Finance Act 2019: how it will impact your company

The draft Finance Act 2019 contains a number of tax measures affecting business finances but which are most likely to impact your company?

Corporation Tax Rate Fall

For the year beginning 1st April 2019, the corporation tax rate remains at 19% but, as previously announced, it will reduce to 17% for the year beginning 1st April 2020.

Tip: Consider bringing forward any large expenditure projects into the 2019 year to obtain an extra 2% tax relief.

AIA Increase

The big surprise in the Budget 2018 which has been incorporated into the Finance Act 2019 (FA 2019) is the temporary increase in the annual investment allowance (AIA) cap from the current £200,000 to £1m for two years from 1st January 2019. The AIA effectively gives 100% tax relief to qualifying asset purchases (which notably doesn’t include cars).

Tip: If your business doesn’t have a 31st December year end, then you need to be aware of the transitional rules. For accounting periods that straddle 1st January 2019, the current £200,000 and the new £1m allowance must be apportioned on a calendar basis to calculate the maximum qualifying expenditure. 

Example: A business with a 30th June year end will have a total available AIA for the year ending 30th June 2019 of £600,000 (6/12 x £200k + 6/12 x £1m). But the maximum AIA available for expenditure incurred in the period 1 July 2018 to 31 December 2018 will be £200,000.

Tip: Plan the timing of any significant asset purchases to maximise the AIA available.

Group Relief

Group relief for trading losses made by a “UK-related” company can only be used by another UK-related company where a group relief group exists. This is where one is a 75% subsidiary of the other, or both are 75% subsidiaries of another company. The FA 2019 extends the definition of “UK related company” with effect from 5th July 2016 to include any non-UK resident companies within the charge to corporation tax.

Tip: If your company is affected by this change, you need to make the group relief claim by 31st December 2019.

 

The most significant impact is likely to be the increase in AIA from £200,000 to £1m from 1 January 2019. If you have a non-December year end, use our table to work out your maximum AIA.

For more information, we provide a Business Consultation to ensure our clients benefits from tax planning and accounting matters.

Companies999 are Chartered Certified Accountants and Birmingham’s Best Company Formation Agent.

For any assistance contact Companies999, we will be happy to help you!

Budget 2018: How does it affect you?

Leave a Reply

Your email address will not be published. Required fields are marked *