Budget Summary - Business Tax Matters

March 20th 2015

George Osborne has presented his 6th and final Budget before the coming election in May. We have summarised below some of the Business Tax matters:

Corporation Tax rate

The main rate of Corporation Tax from 1 April 2015 is 20%. The main rate and small company rate will be the same from this date dispensing with the need for marginal rate calculations.

National Insurance for under 21s partially abolished

From 6 April 2015 employers with employees under 21 years old will no longer have to pay Class 1 Secondary National Insurance Contributions (NICs) on earnings up to the Upper Secondary Threshold (UST) for those employees.

The zero rate won’t apply to Class 1A or Class 1B NICs. Class 1 Secondary NICs will apply if the employee is earning above the UST.

Capital Gains Tax - Entrepreneurs’ Relief (ER)

Where this relief is linked to the disposal of privately held assets used in a business, to qualify for ER the disposal of these assets must be linked to a significant material disposal of the business. This is defined as at least a 5% shareholding in a company or of a 5% share in the assets of the partnership carrying on the business.

Legislation is also being introduced to prevent claims for ER in respect of gains on shares in certain companies that invest in joint venture companies, or which are members of partnerships. This new provision will deny relief where the investing company has no trade of its own.

Both these changes apply from 18 March 2015.

Entrepreneurs’ Relief on disposal of goodwill

ER is denied in respect of gains on business goodwill where the goodwill has been disposed of to a limited company which is related to the claimant. This change was introduced 3 December 2014 following the Autumn Statement.

Following consultation, the legislation has been amended to allow ER to be claimed if the partners in a firm do not hold or acquire any stake in the successor company.

Capital Gains Tax - wasting assets exemption

From April 2015, the exemption for wasting assets will only be available where the qualifying assets have been used in the seller’s own business.

Van benefits for zero emission vans

From 2020-21 there will be a single benefit charge applying to all vans. This compares with the current £nil rate. The transitional steps will be:

  • 2015-16 - 20%
  • 2016-17 - 40%
  • 2017-18 - 60%
  • 2018-19 - 80%
  • 2019-20 - 90%
  • 2020-21 a single rate will apply with no reduction for zero emission vans.

Farmer’s averaging of profits

It is proposed that farmers will be able to average results for Income Tax purposes for up to 5 years, presently only 2 years, from April 2016.

Flood defence relief

Contributions made by companies and unincorporated businesses after 1 January 2015, to flood relief partnership funding schemes, will be deductible for both Corporation Tax and Income Tax purposes. The relief will apply to monetary contributions and for the cost of contributed services.

Landlord’s energy saving allowance (LESA)

LESA will not be extended beyond 31 March 2015, for corporate landlords, and 5 April 2015 for unincorporated landlords of let residential property.

Bank loss relief restriction

The proportion of a bank’s annual profits that can be offset by carried forward losses is to be restricted to 50%. Following consultations an allowance of £25m will be included for groups headed by a Building Society.

Banks’ compensation payments

Although no date was set for its implementation, the Government will consult on making customer compensation payments non-deductible for Corporation Tax purposes.

Bank levy rate increase

The bank levy is to be increased to 0.21% from 1 April 2015.

Film, orchestra and television tax relief changes

  1. High-end television tax relief: the minimum UK spend requirement reduced from 25% to 10%. Changes to the cultural test will also be made to bring them into line with similar changes to the film cultural test.
  2. Children’s television tax relief: from 1 April 2015 producers of children’s television programmes, including game shows and competitions, will be able to benefit from tax relief.
  3. Film tax relief: payable tax credits to increase to 25% for all films from 1 April 2015.
  4. A new tax relief will be introduced for orchestras from 1 April 2016.

VAT registration and deregistration limits

From 1 April 2015:

  • Registration threshold increased from £81,000 to £82,000
  • Deregistration threshold increased from £79,000 to £80,000

VAT refunds for charities

From 1 April 2015 charities that provide palliative care will be able to obtain a refund of the VAT they incur in providing these services and also in relation to their non-business activities.

A similar scheme will be introduced for “blood-bike” charities to enable them to recover the VAT incurred on the purchase of goods and services.

Gift Aid Small Donations Scheme

From 6 April 2016 the maximum amount that can be claimed through the scheme will be increased to £8,000. This will allow Charities and Community Amateur Sports Clubs to claim a Gift Aid top up payment of up to £2,000 a year.

If you have any queries regarding the budget and what it means for you or your business please contact DSC Chartered Accountants on Harrogate 560547.