Measures affecting companies proposed during Autumn Budget 2024 include updates to the Targeted Anti-Avoidance Rule for loans to participators, enhanced tax relief for visual effects costs, amendments to R&D support in Northern Ireland, adjustments to the R&D intensity condition, and administrative changes to Creative Tax Reliefs. The government also published the Corporate Tax Roadmap, which aims to restore stability and rebuild business confidence.
The Chancellor, Rachel Reeves announced the following measures:
Loans to participators (s.455 charge)
From 30 October 2024:
- The government has identified arrangements where a group of companies or associated companies use chains of loans to avoid a s.455 charge. Current legislation does not capture this type of arrangement.
- The Targeted Anti-Avoidance Rule (TAAR) will be updated to align with other TAARs, applying when companies and shareholders attempt to avoid s.455.
- This change repeals the relief for return payments when the TAAR applies.
Additional tax relief for visual effects costs
From 1 April 2025:
- Film and high-end TV productions can claim an enhanced 39% rate of Audio-Visual Expenditure Credit (AVEC) on UK visual effects costs, which will be exempt from AVEC’s 80% cap.
- This additional credit applies to expenditure incurred on or after 1 January 2025.
- Claims require a final certificate from the British Film Institute, meaning claims can only be made in the accounting period in which the production is completed (or subsequent periods).
- For interim periods, companies can claim the 34% AVEC rate on qualifying costs, including visual effects.
- This measure was this measure was announced at Spring Budget 2024.
Research and Development: Intensity ratio definition
From 1 April 2023:
- The calculation of R&D intensity previously did not consider expenditure eligiable for Research and Development Expenditure Credit (RDEC), although it was always intended to.
- The legislation will be amended to include all relevant R&D expenditure incurred on or after 1 April 2023.
Research and Development: Enhanced R&D Intensive Support (ERIS) in Northern Ireland
From 30 October 2024:
- The cap on benefit for most companies in Northern Ireland claiming ERIS will be amended from £250,000 to €300,000, with lower caps applying to the agriculture and fisheries sectors. Where expenditure takes a company above the cap it will be able to claim RDEC.
- Northern Ireland companies claiming ERIS will be required to take into account relevant aid when considering the 3-year rolling limit.
Audio-Visual and Video Games Expenditure Credits: administrative amendments
From 30 October 2024
- The legilsation that requires companies to have a culteral certificate in place at the end of an accounting period will be amended to state the certificate must only be valid and in force when it accompanies a claim.
From date of Royal Assent to Finance Bill 2024-25
- The legislation will be amended so that unpaid amounts will not count toward qualifying expenditure for credit but will remain deductible as normal for calculating profit. Currently, no deduction is allowed for qualifying expenditure not paid within four months of the end of an accounting period.
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The legislation will also be amended to correct the procedure for regulations made under Part 14A. Statutory instruments making regulations are subject to annulment by the House of Commons only.
These measures align the new AVEC and VGEC with the equivalent provisions under the existing tax reliefs for film, TV, and video game production.
Corporate Tax Road Map
Corporate Tax Roadmap aims to restore stability and rebuild business confidence by providing a stable and predicable environment. Broadly, the key areas are:
- To provide stable Corporation Tax rates.
- To keep current capital allowances and rates, provide simplification, and consider the extension of full expensing for assets purchased for leasing or hiring.
- To keep merged RDEC scheme, the ERIS and Patent Box relief. Improve administration and guidance and launch an R&D disclosure facility.
- To maintain support for audio-visual and video gaming sectors.
- Consult on the effectiveness of Land Remediation Relief.
- Update and align with international standards, and consult on reforms for transfer pricing, permanent establishments, and Diverted Profits Tax.
- Modernise tax processes and technology to provide greater certainty and efficiency.
HMRC's approach to Research and Development (R&D) tax reliefs 2023/2024
- HMRC has published a corporate report outlining:
- Data relating to error and fraud up to 2023/2024
- New data on customer experience.
- Policy and operational changes made in 2023/2024 to address the high levels of error and fraud.
- HMRC increased its compliance coverage from 10% in 2022/23 to 17% in 2023/24, conducting 9,700 compliance checks.
- In 2023/24 HMRC identified £441 million of incorrect claims, through compliance checks, of which 89% were resolved by agreement with the claimant.
- The average compliance check took HMRC 246 days in 2023/24, a slight reduction from 269 days in 2022/23.
- HMRC has acknowledged that, on occasion, its service has fallen short of the HMRC Charter and the Compliance Professional Standards.
- The number of complaints received by HMRC increased from 212 in 2022/23 to 423 in 2023/24.
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HMRC has already set up projects focussing on capability and professionalism in R&D compliance activity, designed to provide confidence about:
- Accessibility of guidance and communications
- Clarity of HMRC’s letter writing
- Consistent use of HMRC powers and penalties
- Clearer escalation routes for complex technical matters, including where a meeting is required
- Additional assurance on more complex cases
- HMRC is taking targeted action to tackle R&D agents whose behaviour is clearly unacceptable, including through the work of the R&D Anti-Abuse Unit.
Useful guides on this topic
Autumn Budget 2024: At a glance
Our At a glance view to the Autumn Budget 2024
Our Autumn Budget 2024: Live Speech highlights
Our live feed summary of the highlights of the Chancellor's Autumn Budget speech.