The Autumn 2021 Budget announced limited changes in terms of the UK Corporation Tax regime.

Tax rates

Previous budgets introduced an increase for most businesses to the corporation tax rate from its current level of 19% to 25% with effect from 1 April 2023. The UK corporation tax rate is still one of the lowest within the G20. The increase in UK corporation tax rate from April 2023 should be considered in the context of the recent OECD announcements of a global minimum corporate tax rate of 15% for large multinational groups. 

The limited corporation tax changes today are not unsurprising and have the benefit of providing some stability for businesses which will be welcomed by many given the turbulence and uncertainty caused by the pandemic. 

Residential Property Developer Tax (RPDT)

In spring 2021, the government announced a consultation on a proposed RPDT and a second consultation on the notification of uncertain tax treatments by large businesses. 

Following on from the consultation on RPDT, the Chancellor confirmed the rate of tax for the new RPDT will be 4%. This tax, effective from 1 April 2022, will be payable on profits arising from residential property developments in excess of £25 million per annum. Draft legislation on this measure was published recently. In effect, for transactions which fall within the remit of this legislation, the effective rate of tax from 1 April 2022 will be 23% and from 1 April 2023 will be 29%. 

Uncertain tax positions

In addition, today’s announcements confirmed large businesses will be required to notify HMRC if it has adopted an uncertain tax position which is either not in accordance with HMRC’s known position or the business has included a provision in its accounts in relation to the uncertainty. From April 2022, the measures apply to companies with either an annual turnover of more than £200 million or balance sheet total over £2 billion with uncertainties in relation to Corporation Tax, Income Tax (including PAYE) and VAT filings resulting in a tax advantage exceeding £5 million. The government had previously considered a third trigger where there is a substantial possibility that a tribunal or court would find the taxpayer’s position to be materially incorrect and whilst this measure has not be included at the moment, it still remains on the table. 

Other matters

As we continue to navigate through the post-Brexit era, there was a technical change with regards to the availability of cross-border group relief. With immediate effect, it will no longer be possible for NI/GB groups to utilise losses by way of group relief claims from non-UK group companies. 

The Chancellor announced plans to shortly launch a consultation to continue to explore the potential introduction of an Online Sales Tax across the UK. This was not an unexpected announcement. 

The government’s main business tax focus was the introduction of further tax incentives in order to encourage investment and innovation. Further detail on the measures announced can be found in the ‘Incentives’ section of this edition of Taxing Times. However, the targeted incentives for creative industries and R&D are particularly good news for NI businesses, as we continue to set ourselves apart on the global stage as an ideal location for television and film production and promote our highly skilled talent pool.

Get in touch

If you have any queries on the topics covered above, please contact Paddy Doherty, partner, KPMG in Belfast.