Corporation Tax Consultants

Business Tax. Corporation Tax. UK Taxes. Reliefs and Changes. UK Autumn Budget

Today, 30^th October 2024, the Chancellor of the Exchequer, Rachel Reeves, delivered the UK Autumn Budget.  She announced the publication of the Corporation Tax Roadmap.  In it, she confirmed that there would be no change to the current corporation tax rate, which is capped at 25%, until 31^st March 2027.  The Small Profits Rate and marginal relief will remain at their current rates and thresholds.  No changes will be made to other business tax areas including:

1. The current Patent Box and Intangible Assets Regime which will be maintained.

2. The Audio-Visual Expenditure Credit will be maintained.  The Video Game Expenditure Credit will also be retained.

3. With regard to Capital Allowances, full expensing for plant and machinery expenditure will be retained.  The £1 million Annual Investment Allowance will also be maintained.

4. 100% first year allowances for qualifying expenditure on zero-emission cars and electric vehicle charge points will be extended to 31^st March 2026.

5. In relation to R&D Reliefs, the current rates for the merged R&D Expenditure Credit Scheme as well as the Enhanced Support for R&D Intensive SMEs will be kept.

6. Support to the global taxation agreements under Pillar 1 and Pillar 2 will continue.

Business Tax Changes

• The Pillar Two Undertaxed Profits Rule will be introduced into law and will take effect from 31st December 2024.

• The Government have introduced changes to the taxation of Employee Ownership Trusts and Employee Benefit Trusts which will take effect from 30^th October 2024.

• For 2025/26, Retail, Hospitality and Leisure businesses will be given 40% relief on their business rates. The maximum amount available in relief each billing year is £110,000 per business.

• From 6^th April 2025, the special tax rules for Furnished Holiday Lets will be abolished. Individuals, corporates, and trusts who operate or sell furnished holiday lettings accommodation will be affected.

• Employer National Insurance contributions will increase to 15.0% from 6^th April 2025. The secondary threshold will be reduced to £5,000 per year, the Employment Allowance will be increased to £10,500 per annum while the £100,000 threshold will be removed.

• There will be further consultation on Transfer Pricing.

• Changes to the treatment of carried interest. From April 2025, the CGT rate applicable to carried interest will increase to 32%.

Anti-Avoidance Legislation

The Government have introduced new Anti-Avoidance legislation in respect to loans to participators.  From 30^th October 2024, these reforms will prevent shareholders from extracting untaxed funds from Close Companies. This new legislation is being introduced to prevent loans which are repaid and then reborrowed from associated companies from avoiding the s455 charge.

Also, from 30^th October 2024, the way in which capital gains are taxed when a Limited Liability Partnership is liquidated has been amended. It relates to situations where assets are disposed of to (i) a contributing member, (ii) a connected company or (iii) any other connected person.  The chargeable gain accruing to the contributing member will be computed as if the gain had arisen at the time they initially contributed the asset to the Limited Liability Partnership.

For further information, please click:

https://www.gov.uk/government/collections/autumn-budget-2024-tax-related-documents

For all your Irish, UK or cross-border business tax concerns, please contact us on queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

If you intend to set up a new company in Ireland in 2017, please be aware that you must register with the Irish Revenue Authorities.  Registration must be within thirty days of incorporation.  This can be done by completing the relevant sections of a TR2 Form:

http://www.revenue.ie/en/tax/vat/forms/formtr2.pdf

http://www.revenue.ie/en/tax/vat/forms/formtr2-nonresident.pdf

What information is required to register?

1. Your CRO Number – For further information you should contact the Companies Registration Office https://www.cro.ie

2. The company’s year-end.

3. The company’s trading activities.

4. The name of the company, its registered office address and the address of its principal place of business.

5. The name of the Company Secretary.

6. Details of Directors and the main shareholders of the company including their Personal Public Service (PPS) numbers.

Who must file a Form 11F CRO?

Every company which is incorporated in Ireland regardless of its residency.  This includes a foreign incorporated company commencing to carry on a trade or profession in Ireland

To file a Form 11F CRO please click: www.revenue.ie/en/tax/it/forms/11fcro.pdf

It must be filed, with the Irish Revenue Commissioners, within thirty days of commencing to trade.

Are there any additional information required?

Under Section 882(2) TCA 1997 where the company is incorporated but not tax resident in Ireland, the following is required:

1. The country in which the company is resident;

2. The name and address of the company which is trading in Ireland if the Trading Exemption in Section 23A(3) applies.

3. The names and addresses of the beneficial shareholders if the Treaty Exemption under Section 23A(2) applies. If, however, the company is controlled by a company whose shares are traded on a stock exchange in an EU or DTA country then the registered office of that company will be required.

How will the company be taxed?

If your company is deemed to be tax resident in Ireland then it will be liable to tax on its worldwide income/profits in Ireland.  In other words,  not just the profits generated in Ireland.

If it is not deemed to be Irish tax resident, then it will only be liable to Irish tax on Irish source or generated income/profits.

How can you determine the residence of your company?

The first question to ask yourself is how to determine the residence of the company.  The 2014 Finance Act, came into effect on 1st January 2015.  It amended the corporate tax residence rules contained in Section 23A TCA 1997.  The aim was to address concerns about the “double Irish” structure.

How can the legislation be summaried?

• A company incorporated in Ireland will be deemed to be Irish tax resident.

• However, to ensure it complies with how company residence is dealt with in the Double Taxation Agreements, there is an exception to this rule.

• The exception states that if, under the provisions of a Double Taxation Agreement, the Irish incorporated company is deemed to be tax resident in another jurisdiction then that company will not, in fact, be considered to be Irish tax resident.

• A company which was not incorporated in Ireland but is managed and controlled in Ireland will not be prevented from being taxed as an Irish tax resident company according to the amendments to Finance Act 2014.

Are there specific rules for companies incorporated in Ireland before 1st January 2015?

The new provisions apply only from the earlier of the following dates:

a) 1st January 2021 or

b) The date of “change” which takes place after 1st January 2015.

What is meant by the term “change”?

By “change” we mean where there is both:

(a) a change in ownership of the company and

(b) a major change in the nature or conduct of the business activities of the company.

Is there a time span for this change to have taken place?

Within one year before the date of the change or on 1st January 2015, whichever is the later date, and ending five years after that date.

What does this really mean?

It means that companies incorporated in Ireland before 1st January 2015 can use the previous company tax residence legislation until 31st December 2020.

It is essential that up to 31st December 2020, all corporate groups take into consideration the impact of the new legislative provisions on any proposed reorganisations, mergers or acquisitions where there would be:

(a) a change in the ownership and

(b) a change in the nature/conduct of the business in relation to non-resident companies which were incorporated in Ireland.

Tax Rates in Ireland

• Trading Income is taxed at 12½%

• Investment Income including Deposit Interest, Interest on Securities and Rental Income is taxed at 25%.

• Dividends or distributions paid by one Irish resident company to another Irish resident company are known as Franked Investment Income and are not liable to Irish Corporation Tax in the hands of the recipient.

• Foreign Dividends received by Irish resident companies will be subject to Irish corporation tax at 25% in most cases. However, tax at the 12½% rate will apply on dividends received from EU subsidiaries where certain conditions are met under 21B TCA 1997.

• Companies are subject to Corporation Tax on their chargeable gains. The relevant rate of Capital Gains Tax is 33% which is applied to the gain which is then adjusted to an amount which would give the same tax liability using the 12½% Corporation Tax rate. The tax adjusted chargeable gain is the figure to be included in your Corporation Tax calculation.

If you are a Company Director or a Business Owner looking to incorporate, and are looking for up-to-date tax advice or compliance services, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.