Phil co-founded The Consultancy Group in 2015. He provides expertise in placing senior finance professionals into FTSE Listed businesses through to fast-growth SMEs. Typical roles include CFO, Finance Director, Group / Divisional Financial Controllers, Head of Finance, FP&A Director and Commercial Finance leaders.
The past quarter has seen several tax changes aimed at addressing fiscal challenges and fostering business innovation. Here’s a roundup of the key updates that could influence your company’s tax planning.
Corporate Tax Hike – April 2024 Implementation
TLDR: The UK’s corporate tax rate increased from 19% to 25% in April 2024, affecting businesses with profits over £250,000. This change is part of the government’s plan to raise revenue amidst inflationary pressures and the ongoing cost-of-living crisis. Companies with profits under £50,000 will remain at the 19% rate.
Our POV: Larger businesses will need to review and adjust their tax strategies to mitigate the effects of this increase. By optimising capital allowances, leveraging R&D tax credits, and considering income deferral strategies, businesses can reduce their overall tax burden.
Moving Forward: Tax professionals should help their organisations reassess financial models and identify areas where tax-efficient investments and reliefs, such as enhanced R&D credits or capital allowances, could be maximised to counterbalance this rise.
Source: HMRC, PwC Analysis
R&D Tax Relief Reform
TLDR: In June 2024, the government introduced changes to the R&D tax credit scheme. The PAYE cap was reinforced to limit abuse, while the R&D Expenditure Credit (RDEC) increased from 13% to 15%, offering more generous relief for larger companies undertaking genuine R&D.
Our POV: While these reforms benefit larger businesses, SMEs face increased scrutiny. Companies will need to provide more comprehensive documentation to substantiate their claims and prove that their R&D activities align with HMRC’s criteria for innovation.
Moving Forward: Tax professionals should ensure their organisations’ R&D projects are properly documented and structured to meet compliance standards. It’s important to conduct regular reviews of ongoing R&D activities to ensure that all potential claims are accurate and robustly supported.
Source: KPMG, HMRC
Green Taxation Updates
TLDR: The government introduced new environmental taxes, including the Plastic Packaging Tax and expanded carbon taxes, as part of its net-zero goals by 2050. Companies producing or importing over 10 tonnes of plastic packaging will face a tax of £200 per tonne unless they use 30% recycled material.
Our POV: Businesses, particularly those in packaging-heavy industries, should prioritise sustainable practices to mitigate the impact of these taxes. As environmental regulations tighten, integrating greener practices not only helps reduce tax liabilities but also aligns with broader corporate sustainability goals.
Moving Forward: Tax professionals should lead efforts to assess their company’s carbon footprint and supply chain efficiency. Engaging in green tax planning, such as investing in sustainable technologies or exploring tax relief for eco-friendly projects, can significantly reduce exposure to these levies.
Source: Deloitte, HMRC
Autumn Budget Preview
TLDR: The upcoming Autumn Budget, scheduled for October 2024, is expected to address current market challenges. Speculation surrounds potential changes to Capital Gains Tax and VAT thresholds, with discussions of additional windfall taxes on energy companies due to their record profits.
Our POV: Tax professionals in energy and finance sectors should be particularly alert to these potential tax rate hikes. Preparing for possible changes by reviewing your company’s tax exposure and identifying opportunities for early tax planning can help mitigate future impacts.
Moving Forward: Stay ahead by monitoring developments and pre-budget leaks. Begin reviewing your company’s tax strategy now to identify vulnerabilities and opportunities for optimisation before the Budget announcements.
Source: EY, Treasury Reports
By staying informed and adopting proactive strategies, tax professionals can help their organisations navigate these changes and ensure tax efficiency amidst evolving fiscal policies.
