Corporation tax and bank surcharge
The main rate of corporation tax will remain at 19% for the year beginning 1 April 2022 and will rise to 25% from April 2023 for businesses with profits of £250,000 and over. The rate for businesses with profits of £50,000 or less will remain at 19% and there will be a marginal taper for profits between £50,000 and £250,000 – all as announced in March 2021.
The bank surcharge rate will be set at 3% from April 2023, so banks will pay corporation tax at 28%. The annual allowance within the surcharge will be raised to £100 million.
Dividend tax rates will rise from 6 April 2022. You could save tax if your company pays you a dividend in the current tax year.
The business rates multipliers will be frozen for a second year, from 1 April 2022 until 31 March 2023, keeping the multipliers at 49.9p and 51.2p.
There will be a temporary business rates relief for eligible retail, hospitality and leisure properties for 2022/23. Eligible properties will receive 50% relief, up to a cap of £110,000 per business.
From 2023, a 100% improvement relief for business rates will provide 12 months’ relief from higher bills for occupiers where eligible improvements to an existing property increase the rateable value. The relief will be reviewed in 2028.
From 1 April 2023 to 31 March 2035 there will be targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage. There will also be a 100% relief for eligible heat networks to support the decarbonisation of non-domestic buildings.
Business rates revaluations will take place every three years instead of every five years, from 2023.
Transitional relief for small and medium-sized businesses and the supporting small business scheme will be extended for one year. This restricts increases in rates bills for properties with a rateable value of up to £100,000.
Online sales tax consultation
The government will publish a consultation about an online sales tax ‘shortly’. If it is introduced, the revenue from such a tax would be used to reduce business rates for retailers in England and increase the block grants of the devolved administrations.
Income tax basis period reform
Income tax basis periods will be reformed so that a business’s profit or loss for a tax year will be the profit or loss arising in the tax year itself, regardless of the business’s accounting date. This removes the basis period rules, which result in tax being charged on profits twice in some circumstances, as well as the need for overlap relief. The new rules will come into force from 6 April 2024 with a transition period in 2023/24.
Research and development (R&D) tax reliefs
Qualifying expenditure will be expanded to include data and cloud costs. Other changes will refocus support towards innovation in the UK rather than overseas, targeting abuse and improving compliance. The changes will take effect from April 2023.
Your business might be entitled to a valuable R&D tax credit – even if it doesn’t make a taxable profit. Check out the new position; you might be surprised what expenditure can now qualify and how much it could be worth to you.
Annual investment allowance (AIA)
The temporary £1 million level of the AIA will be extended to 31 March 2023.
Recovery loan scheme
The recovery loan scheme will be extended to 30 June 2022 to help small and medium-sized businesses to continue to recover from the pandemic, but the government guarantee will be reduced from 80% to 70%.
Cross-border group relief
Cross-border group relief and related loss reliefs are abolished from 27 October 2021.
Residential property developer tax
A new tax will be introduced on company profits derived from UK residential property development, to help pay for the removal of unsafe cladding and other building safety remediation, as announced in February 2021.
It will be charged on relevant profits arising after 31 March 2022, at 4% on profits exceeding an annual allowance of £25 million. It will be included in corporation tax returns.
Museums and galleries exhibition tax relief (MGETR) will be extended until 31 March 2024. The headline rates of the tax reliefs for theatres, orchestras and MGETR are increased with immediate effect but will reduce on 1 April 2023 and again on 1 April 2024.
The first English freeport sites – in Humber, Teesside and Thames – will be able to begin initial operations from November 2021.
Alcohol duty reform
The government intends to restructure alcohol duty so that all beverages will be taxed in direct proportion to their alcohol content.
To simplify the regime, the government intends to reduce the number of main rates from 15 to 6, with common thresholds for each set of bands across product categories. The rates will be harmonised for drinks at 8.5% ABV or above and there will be reduced rates for products below 3.5% ABV.
The government also intends to introduce a common small producer relief, to reduce the tax burden on smaller producers of wine, cider, spirits and made-wine below 8.5% ABV. Duty rates on draft beer and cider will be cut by 5% to help pubs and support responsible drinking.
The government is publishing a consultation on the detail of these reforms, which will close on 30 January 2022. The government will continue to discuss the application of these reforms to Northern Ireland with the EU during the consultation period of the review.
Air passenger duty (APD)
A new domestic APD band will cover flights within the UK. The rate will be £6.50 for 2023/24. The existing short-haul economy rate will be frozen for 2023/24 at £13 and the long-haul economy rate will increase by £3 to £87. There will be a new ultra-long-haul band, covering destinations with capitals located more than 5,500 miles from London, with an economy rate of £91.
Asset holding companies (AHC) tax regime and real estate investment trusts (REITs)
A new framework will be introduced for the taxation of companies used by funds and institutional investors to make investments, while targeted changes will be made to the REIT tax rules, with effect from April 2022.
UK funds regime review
The government will publish in the coming months its response to the call for input on the broader elements of the UK funds regime review, as well as a consultation on options to simplify the VAT treatment of fund management fees.
Anti-money laundering levy
Businesses and other entities subject to the money laundering regulations will have to pay a new anti-money laundering levy starting with the year 1 April 2022 to 31 March 2023, as previously announced.
The levy will be a fixed fee based on their ‘size’ band, as determined by their UK revenue for the relevant accounting period.
- Medium entities (over £10.2 million up to £36 million) will be expected to pay a fee in the region of £5,000 to £15,000;
- Large entities (more than £36 million up to £1 billion) will pay in the region of £30,000 to £50,000;
- Very large entities (more than £1 billion) will pay a fee in the region of £150,000 to £250,000.
- Small entities will be exempt.
Payments will be due after the end of the relevant year. The levy is intended to raise about £100 million a year to help fund anti-money laundering and economic crime reforms.
Diverted profits tax (DPT)
HMRC will not be able to close corporation tax enquiries into profits subject to a DPT charge until after the DPT review period ends. This will apply to any application for a corporation tax closure notice made after 26 September 2021.
Under another measure, companies can still use certain relieving provisions to amend their company tax returns and bring taxable diverted profits into charge to corporation tax during the DPT review period.
New legislation will enable HMRC to implement tax treaty mutual agreement procedure decisions reached after 27 October 2021.
Tonnage tax reform
The government will introduce a package of measures to reform the UK’s tonnage tax regime for shipping businesses from April 2022. These reforms aim to see more firms basing their headquarters in the UK and flying the UK flag.