By ACCA’s budget team
The government objective was to deliver a competitive corporate tax system to provide the right conditions for business investment and growth.
Corporation tax – main rate
The Chancellor announced a reduction of the main corporation tax rate from 26% to 24% from 1 April 2012.
The main rate of corporation tax will be reduced further for the financial year commencing 1 April 2013 to 23%.
A lower corporation tax rate will make the UK more attractive (relative to other locations) as a destination to locate activity and profits. A reduction in the main rate of corporation tax will reduce capital costs for businesses and promote higher levels of business investment.
Control Foreign Company (CFC) reform
Legislation will be introduced by the Finance Bill 2012 to make changes to the CFC tax rules which means that all profits of foreign subsidiaries will no longer be potentially subject to a charge unless an exemption applies. A charge will only arise on the proportion of overseas profits that have been 'artificially diverted’. The new rules will be effective for accounting periods beginning on or after 1 January 2013.
Patent and Intellectual property
Finance Bill 2012 will allow companies to elect to apply a 10% corporation tax rate to a proportion of profits attributable to patent and certain other qualifying intellectual property from 1 April 2013. In the first year this proportion will be 60% and increase annually to 100% from April 2017.
Corporation tax reliefs for the creative sector
The Government will introduce corporation tax reliefs for the production of culturally British video games, television animation programmes and high end television productions. Consultation on the design will take place over the summer. Legislation will be in Finance Bill 2013 and will take effect from 1 April 2013, subject to State aid approval.
Corporation tax: NHS bodies
Following changes to be introduced by the Health and Social Care Bill, the Government will legislate in Finance Bill 2013 to exempt certain NHS bodies from corporation tax.
Corporation Tax: Grouping Rules
The legislation will have effect for transactions where the relevant day falls on or after 21 March 2012. The measure makes changes to the grouping provisions relaxing the normal commercial loan rules for loan notes carrying a right of conversion into unconnected companies listed on a recognised stock exchange.
Corporation tax – small rate
Finance Bill 2012 sets the small profit rates at 20% for the financial year commencing 1 April 2012.
The government has announced a consultation on a new cash basis for tax for small unincorporated business with under £77,000 turnover and includes a recommendation that they can grow to £150,000 before they have to switch. This will be another consideration for the smallest businesses when considering incorporation verses non incorporation.
Remember, you can see ACCA’s budget blog from yesterday, here