Budget announcements impacting the Creative, Media and Technology sector

Corporation Tax

• As announced in the Conservative manifesto, the UK corporation tax rate will not reduce to 17% from 1 April 2020, as previously legislated, but will instead remain at 19%. Consideration will also need to be given to the rate at which deferred tax is now recognised.

• The rate of the Research and Development (R&D) expenditure credit will increase from 12% to 13% from 1 April 2020 for large companies and those undertaking subsidised expenditure. The SME rate of R&D tax credits is unchanged.

• A consultation on R&D tax credit qualifying costs will be undertaken on whether data and cloud computing costs should qualify for R&D tax credits – a point haysmacintyre raised with HMRC during a technical consultation four years ago.

• The rate of the Research and Development (R&D) expenditure credit will increase from 12% to 13% from 1 April 2020 for large companies and those undertaking subsidised expenditure. The SME rate of R&D tax credits is unchanged.

• Following a consultation last year, the introduction of the PAYE cap on the payable tax credit in the SME R&D schemes will be delayed until 1 April 2021. From HMRC’s narrative on the subject this suggests that it will be more targeted against preventing abusive claims to R&D relief rather than a blanket cap. Linked to the above, if the categories of qualifying R&D expenditure are widened to cover more non-salary expenses then any cap will need to accommodate this.

• The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3% with effect from 1 April 2020 for corporation tax and from 6 April 2020 for income tax.

• The government will undertake a review of the Enterprise Management Incentive (EMI) scheme. In HMRC’s words this will be undertaken to ensure that the scheme continues to provide support for high-growth companies to recruit and retain the best talent, rather than any suggestion that the scheme will be scrapped. Indeed, the budget policy decisions paper suggests that the scheme may be widened to cover other businesses which do not qualify for the scheme; this may be of benefit to some Fintech companies which would not qualify under the current rules.

• The government will lead a major review into the Fintech sector to identify what more industry and government can do to support growth and competitiveness. Funding will also be extended for the Fintech Delivery Panel, as well as touring the UK to showcase its diverse range of Fintech firms.

• The government will undertake a consultation on measures to bring certain cryptoassets into the scope of financial promotions regulation, in order to protect consumers and support innovation in cryptoassets

• Although not an announcement, we confirm that the proposed changes to off-payroll working (IR35) will take place as planned from 1 April 2020 for large and medium sized private companies.

Personal Tax

• As expected, Entrepreneurs Relief will undergo further changes. The relief (which offers a reduced 10% rate of Capital Gains Tax on qualifying disposals) will remain in place, however, the lifetime limit for gains eligible for the relief will reduce from £10m to £1m effective from 11 March 2020.

• Currently each individual has a pension annual allowance, being the maximum amount of tax relieved pension savings per year, of £40,000 per annum. For those with higher income there is a tapering of the annual allowance in which this is reduced by £1 for every £2 their adjusted income exceeds £150,000. Once their income exceeds £210,000 the annual allowance is tapered to the minimum annual allowance of £10,000. From the 2020/21 tax year the threshold will be increasing meaning individuals will not be subject to the tapering of their annual allowance until their adjusted income is in excess of £240,000 (a £90,000 increase!). There is, however, also a change to the minimum annual allowance in which from 2020/21 tax year it can be tapered down to £4,000.

• As released earlier, the final deemed occupation period of 18 months, in respect of Private Residence Relief, will be reducing to 9 months from 6 April 2020.

• From the 2020/21 tax year, the national insurance class 1 primary threshold and class 4 lower profits limited will increase from £8,632 to £9,500 resulting in a saving of circa £80 and £100 respectively.

• From 6 April 2020, employer’s who have a national insurance bill below £100,000 will see their entitlement to the employment allowance increase from £3,000 to £4,000.