When “old” news is still news … What the Chancellor has confirmed for large businesses

Wed 23 Nov 2016

The Government has confirmed the implementation of previously announced measures, namely (i) reduction in corporation tax rates to 17% by April 2020, (ii) changes to interest tax relief rules for companies and (iii) changes to tax loss utilisation rules by companies.

The Chancellor today confirmed that the changes to interest tax relief and tax loss utilisation will be effective from April 2017.

The Chancellor confirmed that various amendments previously announced will be implemented:

Corporation tax rate

There had been speculation as to whether the Government would stick by its proposed reduction in corporation tax rates, which would reduce to 17% by 1 April 2017. See https://blogs.mazars.com/letstalktax/2016/03/corporation-tax/.

No mention was made by the Chancellor about changes to the application of the Quarterly Instalment Payments regime for companies with profits in excess of £20m, effective from 1 April 2019. We can therefore only assume that this change will also continue to be made as previously announced.

Corporate tax loss relief

We previously commented on the proposal to amend the corporate tax loss relief rules, with the Government giving with one hand (greater flexibility to uses losses of one type against profits of another) and taking away with the other (for groups with taxable profits in excess of £5m, the amount of profits that can be offset by brought forward losses is to be restricted to 50%). See https://blogs.mazars.com/letstalktax/2016/03/corporate-tax-losses-giving-with-one-hand-and-taking-away-with-the-other/

The starting date for these changes has been confirmed as April 2017. There may be some minor (administrative) changes to the rules as previously announced, but the substance of the proposals is unchanged.

Restrictions on interest tax deductions

Similarly, we have also commented on proposed restrictions to interest deductions that can be claimed by large groups, which will apply where the total of net interest paid by the UK group exceeds £2 million. See https://blogs.mazars.com/letstalktax/2016/03/restrictions-to-interest-deductions/.

The starting date for this change has also been confirmed as April 2017.

The only change mentioned in the Autumn Statement is widening of the provisions proposed to protect investment in public benefit infrastructure. No further detail has yet been given on this change.

Reform of Corporation Tax Loss Relief – Finance Bill 2017

At this year’s Budget, a significant development announced was the reform of corporation tax loss relief and a consultation document was issued in May 2016. On 5 December 2016 HMRC issued a response to this consultation document, together with draft clauses in Finance Bill 2017. However, this is still not the whole story as further […]

Double tax relief: new revenue protection measures

Anti-avoidance measures will be introduced in the Finance Bill 2014 to restrict claims for double tax relief by companies in two specific situations. The first measure relates to repayments from a tax authority made to a person as part of a scheme designed to circumvent the existing legislation. Under the existing provisions, the amount of […]

Controlled Foreign Companies – ‘at a loss regarding relief’/’bring it onshore’

Under the Controlled Foreign Company (‘CFC’) legislation, UK-resident holding companies of a large group will face a CFC charge on profits of certain foreign subsidiaries. Previously, UK holding companies could offset UK losses/excess expenses to ‘reduce’ the profits of the relevant foreign when calculating the CFC charge. From 8 July 2015 UK losses/surplus expenses will […]

Corporation Tax main rate falls to lowest level in history, QIP changes for large companies and Annual Investment Allowance permanently increased to £200k

The Chancellor announced in the Summer Budget that the rate of corporation tax will eventually fall to 18%. However, companies and groups with taxable profits of £20m or more will need to pay their quarterly instalments of corporation tax in the accounting period the profit arises in. Finally, the Annual Investment Allowance, due to fall […]

EU and Switzerland Sign Historic Tax Transparency Agreement

On 27 May, the EU and Switzerland signed a historic new tax transparency agreement, which will significantly improve the fight against tax evasion. Under the agreement, both sides will automatically exchange information on the financial accounts of each other’s residents from 2018. This agreement on the automatic exchange of information in tax matters will replace […]

Has the European Commission Been Defeated over Spanish State Aid?

Analysis of cases T-219/10 Autogrill España SA v Commission and T-399/11 Banco Santander SA and Santusa Holding SL v Commission Summary On 7 November, the General Court of the European Union annuls the European Commission decisions (2009 and 2011) over Spanish State Aid rulings declaring the Spanish tax regime allowing for the deduction of shareholdings […]

Court upholds employee “negative earnings” loss claim

Julian Martin (M) and HMRC’s cross-appeals on his negative earnings claims have been heard by the Upper Tier Tribunal (UTT). The UTT confirmed the earlier FTT decision, but for different reasons, with the result that: M’s claim that where part of a signing-on bonus was refunded (the bonus having been taxed in full as earnings […]

Controlled foreign companies: changes to prevent profit shifting

Two changes will be introduced to the CFC rules in the Finance Bill 2014, in order to prevent profit shifting under the finance company exemption provisions. If a UK company currently has in place a loan made to a non-UK group company, the temptation would be to transfer that loan to a new low-taxed offshore […]

Corporation tax – Law of Property Act receivership breaks a group for group relief purposes

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Taxable Loan Relationships Profit arises despite no Accounting Profit

The FTT case of GDF Suez Teeside v HMRC considered whether any taxable profits should arise when a UK company assigned a number of contingent debt claims to a wholly owned subsidiary resident in Jersey. Background GDF Suez Teeside (sic) Limited, formerly Teeside Power Limited (‘TPL’), operated Teesside power station, and as part of that […]

Worldwide debt cap: expansion of ‘group’ definitions

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Corporate debt rules for corporate partners

Following consultation on the corporate debt rules as a whole, legislation is to be introduced in Finance Bill 2014 which clarifies and consolidates the rules so far as they apply to companies that are members of partnerships. HMRC first issued a consultation document on the modernisation of corporate debt in June 2013. A summary of […]

High profile ‘Working Wheels’ tax scheme fails

Last weekend’s press had headline stories of the First Tier Tribunal (FTT) decision in Flanagan & Others v HMRC that the “working wheels” tax scheme was not effective. The press particularly highlighted the involvement of Chris Moyles, the former Radio 1 DJ. Three matters were considered by the Tribunal: were the participants carrying on a […]

First Tier Tribunal rejects HMRC ‘hope value’ argument and allows negligible value relief

In TC03118: Robert Brown the taxpayer claimed income tax relief on the basis that shares had become of negligible value. The only point of contention was whether the shares were actually of negligible value at 2006, the point at which the claim was made. The company was involved in research and development activity to develop […]

CFC and offshore financing exemption – interaction with unallowable purpose rule

The new CFC rules in Part 9A TIOPA allow groups to establish (or in some cases retain) tax efficient offshore financing arrangements under the finance company exemptions (Chapter 9). Provided the detailed conditions in are met, the CFC charge on UK chargeable companies may be reduced by between 75% and 100%. However depending on the […]

Eclipse Films loses appeal – no tax relief for investors in film scheme

The Upper Tribunal have agreed with the earlier FTT decision that the activity of a limited liability partnership did not amount to trading. The 2012 FTT decision received considerable publicity as many well known individuals were members of Eclipse Film Partners No 35 LLP. There are several varieties of film schemes. The essentials of Eclipse […]

UK Tax Authority Under Attack

In the UK, The Independent newspaper is today running the headline “Take from the poor, but not the rich”, following the publication of the UK Public Accounts Committee (PAC) report on HMRC tax collection. The main challenges to HMRC were lower than expected tax collected from undisclosed Swiss bank accounts (£440m vs £3.12bn) and that […]

Corporate scrapings at the bottom of the Emergency Budget fish paper

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Corporation tax instalment payments – ‘very large’ companies

HMRC have released draft regulations, explanatory notes, technical guidance and a tax information and impact note in respect of the change to bring forward the timing of the payment of corporation tax by very large companies by four months for accounting periods beginning on or after 1 April 2017. The draft regulations, known as ‘The […]

HMRC consultation – tax deductibility of corporate interest expense

HMRC opened a consultation on the tax deductibility of corporate interest expense on 22 October 2015, inviting responses by 14 January 2016. This consultation follows on from the release of the final report on Action 4 of the Base Erosion and Profit Shifting (BEPS) plan by the OECD in October 2015. The intention is that […]

BLAGAB loss relief rule changes bring complexity

Application of loss relief rules to life companies with Basic Life Assurance and General Annuity Business (“BLAGAB”) trade losses From 1 April 2017, companies will be restricted in the amount of losses that can be utilised to offset taxable profits to 50% of those profits. The tax regime for life companies is complex and is […]

Yet another nail in the coffin for offshore arrangements?

The UK Government has introduced a raft of legislation to address tax evasion and latterly tax avoidance. This has included; The Requirement to Correct legislation which has introduced punitive offshore penalties and extended assessing time limits for Income Tax, Inheritance Tax and Capital Gains Tax to 5 April 2021 and, Enhancing automatic exchanges of information […]

US tax reform

The US tax reform Bill was enacted on 22 December 2017. The White House has statement on the passage of the Bill. A brochure on the changes has been produced by the Mazars New York office. Some of the main business points in the Bill that has been approved are: CT rate to be 21% […]

A corporation tax (CT) loss can be offset against profits subject to income tax (and also profits subject to CT)

The Upper Tribunal (UT) has held that it is possible for a non-UK resident landlord of UK property (English Holdings (BVI) Ltd), which also had a UK PE undertaking a trade, to offset the loss of the PE’s trade (subject to corporation tax) against the profits of the non-resident landlord business (subject to income tax). […]

Amending submitted corporation tax returns covering periods ending between 8 March and 16 November 2017

If UK corporation tax returns have been submitted in respect of accounting periods ending between 8 March 2017 and 16 November 2017 on a basis which is not consistent with F(No.2)A 2017, these returns will need to be amended and resubmitted. HMRC has issued a guidance note concerning this issue. Corporation tax return amendments may […]

HMRC’s Implacables defeat tax scheme Incredibles

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Mansworth v Jelley still wobbling after all these years- HMRC win in CA judicial review: R (Hely-Hutchinson) v HMRC

The Court of Appeal has ruled in the Hely-Hutchinson judicial review that Mr. Hely-Hutchinson was not entitled to rely on HMRC’s 2003 ‘Mansworth v Jelley’ guidance for his open returns relating to tax years ended before HMRC withdrew that guidance in 2009. Hely-Hutchinson’s contention was that he had relied on HMRC guidance but was not […]

Autumn Statement – what’s in it for banks?

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Preventing abuse of the R&D tax credit relief

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Interaction between income tax and corporation tax for companies

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HMRC fail to delay hearing in Degorce to align proceedings with another year’s appeal

Patrick Degorce has invested in film schemes in 2006/07 and 2007/08. His appeal against HMRC’s refusal of relief for 2006/07 was turned down by the Upper Tribunal ([2015]UKUT447) in September 2015 but he has appealed against that decision and the case is now due to be heard by the Court of Appeal (CA) in spring 2017. […]

Corporate tax losses: giving with one hand and taking away with the other

From 1 April 2017, rules for the use of corporate tax losses are to be changed in two ways. On the positive side, new rules will give companies the ability to use one type of losses against future profits of a different type, and will give groups the ability to use brought forward losses against […]

Tightening the screw on Transactions in Securities (TiS) rules

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Incorporation and goodwill relief

Entrepreneurs’ Relief on goodwill transferred to a limited company was withdrawn on 3 December 2014. It’s back – but only where the resulting shareholding is less than 5%. A well used planning technique to effect a 10% tax rate on business profits was blocked in December 2014. It worked like this – a sole trader […]

Final Call for the Settlement Opportunities

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HMRC v Bloomsbury – interpretation of Sch 18 FA 1998 on the ability to claim losses in future years

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The evolving world of tax transparency

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When “old” news is still news … What the Chancellor has confirmed for large businesses

When “old” news is still news … What the Chancellor has confirmed for large businesses

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