1. Consortium relief: removal of location of link company requirements
The requirements regarding the location of link companies for the purposes of consortium relief will be removed with effect from 10 December 2014.
A company that is owned by a consortium may surrender losses to another company that is in the same group as a member of the consortium (a link company). Section 133 of the Corporation Tax Act 2010 (section 133) currently provides that a link company must be resident in the UK, a non-UK resident carrying on a trade in the UK or established in the European Economic Area (EEA). Where the link company is established in the EEA, the consortium relief provisions only apply if the link company is a 75% member of the same group of companies as the surrendering company or the claimant company without the involvement of a company that is not established in the EEA. Legislation will be included in the Finance Bill 2015 amending section 133 to remove the location requirements, thereby removing the differences in UK treatment of link companies.
2. Stamp duty on take-overs: prohibition on schemes of arrangement by reduction of share capital
Reductions of share capital as a means of mitigating stamp duty or SDLT on a take-over effected by a scheme of arrangement will be prohibited. Historically, schemes of arrangement have been carried out by cancelling the target’s share capital and issuing new shares to the acquiring company to avoid the stamp duty liability that would arise on a transfer of shares.
The government will, by early 2015, introduce regulations amending section 641 of the Companies Act 2006 to prohibit reductions of share capital in these circumstances.
3. R&D: increased rates, restricted qualifying expenditure and improved process
In relation to research and development (R&D) credits, the government intends to:
i) Increase in the Finance Bill 2015 the rate of:
- the “above the line” credit to 11% from 1 April 2015; and
- the R&D credit for small and medium-sized enterprises (SMEs) to 230% from 1 April 2015.
ii) Exclude in the Finance Bill 2015 the costs of materials incorporated in products that are sold from qualifying expenditure attracting R&D credits from 1 April 2015.
iii) Launch a package of measures to streamline the application process for smaller companies investing in R&D. This is to involve introducing an advance assurance scheme for small businesses making their first claim and developing new guidance for R&D credits. The government intends to launch a consultation on the issues that smaller businesses face when claiming R&D credits in January 2015.
4. Tax relief for contributions to flood defence projects
From 1 January 2015, business contributions to flood and coastal erosion risk management (FCERM) projects will be fully deductible for corporation tax and income tax purposes. Legislation will be included the Finance Bill 2015.