Chancellor Philip Hammond confirmed the government’s commitment to cut the main rate of corporation tax to 17% by 2020.
To remove the inconsistency between rural rate relief and small business rate relief, it was announced that the government will increase rural rate relief from 50% to 100% from 1 April 2017.
To support the rollout of full-fibre broadband and facilitate trials of 5G communications, a new 100% business rates relief will be introduced over a 5 year period with effect from 1 April 2017. This will apply to new full-fibre infrastructure.
VAT flat rate scheme
The chancellor announced the introduction of a new 16.5% flat rate of VAT for ‘businesses with limited costs’.
From 1 April 2017, businesses will be required to determine whether they meet the definition of a limited cost trader at the same time as establishing their applicable VAT rate, based on their trade sector. This also applies to existing users of the VAT flat rate scheme.
A limited cost trader will be one whose VAT inclusive expenditure on goods is either:
less than 2% of their VAT inclusive turnover in a prescribed accounting period
greater than 2% of their VAT inclusive turnover but less than £1,000 per annum, providing the accounting period is 1 year.
Anti-forestalling legislation was published on 23 November 2016 to prevent any trader continuing to use a lower flat rate by issuing an invoice or receiving a payment before 1 April 2017 for services supplied after that date.
Reform of loss relief
From April 2017, there will be a restriction the amount of profit that can be offset by carried forward losses to 50%, while allowing greater flexibility over the types of profit that can be relieved by losses incurred after that date.
The restriction will be subject to a £5 million allowance for each standalone company or group. These rules are being introduced following the consultation process conducted after Budget 2016.
It was confirmed that the government will take steps to address any unintended consequences identified in the reform process and to simplify the administration of the new rules.
Tax deductibility of corporate interest expense
Following consultation, the government has confirmed that new rules will come into force from 1 April 2017 to limit the tax deductions that large groups can claim for their UK interest expenses.
The rules will seek to limit deductions where a group has net interest expenses of more than £2 million, net interest expenses exceed 30% of UK taxable earnings and the group’s net interest to earnings ratio in the UK exceeds that of the worldwide group.
National living wage
For those aged 25 or over, the national living wage will increase from £7.20 to £7.50 per hour with effect from April 2017.
National minimum wage
The government has also announced the new national minimum wage rates that will apply from April 2017 will be as follows:
21 to 24 year old: £7.05 per hour
18 to 20 year olds: £5.60 per hour
16 to 17 year olds: £4.05 per hour
apprentices: £3.50 per hour.
The government will also invest additional funds to strengthen enforcement of national minimum wage legislation and help small businesses understand and comply with the rules.
Company car taxation
In an effort to encourage the purchase of ultra low emission vehicles, new company car tax bands for the lowest emitting cars will be introduced for the 2020/21 tax year.
The percentage for cars with emissions greater than 90 g/km will also be increased by 1% in 2020/21.
Capital allowances: electric charge point equipment
Expenditure on the acquisition of new and unused electric charge point equipment will benefit from a 100% first year allowance. The new measure will have effect for expenditure incurred on, or after, 23 November 2016 and will expire on 31 March 2019 for corporation tax and 5 April 2019 for income tax purposes.
Non-resident companies’ UK income
The government is considering bringing all non-resident companies receiving taxable income from the UK into the corporation tax regime.
At Budget 2017, the government will consult on the case and options for implementing such a change.
Substantial shareholding exemption
The government will simplify the substantial shareholding exemption rules by removing the investing requirement and provide a more comprehensive exemption for companies owned by qualifying institutional investors.
Museums and galleries tax relief
The scope of the museums and galleries tax relief announced at Budget 2016 will be broadened to include permanent exhibitions so that it is accessible to a wider range of institutions across the country.
The new rate of relief will be set at 20% for non-touring exhibitions and 25% for touring exhibitions from April 2017. The relief will be capped at £500,000 of qualifying expenditure per exhibition.