Three Major Changes to Corporation Tax between now and 2020

This year’s Budget No2 on 8 July brought us three important changes to corporation tax over the next few years, and here is a reminder of those.

Good news for companies is that the rate of corporation tax – which has been a flat rate of 20% since 1 April 2015 regardless of the level of profits – will fall to 19% from April 2017, and 18% from April 2020.

There will be earlier tax payment dates for more profitable companies though from April 2017.  Currently, companies with profits of £1.5m or more – or for groups, this threshold could be much lower, depending on the number of active companies in the group – quarterly instalment payments are needed by Month 7 of their accounting period.  From April 2017, companies with profits of £20m or more – again, this threshold could be lower, depending on the number of group companies –  will need to start their quarterly instalments by Month 3.  Groups might wish to consider Group Payment Arrangements for tax again and which could be advantageous now, not just from 2017.  We will be discussing with our clients the possible impact on cash flow before then.

Companies which acquire intangible assets such as goodwill on or after 8 July 2015 will no longer be able to claim tax relief on amortisation in the accounts.  This may also change the starting position for some business acquisitions, where for many years the best purchase route was often trade and assets, and was at odds with the tax position of individual shareholders who generally preferred a share sale.

There is of course a major change to how dividends are taxed on individual shareholders from April 2016, and that will be the subject of a blog for another day.

If you have any queries please contact Rob or your usual Garbutt + Elliott contact on 01904 464100.