News: March 2014

Business Taxes

Capital Allowances

The rates and thresholds of the main capital allowances will apply as follows:

From: 1 January 2013 to April 2014 1 or 6 April 2014 to 31 December 2015 From 1 January 2016
Main pool: writing down allowance 18% 18% 18%
Special rate pool: writing down allowance 8% 8% 8%
Annual Investment Allowance (AIA) cap: £250,000 £500,000 £25,000

Expenditure within the AIA qualifies for 100% allowance in the year of purchase. The AIA cap was increased to £250,000 on 1 January 2013, and is doubled to £500,000 on 1 April 2014 for companies (6 April 2014 for unincorporated businesses).

This increase in the AIA cap will help businesses invest in equipment and fixtures (cars and buildings don’t qualify), with 100% tax relief in the year of purchase. However, great care is needed to calculate the available AIA for accounting periods which straddle the various changes. The AIA cap is due to revert to £25,000 on 1 January 2016.

Corporation Tax
Rates

The corporation tax rates for small and large companies will be aligned at 20% from April 2015. This will remove the need for the associated companies rule and the marginal rate of corporation tax will disappear. The rates for the three financial to 31 March 2016 have been announced as:

Year beginning 1 April: 2013 2014 2015
Small profits rate
(profits up to £300,000)
20% 20% 20%
Marginal rate
(profits in band £300,000 to £1.5 million)
23.75% 21.25% N/A
Main rate for companies
(profits above £1.5 million)
23% 21% 20%

Different rates apply to profits from North Sea oil and gas.
Banks pay a special bank levy in addition to these rates of corporation tax.

Research and Development (R&D)

Companies can claim enhanced deductions for expenditure on R&D projects at rates broadly dependent on the size of the company as follows:

  • Small and medium(SME): 225% of qualifying expenditure
  • Large: 130% of qualifying expenditure

Where the SME deduction for R&D is claimed and the company makes a loss, it can claim a cash credit from HMRC of 11% of that loss. This rate is increased to 14.5% where the R&D expenditure is incurred from 1 April 2014.

Enterprise Zones

Around 46 enterprise zones have been formed around the country to encourage investment and job formation. Businesses in some of those zones can claim 100% capital allowances on the equipment they use within the zone. The period for which those 100% allowance are available has been extended by three years to 31 March 2020.

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