corporation tax rates 20/21

So what might 2020 have in store for Corporation Tax (CT)? The Liberal Democrat manifesto indicates that they would introduce a slight raise in the CT rate, restoring it to 20% and keeping it stable there. In outline, the amount of payable tax credit that a loss-making company can receive in any year through the SME scheme will be capped at three times the company’s total PAYE and NICs liability for that year.

This change isn’t dependent on a Budget or Finance Bill as the relevant legislation was included in Finance Act 2019. However, it appears that this might no longer happen. But that doesn’t mean there won’t be any tax changes next year, especially given the December general election. Accordingly, the legislation will need to be amended post-election to maintain the rate …

That rate was scheduled to drop again to 17% from April 2020 – a cut which was actually legislated for in Finance Act 2016. The Conservative party manifesto states that they would not go ahead with the cut but instead maintain the rate at 19%. The Corporation Tax charge and the main rate will also be set at 19% for all non-ring fence profits for financial year 2021. Whoever ends up in government, we cannot rule out additional or different measures making it through to any subsequent Budget and Finance Bill. Labour have also said they would reintroduce a small companies rate. There are a couple of suggested measures to limit the adverse impact of this change on legitimate businesses, including a threshold below which claims would not be subject to the cap. The level of this threshold has not been confirmed, but £10,000 was used as an example in the most recent consultation document. This transfer to CT will be a big change for affected companies. Again, the proposal is that this would gradually increase over the next few years – starting at the current rate of 19% from April 2020 before increasing to 20% from April 2021 and to the target of 21% in April 2022.

In recent years we have become used to seeing the Corporation Tax rate fall on a regular basis. Their manifesto proposes a gradual increase to a final rate of 26% – which would take CT back to its 2011 level.

That rate was scheduled to drop again to 17% from April 2020 – a cut which was actually legislated for in Finance Act 2016.

We have not yet seen draft legislation for this cap, which will presumably need to be included in the next Finance Bill if it is to go ahead from April 2020.

The previous cap was abolished in 2012.

But, whatever happens, it looks like the trend of ever decreasing CT rates may well have come to an end. However, it is one to watch for businesses which claim under the SME scheme and have low PAYE and NICs bills – this may include start-ups, but also those using tax efficient share schemes or owner-managed companies where remuneration is drawn mainly as dividends.

It is important to note that the corporation tax rate reduction to 17 percent for the financial year commencing 1 April 2020 (FY20) has already been legislated for in section 46 Finance Act 2016. In recent years we have become used to seeing the Corporation Tax rate fall on a regular basis.

It should be noted these are just highlights – it would take more than one article to cover all potential changes to CT, never mind other taxes – and that this article was written before the election and is therefore subject to change.

From a high of 52% back in the 1970s, we currently have a record low rate of 19%. It therefore seems that 2020 could be an eventful year, and that’s without even mentioning Brexit or Making Tax Digital. Labour by contrast would revers…

They will be taxed at a different rate(s) (possibly lower, possibly higher, depending on the election results) and they will also come into the remit of some complex rules such as those restricting interest deductions and the use of carried forward losses. By contrast, Labour have said they would phase out both RDEC and the patent box entirely in favour of more direct funding of R&D. The Conservatives have indicated that they would raise the relief available under the Research and Development Expenditure Credit (RDEC) scheme from 12% to 13% and look into widening the definition of R&D. Boris Johnson has told business leaders he will shelve a planned cut in corporation tax, claiming he would put £6bn into public services instead. Looking beyond CT rates, Labour’s manifesto commits to a review of corporate tax reliefs with a target of reducing them by £4.3bn. Under this plan the initial increase in April 2020 would be to 21%, followed by 24% from 2021 and 26% from 2022.

Of course, these plans may never come to fruition, especially if none of the parties get their desired majority. The cap is being reintroduced as HMRC have identified fraudulent attempts to claim payable tax credits totalling over £300 million by using companies or structures with little employment or R&D activity in the UK. From 6 April 2020, non-UK resident companies will be chargeable to Corporation Tax rather than to income tax on their UK property income. Labour by contrast would reverse recent cuts in CT rates. This maintains the rate at 19%, rather than reducing it to 17% from 1 April 2020.

The eventual picture will depend significantly on the composition of Parliament after 12 December. Companies will also have to get to grips with administrative changes including the requirement to file CT returns and use iXBRL tagging.

Summary of impacts Exchequer impact (£m) Below we take a quick look at some of the key potential changes. 2020 Vision: the outlook for Corporation Tax, Top 20 International Alliances and Associations 2019, Media furore over corporate tax targets Netflix, How to optimise your compliance lifecycle, 5 ways internal productivity can boost your profitability, Get the latest analysis and reports delivered to your inbox daily. The above is not an exhaustive list of all the CT changes which could be introduced in 2020. From a high of 52% back in the 1970s, we currently have a record low rate of 19%. This measure sets the Corporation Tax main rate at 19% for the financial year beginning 1 April 2020. However, it appears that this might no longer happen. We are now coming to the end of a most unusual year – the first without a Budget for at least 120 years. April 2020 is scheduled to see the return of the cap on the repayable credit available under the R&D regime for small and medium sized businesses (SMEs). All of this means that non-resident corporate landlords are likely to see an increase in compliance costs from next year, both one off and on-going. Emma Rawson is Technical Officer at the Association of Taxation Technicians (ATT).

The Conservative party manifestostates that they would not go ahead with the cut but instead maintain the rate at 19%. The rate of Corporation Tax you pay depends on how much profit your company makes.. Rates for Corporation Tax years starting 1 April. Depending on the outcome of the election, we may also see changes to large company R&D relief in the coming years. Corporation Tax rates. Emma Rawson from the Association of Taxation Technicians (ATT) looks ahead to the potential key changes for Corporation Tax in 2020.

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