Corporation tax (CT) rate – Since 2010 the government has cut the headline rate of CT from 28% to 19%, giving the UK the lowest headline rate in the G20.91 To provide support for vital public services while maintaining the UK’s competitive rate of CT, the government will legislate to retain the current 19% rate in April 2020. (45)
Digital services tax (DST) – As announced at Budget 2018, the government will introduce a new 2% tax on the revenues certain digital businesses earn from 1 April 2020. This will ensure the amount of tax paid in the UK reflects the value these businesses derive from their interactions with, and the contributions of, an active user base. Legislation will require businesses to pay the DST on an annual basis, consistent with the draft legislation published in July 2019. The government will continue to give consideration to how the legislation applies to marketplace delivery fees and whether that application is consistent with the policy rationale of the DST. The government remains committed to developing a multilateral solution to the challenges digitalisation has created for the corporate tax system and will repeal the DST once an appropriate global solution is in place. (50)
Intangibles reform – The government will legislate in Finance Bill 2020 to remove the pre-2002 exclusion from the Intangible Fixed Assets (IFA) regime to support UK investment in intellectual property and other intangible assets. This means tax relief for the cost of acquiring corporate intangible assets on or after 1 July 2020 will be provided under a single regime, subject to restrictions to prevent tax avoidance. (28)
Corporate capital loss restriction – As announced at Budget 2018, from 1 April 2020, the government will restrict the proportion of annual capital gains that can be relieved by brought-forward capital losses to 50%. This measure includes an allowance that gives companies unrestricted use of up to £5 million capital or income losses each year, meaning that 99% of companies will be unaffected.92 Following consultation on the detailed design of the rules,93 the government will also exclude certain companies in liquidation from the scope of the restriction. (51)
Review of the UK funds regime – The government will undertake a review of the UK’s funds regime during 2020. This will cover direct and indirect tax, as well as relevant areas of regulation, with a view to considering the case for policy changes. The review will begin with a consultation, to be published at the Budget, on whether there are targeted and merited tax changes that could help to make the UK a more attractive location for companies used by funds to hold assets. The review will also consider the VAT treatment of fund management fees and other aspects of the UK’s funds regime.
Transfer of unlisted securities to connected companies for Stamp Duty and Stamp Duty Reserve Tax – In Finance Act 2018-19, the government introduced a targeted market value rule to prevent artificial reduction of the tax due on share acquisitions when listed shares are transferred to a connected company. This rule is being extended to unlisted shares in Finance Bill 2020 to prevent further tax avoidance. As part of this change, the government will amend legislation to prevent a double tax charge arising on certain company reorganisations. (67)
Consultation on the tax impact of the withdrawal of the London Inter-Bank Offered Rate (LIBOR) – The government will consult to ensure that where tax legislation makes reference to LIBOR it continues to operate effectively. The consultation will also enable the government to ensure it is aware of all the significant tax issues that arise from the reform of LIBOR and other benchmarks.
Consultation on aspects of the hybrid mismatch rules – The government will publish a consultation on the corporation tax rules that apply to hybrid mismatch arrangements that seek to exploit the differences in tax treatment between two jurisdictions. The consultation seeks to ensure that the hybrid mismatch rules work proportionately and as intended.