Corporation Tax

The Structures and Buildings Allowances (SBA) allows for tax relief on qualifying capital expenditure on new non-residential structures and buildings. The relief applies to the qualifying costs of building and renovating commercial structures. 

The relief was introduced in October 2018 at an annual capital allowance rate of 2% on a straight-line basis. The annual rate was increased to 3% from April 2020, and the corresponding period reduced to thirty-three and one-third years. 

HMRC’s guidance sets out the process for making a claim. In order to make a valid claim a written allowance statement is required. 

The allowance statement must include:

• information to identify the structure, such as address and description
• the date of the earliest written contract for construction
• the total qualifying costs
• the date that you started using the structure for a non-residential activity

The claimant must also meet the necessary requirements in respect of the building itself and the chargeable period for the claim. 

The start date of the claim is the later of the following two dates:

• the date when you started using the structure for a qualifying activity
• the date that you are due to pay for the structure or construction.

No relief is available where parts of the structure qualify for other allowances, such as plant & machinery allowances.

If a company has stopped trading and has no other income, then the company is usually classed as dormant for Corporation Tax purposes. 
A company is usually dormant for Corporation Tax if it:

• has stopped trading and has no other income, for example investments
• is a new limited company that hasn’t started trading
• is an unincorporated association or club owing less than £100 Corporation Tax
• is a flat management company.

There is a special online form that can be used to advise HMRC if a company is dormant. The form can be found at www.gov.uk/tell-hmrc-your-company-is-dormant-for-corporation-tax. In order to complete the form, you will need the company’s name, 10-digit Unique Taxpayer Reference (UTR) and the date the company ceased trading. 

HMRC can also send a notification if they think a company is dormant. This notice will state that a company or association is dormant and is not required to pay Corporation Tax or file Company Tax Returns.

Limited companies are still required to file annual accounts and a confirmation statement even if the company is dormant for Corporation Tax and dormant according to Companies House. A company defined as 'small' by Companies House can instead file 'dormant accounts' and does not have to include an auditor’s report.

A company can stay dormant indefinitely, however there are costs associated with this option. This might usually be done if for example a company is restructuring its operations or wants to retain use of a company name, brand or trademark.

The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. Businesses in the construction industry are known as 'contractors' and 'subcontractors' and should be aware of the tax implications of the scheme.

Under the scheme, contractors are required to deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

Contractors are defined as those who pay subcontractors for construction work or who spent more than £3m on construction a year in the 12 months since they made their first payment.

Subcontractors do not have to register for the CIS, but contractors must deduct 30% from their payments to unregistered subcontractors. The alternative is to register as a CIS subcontractor where a 20% deduction is taken or to apply for gross payment status whereby the contractor will not make a deduction, and the subcontractor is responsible to pay all their tax and National Insurance at the end of the tax year.

In practice the subcontractor company could apply the off-set rules and must simply reduce their PAYE, NIC, any CIS liabilities and student loan repayments due from company employees or their own subcontractor’s, by the amount of any CIS deductions the subcontractor company made from their payments. 

If in any month or quarter the company’s own CIS deductions are greater than the total liabilities due, the company can set-off the excess against future payments of PAYE, NIC, or CIS liabilities and student loan repayments due in the same tax year.

The subcontractor company must keep a record of the amounts set-off in order to fully complete the form P35 at the end of the tax year.

A new consultation has been published by the UK government seeking views for how a worldwide 15% minimum Corporation Tax should be enforced domestically. This follows more than 130 countries signing up to a new global minimum tax framework in October 2021, after the G7 agreed in principle to this measure during UK’s presidency.

We have also seen publication of the Global Anti-Base Erosion Model Rules (Pillar Two) by the OECD/ G20 on 20 December 2021. This paper states that implementation of these new rules is envisaged by 2023.

This new agreement is expected to ensure large international firms pay at least 15% tax rate on profits in each country in which they operate, helping to tackle avoidance and ensure a more level playing field for UK businesses.

The consultation will run for 12 weeks and seeks views on the application of the global minimum Corporation Tax in the UK, as well as a series of wider implementation matters, including who the rules apply to, transition rules and how firms within scope should report and pay.

The rules for the Corporation Tax treatment of carried forward losses changed from 1 April 2017. The changes increased flexibility to set off carried forward losses against total profits of the same company or another company in a group whilst at the same time introducing new restrictions as to the amount of profits against which carried forward losses can be set.

However, there is a specific restriction in respect of company reconstructions that disallows carried forward losses to a successor company. Broadly speaking, the losses disallowed equate to the amount of the debts the predecessor company is unable to pay.

The restriction is calculated as follows:

1. add up the liabilities, except share capital and reserves, kept by the predecessor,
2. deduct the value of the assets kept by the predecessor,
3. deduct the sale consideration given for the transfer.

If the result is a positive sum, that is the amount of the relevant liabilities restriction. Losses up to and including that amount are then disallowed (any losses in excess of that sum being allowed). If the result is a negative sum, there is no disallowance.