New tax year: some key changes affecting businesses

Fiona Phillips, tax specialist and partner with Andrew Jackson Solicitors

THE NEW TAX YEAR is here, bringing with it changes that may impact your business. Fiona Phillips, tax specialist and partner with Andrew Jackson Solicitors, has produced a useful overview of some of the tax changes that have been announced or confirmed over the last few months.

Company Share Option Plan (CSOP)

One announcement made in the Autumn 2022 Statement, which survived the change of Chancellor, was amendments to the CSOP rules which have now taken effect from 6 April.

CSOP rules allow employees to acquire shares in their employer company and provided that the price to be paid for the shares is at least the market value of those shares at the date of grant of the option, no income tax or NIC arises.

CSOPs were often seen as less attractive than Enterprise Management Incentive (EMI) share options, due to the restrictions in the scheme. Two major restrictions which were the subject of the 6 April changes are :–

• the limit on the unexercised options that an employee can hold – this has now increased from £30,000 to £60,000 (as measured as the open market value on the date of grant of the options); and
• the restriction regarding the class of shares over which the options are granted has been lifted.

Previously the options could only be granted over shares in a class which were held in the open market (ie not held by employees or directors) or shares that gave employees control of the company, which made it difficult for some companies with multiple share classes – especially family owned companies – to grant CSOP.

These amendments will broaden the reach of the CSOP and could be used if the EMI qualifications are not met (for example, if the company does not carry on an EMI  qualifying trade).

Corporation tax rates

The rise in the rate of corporation tax from 19 % to 25% was first announced when Rishi Sunak was chancellor and although there has been calls for this to be abandoned (and which was announced in the Autumn statement) the increase took effect  from 1 April 2023. In fact, the 19% rate still applies for profits up to £50,000; profits over £250,000 are subject to the 25% rate; and profits between £50,000 and £250,000 are subject to a tapered rate. These rate bands are shared amongst associated companies (companies under the same control) effectively splitting the potential benefit between them. Groups of companies should be reviewing their structures to ensure that maximum use is made of the lower rate band.

Capital Allowances

As the super deduction ended on 31 March 2023 the chancellor was being lobbied to introduce further allowances for capital expenditure. From 1 April 2023, a new programme of first-year capital allowances is available: -

• Full expensing will allow companies to claim 100% of the cost of certain plant and machinery against profits in the year of expenditure, effective from 1 April 2023 to 31 March 2026. This applies to spending on plant and machinery which goes into the capital allowances main pool. This excludes cars and items classed as integral features within buildings, or special rate pool assets such as certain long-life assets.
• Expenditure on integral features or other special rate pool assets will instead qualify for first year allowances at a rate of 50%. This again applies to expenditure incurred between 1 April 2023 and 31 March 2026. The remaining balance of the expenditure will be written off at a rate of 6% per year.

Full expensing and the 50% first year allowance will only apply to companies. Partnerships and trading LLPs, and sole traders, will continue to claim allowances under the present rules.

This is in addition to  the Annual Investment Allowance (“AIA”) which has previously been set at £1m permanently. As the AIA applies to both main pool assets and special rate assets the full expensing and 50% First Year Allowance only apply in effect to companies spending in excess of £1m a year on capital equipment.

However it should be noted that the £1m AIA needs to be shared between companies under common control.

For help and advice on these and other tax issues affecting you or your business, please get in touch with us by emailing fiona.phillips@andrewjackson.co.uk or by calling (01482) 325242