The Chancellor, George Osborne, delivered his first Budget of the new Parliament today. As well as being the first of this new Parliament, it was also the first Budget of a majority Conservative Government since November 1996.
This is, of course, the second budget of 2015, the first having been delivered in March, before the general election. Perhaps surprisingly for an interim budget, there was quite a lot in it. However, in terms of matters of specific interest to clients of Aiglon Consulting, the following measures are relevant.
R&D Expenditure Credit Claims by Universities and Charities
This is a measure to correct an anomaly that led to unexpected claims for RDEC from universities. It was never the intention of the R&D relief legislation that such bodies should be able to claim the relief. The qualifying conditions for RDEC in s104A CTA 2009 will be amended to ensure it is clear that universities and charities do not qualify.
Of slight concern is he fact that the Treasury will be given the power to further amend the categories of ineligible company by secondary legislation. I really do not like this use of secondary legislation to make important changes.
These proposed changes will apply to expenditure incurred on or after 1 August 2015.
At present, a company that purchases the business and assets (as opposed to the shares) of another company can obtain a deduction for the amortisation of any goodwill that arises on the purchase. This also applies to any customer related intangibles included in the acquisition.
The proposal is that CTA 2009 will be amended to remove the relief for all purchased goodwill and customer related intangibles. This will not apply in relation to acquisitions made before 8 July 2015 (or completed afterwards pursuant to an unconditional obligation entered into before 8 July 2015).
CTA 2009 will also be amended such that debits accruing on the disposal of assets subject to these new rules will be treated as non-trading debits.
Transfers of Intangible Assets Between Related Parties
At present the rules in Chapter 13 of Part 8 to CTA 2009 broadly require that the transfer of an intangible asset between related parties take place at market value. However, if the transfer pricing rules in Chapter 1 of Part 4 to Taxation (International and Other Provisions) Act 2010 (TIOPA) apply, these rules take priority over the market value rule.
The proposed changes will ensure that a market value adjustment can still be made, even where the transfer is subject to the transfer pricing rules in TIOPA. This will ensure that the transfer will always be at not less than market value for tax purposes.
This change will apply to transfers of intangible assets made on or after 8 July 2015.
Annual Investment Allowance (AIA)
The rate of AIA has been bouncing up and down for several years now and it was due to revert to £25,000 with effect from 1 January 2016. The good news is that the AIA will now be permanently increased to £200,000 per annum from 1 January 2016. This may not be as high as many would like but at least it will create a more stable and certain environment.
Corporation Tax Rates
Rates of CT are continuing to fall! From 1 April 2017, the main rate will reduce to 19% and then to 18% from 1 April 2020.