Small profits relief meaning

On Wednesday, 6 March 2024, the Chancellor of the Exchequer, Jeremy Hunt, presented the government’s Spring Budget. In a year when a general election is anticipated, he repeatedly cast it as a programme for long-term growth, concluding with the line ‘growth up, jobs up and taxes down’. He also outlined tax measures aimed at making the system ‘simpler and fairer’. While scrapping some reliefs may streamline matters, the backdrop of the main and small profits corporation tax rates holding at 25% and 19%, personal allowances and income tax bands staying frozen (and expected to remain so for a few more years), and the annual exempt amount for capital gains tax being halved to £3,000 from 6 April 2024, makes it uncertain whether the electorate will experience the changes as fairer. Key announcements include: abolishing, with effect from 6 April 2025, the non-dom rules and replacing them with a residence-based regime under which individuals who opt into the regime will (subject to conditions) not pay UK...

In this issue: VAT Companies and corporation tax Employment taxes Business Structures International Taxes management and litigation Budgets and Finance Bills Devolved taxes Daily and weekly news alerts New and updated content Latest Q&A Dates for your diary Trackers Useful information VAT The Supreme Court has held that Northumbria Healthcare NHS Foundation Trust ought to have levied VAT on hospital car parking (Northumbria Healthcare NHS Foundation Trust v HMRC). As noted below, the justices unanimously allowed HMRC’s appeal, setting aside the Court of Appeal’s conclusion that the Trust did not need to charge VAT on parking at its hospitals. The Court found the Trust was not operating under a ‘special legal regime’ (SLR) when managing its car parks, and VAT was therefore due. It also confirmed that following external guidance, even together with the general public law duty to comply with it unless there is good reason not to, does not...

SME R&D relief—additional deduction (pre-1 April 2024) This Practice Note addresses the principal research and development (R&D) relief for small or medium-sized enterprises (SMEs) for accounting periods beginning before 1 April 2024, subject to transitional provisions. For further detail, see Practice Note: SME R&D relief—tax credit (pre-1 April 2024). For the R&D expenditure credit that applies to periods beginning before 1 April 2024, see Practice Note: R&D expenditure credit (pre-1 April 2024). In this Practice Note, these two are collectively described as the pre-1 April 2024 schemes. For guidance on the schemes of relief for R&D generally applying to accounting periods beginning on or after 1 April 2024, see Practice Notes: The merged R&D expenditure credit (post-1 April 2024) and Enhanced relief for R&D-intensive loss-making SMEs (post-1 April 2024). SME R&D relief—additional deduction Where the relevant conditions are satisfied, an SME company may claim an additional deduction equal to 186% of its qualifying research and development (R&D) expenditure when computing profits chargeable to corporation tax...

GOVERNMENT CONSULTATION : The government is consulting on proposals to require close companies to give HMRC more granular information about transactions with participators (usually shareholders). In scope are: Cash withdrawals Loans Debts Dividends Other distributions Asset transfers Items already reported via RTI, such as salary, would be excluded. Reported data would set out the recipient, amount, date, and identifying details, potentially including NI numbers. Views are sought on the scope, timing and delivery method (for example via CT600A, the company tax return, or a digital service), whether repayments, releases and write‑offs of loans should be included, and whether existing penalties are adequate or bespoke penalties are needed. The consultation closes on 10 June 2026. Introduction and summary of main rules Without specific rules, a company controlled by a small number of persons could structure its affairs to enable those persons to sidestep income tax. Legislation to counter the avoidance of income tax through companies was first...

Patent box The patent box is an elective regime that delivers an effective corporation tax rate of 10% on worldwide profits attributable to qualifying patents and comparable intellectual property (IP) rights. Profits that qualify for the relief are, in substance, charged to corporation tax at the reduced rate of 10%. The relief is given effect through legislation that permits a deduction when calculating a company’s trading profits for a particular accounting period. For general background on the patent box, see Practice Note: Patent box—key features of the regime. To align with BEPS Action Plan 5, the patent box rules were revised on 1 July 2016 to introduce an R&D fraction restriction, which can curtail the value of patent box claims for businesses that have acquired relevant IP and/or sub-contracted development of relevant IP to affiliates. A series of ancillary amendments to the rules accompanied these changes to ensure the restriction was implemented correctly...