1.12 Corporation Tax rates

As announced at Budget 2020, the Corporation Tax main rate for the financial year beginning 1 April 2020 will remain at 19%. Legislation in Finance Bill 2020 will set the rate at 19%. Legislation will also be introduced in Finance Bill 2020 to charge Corporation Tax and set the main rate at 19% for the financial year beginning 1 April 2021.

1.13 Corporation Tax: non-UK resident companies with UK property income

Finance Act 2019 enacted rules under which non-UK resident companies that carry on a UK property business, or have other UK property income, will be charged to Corporation Tax on its property profits or property income from 6 April 2020 rather than being charged to Income Tax as at present. The government will legislate in Finance Bill 2020 to ensure that the Finance Act 2019 rules work as intended to ensure a smooth transition of the taxation of UK property profits from Income Tax to Corporation Tax and continue to deliver more equal tax treatment for UK and non-UK resident companies in receipt of similar income.

1.14 Corporate capital loss restriction

As announced at Budget 2018, the government will legislate in Finance Bill 2020 to restrict companies’ use of carried-forward capital losses to 50% of capital gains from 1 April 2020. This measure includes an allowance that gives groups unrestricted use of up to £5 million capital or income losses each year. A consultation paper was published on 29 October 2018 and draft legislation was published on 11 July 2019, with a further period of technical consultation running until 5 September 2019. An
anti-forestalling measure to support this change has effect on and after 29 October 2018.

1.15 Intangible fixed assets: relief for pre-Finance Act 2002 assets

As announced at Budget 2020, the government will introduce legislation in Finance Bill 2020 on the tax treatment of intellectual property (the intangible fixed asset regime). This will allow all pre-Finance Act 2002 intangible assets acquired from 1 July 2020 to come within the intangible fixed asset regime, subject to certain transitional provisions in respect of related party acquisition costs.

1.16 Digital Services Tax

As announced at Budget 2018, the government will legislate in Finance Bill 2020 to introduce the Digital Services Tax (DST). The DST is a new tax on the revenues of certain digital businesses to ensure the UK tax they pay reflects the value they derive from UK users. The rate of this tax will be set at 2% and raise around £2 billion for the public finances. The DST will take effect from 1 April 2020

1.17 Research and Development Expenditure Credit (RDEC) rate

The government will introduce legislation in Finance Bill 2020 to increase the rate of RDEC from 12% to 13% from 1 April 2020, supporting businesses investing in R&D and helping to drive innovation in the economy.

2.16 Consultation on research and development (R&D) tax credit qualifying costs

The government will consult on whether expenditure on data and cloud computing should qualify for R&D tax credits.

2.17 Preventing abuse of the R&D tax relief for small and medium enterprises (SME)

Following consultation last year, the government will delay the implementation of the PAYE cap on the payable tax credit in the SME R&D scheme until 1 April 2021. The government has listened to industry and will also consult on change to the cap’s design, to ensure it targets abusive behaviour as intended while ensuring that eligible businesses are able to access the relief. The government will also publish a summary of responses to the first consultation.

2.18 Hybrid and other mismatches

As announced at Budget 2020, the government will publish a consultation on the corporation tax rules that apply to hybrid mismatch arrangements. These are arrangements that exploit the differences in tax treatments between the two jurisdictions and the consultation seeks to ensure that the hybrid mismatch rules work proportionately and as intended.

2.19 Consultation on the tax impact of the withdrawal of the London Interbank Offered Rate (LIBOR)

The government will consult to ensure that where tax legislation makes reference to LIBOR it continues to operate effectively. The consultation will also enable the government to ensure it is aware of all of the significant tax issues that arise from the reform of LIBOR and other benchmark rates.

2.20 Review of the UK funds regime

As announced at Budget 2020, the government will undertake a review of the UK’s funds regime during 2020. This will cover direct and indirect tax as well as relevant areas of regulation, with a view to considering the case for policy changes. The review will include a consultation on whether changes to the tax treatment of companies used by funds to hold assets could make the UK a more attractive location for these companies. It will also consider the VAT treatment of fund management fees and other aspects of the UK’s funds regime