The UK’s autumn budget measures were announced on 22 November 2017. Important measures affecting business are as follows:

R & D Tax Relief

The Research & Development Expenditure Credit (RDEC) rate available to companies claiming under the Large Company R&D scheme is set to rise from 11% to 12% from 1 January 2018. A new advanced clearance service is to be piloted, providing for a pre-filing agreement for three years for RDEC claimed.

Intangible fixed assets

A consultation is being launched in relation to the intangible fixed asset regime. This will consider whether there is a case for targeted changes to the regime to support UK companies investing in intellectual property.

Intangible fixed assets: Licence between related parties

Anti-avoidance provisions treating transfers of intangible fixed assets between related parties as being at market value are being extended to apply to the grant of a licence or other right relating to chargeable intangible assets if the grantor and grantee are related parties.

Withholding tax on royalties

The government is to widen the circumstances in which a royalty payment to non-UK residents is liable to UK income tax. A consultation beginning in December 2017 is to focus on multinational digital businesses paying royalties to low tax jurisdictions in relation to UK sales. The government intends to bring non-UK resident companies within the scope of UK income tax where goods or services are provided to UK customers and a royalty is paid to a company resident in a no/low tax country. The resulting tax changes are likely to take effect from April 2019.

Energy and water saving technologies

The availability of first year tax credits to loss-making companies is extended for another five years up to 31 March 2023. The measure applies to expenditure on assets qualifying for the energy saving and water efficient first year allowance schemes.

Property Income of Non Resident Companies

Following a government consultation income received by non-UK resident companies from UK property is to become chargeable to UK corporation tax, rather than income tax, from April 2020. This would bring non-resident landlord companies within the scope of corporation tax measures such as the corporate interest restriction, restriction on offsetting losses and rules relating to hybrids.

Indexation allowance on chargeable gains

When a company disposes of an asset and there is a chargeable gain, for corporation tax purposes the gain is reduced by an indexation allowance. The budget changes provide that when a company makes a chargeable gain on or after 1 January 2018, the indexation allowance will only be calculated up to 31 December 2017 and there will not be any indexation relief for the part of the gain arising after 1 January 2018.

Taxation of capital gains of non-residents

All property gains by non-residents are to be within the scope of UK taxation from April 2019. The rules will apply to direct disposals of commercial and residential property if not already covered by the residential property CGT rules introduced in 2015; and to indirect disposals through the sale of entities where at least 75% of the entity’s value is from UK land and the non-resident seller holds an interest of at least 25% in the entity in the five years before the disposal. Only gains after April 2019 will fall within the new rules. Measures against ‘treaty shopping’ will be applicable from 22 November 2017.

The existing exemption within the residential property CGT rules for certain widely-held companies will be abolished from April 2019.

Enterprise Investment Scheme (EIS)

With effect from 6 April 2018, the annual limit for investment by an individual investor in the EIS is increased to GBP 2 million, provided that the excess of the amount invested over GBP 1 million is invested in qualifying ‘knowledge-intensive’ companies. A knowledge-intensive company is defined as a company primarily engaged in the creation of intellectual property or employing a high proportion of skilled employees.

The annual limit on the amount of funding that can be raised by a qualifying company through the EIS or the Venture Capital Trust (VCT) regime is increased from GBP 5 million to GBP 10 million.

A new condition is introduced for raising funds under the EIS and VCT legislation, requiring that companies are genuine entrepreneurial companies with the objective of growing and developing (the “risk to capital” condition).

Entrepreneur’s Relief

The UK government is to launch a consultation in relation to how in some situations individuals owning at least 5% of the shares in a trading company can retain entrepreneurs’ relief even after their shareholding is reduced below the 5% threshold for the relief. The government suggests that the relief could remain available on gains accrued up to the date new shares are issued as a result of raising funds for commercial purposes.