The Autumn Statement 2022 confirmed that the government will proceed with the introduction of a new top rate of corporation tax of 25% from next April.
From April 2023, the following rates will apply:
- a main rate of 25% payable by companies with profits over £250,000
- a small profits rate of 19% payable by companies with profits of up to £50,000
- companies with profits between £50,000 and £250,000 will pay the main rate, reduced by "marginal relief" - consequently paying tax at a rate between 19% and 25%, with the effective rate gradually increasing as profits approach the main rate threshold
This marks a return to the 'old' system, with multiple rates of corporation tax. The rules around 'associated companies' will also be reintroduced (replacing the 51% group company test) - these rules determine whether a company is large (or very large) for the purposes of the quarterly instalment payment regime.
Key considerations for companies may include the following:
- confirm the number of associated companies under the new rules - check if the company now falls within the quarterly instalment payment regime
- consider whether to take salary or loan interest, rather than dividends, to benefit from enhanced corporation tax savings?
- consider whether to claim capital allowances now to generate tax savings - or disclaim allowances now to save tax at a higher rate next year?
- consider whether to relieve losses now, or carry-forward and relieve in future?
- consider the timing of transactions and the timing of discretionary spend, bearing in mind the effective rates of tax that may apply
Contact us to discuss how this announcement may affect your company.