Business tax and investment incentives

As announced in the Autumn Budget 2018:

Corporation tax 

Corporation tax rates are as follows:

Financial year from 1 April 2018 – Corporation tax rate 19 per cent
Financial year from 1 April 2019 – Corporation tax rate 19 per cent
Financial year from 1 April 2020 – Corporation tax rate 17 per cent

Annual Investment Allowance (AIA)

The AIA will be temporarily increased from £200,000 to £1 million. This change will have effect in relation to qualifying expenditure incurred from 1 January 2019 to 31 December 2020.

Capital allowances – special rate pool

The rate of writing down allowance on the special rate pool of plant and machinery will be reduced from 8 per cent to 6 per cent. The new rate will be effective from 1 April 2019 for businesses within the charge to corporation tax and 6 April 2019 for businesses within the charge to income tax.

Structures and Buildings Allowance (SBA) 

The government will introduce a new SBA to provide relief for qualifying expenditure on new non-residential structures and buildings.

Relief will be available for eligible expenditure incurred where all contracts for the physical construction works are entered into on or after 29 October 2018. Relief will not be available for the costs of land or dwellings. The SBA will be available at an annual rate of 2 per cent. This will be at a flat rate, calculated on the amount of original construction expenditure. There will not be a system of balancing charges or balancing allowances on a subsequent disposal of the asset. Instead, a purchaser will continue to claim the annual allowance of 2 per cent of the original cost.

First Year Allowances (FYAs)

Legislation will be introduced to end the FYA and first year tax credits for products on the Energy Technology List and the Water Technology List from April 2020.

The current 100 per cent FYA for expenditure incurred on electric charge-point equipment will be extended for a further four years. It will expire on 31 March 2023 for corporation tax and 5 April 2023 for income tax purposes.

Corporate capital loss restriction 

The government will legislate to restrict companies’ use of carried forward capital losses to 50 per cent of capital gains from 1 April 2020.

The measure will include an allowance that provides companies unrestricted use of up to £5 million capital or income losses each year. An anti-forestalling measure to support this change will have effect on and after 29 October 2018.

Research and Development (R&D) tax relief

A limit will be introduced on the amount of payable tax credit that can be claimed by a company under the R&D SME tax relief. The limit will be set at three times the company’s total PAYE and NICs payment for the period. The change will have effect for accounting periods beginning on or after 1 April 2020. Any loss that a company cannot surrender for a payable credit can be carried forward and used against future profits.

Despite Brexit, London remains an established world-leader in finance, creative industries and business services, and a growing force in newer industries such as tech, low carbon and life sciences. It offers some tempting UK tax incentives to support innovation, startups and growing businesses.

At Beavis Morgan, we specialise in working with SMEs and entrepreneurial people across a wide range of sectors, providing guidance and strategic advice to help in formulating plans for your business in order to strengthen its prospects of success, achieve growth and maximise wealth.

If you would like to find out more about how we can assist you and your business or to discuss how any of these tax incentives could benefit your business, contact Joanne Holland or your usual Beavis Morgan Partner.

Further reading: UK businesses claim £3.5 billion in R&D tax relief