Corporation tax rates and bands are as follows:
|Financial Year to||31 March 2012||31 March 2011|
The main rate of corporation tax will be reduced to 25% for the financial year commencing 1 April 2012 and to 24% for the financial year commencing 1 April 2013.
A new measure amends corporation tax small profits rate legislation. It will ensure that companies are not held to be associated through an attribution of rights (solely by virtue of relationships between individuals), but only where the level of commercial interdependence between the companies themselves makes it appropriate to do so.
The tax effect on companies which are held to be associated is to lower the profit threshold at which they fall within the main rate of corporation tax, in proportion to the number of associated companies.
A reduced 10% rate of corporation tax for profits arising from patents will come into effect from 1 April 2013.
The rates of writing down allowances (WDAs) for new and unrelieved expenditure on plant and machinery will be reduced from 20% to 18% per annum for expenditure allocated to the main rate pool, and from 10% to 8% per annum for expenditure allocated to the special rate pool. This will have effect for chargeable periods ending on or after 1 April 2012 for businesses within the charge to corporation tax and on or after 6 April 2012 for businesses within the charge to income tax.
The Annual Investment Allowance (AIA) will be reduced from the current limit of £100,000 to a new limit of £25,000. This will have effect from April 2012.
The period over which expenditure can be given short life asset treatment will be increased from four years to eight years. This will have effect for expenditure incurred on or after 1 April 2011 for businesses within the charge to corporation tax and on or after 6 April 2011 for businesses within the charge to income tax.
The additional corporation tax deduction given to SMEs for qualifying R&D expenditure will increase from 75% to 100%, giving a total deduction of 200%. Subject to State aid approval, this will have effect for expenditure incurred on or after 1 April 2011. A further increase to 125% will have effect for expenditure incurred on or after 1 April 2012.
The following changes to the CFC rules will be introduced in Finance Bill 2011:
A full reform of the CFC rules will be introduced in 2012.
Legislation will be introduced to allow a UK resident company to make an irrevocable election for all of its foreign branches, located anywhere in the world, to be exempt from UK corporation tax on their profits. If an election is made, no relief will be available for foreign branch losses. This will have effect for accounting periods commencing on or after Royal Assent.
Subject to State aid approval, the rate of income tax relief given under EIS will increase to 30% for shares issued on or after 6 April 2011.
For EIS and VCTs, the following increases will, subject to State aid approval, be introduced for shares in investee companies that are issued on or after 6 April 2012:
Companies whose trade consists wholly or substantially in the receipt of Feed-In Tariffs (FITs) or similar subsidies will only be eligible for the two schemes where commercial electricity generation commences before 6 April 2012. Shares issued before 23 March 2011 will not be affected.
The Government will offer up to 100% business rate discount for five years to businesses located in any of the 21 new Enterprise Zones.
The small business rate relief ‘holiday’ will be extended by one year from 1 October 2011.