Chancellor Rishi Sunak has confirmed plans to raise corporation tax rates to 25% by April 2023.
Sunak put “profitable” businesses in the cross hairs of his initial revenue raising plans to pay for the £407bn cost of Covid support measures.
Corporation tax rates will also be tiered for the first time with firms making an annual profit of £50,000 or less continuing to pay the current 19% rate.
Rates will then be tapered up to £250,000 profits when companies will pay the new 25% rate from 2023.
Sunak said only 10% of firms would pay the new higher rate.
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Treasury documents show that the corporation tax increase is expected to raise between £12bn and £17bn annually from 2023.
The move reverses a decade of corporation tax cuts by previous chancellors and will make the main UK rate on a par with China’s at 25%.
The government will also invest over £100m in a Taxpayer Protection Taskforce of 1,265 HMRC staff to combat fraudulent Covid support package claims.
In better news for business a new “super-deduction” scheme will come into force from 1 April 2021 until 31 March 2023.
Construction companies investing in qualifying new plant and machinery will benefit from a 130% first-year capital allowance.
Sunak said: “Under the existing rules, a construction firm buying £10m of new equipment could reduce their taxable income, in the year they invest, by just £2.6m.
“With the Super Deduction, they can now reduce it by £13m.”
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Rob Oliver CEO of the Construction Equipment Association said: “We look forward to reviewing the details, but on the face of it, it looks like it will be a great time to renew the machine fleets of plant hirers and contractors.
“These tax concessions are clearly a quid pro quo for swallowing a corporation tax hike in the future”.
Paul Hamer, CEO of Sir Robert McAlpine, said: “The planned ‘super deductions’ for businesses investing is good news, and could see innovation accelerate right across the sector as firms commit money to new technologies and sustainable construction solutions.
“The positive ripple effect could be significant and we will be looking closely at how this may benefit our business and future projects.”
Source: Construction Enquirer
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