Category Archives: Corporation Tax

Announcements by the Chancellor – 17 October 2022

The markets have experienced considerable volatility as a result of the ‘Growth Plan’ delivered by the former Chancellor, Kwasi Kwarteng on 23 September.

That made regaining economic confidence an urgent task for the newly appointed Chancellor, Jeremy Hunt, who has delivered a reversal of many of the key tax measures announced in the mini-Budget in a new fiscal statement.

The only big measures to survive were changes to Stamp Duty Land Tax (SDLT) thresholds and the cut to National Insurance due on 6 November.

The new announcements at a glance:

Changed:

Income Tax

As previously announced, the Additional rate of Income Tax will remain in effect.

The Chancellor has now also cancelled the one penny-in-a-pound cut to the Basic rate, which was brought forward by Kwasi Kwarteng from April 2024 to April 2023. It will now remain at 20 per cent indefinitely.

 

Dividend Tax

The 1.25 percentage point increase that took effect from April 2022 will no longer be reversed from April 2023. This means the current rates of dividend tax will instead remain in effect.

 

Corporation Tax

As announced by the Prime Minister on Friday, Corporation Tax will not remain at 19 per cent for all companies and instead will be levied at 25 per cent for those with profits of more than £250,000 from April 2023.

Those with profits below £50,000 will continue to pay at 19 per cent, while marginal relief will be available to those with profits between £50,000 and £250,000.

 

Energy Price Guarantee

The Energy Price Guarantee for households will remain in effect until April 2023, rather than for two years as originally announced. The Energy Bill Relief Scheme for businesses will also be reviewed before April 2023.

HM Treasury will review these policies with a view to reducing the cost of the measure and making business support more targeted.

 

IR35/Off-payroll Working Rules

The planned reversal of the 2017 and 2021 reforms to the IR35/Off-payroll Working Rules in the public and private sectors from April 2023 will now not take place.

It will remain for employers to determine whether a contractor falls within the scope of the rules and should be taxed similarly to an employee.

 

Alcohol Duty

The planned freeze in Alcohol Duty rates from 1 February 2023 has been cancelled.

 

Unchanged:

National Insurance/ Social Care Levy

The cancellation of the increase in National Insurance from 6 November and the Social Care Levy that was to have been introduced from April 2023 remains in effect.

 

Stamp Duty Land Tax (SDLT)

The changes to the Stamp Duty Land Tax (SDLT) thresholds that took effect immediately after the mini-Budget remain in place and will not be cancelled.

 

Annual Investment Allowance

This tax relief on plant and machinery will be permanently retained at £1 million, as outlined in the mini-Budget.

 

Tax-advantageous investment schemes

The Seed Enterprise Investment Scheme and the Company Share Options Plan will also continue to further support business investment having been expanded upon in the mini-Budget.

 

The Chancellor’s announcements may have significant tax planning implications. Please contact us for advice.

Corporation Tax to rise in April 2023: what you need to know

The Prime Minister has announced that the Corporation Tax increase announced by the previous administration and then cancelled by the former Chancellor Kwasi Kwarteng will take place in April 2023.

What does the announcement mean?

Companies with profits of £250,000 or more

For companies with profits of £250,000 or more, the upper profits limit, the rate of Corporation Tax will rise from 19 per cent to 25 per cent.  

Companies with profits of £50,000 or less

For companies with profits of £50,000 or less, the ‘lower profits limit’, Corporation Tax will continue to be charged at 19 per cent.

Companies with profits between £50,000 and £250,000

Companies with profits between £50,000 and £250,000 will receive marginal relief so that the rate of Corporation Tax will rise incrementally until it reaches 25 per cent.

Companies with accounting periods of less than 12 months

The upper and lower profits limits will be reduced accordingly for companies with accounting periods of less than 12 months.

Groups and associated companies

Companies within groups or with associated companies will also see reductions in the upper and lower profits limits.

What should I do now?

The announcement by the Prime Minister means that the Corporation Tax rises that had been scheduled for April 2023 will take place as originally planned.

If you had already planned for the tax rise and had not changed your planning since the mini-Budget in September, you can stick with your existing plans.

If you have not planned for a tax rise, you should consider how you spread investments in your business over the coming years to maximise your tax efficiency.

Tax planning is complicated and comes with a vast array of permutations. Speak to us today for professional advice.

Updated requirements for submitting Corporation Tax CT600 Return

With the winding up of the Coronavirus Job Retention Scheme (CJRS) or furlough, at the end of September, it is vitally important that all employers are up to date with their Corporation Tax Form CT600, particularly over grants received from the scheme.

HM Revenue & Customs (HMRC)  is looking to close any loopholes and ‘claw back’ any overpayments, such as claims for an employee who left the business while the scheme was in operation.

HMRC amended their CT600 guidance at the start of September to clarify how these entries should be presented, so businesses should seek immediate guidance from their accountants.

From April 2021, companies were required to disclose details of their CJRS claims and make a formal declaration in relation to the CJRS income received as part of its CT600 return.

As with the rest of the Corporation Tax CT600 Return, the director signing off the CT600 return must ensure that the information is correct and reported in the format that HMRC require.

The company should provide accurate information on the following for the CT600 return:

CJRS payments received in the period

  • This is the amount received in the period covered by the CT600 return (and not the amount accrued).
  • Do not deduct overpayments already assessed by HMRC, or amounts disclosed or repaid to HMRC.
  • Do not deduct amounts repaid voluntarily.
  • Add back any overpayments of amounts received in earlier periods that have been offset against payments received in this period.

The CJRS payment that the company was entitled to

  • This is the total amount of CJRS payments received in the period that the company was entitled to claim.
  • If the company was entitled to an amount at the time of the claim but was not entitled to retain this amount by the end of the period (for example if it was not used for the required purpose), then it should not be included in this amount.
  • Include any amounts entitled to but repaid voluntarily.

CJRS overpayments already disclosed or repaid, including:

  • Amounts already assessed by HMRC, whether paid or unpaid.
  • Amounts voluntarily disclosed to HMRC as CJRS overpayments, whether paid or unpaid.
  • Overpayments offset against subsequent CJRS payments received in later accounting periods.
  • Do not include amounts received and entitled to but repaid voluntarily.

If an overpayment is due to be repaid to HMRC, this will be added to the company’s Corporation Tax liability reported on the CT600 return.

There are also new requirements in relation to the ‘Eat Out to Help Out’ Scheme.

For more information on amending your Corporation Tax CT600 Return please contact our expert team.