Summer Budget 2015: considerations for restructuring

On 8 July 2015, George Osborne, the Chancellor of the Exchequer, delivered his summer budget - the first budget of the new Conservative government following the general election and the second budget for 2015. He highlighted the UK's strong economic growth, but stressed the need to build business confidence. For UK corporates, it is a balancing act as set out below:

An increasingly stable environment

  • A surprise announcement of a cut in corporation tax rates signals that Britain is keen to remain competitive internationally. 
  • Assurances that VAT, income tax and corporation tax rates will not increase should provide business with stability during the term of this government. 

Broadened tax base and accelerated payment of tax

The announcements above are balanced by measures that will broaden the corporate tax base and accelerate the payment of corporation tax in some cases. 

  • From Budget Day, tax relief for amortisation of purchased goodwill has been withdrawn.  This has been a valuable relief and will result in an increased tax cost. 
  • From 2017, large groups (with taxable profits of £20m or more) will pay 50% of their corporation tax bill 6 months earlier i.e. before the accounting year end.  Currently this is due in equal installment payments after the year end. 
  • UK corporates with Controlled Foreign Companies (CFCs) (overseas companies in low tax jurisdictions or tax havens) which will have to pay UK corporation tax on the CFC profits. This is regardless of the fact that the UK corporate may be loss making or have brought forward tax losses.  See below for more details. 

For businesses that may currently be considering restructuring options, it will be important to factor the impact of these changes into cash flow projections. 

Making it easier to restructure debt

Before the general election, HMRC had announced additional measures to facilitate debt restructuring in distress situations without tax cost.   These measures are now to be included in the next finance bill and could potentially come into force from when the bill is given Royal assent towards the end of this year.  These new rules could be helpful when restructuring debt…whether they apply will require judgement depending on the relevant facts and circumstances. 

Most of the budget announcements included little technical detail on the changes themselves. A finance bill containing draft legislation for many of the measures announced will be published on 15 July 2015.

In the meantime, please visit our Budget website for a full summary of the budget, including videos and infographics.

Alternatively, if you would like to discuss the topic above in further detail feel free to schedule a meeting to discuss your situation in confidence.

Jay Marwa | Director
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Manoj Luhar | Tax Senior Manager
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