Finance Bill 2012: Corporate Tax overview

Tax advisers are usually hard to please, but draft clauses for the 2012 Finance Bill and other tax updates published by the government on 6 December have been broadly welcomed, reports Nick Huber.

The proposed tax changes, including tax breaks for patent-related profit and a new rule for the taxation of companies’ foreign profits are part of a plan to simplify the tax system, close loopholes and encourage investment in the UK.

Patent Box

The government has published draft legislation for a lower corporation tax rate on profits that can be attributed to patents
The ‘patent box’ tax scheme will allow companies to apply a 10% corporation tax rate on profits that stem from patents. It hopes to encourage pharmaceutical, manufacturing and defence businesses to do more research and development in the UK rather than abroad, creating jobs and boosting economic growth.

The Treasury said that most responses to its June 2011 consultation on a patent box welcomed the proposal, saying that it would improve the competitiveness of the UK corporate tax system for patent income and that it would encourage firms to invest in the UK rather than developing patents offshore.

Continued...

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Draft Clauses in respect of Capital Allowances Claims

plummy1 | | Permalink

ACCOUNTANTS AND SOLICITORS WILL HAVE TO WORK TOGETHER WHEN CLIENTS ARE BUYING AND SELLING COMMERCIAL PROPERTY! 

As well as the above the draft clauses contained proposed regulations for capital allowances claims on commercial property (including furnished holiday lets).

Given the proposals in the original consultation document the draft clauses have come as a bit of a relief to the capital allowances claims industry. The main points of note for our business are that:-

i) For property related expenditure before April 2012 the rules remain as they are presently i.e. it is possible to make a capital allowances claim on a property regardless of when it was purchased. This is subject to the usual restrictions e.g. establishing the previous claims history etc.

ii) What is more interesting perhaps is that from April 2012 onwards when a property is sold it is proposed that there is going to be a statutory need to establish the capital allowances position so that a section 198 election agreement can be drawn up which allocates the share of the these allowances between the parties. The implication being that a sellers solictors and accountants will have to work much more closely together to establish the capital allowances position at the time of sale and where capital allowances have not previously been claimed on a property a capital allowances claim will have to be commissioned through a specialist company. 

iii) From April 2012 there will be a two year period in which if the capital allowances position is not established at the time of sale the buyer will be able to go back to the seller and try to establish the capital allowances position. If agreement is not reached then the case can be taken to a tribunal to make a decision on behalf of the parties.

iv) If the s198 agreement gets missed within this two year period then the right to claim capital allowances on the property will be lost to not only the existing owner but the all subsequent purchasers. 

vii) Even none tax payers such as pension funds will need to establish the capital allowances position on their purchases so that this information is available to buyers on re-sale of the property.

vi) After the two year grace period i.e by April 2014 my understanding is that the need to enter into a section 198 agreement at the time of sale and purchase will become a mandatory requirement.  

John Plumridge

www.curtisplumstone.com