility threshold will be reduced from 110g/km to 95g/km and leased business cars will no longer qualify. There will be a further reduction to 75g/km from April 2015. The allowance and threshold will be reviewed again in the 2016 Budget.
The emissions threshold below which cars are eligible for the main (18%) rate of capital allowances will be reduced from 160g/km to 130g/km from April 2013. The threshold will be reviewed again in the 2016 Budget and any amendments will take effect from April 2018.
Simpler income tax
Small unincorporated businesses will be able to calculate their income tax on a cash basis from April 2013. Businesses with annual receipts of up to £79,000 will be eligible and will be able to continue to use the cash basis until receipts reach £158,000. They will not have to align their accounting period with the tax year. Also from April 2013, all unincorporated businesses will be eligible to use flat rates to calculate certain business expenses rather than having to calculate their actual business usage. The Office of Tax Simplification is to review ways of simplifying the taxation of partnerships.
There will be revised restrictions on companies resident in the European Economic Area (EEA) surrendering losses from their UK branches in the form of group relief in the UK. From 1 April 2013 these restrictions will depend on whether the losses are used elsewhere in any period, rather than on whether they could potentially be used elsewhere.
The types of commercial arrangements that are exempt from anti-avoidance rules affecting group loss relief will be expanded, with a view to targeting these rules more effectively for the future.
Loans to participators
The government will consult on reforming the structure and operation of the tax charge on loans from close companies.
SAVER: Sharing with your spouse
If you run a company or business, make sure that your spouse/partner is appropriately paid and pensioned for any work and that they share in the profits if possible. You may be able to adjust your incomes to retain your child benefit.
A disincorporation relief for businesses with total qualifying assets of up to £100,000 will allow a company to transfer goodwill and an interest in land to its shareholders so that no CT arises on the company with respect to the transfer. It will be available for five years from April 2013.
Lease premium relief
The availability of lease premium relief will be limited for leases of more than 50 years that are granted after 31 March 2013 for companies and after 5 April 2013 for individuals and partnerships.
Reliefs for the creative sector
Previously announced CT reliefs for the animation and high-end television industries will start on 1 April 2013. A video games tax relief will be introduced following state aid approval.
Worldwide debt cap rules
There will be revisions to the debt cap rules to change the way in which the group treasury company election operates with effect from 11 December 2012.
Foreign currency assets
Relevant companies will have to compute their chargeable gains and losses on disposals of shares, interests in shares, ships and aircraft in their functional currency from a date to be announced shortly after Royal Assent to Finance Bill 2013.
Corporation tax deductions for employee share acquisitions
Changes will be made to the rules governing deductions for accounting expenses in connection with share options or awards granted to employees with effect from 20 March 2013.
Tax measures aimed at encouraging the exploration and production of shale gas will include a new shale gas field allowance and the extension of the Ring Fence Expenditure Supplement for shale gas projects from six to ten years. The government will consult on whether these measures should be extended to other forms of unconventional onshore gas.
The standard rate of landfill tax will go up by £8 per tonne to £80 per tonne from 1 April 2014. The lower rate will remain at £2.50 per tonne.