In the Autumn Budget 2024, the Government published its Corporate Tax Roadmap (the 'Roadmap') which sets out its priorities in terms of company taxation with the aim of enhancing predictability, stability and certainty to build confidence and encourage investment and growth in the UK.
The Corporate Tax Roadmap sets out several commitments to maintain the current regime, draws attention to the areas where change is expected and lists forthcoming consultations.
These include:
Corporation Tax
- Capping the headline Rate of Corporation Tax at 25%.
- Maintaining the current rates and thresholds of Small profits rate and marginal relief.
- The key principles governing how Corporation Tax liabilities are calculated will not change significantly. This includes the treatment of tangible and Intangible assets, Loss relief regime, Substantial shareholdings exemption (SSE), dividend exemptions, Withholding tax and double taxation relief.
- The UK government remains willing to engage with the Northern Ireland Executive on devolution of the Corporation Tax rate.
- The Government will keep the bank tax regime under review.
Capital Allowances
- Maintaining full expensing, Annual Investment Allowance, Writing-down allowances, and Structures and Buildings Allowance.
- To clarify what qualifies for Capital allowances, specifically the treatment of Computer software and the interaction between AIA and full expensing.
- In early 2025, the Government will launch a consultation on the treatment of Pre-development costs, following the concerns raised by the Gunfleet Sands Limited & Ors v HMRC [2023] UKUT 260 case.
- Consider the extension of full expensing for assets purchased for Leasing or hiring.
R&D & Patent Box
- Maintaining the Merged R&D Expenditure Credit scheme, the Enhanced Support for R&D Intensive SMEs and Patent Box relief.
- Establishing the R&D expert advisory panel, to improve the administration.
- Continuing to improve guidance.
- Launching an R&D disclosure facility by the end of 2024.
- Consulting on widening the use of Advance clearances for R&D reliefs in Spring 2025.
Other Corporation Tax reliefs
- Maintaining the Audio-Visual Expenditure Credit and a Video Game Expenditure Credit.
- Consulting on the effectiveness of Land Remediation Relief in Spring 2025.
International Corporation Tax issues
- Consulting on reforms for transfer pricing, Permanent establishments, and Diverted Profits Tax. This includes the potential removal of UK-to-UK transfer pricing and reviewing cost contribution arrangements. The Government will launch consultations on:
- Lowering the thresholds for exemption from transfer pricing for medium-sized businesses. The exemption for small businesses will remain unchanged.
- Introducing a requirement for multinationals to report cross-border related party transactions.
- Support the international agreement under Pillar 1 and repeal the UK's Digital services tax.
- Ensure that the rules reflect internationally agreed updates to Pillar 2. These rules consist of three parts. The UK has implemented the first two; the Income Inclusion Rule and the Domestic Minimum Tax. The third, the Undertaxed Profits Rule, will take effect from 31 December 2024.
- Consider opportunities for simplification or rationalisation of taxing cross-border activities.
Tax Administration
The Government has committed to developing and consulting on a new process that will give investors in major projects increased advance certainty about the tax that will apply.
Helping firms operate OECD Pillar 2
- HMRC have already established a dedicated Pillar 2 compliance team that regularly engages with customers ahead of their first returns, due in June 2026.
- HMRC are developing extensive technical guidance to help businesses operate Pillar 2 rules.
Modernising the administration of Corporation Tax
- The UK has been heavily involved in developing the OECD’s Tax Administration 3.0 programme and HMRC recognise the benefits of integrating tax within day-to-day systems and the processes of businesses. However, finding the right way to do that will take time, and the costs and benefits should be carefully weighed.
- Further details on HMRC’s modernisation ambitions will be set out in the Spring.
Summary of consultations outlined in the roadmap
The Corporation Tax Road Map set out several consultations that are set to take place in Spring 2025. These included:
- Consultation on tax treatment of predevelopment costs.
- Consultation to review the effectiveness of Land Remediation Relief.
- Second-round consultation on reforms to the UK’s rules on transfer pricing, permanent establishments, and Diverted Profits Tax – including the potential removal of UK-to-UK transfer pricing.
- Consultation on widening the use of advanced clearances in the R&D reliefs.
- Consultations on potentially lowering the thresholds for exemption from transfer pricing and introducing a requirement for multinationals to report cross-border related party transactions to HMRC.
- Consultation on a new process that will give investors in major projects increased advance certainty.
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