By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants. The Money Matters column appears in the Pembrokeshire Herald, the Carmarthenshire Herald and the Llanelli Herald newspapers.By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.
If you’re in business, then it pays to keep up-to-date with the latest tax changes.
In Money Matters, we’ve been putting the spotlight on the latest Budget from the Chancellor of the Exchequer Philip Hammond . . .
At Clay Shaw Butler chartered accountants, we have produced a summary on the tax measures which may affect your business.
Here are some key points on business tax changes and updates–
Annual Investment Allowance:
The government has announced an increase in the Annual Investment Allowance for two years to £1 million in relation to qualifying expenditure incurred from 1 January 2019. Complex calculations may apply to accounting periods which straddle this date.
A number of changes are made to other rules relating to capital allowances –
- a reduction in the rate of writing down allowance on the special rate pool of plant and machinery, including long-life assets, thermal insulation, integral features and expenditure on cars with CO2 emissions of more than 110g/km, from 8% to 6% from April 2019. Complex calculations may apply to accounting periods which straddle this date
- clarification as to precisely which costs of altering land for the purposes of installing qualifying plant or machinery qualify for capital allowances, for claims on or after 29 October 2018
- the end of the 100% first year allowance and first year tax credits for products on the Energy Technology List and Water Technology List from April 2020
- an extension of the current 100% first year allowance for expenditure incurred on electric charge-point equipment until 2023.
In addition, a new capital allowances regime will be introduced for structures and buildings. It will be known as the Structures and Buildings Allowance and will apply to new non-residential structures and buildings. Relief will be provided on eligible construction costs incurred on or after 29 October 2018, at an annual rate of 2% on a straight-line basis.
Change to the definition of permanent establishment:
A non-resident company is liable to corporation tax only if it has a permanent establishment in the UK. Certain preparatory or auxiliary activities, such as storing the company’s own products, purchasing goods or collecting information for the non-resident company, are classed as not creating a permanent establishment.
From 1 January 2019, the exemption will be denied to these activities if they are part of a ‘fragmented business operation’.
Preventing abuse of the Research and Development tax relief for SMEs:
To help prevent abuse of the Research and Development (R and D) SME tax relief by artificial corporate structures, the amount that a loss-making company can receive in R&D tax credits will be capped at three times its total PAYE and NICs liability from April 2020.
HMRC has identified and prevented £300 million of fraud linked to this relief and this change will help to address similar abuses in future. Almost 95% of companies currently claiming the payable credit will be unaffected.
Protecting taxes in insolvency:
From April 2020, HMRC will have greater priority to recover taxes paid by employees and customers.
The changes appear to be mainly targeted at the distribution of funds to financial institutions as creditors. The rules will remain unchanged for taxes owed by the business and HMRC will remain below other preferential creditors such as the Redundancy Payment Service.
This will ensure that an extra £185 million in taxes already paid each year reaches the government.
You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) – http://www.clayshawbutler.com/news/latest-news-for-business
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