It isn’t changing just yet, but as expected corporation tax is going up. From 1 April 2023 the main rate of corporation tax will be 25%.
However, we do also see the return of the small profits rate for corporation tax and marginal relief to taper the jump to the main rate of tax. Small rate will remain at 19% for those with profits up to £50,000 and tapering will apply for those with profits between £50,000 and £250,000. The tapering is a stepped increase in rate up to the main rate for those with profits over £250,000.
In line with a 6% increase in the corporation tax main rate from 19% to 25%, Diverted Profits Tax will also increase by 6% from 25% to 31%.
We all heard the Chancellor announce that he was launching a consultation to review the R&D tax credits system to ensure that the UK was remaining competitive for innovation and continuing to encourage investment and technology within the UK.
However, hidden in the small print there is also the introduction of a cap on the R&D SME payable credit that is being introduced for periods beginning on or after 1 April 2021, which is intended to prevent abuse.
There will be a maximum that any company can claim as a payable credit from HMRC in any one financial year, capped at £20,000 plus three times the company’s total PAYE and National Insurance Contributions liability.
This will be bad news for some start-ups relying on the R&D tax credit for funding as the amount of cash they receive going forward will be limited.
If you have questions on any of these areas, please contact us.