- Bringing forward to April 2018 a change to the method of measuring inflation: the Consumer Prices Index will be used instead of the Retail Prices Index.
- Legislating retrospectively to reverse the effect of a Supreme Court judgment in a case in which two floors of an office building occupied by the same business had to be treated as separate properties for rating purposes.
- Continuing the discount for public houses with a rateable value up to £100,000, subject to restrictions for businesses with multiple properties.
- Increasing the frequency of revaluations by the Valuation Office from five years to three years after the next revaluation, which is scheduled for 2022.
The Chancellor confirmed the Corporation Tax rates previously announced: 19% for three years from 1 April 2017, then 17% from 1 April 2020.
Corporate capital gains
Capital gains made by companies have been computed differently from gains of individuals and trusts since 1998. Relief is given to companies for the effect of inflation by means of ‘indexation allowance’, which adjusts the cost of an asset for the rise in the Retail Prices Index between the acquisition and the disposal of the asset. The Chancellor has decided to freeze this allowance with effect from January 2018, so companies will pay increasing amounts of corporation tax on gains realised after that date as the benefit of the relief reduces. This measure is budgeted to bring in substantial amounts of tax – over half a billion pounds a year by the end of the Parliament.
Research and Development
Qualifying expenditure on research and development benefits from extra reliefs for corporation tax. To encourage further investment in R&D, the rate of Research and Development Expenditure Credit will increase from 11% to 12% with effect from 1 January 2018.
Capital Allowances on cars
New ‘low emission’ cars attract a 100% first year allowance. For expenditure from 1 April 2018, the CO2 emission threshold for qualifying cars reduces to 50g/km (from 75g/km). From the same date, the threshold at which a
car is treated as ‘high emission’ also falls to 110g/km (from 130g/km). High emission cars only qualify for reduced writing down allowances at 8% per annum in the ‘special rate pool’, rather than the 18% rate of allowance that applies to general plant.
A business that is considering buying a car might advance a purchase to enjoy the better treatment of expenditure before these changes take effect.
Enhanced Capital Allowances
The list of designated technologies qualifying for 100% relief on capital expenditure, to support investment in energy-saving plant and machinery, will be updated by way of statutory instrument after the Budget.
To address the avoidance of UK tax by multinational groups paying royalties on UK sales – a deductible expense for UK corporation tax – to group companies based in low-tax jurisdictions, a withholding tax will be introduced on such payments with effect from April 2019.
The Budget report notes that previous Budgets included measures to relieve the impact of business rates by about £9.5 billion over the life of this Parliament. Further measures have been added, intended to support businesses affected by business rates increases with a total benefit of another £2.3 billion:
Local government will be fully compensated for the loss of income as a result of these measures.