As part of his ‘Growth Plan’, Kwarteng had set out a number of tax cuts designed to support the growth of the British Economy. However, following widespread criticism and instability in financial markets, Mr Kwarteng was replaced with Jeremy Hunt who has scrapped all of the growth plan changes bar the planned cut to stamp duty and National Insurance. As of today, 17^th October 2022, the only changes still going ahead are:

• NI (health and social care levy) increase of 1.25% has been repealed from 6th November 2022
• Stamp duty 0% threshold increased to £250,000

The post BREAKING NEWS – today’s announcements from Jeremy Hunt appeared first on Assure Accountants.

The (not so) mini-budget delivered by new Chancellor, Kwasi Kwarteng last Friday, had a lot more in it than anyone expected, and lots of great news for small businesses. Here are the headlines:

• Corporation Tax planned increase from 19% to 25% has been scrapped
• Basic rate of income tax reduced from 20% to 19% from April 2023
• Reversal of the 1.25% increase in the dividend tax rate from 2023
• Additional rate of income tax of 45% has been scrapped
• NI (health and social care levy) increase of 1.25% has been repealed from 6th November 2022
• AIA remains at £1m indefinitely
• Stamp duty 0% threshold increased to £250,000. This is a saving of £2,600 on an average house costing £312,000
• Freeze on energy bills
• Rules on bankers’ bonus limits are to be scrapped
• IR35-off-payroll rules to be repealed from April 2023. Reverting to pre-2017 rules

For a more detailed look at the mini budget and what was announced, please see below.

Chancellor reveals his plan for growth

The week leading up to Chancellor Kwasi Kwarteng’s ‘Mini Budget’ may have been a short one due to the Queen’s funeral but the new government managed to fill it with a stream of policy announcements.

Before Mr Kwarteng stood up to make his statement on ‘The Growth Plan’ much of what he had to say about energy support for businesses and households, bankers’ bonuses, investment zones and reversals to NICs had already been announced. The government also said that the Chancellor’s statement would not be subject to a forecast from the Office for Budget Responsibility. However, this did not stop the media from dubbing this event a Mini Budget.

The Growth Plan set out a new approach to the economy built around three central priorities:

• reforming the supply-side of the economy
• maintaining a responsible approach to public finances
• cutting taxes to boost growth.

National Insurance contributions

In September 2021 the government published its proposals for new investment in health and social care in England. The proposals were intended to lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government introduced a UK-wide 1.25% Health and Social Care Levy based on the National Insurance contributions (NICs) system but ringfenced for health and social care.

The Health and Social Care Levy Act provided for a temporary 1.25% increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23. From April 2023 onwards, the NIC rates were intended to revert back to 2021/22 levels and be replaced by a new 1.25% Health and Social Care Levy.

However, the new Chancellor has decided to:

• reverse the temporary increase in NICs from November and
• cancel the Health and Social Care Levy completely.

The Health and Social Care Levy was expected to raise around £13 billion a year to fund health and social care and the Chancellor has confirmed that funding will be maintained at the same level as if the Levy was in place, funded from general taxation.

More detail for employees and employers

The changes take effect for payments of earnings made on or after 6 November 2022, so:

• primary Class 1 NICs (employees) will generally reduce from 13.25% to 12% and 3.25% to 2% and
• secondary Class 1 NICs (employers) will reduce from 15.05% to 13.8%.

The effect on Class 1A (payable by employers on taxable benefits in kind) and Class 1B (payable by employers on PAYE Settlement Agreements) NICs will effectively be averaged over the 2022/23 tax year, so that the rate will generally be 14.53%.

More detail for the self-employed

Following the principle detailed above, the changes to Class 4 NICs will again be averaged across 2022/23, so that the rates will be 9.73% and 2.73%.

Income tax

Income tax rates

The government had previously announced that there would be a cut in the basic rate of income tax, from 20% to 19%, from April 2024. This is now being accelerated so that it takes effect from April 2023.

In addition, to ‘incentivise enterprise and hard-work and simplify the tax system’, the government will abolish the 45% additional rate of income tax from April 2023. Consequently, there will be a single higher rate of income tax of 40%.

There are a number of tax consequences which stem from these changes. One of them is the amount of tax relief given at source on pension contributions and Gift Aid donations. This is currently given at the basic rate of 20%. The government has stated that there will be a four-year transition period for Gift Aid relief to maintain the income tax basic rate relief at 20% until April 2027. This will support almost 70,000 charities and is worth over £300 million. However, there was little comment on pension contributions other than that there will also be a one-year transitional period for Relief at Source pension schemes to permit them to continue to claim tax relief at 20%.

Dividends

From April 2023:

• the dividend ordinary rate of 8.75% will reduce to 7.5%
• the dividend upper rate of 33.75% will reduce to 32.5% and
• the dividend additional rate will be abolished.

As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, it will also reduce to a 32.5% charge for loans made on or after 6 April 2023.

These changes will apply in Scotland as the rules on dividends apply to the whole of the UK.

Business

Corporation tax rates

It had been previously announced that the rate of corporation tax would increase for many companies from April 2023 to 25%. This change will now not go ahead, leaving the rate of corporation tax at 19% for the majority of companies.

In line with this change, the Bank Corporation Tax Surcharge will remain the same, as will the Diverted Profits Tax.

Capital allowances

The Annual Investment Allowance (AIA) gives a 100% write-off on certain types of plant and machinery, including cars with zero emissions, up to certain financial limits per 12-month period. The limit has been £1 million for some time but was scheduled to reduce to £200,000 from April 2023. The government has announced that the temporary £1 million level of the AIA will become permanent and the proposed reduction will not occur.

Up to 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from capital allowances, generally referred to as ‘super-deductions’. These reliefs are not available for unincorporated businesses. Interestingly, these allowances were not mentioned, other than minor amendments to the current rules, so it appears the scheduled withdrawal of them will occur in 2023.

Seed Enterprise Investment Scheme

From April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

Company Share Option Plan

From April 2023, qualifying companies will be able to issue up to £60,000 of Company Share Option Plan (CSOP) options to employees, twice the current £30,000 limit. The ‘worth having’ restriction on share classes within CSOP will be eased, better aligning the scheme rules with the rules in the Enterprise Management Incentive scheme and widening access to CSOP for growth companies.

Investment Zones aim to encourage rapid development

As part of the government’s plan to drive economic growth and encourage development the Chancellor confirmed that Investment Zones will be established across the UK.

These zones will benefit from lower taxes and liberalised planning frameworks to encourage business investment.

The government is already in discussions with 38 local authorities to establish investment zones in England. In addition, it says it will work closely with the devolved administrations to offer the same opportunities in Scotland, Wales and Northern Ireland.

Businesses in designated areas in investment zones will benefit from 100% business rates relief on newly occupied and expanded premises.

In addition, businesses will receive full Stamp Duty Land Tax relief on land bought for commercial or residential development and a zero rate for employer NICs on new employee earnings up to £50,270 per year.

There will also be a 100% first year enhanced capital allowance relief for plant and machinery used within designated sites and accelerated Enhanced Structures and Buildings Allowance relief of 20% per year.

As well as time-limited tax benefits there will be designated development sites that will release more land for housing and commercial development in the zones. The need for planning applications will be minimised and streamlined.

Stamp Duty Land Tax

A number of changes are made to the Stamp Duty Land Tax (SDLT) regime. Generally, the changes increase the amount that a purchaser can pay for residential property before they become liable for SDLT.

The residential nil rate tax threshold is increased from £125,000 to £250,000.

The nil rate threshold for First Time Buyers’ Relief is increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for First Time Buyers’ Relief is increased to £625,000.

The changes apply to transactions with effective dates on and after 23 September 2022 in England and Northern Ireland. These changes do not apply to Scotland or Wales which operate their own land transactions taxes.

There are no changes in relation to purchases of non-residential property.

Residential rates may be increased by 3% where further residential properties are acquired.

Other comments

There were a number of other interesting comments made by the Chancellor which suggest future policies and changes, although lacking detail at the moment.

IR35 and off-payrolling

Over the last 20 years, there have been numerous changes to the tax system to try and address ‘disguised employment’ and to generate additional tax and NICs accordingly. In a surprise announcement, the government has stated that it will repeal the off-payroll working rules from 6 April 2023. From this date, workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.

Infrastructure

The Chancellor announced plans to accelerate new roads, rail and energy infrastructure with new legislation which will cut barriers and restrictions. This will make it quicker to plan and build new roads, speeding up the deployment of energy infrastructure such as offshore wind farms and streamlining environmental assessments and regulations.

State benefits

Universal Credit claimants who earn less than the equivalent of 15 hours a week at the National Living Wage will be required to meet regularly with their work coach and take active steps to increase their earnings or face having their benefits reduced, broadly from January 2023. Jobseekers over the age of 50 will also be given extra time with Jobcentre work coaches, to help them return to the job market.

VAT-free shopping areas

The government will introduce a modern, digital, VAT-free shopping scheme with the aim of providing a boost to the high street and creating jobs in the retail and tourism sectors. The delivery will include modernising the scheme that currently operates in Northern Ireland and introducing a new digital scheme in Great Britain. The new VAT-free shopping scheme for non-UK visitors to Great Britain will enable them to obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage.

Alcohol duties

Reforms to modernise alcohol duties will also be taken forward and the government has published a consultation response on these plans. The reforms will be implemented from 1 August 2023. The government is also freezing the alcohol duty rates from 1 February 2023 to provide additional support to the sector.

Further announcements

Over the next few weeks, the government will set out further details of plans to speed up digital infrastructure, reform business regulation, increase housing supply, improve our immigration system, make childcare cheaper, improve farming productivity and back the financial services sector.

Government announces plans to help cut energy bills for businesses

On 21 September 2022 the government announced a new scheme, the Energy Bill Relief Scheme, which is designed to cut energy prices for non-domestic energy customers, such as businesses, charities and public sector organisations. The new scheme is in addition to the recently announced Energy Price Guarantee for households.

The scheme will apply to fixed contracts agreed on or after 1 April 2022 in addition to deemed, variable and flexible tariffs and contracts. Running for an initial six-month period, the scheme will apply to energy usage from 1 October 2022 to 31 March 2023. According to the government, savings will first be seen in businesses’ October bills.

Businesses are not required to take action or apply for the scheme, support will be automatically applied to bills.

The government intends to conduct a review of the scheme in three months to assess:

• how effective it has been in giving support to vulnerable, non-domestic customers
• which groups of non-domestic customers remain vulnerable to energy price rises
• the extent to which the scheme could either be extended or further targeted.

Support after 31 March 2023 will be determined following the review.

Energy Price Guarantee plan caps household bills

Prime Minister Liz Truss announced the Energy Price Guarantee (EPG) for households on 8 September 2022 which will apply from the start of October 2022. The EPG means that an average household will pay no more than £2,500 per year for each of the next two years. It comes in addition to the £400 Energy Bill Support Scheme and will save the average household at least £1,000.

The EPG limits the price suppliers can charge customers for energy supplies. This takes account of temporarily removing green levies, worth around £150, from household bills. The guarantee will supersede the existing energy price cap.

Under the plan, those households who do not pay directly for mains gas and electricity, such as those living in park homes or on heat networks, will be no worse off and will receive support through a new fund.

The government estimates that the EPG will deliver substantial benefits to the economy, boosting growth and curbing inflation by four to five percentage points, which will in turn reduce the cost of servicing the national debt.

The government will provide energy suppliers with the difference between this new lower price and what energy retailers would charge their customers if this were not in place. Schemes previously funded by green levies will also continue to be funded by the government during this two-year period to ensure the UK’s investment in homegrown, secure renewable technologies continues.

New plan for patients aims to tackle NHS backlog

Health and Social Care Secretary Thérèse Coffey unveiled the government’s new ‘Our plan for patients’ on 22 September 2022, which aims to tackle NHS backlogs.

The centrepiece of the plan is the expectation that everyone who needs an appointment at a GP practice should get one within two weeks, with patients with the most urgent needs being seen the same day.

The plan also includes changing funding rules to recruit extra support staff so that GPs can focus on treating patients. The government says this will free up over one million appointments per year.

There will also be ‘more state-of-the art telephone’ systems to make it easier for patients to get through to their GP surgeries. In addition, more information will be available for patients, with appointments data published at a practice level for the first time ever.

Pharmacies will help ease pressures on GPs and free up time for appointments by managing and supplying more medicines without a GP prescription and taking referrals from emergency care for minor illnesses.

The post MINI BUDGET SEPTEMBER 2022 appeared first on Assure Accountants.

Chancellor Rishi Sunak delivered his first Budget, and the first since the UK’s departure from the European Union, against the backdrop of the coronavirus outbreak.

The Chancellor announced a £30 billion stimulus package to support the economy through coronavirus contagion and pledged to give the NHS whatever extra resources are needed to cope.

Following the news that the Bank of England had reduced interest rates to 0.25%, in an emergency response to the coronavirus, Mr Sunak put further measures in place.

These include Statutory Sick Pay (SSP) for employees who are advised to self-isolate, even if they are displaying no symptoms. The government will also meet some SSP costs for businesses.

In addition, business rates for shops, cinemas, restaurants and music venues in England with a rateable value below £51,000 have been suspended for a year. This tax holiday will be worth up to £25,000 to thousands of businesses across the retail, leisure and hospitality sectors.

Citing the latest economic forecasts from the Office for Budget Responsibility, Mr Sunak said the economy is predicted to grow by 1.1% this year. However, the GDP forecast does not fully account for the impact of coronavirus.

Turning to duties, tax on beer, wine, cider and spirits have been frozen while tobacco duty will continue to rise by inflation plus 2%. Fuel duty will also remain frozen, for a tenth consecutive year, despite widespread speculation that it would rise. However, Mr Sunak introduced other green measures including a new tax on plastic packaging and freezing the climate change levy on electricity while raising it on gas. The Chancellor also promised to spend £500 million to support the rollout of new rapid charging hubs for electric cars.

In addition, Mr Sunak resisted calls to end Entrepreneurs’ Relief, although the lifetime allowance will be reduced from £10 million to £1 million. The Chancellor will abolish the so-called ‘tampon tax’, reducing the VAT rate on sanitary products to zero from 1 January 2021, as well as scrapping VAT on digital e-publications, including e-books, e-newspapers, e-magazines and academic e-journals, from 1 December 2020.

The Budget confirmed increased spending on infrastructure projects including broadband, railway and roads. £5 billion was promised to get gigabit-capable broadband into the hardest to reach places and £510 million of new investment into the shared rural mobile phone network.

Budget Highlights

• A reduction in the Entrepreneurs’ Relief lifetime limit
• An increase in the Employment Allowance
• An increase in the rate of Structures and Buildings Allowance
• An increase and extension of business rates discounts
• Extended access to Statutory Sick Pay due to coronavirus
• An increase to the National Insurance thresholds
• Fuel duty to be frozen for the 10th consecutive year

Personal tax

Pensions changes

The pensions annual allowance (currently £40,000) is the maximum amount of tax-relieved pension savings that can be accrued in a year. However, for those on higher incomes, the annual allowance is reduced by £1 for every £2 that an individual’s ‘adjusted income’ exceeds £150,000, to a minimum annual allowance of £10,000. Adjusted income is broadly net income before tax with the addition of any pension accrual. The taper potentially applies to an individual with income before tax, without the addition of the pension accrual, above £110,000. This is known as the ‘threshold income’.

Adjusted income and threshold income will each be raised by £90,000 for 2020/21.  The threshold income will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance. The annual allowance will begin to taper down for individuals who also have an adjusted income above £240,000.

There is also a change to the minimum annual allowance. The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from 6 April 2020. This reduction will only affect individuals with adjusted income over £300,000.

Support during the coronavirus

The Prime Minister previously announced that the forthcoming COVID-19 Bill will temporarily allow Statutory Sick Pay (SSP) to be paid from the first day of sickness absence, rather than the fourth day, for people who have COVID-19 or have to self-isolate in accordance with government guidelines. The Budget sets out a further package to widen the scope of SSP and make it more accessible. The government will temporarily extend SSP to cover:

• individuals who are unable to work because they have been advised to self-isolate
• people caring for those within the same household who display COVID-19 symptoms and have been told to self-isolate.

Support for those ineligible for SSP

The government recognises that self-employed people and employees earning below the National Insurance Lower Earnings Limit are not entitled to SSP and will offer financial support to these individuals through a ‘new style’ Employment and Support Allowance and Universal Credit.

Child Trust Funds (CTFs)

Junior ISAs and its precursor CTFs allow tax free savings to be made for children under 18. There is no access to the investments until the child is 18. CTF accounts will start to mature in September 2020 when the first children reach 18. Without regulatory change the investments would lose their tax advantaged status. CTF and ISA regulations have therefore recently been made which:

• make sure that investments in CTF accounts retain their tax advantaged status post maturity, pending instructions from the account holder
• allow savings transferred from a matured CTF to be disregarded for the annual ISA subscription limit.

Junior ISA and CTF annual subscription limits

The annual subscription limit for Junior ISAs and CTFs will be increased from £4,368 to £9,000 for 2020/21.

Income tax and personal savings

The Chancellor announced the following income tax rates and allowances.

Income tax rates and bands

Income tax rates in Scotland and Wales on income other than savings and dividend income have been devolved.

Savings income

A starting rate for savings band of £5,000 at 0% may be available unless taxable non-savings income exceeds the starting rate band.

Dividend income

Personal allowances

Scottish income tax rates and bands

Savings and dividend income are taxed using UK rates and bands.

Welsh income tax rates

Although income tax for Wales has been devolved, Welsh resident taxpayers continue to pay the same overall rates as taxpayers in England and Northern Ireland.

Employment taxes

National Insurance thresholds

The government has recently announced National Insurance thresholds for 2020/21. Most thresholds will rise with inflation. Two thresholds, however, will rise by 10% from £8,632 to £9,500:

• the primary threshold – which sets the level at which employees start to pay Class 1 National Insurance contributions (NICs)
• the lower profits limit – which sets the level at which the self-employed start to pay Class 4 NICs.

The upper thresholds which apply to these two classes of NICs remain at £50,000.

Off-payroll working in the private sector

The changes to the off-payroll working rules (commonly known as IR35), which came into effect in April 2017 for the public sector, will be extended to the private sector from April 2020. Draft legislation has been issued. The new rules apply to payments made for services provided on or after 6 April 2020.

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.

Only medium and large businesses will be subject to the 2020 rules, so small businesses will not need to determine the status of the off-payroll workers they engage. A small company is one which meets two of these criteria: its annual turnover is not more than £10.2 million: it has not more than £5.1 million on its balance sheet: it has 50 or fewer employees. For unincorporated organisations it is only the annual turnover test that applies.

Review

In January 2020, the government announced a review of the implementation of the April 2020 reform, to address concerns from affected businesses and individuals. The government has confirmed the changes will go ahead but:

• businesses will not have to pay penalties for errors relating to off-payroll working in the first year, except in cases of deliberate non-compliance
• there will be a legal obligation on clients to respond to a request for information about their size from the worker or the fee-payer.

Employer provided cars

The scale of charges for calculating the taxable benefit for an employee who has use of an employer provided car is computed by reference to bands of CO2 emissions multiplied by the original list price of the vehicle. The maximum charge is capped at 37% of the list price of the car.

For 2019/20 the rates increased by 3% from the rates applying for 2018/19.

The government announced in Budget 2017 that CO2 emissions for cars registered from April 2020 will be based on the Worldwide Harmonised Light Vehicles Test Procedure (WLTP). Draft legislation has been issued to amend the previously planned benefit percentages for 2020/21 through to 2022/23:

• All zero emission cars will attract a reduced percentage of 0% in 2020/21 and 1% in 2021/22, before returning to the planned 2% rate in 2022/23.
• For cars registered before 6 April 2020, the current test procedure will continue to apply and there are no further changes to percentages previously set for 2020/21. These rates will be frozen at the 2020/21 level for 2021/22 and 2022/23.
• For cars first registered from 6 April 2020 most rates will reduce by 2% in 2020/21 before returning to planned rates over the following two years, increasing by 1% in 2021/22 and 1% in 2022/23.

Employment Allowance

The Employment Allowance provides businesses and charities with relief from their employer NICs bill. Regulations have been issued to restrict the Employment Allowance, from 6 April 2020, to those employers whose employer NICs bill was below £100,000 in the previous tax year. Employers who are connected to other employers (such as companies within a group) will need to add together all of their employer Class 1 NICs liabilities incurred in the tax year prior to the year of claim to determine eligibility.

The maximum Employment Allowance will be increased from £3,000 to £4,000 with effect from 6 April 2020.

From 6 April 2020 the Employment Allowance will operate as de minimis State aid. This means it will count towards the total aid a business is entitled to under the relevant de minimis State aid cap.

Loan Charge review

The Loan Charge tackles disguised remuneration tax avoidance schemes. These are tax arrangements that seek to avoid income tax and NICs by paying income to individuals in the form of loans, usually via an offshore trust, with no expectation that the loans will ever be repaid. The charge applies to any loans made through disguised remuneration schemes after 6 April 1999, which had not been repaid by 5 April 2019.

Draft legislation has been issued to amend the scope of the Loan Charge:

• It will now only apply to outstanding balances of disguised remuneration loans made between 9 December 2010 and 5 April 2019 inclusive.
• It will not apply to loans made in tax years before 2016/17 where a reasonable disclosure of the use of a disguised remuneration tax avoidance scheme was made within the relevant tax return or associated documents where appropriate, and HMRC failed to take any action (for example by opening an enquiry).
• Those affected by the Loan Charge will be able to elect to split their loan balance over three consecutive years 2018/19 to 2020/21 (rather than the full charge arising in 2018/19).
• The date by which the additional information form must be returned to HMRC will move from 1 October 2019 to 1 October 2020. The form requires taxpayers to provide full information to HMRC relating to any outstanding disguised remuneration loans for which they will need to make tax payments.

National insurance

2020/21 Class 1 (employed) rates

Entitlement to contribution-based benefits for employees retained for earnings between £120 and £183 per week.
The employer rate is 0% for employees under 21 and apprentices under 25 on earnings up to £962 per week.

Minimum wage

Increases in the National Minimum Wage and National Living Wage rates now occur in April each year.

Apprentice rates apply to those under 19, or 19 or over and in the first year of their apprenticeship. National Living Wage applies to those aged 25 and over.

Tax and Travel

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The fuel only advisory rates below relate to company cars only and apply from 1 March 2020.

For those using their own vehicle the following mileage allowance payments apply.

Car benefits

Business tax

Corporation tax rates

Corporation tax rates have already been enacted for periods up to 31 March 2021.

The main rate of corporation tax is 19%. The rate for the Financial Year beginning on 1 April 2020 was due to fall to 17% but the Chancellor has announced the rate will remain at 19%.

Capital Allowances: Structures and Buildings Allowance

The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax.

Enhanced Capital Allowances in Enterprise Zones

The government has announced the 100% first year allowance for investment in new plant and machinery within designated assisted areas within Enterprise Zones will remain available for expenditure incurred in relation to all areas, whenever designated, until at least 31 March 2021.

First year allowances for business cars from April 2021

The government has announced an extension to 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 WDAs for business cars.

Research and Development (R&D) tax relief

The rate of tax credit for companies falling within the Research and Development Expenditure Credit (RDEC) scheme will rise by 1% to 13% from 1 April 2020. This relief is given as an above the line credit for companies undertaking qualifying R&D.

Budget 2018 announced that, from 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year. The government has now announced the implementation of the restriction will be delayed to 1 April 2021.

Corporation tax loss relief

Draft legislation has been issued to extend the rules that potentially limit the use of brought forward losses to include brought forward capital losses. Companies (and corporate groups) will continue to have a £5 million ‘deductions allowance’ before restrictions apply.

The changes will have effect where carried forward capital losses are used to offset chargeable gains accruing from 1 April 2020.

Intangible fixed assets

The government has announced an extension to corporation tax relief for intangible fixed assets. All pre-Finance Act 2002 intangible assets acquired from 1 July 2020 will come within the intangible fixed asset regime, subject to certain transitional provisions.

Digital Services Tax

The government has confirmed a new 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. The tax only applies when the group’s worldwide revenues from these digital activities are more than £500 million and more than £25 million of these revenues are derived from UK users.

The tax will apply from 1 April 2020.

Freeports

The government is consulting on proposals to create up to ten freeports across the UK which would have different customs rules to those which apply in the rest of the UK.

The government is considering a UK freeport model which would include multiple customs zones located within or away from a port, as well as a type of special economic zone (SEZ) designated over or around the customs zones. The government intends to work with the devolved administrations to develop proposals to allow freeports to be created in Scotland, Wales and Northern Ireland, in addition to those in England.

The proposals include the following customs and tariff benefits for businesses bringing goods into a freeport site:

• duty suspension, with no tariffs, import VAT or excise to be paid on goods brought into a freeport from overseas until they leave the freeport and enter the UK’s domestic market
• duty inversion, if the duty on a finished product is lower than that on the component parts, allowing businesses to import components duty free, manufacture the final product in the freeport, and then pay the duty at the rate of the finished product when it enters the UK’s domestic market
• duty exemption for re-exports, allowing businesses to import components duty free, manufacture the final product in the freeport and pay no tariffs when the final product is re-exported
• simplified customs procedures for businesses accessing freeports.

Business rates

Business rates have been devolved to Scotland, Northern Ireland and Wales. The government has already announced that, for one year from 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England will increase from one third to 50% and will be expanded to include cinemas and music venues. To support small businesses in response to COVID-19, the retail discount will be increased to 100% and expanded to include hospitality and leisure businesses for 2021.

The government previously committed to introducing a £1,000 business rates discount for pubs with a rateable value below £100,000 in England for one year from 1 April 2020. To further support pubs, in response to COVID-19 the discount for pubs will be increased to £5,000.

The government is launching a fundamental review of business rates to report in the autumn. A call for evidence will be published in the spring.

Time to Pay

The government will ensure that businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs.

HMRC has set up a dedicated COVID-19 helpline to help those in need, and they may be able to agree a bespoke Time to Pay arrangement. Time to Pay gives businesses a time-limited deferral period on HMRC liabilities owed and a pre-agreed time period to pay these back.

Statutory Sick Pay

The government will support small and medium-sized businesses and employers to cope with the extra costs of paying COVID-19 related SSP by refunding eligible SSP costs. The eligibility criteria for the scheme include:

• the refund will be limited to two weeks per employee
• employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020
• employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
• employers should maintain records of staff absences, but should not require employees to provide a GP fit note
• the eligible period for the scheme will commence from the day on which the regulations extending SSP to self-isolators come into force.

Capital taxes

Capital gains tax (CGT) rates

The current rates of CGT are 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:

• Entrepreneurs’ Relief (ER). 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.

Investors’ Relief has a lifetime limit of £10 million, however the lifetime limit position for ER has been changed in the Budget and is considered further below.

CGT annual exemption

The CGT annual exemption is £12,000 for 2019/20 and £12,300 for 2020/21.

Entrepreneurs’ Relief (ER)

The lifetime limit is reduced from £10 million to £1 million for ER qualifying disposals made on or after 11 March 2020.

There are special provisions for disposals entered into before 11 March 2020 that have not been completed.

Private Residence Relief (PRR)

Draft legislation has been issued to make changes to the PRR regime from 6 April 2020. For properties that have not been occupied throughout the period of ownership, available deductions for capital gains tax purposes will be amended as follows:

• the final period exemption will be reduced from 18 months to nine months (there are no changes to the 36 months that are available to disabled persons or those in a care home)
• lettings relief will be reformed so that it only applies in those circumstances where the owner of the property is in shared occupancy with a tenant.

Payments on account and 30 day returns

Legislation has been enacted to change reporting obligations for residential property gains chargeable on UK resident individuals, trustees and personal representatives. Also introduced is a requirement to make a payment on account of the associated CGT liability. For disposals made on or after 6 April 2020:

• a tax return is required if there is a disposal of UK land on which a residential property gain accrues
• CGT is required to be computed on the reported gain in the tax return.

The return needs to be filed and the CGT paid within 30 days of the completion date of the property disposal.

The new requirements do not apply if a chargeable gain does not arise, for example where the gains are covered by PRR.

Inheritance tax (IHT) nil rate bands

The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount until April 2021. An additional nil rate band, called the ‘residence nil rate band’ (RNRB), continues to be phased in. For deaths in 2019/20 it is £150,000 rising to £175,000 for deaths in 2020/21. Thereafter it will rise in line with CPI.

Stamp Duty Land Tax (SDLT) surcharge

A SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland is to go ahead. The 2% surcharge is to take effect from 1 April 2021. Where contracts are exchanged before 11 March 2020 but complete or are substantially performed after 1 April 2021, transitional rules may apply.

Other matters

VAT

E-publications

The government will introduce legislation to apply a zero rate of VAT to e-publications from 1 December 2020, to make it clear that e-books, e-newspapers, e-magazines and academic e-journals are entitled to the same VAT treatment as their physical counterparts.

Tampon tax

From 1 January 2021 the government will apply a zero rate of VAT to women’s sanitary products.

Postponed accounting

From 1 January 2021 postponed accounting for VAT will apply to all imports of goods, including those from the EU.

Plastic Packaging Tax

This will be a new tax that applies to plastic packaging produced in or imported into the UK that does not contain at least 30% recycled plastic. The tax rate will be £200 per tonne of non-compliant plastic packaging. A consultation on the design and implementation of the tax has been issued and the tax is to take effect from April 2022.

Duties

Alcohol and tobacco duties

The duty rates remain frozen for beer, spirits, wine and made-wine, still and sparkling cider and perry.

The duty rate on all tobacco products will continue to increase by 2% above RPI inflation. The duty rate on hand-rolling tobacco will increase by a further 4%. These rates will have effect from 11 March 2020.

Fuel duty

Fuel duty will be frozen for the 2020/21 tax year.

What They Said…

‘This is the Budget of a government that gets things done.’

Rishi Sunak, Chancellor of the Exchequer

‘The reality is that this is a Budget that is an admission of failure – an admission that austerity has been a failed experiment.’

Jeremy Corbyn, Leader of the Labour Party 

‘In deeply challenging times, the Chancellor has worked against the clock to deliver two Budgets in one: a first for national resilience today and a second for economic ambition tomorrow.’

Dame Carolyn Fairbairn, Director General of the Confederation of British Industry

‘This is a pro-small business Budget, which has delivered a high streets bonus, a series of Conservative manifesto promises to small businesses, and emergency steps to support small firms through the coronavirus outbreak.’

Mike Cherry, National Chairman of the Federation of Small Businesses

‘The Budget has addressed the immediate challenges facing the economy, but the Chancellor will have to do more to support businesses as they navigate changes to trading arrangements and the end of the Brexit transition period.’

Dr Adam Marshall, Director General of the British Chambers of Commerce 

2020/21 Tax Calendar

This Budget Report was prepared immediately after the Chancellor’s Budget Statement based on official press releases and supporting documentation. The Budget proposals are subject to amendment before the Finance Act receives Royal Assent. This Report is for guidance only, and professional advice should be obtained before acting on any information contained herein. No responsibility can be accepted by the publishers or the distributors for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

The post Sunak delivers Budget to meet ‘challenging times’ appeared first on Assure Accountants.

You may be doing this already, which is fantastic, but it’s important you regularly review your tax planning strategies to see if they are still tax-efficient. Plus, changes which were announced in the 2018 Budget means some of these strategies may have changed. As an owner – manager of a business, here are some things that our team think you need to be aware of:

Capital allowances

The Chancellor announced in the 2018 Budget there will be a temporary increase to the Annual Investment Allowance (AIA) from £200,000 to £1 million. This is available for capital expenditure, such as plant and machinery which is purchased from 1^st January 2019 to 31^st December 2020.

While most welcome this increase. It may cause problems for some businesses whose chargeable period spans 1^st January 2019. If this is the case the business’ transitional chargeable period comprises of:

1. the AIA entitlement, based on the £200,000 cap for the portion of the period falling before 1 January 2019
2. the AIA entitlement, based on the temporary £1,000,000 annual cap for the portion of the period falling on or after 1 January 2019

Source: HMRC

The business’ maximum Annual Investment Allowance for their transitional period would be the total of i. + ii.

For example, a business who has a chargeable period of 1 June 2018 to 31st May 2019, their maximum AIA would be:

1. Proportion for the period 1 June to 31^st December 2018 is 7/12 x £200,000 = £116,666
2. Proportion for the period 1 January to 31st May 2019 is 5/12 x £1,000,000 = £416,666

Total of £116,666 + £416,666 = £533,332.

In some cases, it may be appropriate to revise the chargeable period to align it with the calendar year.

Employer pension contributions

Employers can make a lump sum contribution into an employee’s pension scheme. And, as it’s classed as an allowable business expense, it can be deducted off the business’ profits, therefore reducing the amount of Corporation Tax that is due.

However, at your year-end, you can’t account for future pension contributions as they must be paid by the year-end for it to be a deductible expense. Also, if you plan on making a large contribution, this may have to be spread across the year.  To understand more about the deductibility and amounts that can be claimed, our directors can assist on +44 330 174 4922.

Claim for everything you can

Every business has 12 months after its accounting period ends to file a Company Tax Return, and a further 12 months to make amendments to this return.

It’s important that you use this period to check to see if there is anything else you can claim for. Such as losses against the previous year’s profit. Or, tax reliefs such as the ‘creative industry relief’ which is available to companies who work in TV and film industry.

Something else worth considering, is if the business has acquired commercial property with fixtures that may be eligible for capital allowances, then the business has two years from the purchase date to raise a query in conjunction with the vendor, to agree on how much of the purchase price is eligible for capital allowances and maybe AIA.

If you’re looking to get your year-end planning back on track, there is no better time to do it. Speak to one of our Directors on +44 330 174 4922 to discuss these points further in detail, or send us a brief message through our website and we’ll call you back.

The post Year-end planning 2018/19 – get your strategy on track appeared first on Assure Accountants.