Author: Glenn

Companies developing artificial intelligence (AI) to improve safety on construction sites, reduce time spent repairing the railways and cut emissions across supply chains are amongst a number of projects set to receive a share of £32 million in UK Government funding.

Announced 7 August 2024, almost 100 ground-breaking projects have been awarded financial backing as the government continues its mission to boost productivity and kickstart growth across the economy through AI, so everyone is better off.

A total of 98 projects from Southampton to Birmingham and Northern Ireland will receive funding, involving more than 200 businesses and research organisations spanning a range of sectors including public services, driving efficiencies and reducing administrative tasks.

As part of the government’s mission to build an NHS which is fit for the future, pharmacies that deliver prescriptions across the country are also set to benefit from this new financial support. A project led by Nottingham-based Anteam will see them collaborating with retailers and the NHS to improve the efficiency of their deliveries using AI algorithms. This technology will match the delivery needs of retailers and hospitals to existing delivery journeys, unlocking under-utilised capacity, cutting carbon emissions and delivering a better experience for patients.

It was announced as part of the Spring Budget measures that the present favourable tax benefits presently allowed for the letting of properties as short-term holiday lets – known as the furnished holiday lettings (FHL) tax regime – is to be abolished from April 2025. The Labour government has confirmed that these changes will take effect as planned.

HMRC has now published a policy paper providing further details of how these changes will work in practice.

The policy paper states that the changes will remove the tax advantages that current furnished holiday let landlords have received over other property businesses in four key areas by:

• applying the finance cost restriction rules so that loan interest will be restricted to basic rate for Income Tax;
• removing capital allowances rules for new expenditure and allowing replacement of domestic items relief;
• withdrawing access to reliefs from taxes on chargeable gains for trading business assets; and
• no longer including this income within relevant UK earnings when calculating maximum pension relief.

After repeal, former FHL properties will form part of the person’s UK or overseas property business and be subject to the same rules as non-furnished holiday let property businesses.

There is also an anti-forestalling rule that prevents the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules. This rule applies from 6 March 2024.

The loss of the special tax regime for holiday lets is expected to have a significant effect on many of those involved with the short-term holiday rental business in the UK.

When a limited company makes charitable donations specific rules apply. These may include Corporation Tax relief for donations to registered charities or community amateur sports clubs (CASC), as well as capital allowances for equipment donated that has been used by the company.

However, the rules are different if the company is given something in return for making a donation, such as tickets for an event.

These rules apply to benefits given to any person or company connected with your company, including close relatives.

Charity sponsorship payments are different from donations because the company gets something related to the business in return. A company can deduct sponsorship payments from its business profits before it pays tax by treating them as business expenses. 

Payments qualify as business expenses if the charity:

• publicly supports the company's goods or services;
• allows the company to use their logo in company’s printed material;
• permits the company to sell their goods or services at the charity's events or premises; and/or
• has links from their website to the company's website.

Goodwill is a concept frequently discussed, and yet it is seldom addressed in legislation. Typically, it is defined as the additional value of a business beyond its tangible assets.

In the vast majority of cases, when a business is sold, a significant proportion of the sale price will be for intangible assets including goodwill. Essentially, this involves assigning a monetary value to the business’s reputation and customer relationships. Or as HMRC say in their guidance, in accounting terms, purchased goodwill is the balancing figure between the purchase price of a business and the net value of the assets acquired. Valuing goodwill is complex and there are many different methods which can be used and that vary from industry to industry.

Businesses may qualify for Corporation Tax relief on purchases of goodwill made on or after 1 April 2019 if the:

• goodwill and relevant assets are purchased when you buy a business with qualifying intellectual property (IP);
• business is liable to Corporation Tax; and
• relevant assets (including goodwill) are included in the company accounts.

If relief is available, it is at a fixed rate of 6.5% a year on the lower of the cost of the relevant asset or 6 times the cost of any qualifying IP assets in the business purchased. Relief is given yearly until the limit is reached and a claim is made using the Company Tax Return.

A higher rate of CGT applies to gains on the disposal of residential property (apart from a principal private residence). In the Spring Budget 2024, the Chancellor announced a reduction in the higher rate that exists for residential property to 24% (from 28%) from 6 April 2024. These rates apply to higher rate taxpayers as well as to trustees and personal representatives. The lower rate that applies to basic rate taxpayers remain unchanged at 18% in the current 2024-25 tax year.

Most people are aware that they do not usually have to pay CGT when they sell their qualifying residential property used wholly as a main family residence. However other sales of property that are not a principle private residence (PPR) will be subject to CGT.

This includes:

• buy-to-let properties
• business premises
• land
• inherited property

The deadline for paying any CGT due on the sale of a residential property is 60 days. This means that a CGT return needs to be completed and a payment on account of any CGT due should be made within 60 days of the completion of the transaction. This applies to UK residents selling UK residential property where CGT is due. There are various reliefs available from CGT for the sale of qualifying business assets.