Our latest Chancellor of the Exchequer, Jeremy Hunt delivered his first Budget to the House of Commons on Wednesday 15^th March.  The Budget sets out the Governments proposed spending and changes to current taxation levels. Most of the provisions in the Budget won’t take place until after our next General Election so if there is a change of Government, then these announcements are academic and won’t happen.

Budget Announcements are a high-level “sound-bite” statement. The detailed documents that are published once the Chancellor sits down after delivering his statement have more of the detail but are often incomplete. 

Once the Budget Speech is completed, the Finance Bill is issued and this receives three readings, a committee stage and a report stage in each of our two Parliamentary Houses, the Commons and the Lords. Once the Bill has gone through these stages it then receives Royal Assent from our new King!

In this blog, I’ll cover those aspects of the Budget that we believe are most relevant to our clients.

Corporation Tax Rates

It had previously been announced that Corporation Tax rates will rise from 1 April 2023. Your limited company will pay tax at 19% on profits earned to 31 March 2023 and at the relevant new rate thereafter. If your company’s year end is not 31 March then we have to apportion the profits over the course of your financial year based on the number of days at the old rate and the number of days at the new rate.  The new rate will depend on the level of profits and will be as follows;

Profits                                                                                                  Rate of Tax

Up to £50,000 (£37,500 for calendar year to 31.12.2023)                       19%

Over £250,000 (£187,500 for calendar year to 31.12.2023)                    25%

Between £50,001 and £250,000                                                      Sliding scale from 19% to 25% on total profit

There is a further complication where a company is owned by another company, or more than one company is under the common control of the same person. In this case, the bands are divided by the number of companies worldwide to arrive at the appropriate rate. We will need to ask you for more information about your non-UK companies when we prepare tax computations in future.  (Companies that are completely dormant, that do not have any transactions at all during the year are not included in the count for the number of companies). We are happy to explain this further and will, as always, provide detailed calculations of your Company Tax bills when we prepare your Company accounts.

Investment Zones

The Chancellor announced the intention to create 12 further Investment Zones across the UK. Areas will need to bid for the funding to create the Zone and tax incentives for businesses will be on offer. These areas are intended to attract private funding and will result in regeneration in line with the Governments policy to “level up” the UK and reduce inequality between regions.  The areas will attract an exemption from Stamp Duty land Tax on commercial property that is acquired and used for commercial purposes for a defined period – initially set at 3 years.

Digitalising Business Rates

After a period of consultation, the Government is looking to explore new policy options to tax commercial property according to profitability or turnover rather than the current system of taxing by property use or value. Their first step will be to centralise the data matching of properties to owners to identify those who have made incorrect claims for Small Business Rate relief over multiple properties in multiple areas. A penalty regime will be introduced to discourage fraud and penalise those who have abused the system. Ultimately, the Government is looking to provide a platform for ratepayers to see their tax and business rates information, but this is a long way off.

Share Exchanges – applicable to individuals who are UK resident but non-domiciled in the UK  (if you are an overseas investor but come to live in the UK for less than 14 years)

Where shares in a non-UK company are received for shares in a UK company, an individual is liable to UK tax on the gains or income received from that non-UK company. This measure will apply to individuals who hold more than 5% of the shares in a UK company that has five or fewer shareholders (called a “close company”). If the offshore holding company pays income to an individual the UK will now seek tax on the gains or dividends as if the shares had been held in the UK company. If the offshore company exchanges shares for yet another offshore company the same tax obligations will apply. This ruling applies to share exchanges that have taken place since 17 November 2022 and is intended to stop UK resident non-domiciled individuals from escaping tax. Whilst it will not impact Shareholders who are resident outside the UK for tax purposes, it may be of importance if you are intending to become resident in the UK in the future.

If you would like to discuss any of the above, please book a 10 minute meeting with us using this link   http://bookings.providencefinancial.co.uk

Liz Noble FCA BFP
Technical Director – Providence Financial Limited