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This analysis is part of the Lexis®PSL Tax team’s summary of the Autumn Budget 2017. Some of the links require a LexisPSL subscription. If you are not a subscriber, you can take a free trial here.
Corporate capital gains indexation allowance
The government has announced that indexation allowance (see Practice Note: How is a capital gain calculated? — Indexation allowance for companies), which has been available to reduce the chargeable gains of companies on account of inflation, will be frozen from 1 January 2018. Any disposal on or after that date will be entitled only to the indexation allowance that would be due based on the RPI for December 2017.
The removal of this relief is designed to bring the UK into line with other major economies and broaden the tax base. Legislation will be included in FB 2018.
See: Autumn Budget 2017 (para 3.31), OOTLAR (para 1.31) and TIIN: Corporation Tax: removal of capital gains indexation allowance from 1 January 2018.
Increasing the rate of the R&D expenditure credit
FB 2018 will include legislation increasing the rate of the R&D expenditure credit (see Practice Note: R&D expenditure credit) from 11% to 12%. The increase will take effect in respect of expenditure incurred on or after 1 January 2018.
See: Autumn Budget 2017 (paras 3.26 and 4.18), OOTLAR (para 1.26) and TIIN: Corporation Tax: increasing the rate of Research and Development expenditure credit.
Capital gains depreciatory transactions
The government has announced that FB 2018 will contain provisions removing the six-year time limit that currently limits the scope of the depreciatory transaction rules (see Practice Note: Depreciatory transactions and dividend stripping).
Currently, where a company claims a capital loss on the disposal of shares or securities in a subsidiary, it is required to adjust its calculation for any depreciatory transactions that materially reduced the value of those shares or securities within the six years prior to the disposal. The change will remove the
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