A summary of the latest developments in tax for small and medium sized companies and their owners.

Company tax rates

  • Remain at 19% for FY 2018 and 2019.
  • Will reduce to 17% from 1 April 2020.

See Company tax rates and allowances

Dividend taxation

From 6 April 2018:

  • The dividend allowance reduced to £2,000 from £5,000.

See Dividend tax

Corporate capital gains

  • The indexation allowance was frozen at 31 December 2017 rates for disposals on and after 1 January 2018.

Corporate capital losses

  • It is proposed to bring the tax treatment of corporate capital losses in line with the income tax treatment.
  • The proposed measures will restrict the proportion of corporate annual capital gains that can be relieved by brought-forward capital losses to 50%. It will however only apply where there are profits and gains totalling more than £5million per company or group

See Corporate Capital Loss Restriction: consultation

Corporation tax payments

For accounting periods commencing 1 April 2019

  • Companies with annual profits in excess of £20m now pay CT four months earlier than other large companies.
  • For a 12-month period, payments will be made in months 3,6,9 and 12.
  • Currently companies with annual profits in excess of £1.5m make payments in months 7 and 10, with final payments made in month 1 and 4 of the following a/p.

See Corporation Tax Instalment Payments

Annual Tax on Enveloped Dwellings (ATED)

From 1 April 2019

  • ATED charges to rise by an average of 2%, compared to 2.9% in the previous year.
  • The ATED will be based on the market value of properties on 1 April 2017, or cost price if acquired after this date.
  • Relief declaration forms for the year ending 31 March 2020 had to be submitted by 30 April 2019.

See Annual Tax on Enveloped Dwellings

ATED CGT

From 6 April 2019

  • Following changes to the taxation of non-resident companies (see below),  Finance Act 2019 abolishes ATED-CGT from 6 April 2019.

Non-resident companies 

From 6 April 2019

Finance Act 2019 provides that:

  • Non-UK resident companies will be taxed on all gains arising on all disposals of UK immoveable property (i.e. both residential and commercial).
  • Non-UK resident companies will move into corporation tax in respect of their disposals of UK property instead of CGT.
  • Non-resident CGT will also apply to indirect disposals of interests in property rich entities (companies or other entities with 75% or more of gross assets represented by UK land and property) i.e. a shareholding in a property investment company or partnership.

See Non-resident CGT: UK residential property

From April 2020

  • The UK property income of non-UK resident companies currently under the Non-resident landlord's scheme will move to the corporation tax regime from April 2020.

SDLT: Non-resident companies

  • In February 2019 the government launched a consultation on plans to introduce a 1% Stamp Duty Land tax (SDLT) surcharge for non-residents buying residential UK land and property.
  • This will be legislated for in a future finance bill; it is not currently known when it will come into force.

SDLT returns and payments

  • For purchases with an effective date on or after 1 March 2019 there is now a 14 day filing and payment window.

See Stamp Duty Land Tax: rates & reliefs

Stamp Duty: transfers to a connected company

From 29 October 2018:

  • A new market value rule will apply where listed securities are transferred to a connected company. 

See Budget 2018: Stamp Duty connected companies

Close company loans to participators

  • From 6 April 2018 the s455 CTA 2010 charge remains at 32.5%.

See Close Company Loans Toolkit 

Losses

For accounting periods beginning on or after 6 July 2018 (unless otherwise stated)

  • Legislation is included in Finance Act 2019 to prevent losses being claimed in excess of that intended. This will apply to group relief, terminal loss relief (for accounting periods commencing on or after 1 April 2019) and the transfer of a trade under common ownership.

See Losses: trading and other losses

Personal Service Company contractors

See Personal Service Company (PSC) Tax 

Capital allowances

Allowance for structures and buildings (SBA):

For contracts entered into on or after 29 October 2018 there will be a new writing down allowance on the eligible construction costs of structures and buildings:

  • At an annual rate of 2% on a straight-line basis.
  • There will be no balancing adjustments on sale.

See Structures & Buildings Allowance (SBA)  

Annual investment allowance (AIA):

From 1 January 2019:

  • The AIA is temporarily increased to £1 million for two years from 1 January 2019.
  • Transitional rules apply for periods straddling 1 January 2019.

See Annual Investment Allowance (AIA)

Special rate pool

Legislation is included in Finance Act 2019 to reduce the special rate pool writing down allowance from 8% to 6% from 1 April 2019 for companies. Hybrid rates will apply for years that straddle the change:

See Capital allowances: rates and allowances


Corporate restrictions on interest

Changes to lease accounting

For accounting periods beginning on or after 1 January 2019.

Finance Act 2019 provides that companies adopting IFRS16 or the equivalent FRS101 keep the distinction between operating leases and finance leases for CIR purposes but with modifications requiring an IFRS16 lessee to classify their leases between the two categories for CIR purposes.

See Leases: plant and machinery

Making Tax Digital (MTD)

  • VAT registered businesses will be within Making VAT Digital for their first VAT accounting periods commencing on or after 1 April 2019.
  • From 1 April Newly VAT registered business will move into MVD at registration.
  • The government have confirmed it will not be mandating MTD for any new businesses or taxes in 2020, and this includes corporation tax.

See Making Tax Digital: index and timeline

VAT

Vouchers

From 1 January 2019

  • Finance Act 2019 includes changes required by the EU Vouchers Directive. These change the definitions of single purpose and multi-purpose vouchers and the way they are subjected to VAT.

See Discounts, Reward Schemes & Vouchers: VAT

Fuel Scale charge

Corporate Intangibles

  • Following a consultation in 2018, Finance Bill 2019 provides for a fixed rate writing down allowance for goodwill and other intangibles created or acquired by companies on or after 1 April 2019 where they are acquired alongside qualifying intellectual property (IP) assets.

From 7 November 2018

  • Legislation is included in Finance Act 2019 to more closely align the de-grouping rules for IFA with those for capital gains. De-grouping resulting from a share disposal that qualifies for SSE will be tax neutral for IFA assets.

See Goodwill and intangibles

R&D Relief (corporation tax) 

  • From 1 January 2018 the research and development expenditure credit (RDEC) for qualifying R&D increased from 11% to 12% for expenditure incurred on or after 1 January 2018.

See R&D: Large Company Scheme (RDEC) Guide

  • HM Treasury has published 'Preventing abuse of the R&D tax relief for SMEs'  a new consultation. It is proposed that from April 2020:
    • The amount of payable credit that a qualifying loss-making business can receive through R&D relief in any one year will be capped.
    • The cap will be three times the company’s total PAYE and NICs liability for that year.

See R&D: SME tax credit scheme

Northern Ireland corporation tax

  • The Northern Ireland Executive has committed to a rate of 12.5% from April 2018.

See Northern Ireland Corporation Tax Rate

Phoenixing and insolvency

  • The government has a launched a consultation “Protecting your taxes in insolvency” which looks at making HMRC a secondary preferential creditor for certain tax debts on the insolvency of a business. It closed on 27 May 2019.

See Consultation: Protecting your taxes in insolvency 

Extension of security deposits: Corporation Tax

From 6 April 2019:

Finance Act 2019 extends the scope of the existing security deposits regime to include Corporation Tax as well as Construction Industry Scheme (CIS) deductions.

See CIS and Corporation tax: Security against non-payment

 Disguised remuneration and the loan charge

  • All outstanding disguised remuneration loans not settled with HMRC by 5 April 2019 are subject to the loan charge unless registration for settlement took place before 5 April and settlement is concluded by 31 August 2019.
  • Where a UK employer still exists PAYE should have been applied and paid under RTI by the normal month 12 payroll reporting and payment dates (22 or 19 April).
  • If it has not been possible to deduct the tax under PAYE (because earnings are too low) the employee must make good the tax by 5 July 2019 or a benefit in kind will result.
  • Employees must provide information about their loans to HMRC by 1 October 2019. 

See Disguised Remuneration

Disguised remuneration settlement

  • Taxpayers who have registered must complete their settlement negotiations with HMRC by 31 August 2019 if they wish to avoid the loan charge.
  • See Disguised Remuneration settlement.

Other Consultations and reports

Digital Services tax

  • It is proposed that the UK will proceed with a Digital Services Tax from April 2020.
  • A consultation: Digital services tax: consultation was published in November 2018.

Large Business Risk

Case round-up

Our selection of topical tax cases on companies and their directors.

IR35 and personal service companies

In Atholl House Productions Limited v HMRC [2019] TC07088 the FTT found that TV presenter Kay Adams was not subject to IR35; she was an independent provider of services carrying on a profession on her own account.

In Big Bad Wolff Limited v HMRC [2019] UKUT121 , the Upper Tribunal (UT) upheld the decision of the FTT finding that the special rules for actors prior to 6 April 2014 did not circumvent the deeming provisions of IR35.

In Christianuyi Limited & Others v HMRC [2019] WECA Civ 474 the Court of Appeal confirmed that the UT and FTT were correct in finding that a business (Costello Building Services Limited - 'Costello') which was set up to facilitate workers to provide their services via managed personal service companies was a Managed Service Company (MSC) provider. 

In Albatel Limited v HMRC [2019] TC07045  the First Tier Tribunal allowed appeals against assessments of £1.2m on Lorraine Kelly’s personal service company; IR35 did not apply, ITV did not employ her, it was buying her brand.

See Personal Service Company (PSC) tax

Employment intermediaries

In Leverton Search Ltd v HMRC [2018] TC06786  a company successfully appealed late filing penalties: no employment intermediaries returns were actually due as the company was not a 'specified employment intermediary'.

In Tarrant Howl Ltd v HMRC [2018] TC06788  , the FTT concluded that it was unreasonable to expect an employment intermediary to realise that it was required to file a nil return: HMRC's webpages on the topic were complex and invisible and the appellant would not have understood them.

See Agency Workers: employment intermediaries

 Construction industry scheme

In Thornton Health LLP v HMRC [2018] TC06831 a company persuaded the tribunal that it was not liable to register as a contractor under the Construction Industry Scheme: it was a property investor and although it redeveloped one floor of a building that was not enough to say that it had not changed its business to include construction operations.

Capital allowances

In Stephen May v HMRC [2018] TC6928 the First Tier Tribunal (FTT) held that a horizontal silo was plant for capital allowance purposes. 

In SSE Generation Ltd v HMRC [2018] TC06618  the FTT held that some of the expenditure on constructing a hydroelectric power scheme was eligible for capital allowances as plant; the rest was specifically excluded by CAA 2001.

Loan relationships

In C J Wildbirds Food Ltd v HMRC [2018] TC06556 the First Tier tribunal agreed that a loan which could not be repaid and was written off by the lender was a loan relationship and a deduction was allowed for the impairment debit.

See Loan relationships

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