Employment Taxes and National Insurance
The NIC employment allowance will increase to £3,000 from April 2016 however where the director is the sole employee this will not be available. The increase is intended to cover the NIC costs of four full time workers earning the new national living wage. From April 2016 the national living wage (for over 25’s) will replace the national minimum wage and will be set at £7.20 an hour.
There will be a review of employee benefits and expenses and also the IR35 process.
Capital Allowances – Annual Investment Allowance
The permanent level of the AIA has been set at £200,000 for qualifying plant and machinery for expenditure from 1 January 2016. It is welcome that this is a permanent rate as the annual investment allowance has changed numerous times over the last few years leading businesses to make decisions about capital expenditure based on the prevailing rate of the allowance rather than on commercial grounds.
The corporation tax rate will be reduced to 19% in 2017 and go down to 18% in 2020.
The rules regarding relief for business goodwill amortisation will change as companies will no longer be able to write off the cost of purchased goodwill although relief will be available where the goodwill is sold. This measure only relates to accounting periods beginning on or after 8 July 2015 in respect of acquisitions made after 8 July 2015. This may mean that share acquisitions will become more attractive for purchasers as well as vendors.
There are now 3 different sets of rules regarding goodwill, the “old” regime where the goodwill existed pre 2002, the regime that was introduced in 2002 and these new rules.
Corporation tax payment dates will be changed for companies with annual taxable profits of £20m or more (for groups the limit will be divided by the number of companies in the group) and they will be required to make quarterly payments for accounting periods starting on or after 1 April 2017.
Other corporation tax measures that may be of interest to some of our larger clients are a clarification of the tax treatment of transfers between related or connected parties of trading stock and intangible fixed assets and rules aimed at simplifying the tax treatment of corporate debt.