Spring Budget News 2017 - R&D red tape, corporation and dividend tax…
The Chancellor has spoken and it's a mixed bag for businesses with some welcome news on corporation tax changes but not so welcome news on changes to the tax free dividend allowance, which impacts on small business owners and investors. We summarise the main points relating to corporation tax reductions, R&D red tape, plans to make tax digital and the attack on tax free dividend allowances.
Reductions in Corporation Tax
The corporation tax rate is due to fall from April this year, down from 20% to 19%, the lowest rate in the G20. It will drop again in 2020 to 17% which should go some way to ensuring the Britain remains attractive for business investment.
R&D red tape to be reduced
While there was nothing new said in terms of how R&D red tape would be reduced it is going to be looked at - the Chancellor, Philip Hammond MP said in his budget speech:
“As I committed at the Autumn Statement, we’ve reviewed, with business, our R&D tax credit regime and concluded that it is globally competitive.”
“But to make the UK even more attractive for R&D we have accepted industry calls for a reduction in administrative burdens around the scheme and will shortly bring forward measures to deliver them.”
Any simplification of the current system will of course be very welcome, so long as it is not accompanied by additional scrutiny and questions by HMRC tax officials.
Making Tax Digital still in the pipeline
“In a digital age, it is right that we develop a digital tax system.”
The Chancellor put a temporary brake of one year on introducing digital tax for businesses with a turnover below the VAT registration threshold, for others it’s still on track to be introduced as previously announced. There remains massive uncertainty over how it will work in practice, including in respect of companies claiming R&D tax credits. Follow the link below to find out more.
Tax free Dividend allowance under attack
Business owners will feel the effect of the reduction in the tax free dividend allowance – the Chancellor announced that it will drop from £5,000 to £2,000, with effect from April 2018.
It also has an impact on investors with equity-based portfolios - they may want to look at alternatives to mitigate their increased tax exposure.
The current dividend allowance means there is no tax to pay on the first £5,000 of your dividend income, no matter what non-dividend income you have. It is available to anyone that has dividend income.
Are you ready to find out if you qualify or how much your R&D claims could be worth?