On 19 March 2020 the UK introduced the Finance Bill 2020 into parliament. In addition to implementing the changes to rates and allowances included in the budget announcements the Bill introduces the digital services tax. The measures in the Finance Bill include the following:

Corporate tax rate

The corporate tax rate remains at 19%.

Digital services tax

The digital services tax applicable from 1 April 2020 applies to groups providing social media services, internet search engines or online marketplaces. The 2% tax is to be charged on the group revenues derived from UK users of those digital services. The effective rate of tax could be reduced in certain cases where the UK operating margin from the relevant activities is low.

The tax applies to groups earning at least GBP 500 million of revenue from these digital services activities that includes at least GBP 25 million from UK users of the services, regardless of the location of the service provider.

Structures and Buildings Allowances

The Finance Bill includes an increase in the structures and buildings allowance (SBA) from 2% to 3% of qualifying expenditure incurred on non-residential structures and buildings or after 29 October 2018. The increase is effective from 1 April 2020 for corporation tax and 6 April 2020 for income tax.

Research and Expenditure Credit

The rate of Research and Expenditure Development Credit rises from 12% to 13% for qualifying expenditure incurred by companies on or after 1 April 2020.

Intangible Fixed Assets Regime

The Finance Bill amends the Intangible Fixed Assets regime to bring pre-Finance Act 2002 assets into the regime if acquired from related parties on or after 1 July 2020.

Capital Losses

The amount of chargeable capital gains that may be relieved by capital losses brought forward from previous periods is restricted to 50% with effect from 1 April 2020.

Employment Allowance

The employment allowance, a deduction from the employers’ national insurance payments, is increased from GBP 3,000 to GBP 4,000.

Tax Owed to HMRC in Insolvencies

With effect from 1 December 2020 HMRC will be given priority in relation to debts relating to VAT and some other debts an insolvency. These HMRC debts will be in a new category of secondary preferential creditor. This applies generally to taxes that are collected and held by businesses for other taxpayers, including VAT, PAYE income tax, employee national insurance contributions, construction industry scheme tax deducted and student loan deductions.