Tag Archives: National Minimum Wage (NMW)

Newsletter – September 2021

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Enews – September 2021

In this month’s Enews we consider HMRC’s changes to late payment penalties; the consultation on how digital marketplaces should collect and share information; and warnings over stamp duty refund claims.

With guidance on digital tax scams, national minimum wage penalties and the latest advisory fuel rates, there is a lot to update you on.

HMRC outlines changes to late payment penalty regime

HMRC has published a policy paper outlining the forthcoming changes to the penalties for late payment and interest harmonisation for taxpayers.

The government intends to reform sanctions for late submission and late payments to make them ‘fairer and more consistent across taxes’. Initially the changes will apply to VAT and Income Tax Self Assessment (ITSA).

The changes will see interest charges and repayment interest harmonised to bring VAT in line with other tax regimes, including ITSA.

Under the new regime, there are two late payment penalties that may apply: a first penalty and then an additional or second penalty, with an annualised penalty rate. All taxpayers, regardless of the tax regime, have a legal obligation to pay their tax by the due date for that tax. The taxpayer will not incur a penalty if the outstanding tax is paid within the first 15 days after the due date. If tax remains unpaid after day 15, the taxpayer incurs the first penalty.

This penalty is set at 2% of the tax outstanding after day 15.

If any of the tax is still unpaid after day 30 the penalty will be calculated at 2% of the tax outstanding after day 15 plus 2% of the tax outstanding after day 30. If tax remains unpaid on day 31 the taxpayer will begin to incur an additional penalty on the tax remaining outstanding. This will accrue at 4% per annum.

HMRC will offer taxpayers the option of requesting a Time To Pay arrangement which will enable a taxpayer to stop a penalty from accruing by approaching HMRC and agreeing a schedule for paying their outstanding tax.

For VAT taxpayers, the reforms take effect from VAT periods starting on or after 1 April 2022. The changes will take effect for taxpayers in ITSA from accounting periods beginning on or after 6 April 2023 for those with business or property income over £10,000 per year (that is, taxpayers who are required to submit digital quarterly updates through Making Tax Digital for ITSA).

For all other ITSA taxpayers, the reforms will take effect from accounting periods beginning on or after 6 April 2024.

Internet link: GOV.UK

Digital marketplaces to report sellers’ incomes from 2023

HMRC has published a consultation that outlines plans to implement reporting rules for digital platforms first put forward by the Organisation for Economic Co-operation and Development (OECD).

In February 2020, the OECD consulted on proposed rules setting out how digital platforms should collect information about the income of sellers and report it to tax authorities.

Under the new rules, websites and applications based in the UK will be required to report sellers’ income arising in the previous calendar year to HMRC. The reporting deadline will be 31 January of the year following the calendar year.

HMRC stated that the new rules will improve international co-operation in regard to the exchange of information for tax purposes. They will also allow HMRC to access data from platforms based outside the UK quickly and efficiently, which should encourage compliance and increase the visibility of transactions.

The rules will also help taxpayers to get their tax right and will assist HMRC in detecting and tackling tax non-compliance.

HMRC’s consultation will close on 22 October 2021.

Internet links: GOV.UK

CIOT warns over stamp duty refund claims

The CIOT has warned that some claims being made by firms offering help with Stamp Duty Land Tax (SDLT) refunds are too good to be true.

The CIOT says an increasing number of firms are contacting buyers of properties after completion of a purchase, suggesting that SDLT has been overpaid.

The most common issues raised are that multiple-dwellings relief (MDR) has not been claimed or that the buyer could have paid non-residential rates of SDLT (which are generally lower than residential rates) because the property was a mixture of residential and non-residential land.

The CIOT said:

‘SDLT is complicated and sometimes reliefs are overlooked, so it can be worth revisiting transactions if a letter is received.

‘However, many unsolicited approaches are indeed too good to be true and responsible taxpayers should act with caution and check independently whether a refund is due.

‘The suggested fee arrangements can also seem attractive as it appears that the claims are made on a ‘no win no fee’ basis. But it is important to remember that receiving a refund is not necessarily a win as HMRC may revisit the claim and deny that it was valid. In these circumstances, the fee may already have been paid.’

Internet link: CIOT website

Contactless limit to increase to £100 from 15 October

The national roll-out of the new £100 spending limit for contactless card payments will begin from 15 October 2021, banking trade body UK Finance has confirmed.

The decision to raise the contactless limit from £45 to £100 was made by HM Treasury and the Financial Conduct Authority (FCA) following a public consultation and discussions with both the retail and banking sectors. It follows on from the successful increase in the limit from £30 to £45 in April 2020.

From 15 October 2021, consumers will start to see retailers accepting contactless payments up to the new £100 limit, which will give customers more flexibility when shopping in store.

David Postings, Chief Executive of UK Finance, said:

‘Contactless payment has proved very popular with consumers and an increasing number of transactions are being made using contactless technology.

‘The increase in the limit to £100 will allow people to pay for higher value transactions like their weekly shop or filling up their car with fuel. The payments industry has worked hard to put in place the infrastructure to enable retailers to update their payments systems so they can start to offer their customers this new higher limit.’

Internet link: UK Finance website

HMRC urges taxpayers to stay alert to digital scams

HMRC has urged taxpayers to stay alert to the threat of digital scams and scammers claiming to represent HMRC.

Research published by HMRC revealed that the number of tax-related scams has doubled in the past 12 months.

In the past year HMRC has received more than one million referrals from the UK public in regard to suspicious contact, with many fraudsters offering ‘tax refunds’ or ‘rebates’. The research showed that HMRC received 441,954 reports of phone scams and more than 13,315 reports of malicious websites.

HMRC also stated that, over the last year, it has asked internet providers to take down 441 coronavirus (COVID-19) support scheme scam webpages.

Mike Fell, Head of Cyber Security Operation at HMRC, said:

‘The pandemic has given criminals a fresh hook for their activity and we’ve detected more than 460 COVID financial support scams alone since early 2020.

‘HMRC takes a proactive approach to protecting the public from tax-related scams and we have a dedicated Customer Protection Team that works continuously to identify and close them down.’

Internet link: ICAEW website

BCC calls for government to extend skills training

The BCC has urged the government to extend skills training in light of the publication of research which showed that one in five companies are considering making redundancies as a result of the coronavirus (COVID-19) pandemic.

The BCC has stressed concerns that older workers could go unutilised unless support for retraining is put into place immediately.

The BCC survey, which polled over 250 businesses with employees still on furlough, revealed that one in five are planning to make staff redundant following the rise in employer contributions to the Coronavirus Job Retention Scheme (CJRS).

Jane Gratton, Head of People Policy at the BCC, said:

‘The changes to the furlough scheme will likely result in many thousands of people being released back into the labour market, as employers who are still struggling to recover from the recession are forced to make redundancies and cuts to working hours.

‘With widespread skills shortages across the economy, some will find new jobs where their skills are in demand, while others will need to retrain for opportunities in a different sector.’

Internet links: BCC website

Advisory fuel rates for company cars

New company car advisory fuel rates have been published and took effect from 1 September 2021.

The guidance states: ‘you can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 September 2021 are:

 

Engine size Petrol
1400cc or less 12p
1401cc – 2000cc 14p
Over 2000cc 20p

 

Engine size LPG
1400cc or less 7p
1401cc – 2000cc 8p
Over 2000cc 12p

 

Engine size Diesel
1600cc or less 10p
1601cc – 2000cc 12p
Over 2000cc 15p

HMRC guidance states that the rates only apply when you either:

  • reimburse employees for business travel in their company cars
  • require employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is 4p per mile. Electricity is not a fuel for car fuel benefit purposes.

If you would like to discuss your company car policy, please contact us.

Internet link: GOV.UK AFR

Employers ‘named and shamed’ for paying less than minimum wage

The government has ‘named and shamed’ 191 companies that have broken National Minimum Wage (NMW) laws.

Following investigations by HMRC, the named firms have been fined for owing £2.1 million to over 34,000 workers. The breaches took place between 2011 and 2018. Named employers have since been made to pay back what they owed to employees and were fined an additional £3.2 million.

According to HMRC, 47% of firms wrongly deducted pay from workers’ wages, including for uniforms and expenses. In addition, 30% failed to pay workers for all the time they had worked, such as when they worked overtime, while 19% paid the incorrect apprenticeship rate.

Business Minister Paul Scully said:

‘Our minimum wage laws are there to ensure a fair day’s work gets a fair day’s pay – it is unacceptable for any company to come up short.

‘All employers, including those on this list, need to pay workers properly.

‘This government will continue to protect workers’ rights vigilantly, and employers that short-change workers won’t get off lightly.’

Internet link: GOV.UK

 

Newsletter – April 2021

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Enews – April 2021

In this month’s Enews we consider the extension of business rates relief to COVID-hit businesses outside of the retail, hospitality and leisure sectors, the announcements from the inaugural Tax Day and the details of the 2021 Finance Bill.

With guidance on the new Brexit fund aimed at SMEs, the fourth and fifth instalments of the support grant for the self-employed and minimum wage increases there is a lot to update you on.

Article Index

  • Business rates relief extended with £1.5 billion fund
  • Consultations launched on UK’s first Tax Day
  • Government publishes details of Finance Bill 2021
  • £20 million SME Brexit Support Fund opens for applications
  • HMRC publishes details of final grants for self-employed
  • National Minimum and Living wages increases
  • UK cuts electric vehicle grants by £500
  • ICAEW urges HMRC to rethink quarterly reports under MTD for corporation tax

Business rates relief extended with £1.5 billion fund

The government is to extend business rates relief with a £1.5 billion fund targeted at those businesses unable to benefit from the current COVID-19 support.

Retail, hospitality and leisure businesses have not been paying any rates during the pandemic, as part of a 15 month-long relief which runs to the end of June this year.

However, many businesses ineligible for reliefs have been appealing for discounts on their rates bills, arguing the pandemic represented a ‘material change of circumstance’ (MCC).

The government says that market-wide economic changes to property values, such as from COVID-19, can only be properly considered at general rates revaluations, and will therefore be legislating to rule out COVID-19 related MCC appeals.

Instead, the government will provide a £1.5 billion pot across the country that will be distributed according to which sectors have suffered most economically, rather than on the basis of falls in property values. It says this will ensure the support is provided to businesses in England in the fastest and fairest way possible.

Chancellor of the Exchequer Rishi Sunak said:

‘Our priority throughout this crisis has been to protect jobs and livelihoods. Providing this extra support will get cash to businesses who need it most, quickly and fairly.

‘By providing more targeted support than the business rates appeals system, our approach will help protect and support jobs in businesses across the country, providing a further boost as we reopen the economy, emerge from this crisis, and build back better.’

Internet link: GOV.UK 

Consultations launched on UK’s first Tax Day

The government has published over 30 updates, consultations and documents on the UK’s first ever Tax Day.

The announcements, which would traditionally be published at Budget, have been released later to allow for scrutiny from stakeholders.

It was announced that HMRC will tighten rules to force holiday let landlords to prove they have made a realistic effort to rent properties out for at least 140 days per year. There are suspicions that many simply declare that they will do this but leave the properties empty.

Declaring a home to be a holiday let means that it is exempt from council tax and owners pay business rates instead.

The Treasury plans to cut the rate of domestic Air Passenger Duty. The consultation also seeks views on supporting the UK’s commitment to net zero emissions by 2050 by increasing the number of international distance bands.

Inheritance tax (IHT) reporting regulations ‘will be simplified’ to ensure that from 1 January 2022 more than 90% of non-taxpaying estates will no longer have to complete IHT forms when probate or confirmation is required.

Jesse Norman, Financial Secretary to the Treasury, said:

‘We are making these announcements to increase the transparency, discipline and accessibility of tax policymaking.

‘These measures will help us to upgrade and digitise the UK tax system, tackle tax avoidance and fraud, among other things.

‘Many of today’s announcements form a key part of the government’s wider 10-year plan to build a trusted, modern tax system.’

Internet links: GOV.UK GOV.UK news

 

Government publishes details of Finance Bill 2021

The details of the Finance Bill 2021 have been published by the government.

The Bill outlines the key measures set to be brought into legislation, including many measures announced in the recent 2021 Budget.

In his Budget speech, Chancellor Rishi Sunak announced an extension of the stamp duty holiday in England; a super-deduction capital allowance; extensions of the Coronavirus Job Retention Scheme (CJRS) and the Self-employment Income Support Scheme (SEISS); and an extension of the VAT cut for the tourism and hospitality sectors.

The Bill will make sure the measures announced in the Budget take effect from 6 April 2021. It also legislates for tax changes that were previously consulted on and subsequently confirmed at the Budget.

Internet link: UK Parliament website

£20 million SME Brexit Support Fund opens for applications

The UK government has unveiled a £20 million Brexit support package to help small and medium-sized enterprises (SMEs) with changes to customs and tax rules when trading with the EU.

The SME Brexit Support Fund aims to help businesses prepare for the implementation of further import controls which come into force later this year.

Businesses who trade only with the EU and are therefore new to importing and exporting processes will be encouraged to apply for grants of up to £2,000 for each trader to pay for practical support, including training and professional advice, to ensure they can continue trading effectively.

Businesses must meet certain criteria, including having been established in the UK for at least 12 months, having fewer than 500 employees and no more than £100 million in turnover.

The closing date for applications is 30 June. HMRC states that the fund may close for applications earlier if the full £20 million is allocated.

Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said:

‘We have been asking for proper financial assistance of this scale so that a cash-strapped small business can afford to buy-in expertise, training and practical support. The new fund will make a significant difference.’

Internet links: GOV.UK guidance GOV.UK press release

HMRC publishes details of final grants for self-employed

HMRC has published details of the eligibility criteria of the final two grants available under the coronavirus (COVID-19) Self-employment Income Support Scheme (SEISS).

At the 2021 Budget it was confirmed that the fourth SEISS grant will be set at 80% of three months’ average trading profits, paid out in a single instalment, capped at £7,500. It will cover the period from February 2021 to April 2021.

To be eligible for the fourth grant, self-employed workers must have filed their 2019/20 tax return by midnight on 2 March 2021. This includes those who became self-employed in 2019/20, provided they have filed according to the deadline.

Eligibility will be based on the 2019/20 self assessment tax return which may affect the amount of the fourth grant which could be higher or lower than previous grants.

The remaining eligibility criteria are unchanged so applicants must either be currently trading but impacted by reduced demand, or be temporarily unable to trade due to COVID-19. They must also declare an intention to continue trading.

Claims can be made from late April until 31 May 2021.

The fifth SEISS grant will cover the period from May to September 2021 and will be available from July.

It will be set at 80% of three months’ average trading profits, paid out in a single instalment, capped at £7,500, for those with a turnover reduction of 30% or more.

Alternately, it will be worth 30% of three months’ average trading profits, capped at £2,850 for those with a turnover reduction of less than 30%.

Further details of the fifth grant will be provided in due course.

Internet link: GOV.UK

National Minimum and Living wages increases

UK workers are set to benefit from rises in the National Minimum Wage (NMW) and the National Living Wage (NLW) rates that took effect from 1 April 2021.

The NMW which applies to 21 and 22 year-olds has risen from £8.20 to £8.36 and the NLW has risen from £8.72 to £8.91. 23 and 24-year-olds are now eligible for the NLW, prior to 1 April 2021, only workers aged 25 and over were eligible.

The rates for NMW and NLW for all employees are as follows:

  Previous rate Rate from April 2021 Increase
National Living Wage £8.72 £8.91 2.2%
21-22 year-old rate £8.20 £8.36 2.0%
18-20 year-old rate £6.45 £6.56 1.7%
16-17 year-old rate £4.55 £4.62 1.5%
Apprentice Rate £4.15 £4.30 3.6%

The change follows recommendations made to the government by the Low Pay Commission (LPC) and marks the first step towards the government’s target of the NLW reaching two-thirds of median earnings for workers aged 21 and over by 2024.

Commenting on the wage increases, Bryan Sanderson, Chair of the LPC, said:

‘This week’s increase in the NLW is our first step towards the government’s target of two-thirds of median earnings. It is a real-terms increase, meaning that an hour’s work can buy more than it could last year at the start of the pandemic.

‘Young people should be fairly rewarded for their work. We will seek to understand how young people’s pay and employment are affected by this in our consideration of a further reduction in the NLW age qualification to 21.’

The LPC will make recommendations to the government on the 2022 NMW and NLW rates in October.

Internet link: GOV.UK news

UK cuts electric vehicle grants by £500

The government has cut the Plug-in Car Grant and Van & Truck Grant by £500 and lowered the pricing cap on qualifying electric vehicles.

The Department for Transport will now provide grants of up to £2,500 for electric vehicles on cars priced under £35,000. This is a reduction from the current £3,000 available for vehicles costing up to £50,000.

This will mean the funding will last longer and be available to more drivers, the government statement said. Grants will no longer be available for higher priced vehicles, typically bought by drivers who can afford to switch without a subsidy from taxpayers.

The number of electric car models priced under £35,000 has increased by almost 50% since 2019 and more than half the models currently on the market will still be eligible for the grant.

However, Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT), said:

‘The decision to slash the Plug-in Car Grant and Van & Truck Grant is the wrong move at the wrong time. New battery electric technology is more expensive than conventional engines and incentives are essential in making these vehicles affordable to the customer.

‘This sends the wrong message to the consumer, especially private customers, and to an industry challenged to meet the government’s ambition to be a world leader in the transition to zero emission mobility.’

Internet links: GOV.UK SMMT statement

ICAEW urges HMRC to rethink quarterly reports under MTD for corporation tax

The Institute of Chartered Accountants in England and Wales (ICAEW) has urged HMRC to rethink the requirement for companies to report quarterly under Making Tax Digital for corporation tax (MTD for CT).

In response to HMRC’s consultation on expanding the MTD initiative to corporation tax, the ICAEW suggested that HMRC should reconsider reporting requirements ‘at the very least for businesses below the VAT registration threshold’ and other organisations including those that require a senior accounting officer.

The Institute argued that quarterly reports would merely consist of cash in and out transactions.

The ICAEW said:

‘These reports will tell HMRC very little about the true accounting or tax results of the company for the quarter concerned.

‘The additional burden placed on companies in providing quarterly reports is not justified and should not be introduced until digital record keeping has become established and the software available is shown to work efficiently for companies and HMRC.’

Internet link: ICAEW website

Budget 2021 – March 2021

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Budget 2021

The Chancellor Rishi Sunak presented his second Budget on Wednesday 3 March 2021. In his speech he stated his Budget ‘meets the moment with a three-part plan to protect the jobs and livelihoods of the British people’.

Main Budget proposals

Tax measures include:

  • a super-deduction for companies investing in new plant and machinery
  • a time extension of the temporary increase to the SDLT nil rate band for residential property in England and Northern Ireland
  • an extension to the temporary 5% reduced rate of VAT for certain supplies
  • a temporary increase in the carry-back period for business losses
  • an increased rate of corporation tax from 2023.

Other measures include:

  • a new mortgage guarantee scheme
  • extension to the Job Retention Scheme
  • a Self-Employment Income Support Scheme fourth and fifth grant
  • an extension to the business rates holiday in England.

Previously announced measures include:

  • a cap on the amount of R&D tax credit paid to a loss-making small or medium-sized enterprise
  • new rules apply to off-payroll working payments made for services provided on or after 6 April 2021.

Some Budget proposals may be subject to amendment in the 2021 Finance Act. You should contact us before taking any action as a result of the contents of this summary.

Business

Coronavirus loan schemes

In 2020, the government introduced a number of government-guaranteed coronavirus loan schemes. In December 2020 the Chancellor extended, until the end of March 2021, access to the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Loan Scheme.

Budget 2021 announced a new loan scheme to be introduced to replace those coming to an end.

From 6 April 2021 the Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.

Restart Grants

In addition Restart Grants will be provided in England of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses. This will provide the cash certainty needed to plan ahead and safely relaunch trading over the coming months.

Self-Employment Income Support Scheme (SEISS)

Budget 2021 has confirmed details of a fourth grant. This will be 80% of three months’ average trading profits to be claimed from late April 2021. Payment will be in a single instalment capped at £7,500 in total and will cover the period February to April 2021. The scheme has been extended to those who have filed a 2019/20 self assessment tax return prior to 3 March 2021. This means that the newly self-employed from April 2019 now qualify subject to satisfying the other conditions.

A fifth and final grant was announced and can be claimed from late July 2021 to cover the period May to September 2021. This grant will be determined by a turnover test. Where the self-employed business turnover has fallen by 30% the grant will be worth 80% of three months’ average trading profits capped at £7,500. People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850.

Business rates

Business rates have been devolved to Scotland, Northern Ireland and Wales. All four nations have introduced 100% business rates relief mainly aimed at retail, leisure and hospitality businesses. Such businesses have not had to pay business rates from 1 April 2020 to 31 March 2021.

In a Scottish Budget update statement on 16 February, the Scottish Government proposed an extension to the relief for the retail, hospitality, leisure and aviation sectors until 31 March 2022.

The Chancellor has now announced a continuation of 100% business rates relief for eligible retail, hospitality and leisure properties in England to 30 June 2021. This will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties. Nurseries will also qualify for relief in the same way as other eligible properties.

Following the Chancellor’s announcement, the Welsh Finance Minister has extended the rates holiday for the retail, leisure and hospitality sectors in Wales for a further 12 months.

Rates review

The government announced at Budget 2020 that it would conduct a fundamental review of the business rates system in England. The government’s objectives for the review are reducing the overall burden on business, improving the current business rates system and considering more fundamental changes in the medium-to-long term.

The government has recently announced the final report will be published in Autumn 2021 with an interim report published on 23 March.

Reduced VAT rate for hospitality sector

In July 2020, the government introduced a temporary 5% reduced rate of VAT for certain supplies of hospitality, hotel and holiday accommodation and admissions to certain attractions. In September 2020 the Chancellor extended the reduced rate to 31 March 2021. The government has now announced an extension of the reduced rate until 30 September 2021. To help businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31 March 2022.

Corporation tax rates

The main rate of corporation tax is currently 19% and it will remain at that rate until 1 April 2023 when the rate will increase to 25% for companies with profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.

Comment
The main rate of corporation tax has been 19% since 1 April 2017. The rate for the Financial Year beginning on 1 April 2020 was due to fall to 17% but the Chancellor reversed this decision in Budget 2020.

Tax losses

A temporary extension of the period over which businesses may carry trading losses back for relief against profits of earlier years to get a repayment of tax paid will have effect for company accounting periods ending in the period 1 April 2020 to 31 March 2022 and for tax years 2020/21 and 2021/22 for unincorporated businesses.

Trade loss carry back will be extended from the current one year entitlement to a period of three years, with losses being carried back against later years first.

For companies, after carry back to the preceding year, a maximum of £2 million of unused losses will be available for carry back against profits of the same trade to the earlier two years. This £2 million limit applies separately to the unused losses of each 12 month period within the duration of the extension.

For individuals a separate £2 million cap will apply to the extended carry back of losses made in each of the tax years 2020/21 and 2021/22.

The £2 million limit applies separately to the unused losses of each tax year within the duration of the extension. Income Tax payers will not be subject to a partnership-level limit.

Super-deduction

Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first year capital allowances.

Under this measure a company will be allowed to claim:

  • a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
  • a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.

This relief is not available for unincorporated businesses.

First year allowances for business cars from April 2021

Budget 2020 announced the extension of 100% first year allowances for zero-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations by four years from April 2021.

CO2 emission thresholds will also be amended from April 2021. These determine the rate of capital allowances available through which the capital expenditure for business cars can be written down. The thresholds will be reduced from 50g/km to 0g/km for the purpose of the first year allowances for low CO2 emission cars and from 110g/km to 50g/km for the purpose of writing down allowances (WDAs) for business cars.

Comment
The reduction in thresholds will mean that only business cars acquired with CO2 emissions of 0g/km will be eligible for first year allowances. Ultra-low emission vehicles which currently qualify for first year allowances if 50g/km or less will no longer qualify. They will be eligible for WDAs at the main rate (18%). Cars with CO2 emissions exceeding 50g/km will be eligible for WDAs at the special rate (6%).

Freeports

In 2020 the government consulted on proposals to create up to ten Freeports across the UK. The government is now proposing a range of measures covering customs, tax reliefs, planning, regeneration funding and innovation to create Freeports as national hubs for global trade and investment across the UK.

A UK Freeport will be a geographical area with a diameter up to 45km which is closely linked to a sea port, airport or rail port. East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames have been successful in the Freeports bidding process for England.

The government is working with devolved administrations to establish Freeports in each of the nations.

Customs benefits

Within the Freeport there will be a primary customs site and perhaps custom subzones. A customs site or subzone provides customs and tariff benefits such as:

  • duty deferral while goods remain on site
  • duty inversion if the finished goods exiting the Freeport attract a lower tariff than their component parts
  • subject to the UK’s trade agreements, customs duty exemption on goods that are imported into a Freeport, processed into finished goods and subsequently re-exported
  • simplified import procedures.

Tax benefits

Freeports may also have one or more tax sites within which tax reliefs will apply. The aim is for a single site and up to three tax sites may be allowed but the total area of the site(s) must not exceed 600 hectares. The tax site will likely be located on primarily underdeveloped land to generate new, additional productive activity in Freeport locations.

The intention is to offer:

  • Stamp Duty Land Tax relief on land purchases within Freeport tax sites in England where that property is to be used for qualifying commercial activity
  • a 10% rate of Structures and Buildings Allowance rather than the 3% rate that applies for businesses constructing or renovating structures and buildings for non-residential use
  • enhanced tax relief for qualifying new plant and machinery assets for the full cost of the qualifying investment in the same tax period the cost was incurred
  • 100% relief from business rates on certain business premises within Freeport tax sites in England.

Very broadly, the reliefs will apply for expenditure from various dates in 2021 to 30 September 2026.

In addition, a 0% rate of employer NICs on the salaries of any eligible employee working in the Freeport tax site is proposed. The relief is intended to be available for up to 9 years from April 2022.

Research and Development (R&D) tax relief

A cap on the amount of R&D tax credit which can be paid to a loss-making small or medium-sized enterprise (SME) will be introduced for accounting periods which commence on or after 1 April 2021.

Prior to the introduction of the cap, loss-making SMEs incurring qualifying expenditure on R&D activities are allowed to make a claim to surrender the unrelieved loss for a payable tax credit of up to 14.5%. For accounting periods commencing on or after 1 April 2021, payable tax credits are restricted to £20,000 plus three times the company’s relevant expenditure on workers.

Relevant expenditure on workers is the company’s PAYE and NICs for the period and importantly this is the company’s whole PAYE and NIC liability. In addition, if the company is supplied with workers by a connected company the relevant workers’ expenditure is extended to include a proportion of those worker costs.

Some companies which create or manage intellectual property and spend less than 15% with connected persons on R&D qualifying expenditure will be exempt from this cap.

Capital Taxes

Capital gains tax (CGT) rates

No changes to the current rates of CGT have been announced at Budget 2021. This means that the rate remains at 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties with the exception of any element that qualifies for Private Residence Relief.

There are two specific types of disposal which potentially qualify for a 10% rate up to a lifetime limit for each individual:

  • Business Asset Disposal Relief (BADR) (formerly known as Entrepreneurs’ Relief). This is targeted at directors and employees of companies who own at least 5% of the ordinary share capital in the company, provided other minimum criteria are also met, and the owners of unincorporated businesses.
  • Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly-subscribed shares.

The lifetime limit for BADR was reduced from £10 million to £1 million for BADR qualifying disposals made on or after 11 March 2020. Investors’ Relief continues to have a lifetime limit of £10 million.

CGT annual exemption

The CGT annual exemption will be maintained at the current 2020/21 level of £12,300 for 2021/22 and up to and including 2025/26.

Inheritance tax (IHT) nil rate bands

The nil rate band has been frozen at £325,000 since 2009 and this will now continue up to 5 April 2026. An additional nil rate band, called the ‘residence nil rate band’ (RNRB) which has been increased in stages and is now £175,000 for deaths in 2020/21 will also be frozen at the current level until 5 April 2026. A taper reduces the amount of the RNRB by £1 for every £2 that the ‘net’ value of the death estate is more than £2 million. Net value is after deducting permitted liabilities but before exemptions and reliefs. This taper will also be maintained at the current level.

Business assets and Gift Hold-Over Relief

Gift Hold-Over Relief operates by deferring the chargeable gain on the disposal when a person gives away business assets. The gain then comes into charge when the recipient disposes of the gifted asset. The recipient is treated as though they acquired the asset for the same cost as the person who gave them the asset.

A change to the relief ensures that Gift Hold-Over Relief is not available where a non-UK resident person disposes of an asset to a foreign-controlled company, controlled either by themselves or another non-UK resident with whom they are connected. This measure will affect disposals made on or after 6 April 2021.

Employment

The Coronavirus Job Retention Scheme (JRS)

The current JRS allows an employer to place an employee on furlough and apply for a grant to cover wage costs for the time an employee is on furlough. The employer:

  • can claim 80% of ‘usual salary’ for hours not worked, up to a maximum of £2,500 per employee (pro-rated for hours not worked) per month
  • needs to fund employer National Insurance contributions (NICs) and the minimum employer automatic enrolment pension contributions.

In December 2020, the Chancellor extended the scheme until the end of April 2021.

Further extension of JRS

In Budget 2021 the Chancellor has further extended the scheme to 30 September 2021.

The level of grant available to employers under the scheme will stay the same until 30 June 2021.

From 1 July 2021, the level of grant will be reduced and employers will be asked to contribute towards the cost of furloughed employees’ wages. To be eligible for the grant an employer must continue to pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.

The reduction in the level of the grant means that the percentage recovery of furloughed wages will be as follows:

  • for July 2021 70% of furloughed wages up to a maximum of £2187.50 and
  • for August and September 2021 60% of furloughed wages up to a maximum of £1,875.00.

Employers will need to continue to fund employer NICs and mandatory minimum automatic enrolment pension contributions.

Comment
The Chancellor has also extended eligibility for the scheme. For periods starting on or after 1 May 2021, employers can claim for employees who were employed on 2 March 2021, as long as a PAYE Real Time Information (RTI) submission was made between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee.

Apprenticeships and traineeships

High quality traineeships for young people

The government will provide an additional £126 million in England for high quality work placements and training for 16-24 year olds in the 2021/22 academic year. Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.

Payments for employers who hire new apprentices

The government will extend and increase the payments made to employers in England who hire new apprentices. Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, compared with £1,500 per new apprentice hire (or £2,000 for those aged 24 and under) under the previous scheme.

This is in addition to the existing £1,000 payment the government provides for all new 16-18 year-old apprentices and those aged under 25 with an Education, Health and Care Plan, where that applies.

Supporting apprenticeships across different employers

The government will introduce a £7 million fund from July 2021 to help employers in England set up and expand portable apprenticeships. This will enable people who need to work across multiple projects with different employers to benefit from the high quality long-term training that an apprenticeship provides.

Off-payroll working in the private sector

New tax rules are soon to come into force for individuals who provide their personal services via an ‘intermediary’ to a medium or large business. The new rules apply to payments made for services provided on or after 6 April 2021.

The off-payroll working rules apply where an individual (the worker) provides their services through an intermediary (typically a personal service company) to another person or entity (the client). The client will be required to make a determination of a worker’s status and communicate that determination. In addition, the fee-payer (usually the organisation paying the worker’s personal service company) will need to make deductions for income tax and NICs and pay any employer NICs.

The legislation uses an existing statutory definition within the Companies Act of a ‘small company’ to exempt small businesses from the new rules. A small company is one which meets two of these criteria:

  • a turnover of £10.2 million or less
  • having £5.1 million on the balance sheet or less
  • having 50 or fewer employees.

If the business receiving the work of the individual is not a company, it is only the turnover test that will apply.

Comment
The Status Determination Statement (SDS) is a key part of the status determination procedure. The client must provide the SDS to the worker and should include not only the decision of the client but also the reasons underpinning it. The client must take ‘reasonable care’ in coming to its conclusion. If it doesn’t, the statement is not a valid SDS

In the Budget the government announced minor technical changes to improve the operation of the rules, in response to feedback from stakeholders, which will be legislated for in Finance Bill 2021. The government will make changes to the rules regarding provision of information by parties in the labour supply chain.

Comment
These changes will make it easier for parties in a contractual chain to share information relating to the off-payroll working rules by allowing an intermediary, as well as a worker, to confirm if the rules need to be considered by the client organisation.

National Living Wage (NLW) and National Minimum Wage (NMW)

The National Living Wage will increase by 2.2% and will be extended to 23 and 24 year olds for the first time. For workers aged under 23, the government has announced smaller increases in NMW in recognition of the risks to youth employment which the current economic situation poses.

From 1 April 2021, the new hourly rates of NLW and NMW are:

  • £8.91 for those 23 years old and over
  • £8.36 for 21-22 year olds
  • £6.56 for 18-20 year olds
  • £4.62 for under 18s
  • £4.30 apprentice rate for apprentices under 19, and those 19 and over in their first year of apprenticeship.

Comment
The extension of the NLW to 23 and 24 year olds may catch out some employers. Employees in this category, if they are on the NMW rate, are currently being paid £8.20 an hour.

Enterprise Management Incentives (EMI) scheme

At Budget 2020, the government announced a review of the EMI scheme to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme.

As part of this review the government is publishing a consultation alongside the Budget.

Van benefit charge nil-rating for zero-emission vans

From 6 April 2021, a nil rate of tax applies to zero-emission vans within the van benefit charge. In 2020/21 such vans have a van benefit charge at 80% of the standard flat rate of £3,490.

Comment
A zero-emission van is a van which cannot in any circumstances emit CO2 emissions when driven. Governments have provided varying amounts of discounts from the van benefit charge for zero-emissions vans since 2010. We are now back to the policy which applied from 2010 to 2015 when there was no charge.

Temporary changes to legislation resulting from coronavirus

Easement for employer-provided cycles exemption

The government will legislate in Finance Bill 2021 to introduce a time-limited easement to the employer-provided cycle exemption to disapply the condition which states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020.

The change will have effect on and after Royal Assent of Finance Bill 2021 and be in place until 5 April 2022, after which the normal rules of the exemption will apply.

Employer-reimbursed coronavirus tests

The government will legislate in Finance Bill 2021 to introduce a retrospective income tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen test for the tax year 2020/21. Legislation will extend this exemption for the tax year 2021/22.

The change will have effect on and after Royal Assent of Finance Bill 2021. The corresponding NICs disregard is already in force and this will also be extended for the tax year 2021/22.

Extension of income tax exemption for COVID-19 related home office expenses

The government will, by secondary legislation, extend the temporary income tax exemption and Class 1 NICs disregard for employer reimbursed expenses that cover the cost of relevant home office equipment. The extended exemption will have effect until 5 April 2022.

Other Matters

Land and buildings transaction taxes

Land and buildings transaction taxes are devolved to Scotland (Land and Buildings Transaction Tax) and Wales (Land Transaction Tax). Stamp Duty Land Tax (SDLT) applies to transactions in England and Northern Ireland. All these taxes have had a temporary increase in the nil rate threshold for residential properties. The thresholds were set to return to the previous thresholds from 1 April 2021.

Budget announcement

The government will extend the temporary increase to the SDLT nil rate band for residential property in England and Northern Ireland to 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000. The nil rate band will return to the standard amount of £125,000 from 1 October 2021.

Wales – Land Transaction Tax

Following the Chancellor’s announcement, the Welsh Finance Minister has confirmed that the Land Transaction Tax temporary reduction period will be extended by a further three months so that it will end on 30 June 2021.

In December 2020, the Welsh Government changed the rates charged on higher rates residential property transactions and non-residential transactions including the rent element of non-residential and mixed leases. The changes to the higher residential rates have the effect of increasing the tax rates applied to the bands by 1%. For non-residential transactions, changes have been made to the bands so as to increase the nil rate thresholds. These changes came into effect on 22 December 2020.

SDLT surcharge

New SDLT rates are proposed for purchasers of residential property in England and Northern Ireland who are not resident in the UK. The new rates will be 2% higher than those that apply to purchases made by UK residents, and will apply to purchases of both freehold and leasehold property as well as increasing SDLT payable on rents on the grant of a new lease. The surcharge will apply to land transactions with an effective date of 1 April 2021 or later. Transitional rules may apply to some contracts exchanged before 11 March 2020 but completed or are substantially performed on or after 1 April 2021, or some contracts substantially performed on or before 31 March 2021 but not completed until 1 April 2021 or later.

Plastic Packaging Tax

Draft legislation has been issued to establish a Plastic Packaging Tax. This is a new tax that applies to plastic packaging produced in, or imported into the UK that does not contain at least 30% recycled plastic. Plastic packaging is packaging that is predominantly plastic by weight.

The tax rate will be £200 per tonne of non-compliant plastic packaging. There will be an exemption for businesses that manufacture or import less than 10 tonnes of plastic packaging per year. The tax will take effect from April 2022.

Van Vehicle Excise Duty (VED)

Van VED is currently levied at £250 per year for most light goods vehicles (under 3.5 tonnes) which have been registered since 1 March 2001. A consultation paper explored creating a graduated first year rate for new light goods vehicles and motorhomes from April 2021. The government has recently decided not to proceed with the change in light of the pandemic. Motorhomes will continue to be placed in the Private/Light Goods class.

Reform of penalties for late submission and late payment of tax

The government will reform the penalty regime for VAT and Income Tax Self Assessment (ITSA) to make it fairer and more consistent. The new late submission regime will be points-based, and a financial penalty will only be issued when the relevant threshold is reached. The new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is. These reforms will come into effect: for VAT taxpayers, from periods starting on or after 1 April 2022; for taxpayers in ITSA with business or property income over £10,000 per year, from accounting periods beginning on or after 6 April 2023; and for all other taxpayers in ITSA, from accounting periods beginning on or after 6 April 2024.

Contactless payment card limit

Following a public consultation by the Financial Conduct Authority, the government has approved an increase to the legal contactless payment limits previously set by the European Commission. This will allow banks to support single contactless payments up to £100, and cumulative contactless payments up to £300, without the need for customers to input their chip and pin. The government hopes the banking industry will implement the new limits later this year.

Personal Tax

The personal allowance

The personal allowance is currently £12,500. Budget 2018 announced that the allowance would remain at the same level until 2020/21 and the statutory provision to increase the allowance annually by CPI was to be overridden. The Chancellor has confirmed that the personal allowance will increase by CPI (0.5%) for 2021/22 to £12,570.

There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. So for the current tax year there is no personal allowance where adjusted net income exceeds £125,000. For 2021/22 there will be no personal allowance where adjusted net income exceeds £125,140.

The Chancellor announced that the personal allowance will be frozen at £12,570 for the tax years 2022/23 to 2025/26.

The marriage allowance

The marriage allowance permits certain couples, where neither pays tax at more than the basic rate, to transfer 10% of their personal allowance to their spouse or civil partner.

Comment
The marriage allowance reduces the recipient’s tax bill by up to approximately £250 a year. The marriage allowance was first introduced for 2015/16 and there are couples who are entitled to claim but have not yet done so. It is possible to claim for all years back to 2016/17 where the entitlement conditions are met. The total tax saving for all years up until 2020/21 could be over £1,000. A claim for 2016/17 will need to be made by 5 April 2021.

Tax bands and rates

The basic rate of tax is 20%. In 2020/21 the band of income taxable at this rate is £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance.

The Chancellor announced that for 2021/22 the basic rate band will be £37,700 so that the threshold at which the 40% band applies will be £50,270 for those who are entitled to the full personal allowance. The Chancellor announced that the basic rate band will be frozen at £37,700 for the tax years 2022/23 to 2025/26. The National Insurance contributions Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 for these years.

Individuals pay tax at 45% on their income over £150,000.

Scottish residents

The tax on income (other than savings and dividend income) is different, for taxpayers who are resident in Scotland, from taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income.

In 2020/21 there are five income tax rates which range between 19% and 46%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK. The two higher rates are 41% and 46% rather than the 40% and 45% rates that apply to such income for other UK residents. For 2020/21, the 41% band applies to income over £43,430 for those who are entitled to the full personal allowance. The 46% rate applies to income over £150,000.

In the Scottish Budget on 28 January 2021, the Scottish Government proposed that the Scottish income tax rates will be frozen for 2021/22. The thresholds for the tax bands will be increased by 0.5% except for the 46% rate threshold which remains at £150,000. So the 41% band will apply to income over £43,662 for those who are entitled to the full personal allowance.

Welsh residents

From April 2019, the Welsh Government has had the right to vary the rates of income tax payable by Welsh taxpayers. The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers by 10 pence. For 2020/21 the Welsh Government has set the Welsh rate of income tax at 10 pence which has been added to the reduced rates. This means the tax payable by Welsh taxpayers is the same as that payable by English and Northern Irish taxpayers.

The Welsh Government has announced that the income tax rate will remain at 10 pence for 2021/22.

Tax on savings income

Savings income is income such as bank and building society interest.

The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.

Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income, less allocated allowances and reliefs) exceeds £5,000.

Tax on dividends

The first £2,000 of dividends is chargeable to tax at 0% (the Dividend Allowance). Dividends received above the allowance are taxed at the following rates:

  • 5% for basic rate taxpayers
  • 5% for higher rate taxpayers
  • 1% for additional rate taxpayers.

Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.

To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.

Universal Credit

Universal Credit is a single payment that is made up of different amounts depending on an individual’s circumstances. There is no entitlement if an individual’s capital is worth more than £16,000. Shortly after the 2020 Budget the Chancellor announced an increase in the Universal Credit standard allowance by £20 per week for one year.

The government is extending the temporary £20 per week increase for a further six months.

Working Tax Credit

The government is making a one-off payment of £500 to eligible Working Tax Credit claimants to provide extra support over the next six months.

Mortgage guarantee scheme

The government will introduce a new mortgage guarantee scheme in April 2021. This scheme will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of 5% on homes with a value of up to £600,000.

Under the scheme, all buyers will have the opportunity to fix their initial mortgage interest rate for at least five years should they wish to. The scheme, which will be available for new mortgages up to 31 December 2022, is designed to increase the availability of mortgages on new or existing properties for those with small deposits.

Green National Savings and Investment (NS&I) product

The government will offer a green retail savings product through NS&I in the summer of 2021. This product will be closely linked to the UK’s sovereign green bond framework and will give all UK savers the opportunity to take part in the collective effort to tackle climate change. The green gilt framework, to be published in June, will detail the types of expenditure that will be financed to meet the government’s green objectives.

Venture Capital Schemes: extension of the Social Investment Tax Relief

The government will continue to support social enterprises that are seeking growth investment by extending the operation of Social Investment Tax Relief to April 2023. This will continue the availability of income tax relief and capital gains tax hold-over relief for investors in qualifying social enterprises.

Pensions Lifetime Allowance

The lifetime limit sets the maximum figure for tax-relieved savings that an individual can build up over their lifetime.

Legislation will be introduced to remove the annual link to the CPI increase for the next five years. This will maintain the standard Lifetime Allowance at £1,073,100 for tax years 2021/22 to 2025/26.