In the aftermath of the budget delivered on 30 October, we consider some of the key announcements and takeaways from a business and corporation tax perspective.
1. Corporate Tax Roadmap
The Government has published a Corporate Tax Roadmap which commits to provide predictability, stability and certainty for companies and their stakeholders over the course of this parliament. Specifically, the roadmap states that the Government is:
- Keeping the headline rate of UK corporation tax at 25 per cent.
- Maintaining the existing corporation tax small profits rate of 19 per cent.
- Maintaining the existing core capital allowances regimes with full expensing and the £1m annual investment allowance, which can provide valuable tax deductions for certain types of capital expenditure.
- Keeping the existing R&D, patent box and intangible assets tax regimes.
- Launching consultations to explore the tax treatment of predevelopment costs and to review the effectiveness of land remediation relief.
- Publishing a technical consultation on draft legislation to modernise and simplify three elements of UK international tax legislation – transfer pricing, permanent establishment and the diverted profits tax – including the potential removal of UK-to-UK transfer pricing and further changes to transfer pricing legislation.
- Publishing an update in early 2025 on how the government will take forward modernisation of technology in respect of corporation tax.
Key takeaways
The “Roadmap” does give businesses some certainty to how corporation tax regime will look over the next few years.
Companies can invest into research and development activities and capital expenditures with confidence that the existing reliefs will be available.
2. Employers NICs
The main rate of secondary class 1 NICs paid by employers will rise from 13.8% to 15% from 6 April 2025, while the secondary threshold at which employers being paying these contributions has been lowered from £9,100 to £5,000.
The government has, however, increased the employment allowance to offset against these contributions from £5,000 to £10,500 and abolished the restriction preventing employers from claiming the employment allowance where their NIC liability exceeded £100,000 in the prior tax year.
Key takeaways
The NIC increases coupled with the rise in the national minimum wage means increased costs for employers.
Business owners should revisit their profit extraction strategy to ensure the most tax efficient combination of salary/dividend and pension contributions.
With no real changes to the NIC treatment on employer pension contributions (as was widely predicted) or electric vehicles, the benefits of implementing salary sacrifice schemes have only increased.
3. Capital Allowances (CAs) and Benefit in Kind (BIK) on vehicles
From 6 April 2025, the van benefit charge and the car and van fuel benefit charges will increase. The van benefit charge will become £4,020, whilst the van fuel benefit charge will be £769 (£3,960 and £757 respectively in 2024-25). The car fuel benefit charge multiplier will move to £28,200 (£27,800 in 2024-25).
Double Cab Pick Ups (DCPUs) with weight exceeding one tonne will no longer be classified as commercial vehicles and will instead be regarded as cars for the purposes of BIK and CAs from 6 April 2025. Transitional arrangements will apply for DCPUs as a result of these legislative changes.
From a capital allowances perspective, any contracts entered into to acquire a DCPU before 1 April 2025 for corporation tax and 6 April 2025 for income tax purposes will be eligible for capital allowances under the previous rules providing payment is made and the vehicle is in the position of the buyer prior to 1 October 2025. Capital allowances applicable to other cars will otherwise apply from 6 April 2025.
If an employer provides an employee with the use of a DCPU that has been purchased, leased or ordered prior to 6 April 2025, the corresponding benefit in kind will follow the previous treatment up until earlier of the vehicle’s disposal or 5 April 2029. The same rates applicable to other company cars will then apply from this period onwards.
Key takeaways
It is important to review the position early. In the case of DCPUs, they can be useful multifunctional vehicles for many entities. Accelerating capital investments can ensure maximum relief from taxable profits for the business and, where possible, also minimise the benefit in kind chargeable for employees on the use of these vehicles and associated class 1A charges for employers.
4. Umbrella companies
Following various tax avoidance schemes run by umbrella companies, the responsibility for accounting for PAYE and NIC will move from April 2026 to the agency who engages the umbrella company, or where no agency is in the supply chain, the end client will be responsible. It will still be possible to outsource the operation of the payroll to the umbrella company, but the agency or end client would be liable for any shortfall where non-compliance had occurred.
Key takeaways
Appropriate due diligence checks on the supply chain and having suitable tax indemnities in place will become much more important going forwards where services continue to be outsourced. Businesses should review their arrangements where relevant.
5. Employee ownership trusts (EOTs)
Individuals selling private trading companies to EOTs (which are a specific type of Employee Benefit Trust which acquires the company for the benefit of its employees) can benefit from a capital gains tax exemption if various conditions are satisfied. Various changes are proposed to the regime, including that the former owners cannot retain control of the company post-sale to an EOT, that the trustees of an EOT must be UK resident and that the EOT conditions must continue for a longer period to avoid loss of tax relief.
Key takeaways
EOTs provide an attractive and alternative option for an exit particularly given the increase in capital gains tax rates to 24% (and reduction in business asset disposal relief rates from 6 April 2025). Although some tightening to the rules has been introduced, it is encouraging that the regime continues.
6. Other
Chris Peverley
New anti-avoidance rules have been introduced from Budget date in respect of the loan to participator (s455 tax charge) rules, which will ignore artificial arrangements where new loans are made and then repaid in a chain, such that s455 tax charges will continue to arise on the amounts extracted by the participators.
Key takeaways
This anti avoidance rule will prevent individuals repaying their loans by taking new loans from other non-associated companies.
If you have any questions, please do get in touch with your usual RG contact.
Photo by Artem Podrez