Corporation tax rates
The main rate of corporation tax will be 21% from 1 April 2014. The current rate is 23%. From 1 April 2015 the main rate of corporation tax will be reduced to 20%. The small profits rate will remain at 20% so from 1 April 2015 both rates will be unified.
Annual Investment Allowance (AIA)
The AIA provides a 100% deduction for the cost of most plant and machinery (not cars) purchased by a business up to an annual limit and is available to most businesses. Where businesses spend more than the annual limit, any additional qualifying expenditure generally attracts an annual writing down allowance of only 18% or 8% depending on the type of asset.
The maximum amount of the AIA was increased to £250,000 from £25,000 for the period from 1 January 2013 to 31 December 2014. The amount of the AIA is further increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015. The AIA will return to £25,000 after this date.
Members of Limited Liability Partnerships (LLPs)
It is proposed to reclassify some members of an LLP from self-employment to employees of the LLP. As a consequence employer’s National Insurance Contributions will be due and PAYE will need to be applied to the ‘remuneration’ of the member from the LLP.
A member is potentially a salaried member if at least 80% of the total amount payable by the LLP to the member is ‘disguised salary’. Amounts which vary by reference to the overall amount of profits of the LLP are not disguised salary. However, a fixed or guaranteed profit share would be disguised salary. Whether a bonus based on personal performance is disguised salary will depend on the precise circumstance. For example, a bonus based only on the performance of the individual is not a profit share. A performance bonus calculated by reference to the LLP’s profits is not disguised salary.
However, a member is not caught by the above if either of the following apply:
- the individual has a significant influence in the running of the business as a whole, or
- the individual has invested capital in the LLP that is at least 25% of their expected income from the LLP.
The new regime will come into force on 6 April 2014. The tests will need to be applied at that date for existing members. For the capital invested rule, the measurement of capital will include amounts the member has undertaken to contribute by 5 July 2014.
Employment intermediaries and ‘false self-employment’
It is proposed to introduce new measures to counter “false self-employment” through agencies by amending the current agency legislation. If the agency legislation applies, payments received by a worker are treated as being employment income and the agency must deduct PAYE and NIC.
Currently the agency legislation applies to workers providing their services under the terms of an agency contract which is ‘A contract made between the worker and the agency under the terms of which the worker is obliged to personally provide services to the client.’
To get round this legislation, therefore, agencies set up contracts allowing the worker to send someone else to do their job and thus, it is argued, the worker is not obliged to personally provide the services.
The Government proposes removing the obligation for the worker to provide their services personally. Instead the proposal is that the agency legislation will apply where the worker is:
- subject to (or to the right of) control, supervision or direction as to the manner in which the duties are carried out
- providing their services personally
- remunerated as a consequence of providing their services
- receiving remuneration not already taxed as employment income.
The legislation will be amended with effect from 6 April 2014, with new record keeping and returns requirements coming into force from 6 April 2015.
Community Amateur Sports Club (CASC)
Corporate Gift Aid will be extended to donations of money made by companies to CASCs. This will allow companies to claim tax relief on qualifying donations they make on or after 1 April 2014.
Research and Development (R&D) relief
R&D relief gives additional tax relief to companies for expenditure incurred on R&D projects that seek to achieve an advance in science or technology. For an SME company which incurs losses when conducting R&D activity a tax credit can be claimed by way of a cash sum paid by HMRC. From 1 April 2014 the rate of the R&D payable tax credit will be increased from 11% to 14.5%.