The UK Managing Director continues our series on the 2014 Autumn Statement by looking at the business implications.
Last week’s Autumn Statement included a number of matters which will affect the business world in the UK. Chancellor George Osborne continued his theme of trying to make the UK an attractive place to be in business while at the same time attacking practices which he sees as unacceptable tax avoidance and increasing tax on banks.
UK businesses should take note of the following highlights from the statement.
Corporation tax rates
The power to set corporation tax rates in Northern Ireland is expected to be devolved. This gives Northern Ireland the opportunity to become tax competitive with the south and gives it the prospect of being a very attractive option for inward investment.
Business rates
The Government will carry out a review of the future structure of business rates. This review will be fiscally neutral and will report back by Budget 2016. This could significantly affect rates payable by individual businesses and could become an emotive issue.
Existing rate reliefs will continue and will increase in 2015/16 for small pubs, cafes and restaurants.
Profit shifting
With effect from 1 April 2015 a Diverted Profits Tax of 25% will be charged on profits artificially diverted by multinational enterprises to connected entities in low tax jurisdictions. The draftsman should have fun in trying to define “artificially diverted” and avoiding a paradise for lawyers. Is parking internationally developed intellectual property offshore artificial?
Special purpose share structures
From 6 April 2015 returns to shareholders through special purpose share schemes, often known as B share schemes, will be taxed as dividends. This seeks to close a frequently used loophole to avoid tax.
Banks
Many banks have very large amounts of tax losses brought forward from the disastrous years of the Global Financial Crisis. From 1 April 2015 the amounts of losses that banks will be able to use to offset their profits will be restricted to 50% of the profits. This should produce welcome revenue for the Chancellor but no doubt the detailed legislation will be examined in close detail by the banks’ tax advisors to see how they can minimise this unexpected cost.
R&D
This is good news and bad news. From 1 April 2015 the R&D tax credit will increase from 10 to 11% and the SME scheme super deduction from 225% to 230%. However, qualifying expenditure will be restricted to exclude costs of materials incorporated in products that are sold.
NIC
Employer national insurance contributions will be abolished for apprentices under the age of 25 up to the upper earnings limit of, currently, £42,285 a year. This will be effective from 6 April 2016. This should be a welcome helping hand to young people getting onto the job ladder.
Read more about the intricacies of doing business in the UK.