Corporation Tax Rate to change on 1st April

It was announced in the Summer 2015 Budget that the main rate of Corporation Tax  will drop to 19% from April 2017.

The further cut to 17% from April 2020 will go ahead as planned.

When tax rates fall, this will reduce the tax benefit of expenditure. Therefore you will gain an absolute tax advantage by spending money on discretionary items such as assets qualifying for Annual Investment Allowance, staff bonuses etc. before the rate reduces. Do you have any expenditure planned for 2017, that you can bring forward before April? You need to balance this with the cashflow disadvantage of paying money out earlier.

Corporation Tax loss relief

A surprise relaxation was announced in Budget 2016 in that trading losses incurred from 1 st April 2017 will be able to be offset against any income in later years for the company or another group member (currently it may only be offset against profits from the same trade when carried forward to later years).

This is a welcome simplification. The slight sting in the tail is that there will be a restriction in the utilisation of losses for companies with very high profits; only 50% of profits in excess of £5m will be able to be offset by brought forward losses. This will only affect a minority of companies, although it is not clear at this stage whether the £5m limit will be reduced for associated companies in a group or under common control. Draft legislation is expected soon.