In January this year, the United Kingdom goes down in history as the first country to formally leave the European Union. At that time, the Anglo-Saxon state became the focus of many people. However, this will not be the last time …
On March 3rd,The Finance Bill for 2021Once again, the country was again the talk of many prosecutors. Well, the UK is back in adopting an exciting set of measures.
However, with their expected entry into force in the summer, it is recommended that all people and companies with business in the UK spend time analyzing and studying the new measures.
- Increase corporate tax
Until date, The UK corporate tax rate is 19%. Thus it falls in the lower range of nominal rates in Europe if we do not take into account the “beautiful girls of the tax, such as Ireland, Luxembourg, Switzerland and Hungary”.
With the entry into force of the new tax measures, the nominal corporate tax rate is expected to increase by up to 25%. The aforementioned increase will be effective from April 2023 and only for companies with profits exceeding £ 250,000. Well, those companies whose profits are less than £ 50,000 will still be taxed at 19%. While intermediate businesses (i.e. those earning between £ 50,000 and £ 250,000), a tiered rate will apply.
Although it is a measure that seeks to increase the state’s collection to return public finances to its right track without the need to punish citizens with an increase in income tax or value added tax. I wonder if this measure, however, will penalize and discourage investment in the country by companies already in the UK or future companies.
Here’s the million-dollar question – I open up the debate: Do companies always have to be affected by a tax increase to raise more money? Is this really the only way for a country to increase its coffers, or is it perhaps the easiest procedure?
- Extension “Losses carry over“
A somewhat strange procedure, in effect in many European countries but, nevertheless, not present in Spain.
It consists of the ability to offset losses with benefits not only in future years (i.e. known as – “Nol has been deported”), But also with the benefits from years past.
Currently, in the United Kingdom, the cumulative losses can be applied as a maximum against the gains of the previous year. Now, with the new measures coming into effect, and partly due to the devastating consequences of COVID, up to 2 million pounds of losses accumulated annually will be allowed to be used temporarily to offset profits for up to 3 years before.
This is a measure that can only be applied to losses generated between April 2020 and March 2022. Although it may sound like a major concession, in reality, you have to look at it on a case-by-case basis and weigh the merits. The downsides to doing so. Well, at the moment of truth, it depends on which companies carry out such a procedure that is not only nearly impossible, but sometimes they have more drawbacks than benefits.
- End of the “European Directive on Interest and Fees”
If it was previously known to be a result of Brexit, the safest thing is that the UK will not be able to benefit from European directives. Now, withFinance billWell, it has included the regulations set for the repeal of the European Directive on Interest and the laws formally.
As a result, from June 2021, we will have to worry again about the deduction that we have to apply to benefits and royalties, and we will have to return to the arduous study of international treaties.
- reevaluation DependentResearch and development tax credits
In the United Kingdom there are two types of tax exemptions in relation to research and development activities. One of them applies to small and medium enterprises, whose main benefit is that they can convert tax credit into cash. And another, that applies to large companies, with various ramifications.
In this sense, the announced new measures will have a direct impact on these schemes, which, among the most secure, will be seriously questioned by all companies – among other things, the most relevant are:
- The cash that small businesses applying this credit can ask for will be limited; s
- Certain types of costs deemed eligible for tax credit will be limited, in order to include other expenses related to more sophisticated sectors (such as expenses Zipper).
Again, the measures that make us question whether or not you are really trying to stimulate business.
- New creation “Super discount
Firms that invest in certain commodities (such as machinery) between April 2021 and March 2023 may apply.High consumptionUp to 130% in the first year.
Although it is a succulent measure that can somewhat ensure that the UK remains a good location for investment, I fear that the length of time of the procedure and the fact that initially it will only be applied by companies that generate profits make this novelty decaffeinated to an extent. What. More if one takes into account that it is not sufficient to offset the negative impact of the increase in the corporate tax rate.
As I mentioned in my previous post about Brexit, I have had a special relationship with the UK for a long time. For me, the country has always been an example to follow. A perfect blend of history and development, being one of the oldest democracies in Europe, but at the same time, being one of the most developed, leading and most attractive countries in the region.
Now, after the “failed Brexit” and the “cold stream of tax news”, I wonder if the UK can continue to lead or if so, these events will be a disincentive for business in the future. Time will tell.
Note to the reader: The opinion expressed in this publication is exclusive to its author, and in no way can it be attributed or attributed to any person or entity in his professional environment.