Corporation Tax

Corporation tax rates and bands are as follows:

Annual Investment Allowance (AIA)

The maximum amount of the AIA is currently £500,000 for all qualifying expenditure on plant and machinery made from 1 April 2014 for corporation tax and 6 April 2014 for income tax. After 31 December 2015 the limit was set to be reduced to £25,000 but is now subject to further review. Transitional rules will apply.

Research and development (R&D)

The rate of the above the line credit will increase from 10% to 11% and the rate of the small and medium (SME) scheme will increase from 225% to 230%. These will take effect from 1 April 2015.

Legislation will be introduced to restrict qualifying expenditure for R&D tax credits so that the costs of materials incorporated in products that are sold are not eligible. This will be effective from 1 April 2015.

Venture capital schemes

The Government will, subject to state aid approval, make amendments to the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) so that:

• companies will need to be less than 12 years old when receiving their first EIS or VCT investment, except where the investment will lead to a substantial change in the company’s activity
• total investment received under the tax advantaged venture capital schemes is capped at £15m, increasing to £20m for knowledge-intensive companies
• the employee limit for knowledge-intensive companies is increased from 249 to 499 employees
• all investments are made with the intention to grow and develop a business
• all investors are ‘independent’ from the company at the time of the first share issue.

In addition, with effect from 6 April 2015 there will no longer be a requirement for 70% of the funds raised under SEIS to have been spent before EIS or VCT funding can be raised.

Film tax relief

The rate of film tax relief will increase to 25% for all qualifying core expenditure, for all eligible film productions. The distinction between limited budget films and all others will be removed. These changes will have effect on and after 1 April 2015 or the date of state aid approval, whichever is the later date.

High-end television tax relief & animation tax relief

Subject to state aid clearance, the minimum UK expenditure requirement will be reduced from 25% to 10% for qualifying expenditure incurred on and after 1 April 2015.

Loss refresh prevention

Legislation will be introduced to prevent companies from obtaining a tax advantage by entering contrived arrangements to convert brought forward reliefs into more versatile in-year deductions. This will cover carried forward corporation tax trading losses, non-trading loan relationship deficits, and excess management expenses. The measure will have effect for accounting periods beginning on or after 18 March 2015 and will also apply to arrangements entered into before commencement where these give rise to profits after commencement.

Farmers averaging

The period over which self-employed farmers can average their profits for income tax purposes is to be extended from two years to five. This measure will come into effect from 6 April 2016 following a consultation on the detailed design and implementation of the extension.