For better or worse? The corporate tax roadmap

As part of the October Budget, the government published a ‘corporate tax roadmap’, outlining a commitment to maintaining corporate tax rates for the duration of this parliament. This provides businesses with welcome certainty going forward, although the existing increased rates of corporation tax introduced in 2023 remain a source of disquiet.
The government’s intention with publishing the corporate tax roadmap is that a stable and predictable tax environment will help to provide the confidence companies need to invest, innovate and grow over the long term.

Main commitment
The government has left itself the option of cutting the main rate of corporation tax should this be necessary to keep the UK’s tax regime competitive. This includes:

• Rate of corporation tax: The main rate will be capped at 25%, with the small profits rate and marginal relief kept at their current rates and thresholds.
• Capital allowances: The system of 100% and 50% first-year allowances on new plant and machinery expenditure will be maintained, as will the £1 million annual investment allowance threshold and the structures and buildings allowance.
• R&D reliefs: The current rates for both the merged research and development (R&D) expenditure credit scheme and enhanced R&D intensive support for small- to medium-sized enterprises (SMEs) will be maintained.
• Loss reliefs: The current loss reliefs for both standalone companies and groups will remain in place.

Potential improvements
The roadmap also highlights areas of corporate tax where the government will explore possible improvements. One particular area of concern is the tax treatment of predevelopment costs. A recent Upper Tribunal decision was that the cost of preliminary studies performed prior to the installation of wind turbines did not qualify for capital allowances.

Not surprisingly, this decision has caused uncertainty for investors and a follow-up consultation will be launched in the coming months. The Upper Tribunal’s decision does not match the government’s aim of encouraging investment in renewable energy.
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The full text of the government’s corporate tax roadmap can be found here.