By Martin Hook, Managing Director, Alma Consulting Group
We expect the Chancellor may choose to announce that the mainstream Corporation Tax rate will be reduced by a further one per cent to 20 per cent from April 2015, which will align it with the small companies rate.
There is a slim chance of a further acceleration in this decrease in rate taking place, given the current environment and the fact that the 21 per cent rate, which is effective from April next year, was mentioned in the Autumn Statement in December.
We support this move as it acts as a clear sign that the UK is a business-friendly and highly competitive place for companies to operate in. We anticipate this action will help to further build up our businesses and enable even more innovation to take place on UK soil.
The ultimate alignment of the headline Corporation Tax rate with the small companies rate would also contribute to the policy aim of reducing complexity by removing the need for marginal relief calculations. This will undoubtedly provide much-needed transparency to businesses as it will clearly demonstrate the value of the reliefs they are claiming.”
It is highly likely that the need for stringent measures to further clamp down on aggressive tax avoidance will be a key focus of the 2013 Budget. The GAAR (General Anti Abuse Rule) has already been drafted and is due to kick in later this year however, we may see minor changes to this legislation together with further smaller measures aimed at businesses and individuals.
We welcome the introduction of the GAAR as well as other measures aimed at stamping out illegitimate tax planning. We hope the GAAR will provide businesses with greater clarity and certainty on legitimately managing their taxes without having to fear the political reprisals experienced by the likes of Amazon and Starbucks.
In particular, with the R&D Tax Relief and R&D Expenditure Credit schemes both running until 2016, businesses need to seek expert advice on which scheme is most suitable for them.
As with most areas of tax legislation, there are complexities and potential pitfalls that deter legitimate claimants from claiming what they are entitled to. However, with other areas of tax on a downward trend in terms of generosity, we predict that R&D reliefs and the Patent Box will become even more valuable eligible companies.
We wholeheartedly welcome the introduction of tax reliefs for the creative sector. The UK is internationally recognised as a leader in the field of video games and television and film production as a result of it being ‘home’ to the likes of Downton Abbey, James Bond and Tomb Raider.
Tax relief schemes are key to helping keep these industries within the UK and enable them to continue to push the boundaries of technology.
However, we are disappointed to see that the high-end television tax relief is only available for programmes that cost £1million per hour or more. Our experience of working with start-up businesses within the technology sector has enabled us to appreciate just how important tax credits can be to support and develop exciting new talent.
We are concerned the restriction will exclude smaller businesses from the relief. As unlikely as it seems, we hope the Chancellor looks to address this issue within the 2014 Budget by introducing a reduction in this limit.
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