Budget 2014 – Corporation Tax

Corporation tax rates

The scheduled reduction in the main rate of corporation tax is to go ahead.   Hence, the main rate will be reduced from 23% to 21% (on 1 April 2014) and eventually to 20% (on 1 April 2015), whereby it will then be aligned with the current small companies rate of tax.  When the coalition government came to power in 2010, the main rate was 28%, so this reduction to 20% within 5 years represents a significant saving to businesses (and explains the continuing popularity of the use of corporate structures in tax planning).

 

Research & Development

SMEs that incur R&D expenditure are currently allowed to surrender their tax losses in exchange for cash payments from HMRC at a rate of 11% (e.g. £100,000 of tax losses can be converted to an immediate cash payment of £11,000).  From 1 April 2014 the surrender rate will be increased to 14.5%, which is very welcome news to those businesses that are otherwise unable to use their tax losses, as the immediate payment of cash from HMRC can often be a critical lifeline whilst businesses invest in R&D for the long term.

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Jan 24

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