The main rate of corporation tax will remain at 19% for the financial years beginning 1 April 2021 and 1 April 2022.
From 1 April 2023, the main rate will increase to 25% on profits over £250,000.
A small profits rate will be introduced for companies with profits of £50,000 or less, which will continue to be charged at 19%. It will not be available to close investment-holding companies.
Companies with profits between £50,000 and £250,000 will pay tax at the main rate, but this will be reduced by a marginal relief creating a tapered corporation tax rate.
The lower and upper limits will be proportionately reduced for short accounting periods and where there are associated companies, while the related 51% group company test will also be repealed and replaced by associated company rules.
These rules will also be used in determining whether a company is large or very large for quarterly instalment payment purposes, or for assessing whether a company can use the small claims treatment for the patent box, and so on.
From 1 April 2021 until 31 March 2023, companies investing in new qualifying plant and machinery will benefit from a 130% first-year capital allowance. This ‘super deduction' might allow companies to cut their tax bill by up to 25p for every £1 invested.
The rate of the super deduction will require apportioning if an accounting period straddles 1 April 2023.
Additionally, a 50% first-year capital allowance will be available for qualifying special-rate assets. Certain exclusions will apply including used and second-hand assets.
New disposal rules will apply to assets that have claimed these allowances.
Disposal receipts should be treated as balancing charges, instead of being taken to pools and, for assets claimed under the super deduction, the disposal value for capital allowance purposes should take the disposal receipt and apply a factor of 1.3, except where disposals occur in accounting periods straddling 1 April 2023 resulting in a lower factor.
Corporation tax loss relief
The corporation tax trading loss carry-back rule will be temporarily extended from the existing one year to three years. This measure will cover company accounting periods ending in the period 1 April 2020 to 31 March 2022.
After the loss has been carried back to the preceding year, a maximum of £2m of unused losses will be available to carry back against profits of the same trade to the earlier two years. This £2m cap applies separately for both 2020/21 and 2021/22.
Companies that are members of a group will be able to obtain relief for up to £200,000 of losses in both 2020/21 and 2021/22 without any group limitations.
Companies that are members of a group will be able to obtain relief of up to £2m of losses in 2020/21 and 2021/22, but subject to a £2m cap across the group as a whole.
Research & development relief
The amount of the SME payable R&D tax credit that a company can receive in any one year will be capped at £20,000, plus three times the company's total PAYE and NICs liability. This measure will apply to accounting periods beginning on or after 1 April 2021.
Annual investment allowance
The current temporary £1m annual investment allowance (AIA) limit in respect of capital allowances remains in place for one year from 1 January 2021.
The AIA will reduce to £200,000 on or after 1 January 2022.
Transitional rules will apply to the AIA limit where a business has an accounting period that spans 1 January 2022.
Hiring new apprentices
Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new recruit.
Employer reimbursed COVID-19 tests and home office expenses
The income tax and NICs exemption for COVID-19 antigen tests provided, or reimbursed by, an employer, along with employer reimbursed expenses covering the cost of home office equipment will be extended to the 2021/22 tax year.
Enterprise management incentive (EMI)
Employers can continue to issue new EMI share options to individuals who have been furloughed, have taken unpaid leave or have had their working hours reduced below the current statutory working time requirement for EMI as a result of COVID-19.
EMI participants must ordinarily meet a minimum working time commitment of 25 hours per week or 75% of working time. This relaxation will apply until 5 April 2022.
Diverted profits tax
In line with the increase in the main rate, the diverted profits tax rate will rise to 31% from 1 April 2023, in order to continue to act as a deterrent against diverting profits out of the UK.
Tax sites in freeports
The Government will legislate for powers to create tax sites in freeports in Great Britain, and bring forward legislation to apply this in Northern Ireland at a later date. Businesses in these tax sites will benefit from tax reliefs, including:
- Enhanced 10% structures and buildings allowance rate for constructing or renovating non-residential structures and buildings in Great Britain.
- Enhanced capital allowance of 100% for investing in plant and machinery, applying to main and special rate assets in Great Britain.
- Full relief from stamp duty land tax on land and property within freeport tax sites in England purchased and used for qualifying commercial purposes.
- Full business rates relief in freeport tax sites in England, applying for five years from the point at which each beneficiary first receives relief.
- Subject to parliamentary approval, employer NICs relief for eligible employees in freeport tax sites from April 2022.
Further rules and restrictions will apply to the various reliefs.
Interest & royalties
From 1 June 2021, payments of interest and royalties made by UK companies to companies resident in EU member states will cease to benefit from UK withholding tax exemptions. It will instead be governed by the respective double taxation treaty between the two countries.