Corporation Tax changes from April 2014
From 1 April 2014 the main Corporation Tax rate for companies with profits in excess of £1.5 million was reduced to 21% (from 23%). The small companies rate remained at 20%. The small companies rate applies to companies that have taxable profits of less than £300,000 and have no associated companies. Where a company has profits between £300,000 and £1.5 million a marginal rate of tax applies.
The main CT rate will drop by a further one percent to 20% from 1 April 2015. This reduction will therefore see the unification of the main Corporation Tax rate and the small companies rate from the same date. The introduction of a unified rate will remove the requirement to determine which rate of CT a company should be paying and should make the CT system more straightforward. There will also be an ongoing administrative burden saving for those companies which previously made a claim to marginal relief.
The Annual Investment Allowance (AIA) is available to all businesses regardless of size. This AIA allows businesses to write off 100% of the cost of qualifying P&M, up to the allowed maximum, against taxable profits. In a welcome move the Chancellor announced the doubling of the amount that can be invested in qualifying assets from £250,000 to £500,000. The increase came into effect from 6 April 2014 for unincorporated businesses and 1 April 2014 for companies. There are transitional rules for businesses whose accounting periods span the operative date of the changes.