The 2014 Finance Bill – Corporation tax and business tax

Rates
  • Corporation tax small profits rate remains 20% for year beginning 1 April 2014 and is abolished from 1 April 2015. (Main rate from 1 April 2015 already set at 20% by FA 2013).

Partnerships
  • Abolition of the presumption of employment for members of LLPs.
  • Changes to address the reduction of tax by the use of company partners.
  • Changes to counter arrangements where assets or income streams are disposed of through partnerships in order to take advantage of the lower tax rate applicable to company partners.
  • A system to collect from the partnership rather than the individual partner the tax on amounts of profits of key individuals, the payment of which must be deferred as a result of the Alternative Investment Fund Managers Directive.

Allowances for investment
  • Annual Investment Allowance to be £500,000 until 31 December 2015, and to revert to £25,000 thereafter.
  • Business premises renovation allowance: definition of qualifying expenditure tightened and balancing adjustment period reduced from seven to five years.
  • Film tax relief: rate increased from 20% to 25% for first £20 million of expenditure, and conditions relaxed.
  • Minor amendments to video games tax relief and television tax relief.
  • New theatre tax relief to be introduced during the passage of the Bill through Parliament.
  • Mineral extraction allowances: provisions to deal with the position where the mineral extraction activity begins, or ceases to be, within the charge to UK tax, and to deal with costs of seeking planning permission.
  • R&D payable credit for loss-making SMEs increased from 11% to 14.5%
  • Enhanced capital allowances for designated sites within Enterprise Zones extended from 31 March 2017 to 31 March 2010.

Financial sector
  • Existing provisions dealing with the residence of Undertakings for Collective Investment in Transferable Securities (UCITS extended to Alternative Investment Funds.
  • Existing powers to make regulations about the tax consequences of financial sector regulation extended so that they can be exercised before the regulatory powers come into force.

Banks
  • HMRC to publish annual report on the Code of Practice on taxation for banks.
  • Increases in bank levy from 1 January 2014.
  • Various technical changes to the bank levy.

Oil and gas
  • Shale gas: introduction of onshore oil allowance and extended expenditure supplement for onshore activities, for the purposes of the supplementary charge on ring-fence profits.
  • Relief from corporation tax on chargeable gains for disposals of certain oil and gas exploration and appraisal assets where the proceeds are reinvested in such activities.
  • Capital gains substantial shareholder exemption: adapted to accommodate certain intra-group transfers of oil and gas exploration assets.
  • Cap on the amount that may be deducted in respect of bareboat charters by companies providing drilling or accommodation services on the UK Continental Shelf, and a new ring fence for this activity (to be introduced during the passage of the Bill through Parliament).
  • For taxation of non-residents working on the UK Continental Shelf, see our factsheet here.

Loan relationships
  • Credits not required to be brought into account where a debt is released as a result of the application of any of the stabilisation powers under Part 1 of the Banking Act 2009.
  • Both profits and losses brought into account where a group transfers a loan or derivative contract to a company that subsequently ceases to be a member of the group.
  • Anti-avoidance provisions dealing with holdings by companies collective investment vehicles to be enhanced and clarified.

Rollover relief on reinvestment of business assets
  • Technical change re treatment of intangible fixed assets.
  • Relief extended to payment entitlements under the EU agricultural subsidy Basic Payment Scheme.

Other
  • Exclusion of R&D allowances from the rules preventing loss buying between companies.
  • For the purpose of the rules restricting the carry-forward of corporation tax losses the definition of a change of ownership is relaxed in two specific situations.
  • Gifts by companies to Community Amateur Sports Clubs (CASCs) brought within the scope of the existing corporate Gift Aid regime for gifts to charities.
  • Changes to the time limit for recovery of direct tax under EU law, to reflect a recent decision of the Supreme Court.