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Tax



The Spring Statement is usually intended only to be an economic update, but with inflation hitting a 30-year high of 6.2% in February, the Chancellor has been under pressure to deliver something akin to a mini-Budget.

Here are the highlights………..

Income tax

Sunak announced “for the first time in 16 years” a 1% cut in income tax before the end of the Parliament in 2024. Sunak said this would be a £5bn tax cut. 

In the shock rabbit-out-of-the hat announcement at the end of his speech, Sunak announced “for the first time in 16 years” a 1% cut in income tax before the end of the Parliament in 2024. Sunak said this would be a £5bn tax cut. 

National Insurance

Sunak confirmed that the planned 1.25% increase in national insurance will go ahead next month to raise cash for health and social care. 

However, the Chancellor tried taking the sting out of this roll of the new health and social care levy by increasing the NIC threshold by £3,000 instead of the planned £300. He said this would equalise the NIC and income tax thresholds in one go from July. 

This takes the new NI threshold to £12,570. This is apparently the best way to help low and middle income workers.

 

Minimum wage

We will see an increase in the minimum wage from next month.

For those over the age of 23, the rise to £9.50 an hour will see an increase of over £1,000 a year for a full-time worker.

Those aged between 21-22 will rise to £9.18 per hour

Those aged between 18-20 will rise to £6.83 per hour

Those aged between 16-17 will rise to £4.81 per hour

VAT on energy saving materials

Sunak has scrapped the 5% VAT rate on energy saving insulation and solar panels.

He announced that for the next five years, homeowners having materials like solar panels, heat pumps or insulation installed will no longer pay 5% VAT – they will pay zero. 

He also confirmed that the government will reverse the EU’s decision to take wind and water turbines out of scope and zero rate them. “And we will abolish all the red tape imposed on us by the EU,” he said.

 

Fuel duty

As costs continue to spiral at the pumps, Sunak’s decision to slash fuel duty had been strongly expected. 

The 5p per litre is now in effect and is worth £5bn. However, Richard Murphy pointed out on Twitter, “Fuel duty being cut by 5p per litre, which is less than the increase in VAT now being paid on each litre of fuel bought. In other words, this is costing him nothing.” 

Fuel duty was previously frozen for 12 months at the Autumn Budget in October last year. 

R&D tax relief

Sunak stated that an overhaul on R&D tax relief is needed as it is clearly not working as well as it should for small and medium-sized companies. 

“Right now we know that the amount businesses spend on R&D as a percentage of GDP is less than half the OECD average. And that is despite us spending more on tax reliefs than almost every other country. Something is not working,” he said.

So Sunak confirmed that the government will reform R&D tax credits so that “they’re effective and better value for money. [This] will expand the generosity of the release to include data cloud computing and pure maths. And we’ll consider in the autumn whether to make the R&D expenditure credit more generous.”

Super Deduction Allowance

Prompted by the end of the super deduction scheme in March 2023 the Chancellor had also faced calls from business for more investment and even an extension to the tax break. Sunak alluded to this and we can expect more of this in the Autumn Budget.

 

Timeline:

March 2022

Cutting fuel duty on petrol and diesel by 5p per litre

April 2022

Cutting taxes on small businesses by up to £1,000 – by raising the Employment Allowance to £5,000

Minimum wage rise

VAT cut to energy saving materials

July 2022

Aligning the annual National Insurance Primary Threshold and Lower Profits Limit with the income tax personal allowance, making the first £12,570 of earnings tax free

April 2023

Cutting taxes on business investment – by reforming Capital Allowances and R&D tax reliefs

April 2024

Cutting the basic rate of income tax from 20% to 19%

 

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Tax

No doubt you will have all heard some/all of the budget update yesterday afternoon and I appreciate many of you are eager to know how it will affect you and your business.

Whilst there were many rumours of increases to certain taxes; mainly corporation tax and capital gains tax, the changes are not as expected.


The main areas to summarise on, are below:

CJRS – the job retention scheme will be extended to 30 September 2021. The scheme currently in progress will extend to the end of June and then the claim will be reduced on a sliding scale from months July to September. 

SEISS – Grants for the self-employed are to be awarded. The fourth grant, which was delayed, can be applied for from the end of April 2021. We do not have an exact date as yet. The fifth grant, which is new, can be applied for at the end of July 2021.

Eligibility remains the same as before, meaning that your profits must have decreased to be eligible, but the rule regarding the 2018/19 has changed. The government are now allowing those who filed a 2019/20 return by 2 March 2021 to apply!

Apart from the above eligibility, you must also be submitting a self-employment tax return for 2020/21.

The fourth grant will be based on 80% of trade profits (per the previous grant), but the fifth grant will differ. This will be dependent on how much your sales have decreased. If your sales have gone down by more than 80%, then you will get a grant for 80% of trade profits, but if you sales have decreased by less than 30%, then your grant will be for 30% of trade profits.

PA – the personal allowance of £12,500 in 2020/21 will be increased to £12,570 and frozen until 2026. The basic rate band will be increased from £37,500 to £37,700 in 2021/22, meaning that you can earn up to £50,270 before going into high rate tax of 40%.

Self-assessment tax returns – For those who took advantage of the deadline extension from HMRC, make sure you avoid the 5% late payment penalty. If you have paid your tax on time, there is no need to worry. Equally, if you have set up a payment plan with HMRC which is agreed by 1 April 2021, you will not be penalised.  

As a reminder, anyone who cannot pay their bill in full can apply to spread the cost. Taxpayers can set up a payment plan, in up to 12 monthly instalments, via GOV.UK, provided that they meet the following requirements.

>They have no:
-outstanding tax returns
-other tax debts
-other HMRC payment plans set up

>The debt is between £32 and £30,000
>The payment plan is set up no later than 60 days after the due date for payment but ideally as soon as possible – and certainly before 1 April to avoid a 5% late payment penalty.


Those who do not meet these requirements, or who need more than 12 months to pay off their bill, can apply for a payment plan by speaking to one of HMRC’s debt advisers.

Minimum wage – An increase will be applied from 1 April 2021. Please see the new rates below:

Age

23 and over

21-22

18-20

Under 18

Apprentice

Rate from 01.04.2021

£8.91

£8.36

£6.56

£4.62

£4.30

 

Corporation tax – This is to rise from April 2023 and the marginal rate relief is being re-introduced.

For those companies with profits under £50,000, the rate will remain at 19%

For those companies with profits over £250,000 the rate will be 25%

For those with profits between £50,000-£250,000, a marginal relief will be applied, meaning you will be taxed somewhere between the two.

R&D – Anti-abuse rules are coming into play from 1 April 2021 so those applying for R&D tax credits will be eligible up to a maximum of £20k in repayments per year plus three times the company’s total PAYE/NI liability.

Group companies – the 51% group rule is being replaced by an associated companies rule, so the corporation tax rate applied will be calculated based on the 51% related group company definition.

An associated company will be either a company that has control of another OR both companies are under control of the same person/group/persons.

Capital allowances – Annual Investment Allowance (AIA) of £1m has been extended until 1 January 2022. This means that you will get 100% tax relief on qualifying plant and machinery purchased by your business.

The new Super-Deduction Relief is being introduced from 1 April 2021 until 31 March 2023. This allows companies investing in qualifying new plant and machinery to benefit from 130% first year capital allowances. This allows companies to cut their tax bill by up to 25p for every £1 invested.

Certain expenditures will be excluded. The general exclusions at s46 will apply. In addition, there will be exclusions for used and second-hand assets and expenditures on contracts entered into prior to 3 March 2021 even if expenditures are incurred after 1 April 2021. Plant and machinery expenditure which is incurred under a Hire Purchase or similar contract must meet additional conditions to qualify for the super-deduction and special rate relief. Further information will be available soon.

VAT – The temporary reduced 5% VAT rate within the hospitality sector will remain at this level until 30 September 2021. After this, the rate will increase to 12.5% until 31 March 2022, before returning to 20% from 1 April 2022.

Those who took advantage of the VAT deferral scheme for VAT returns between 20 March and 30 June 2020, can apply for the VAT deferral payment scheme where the VAT is paid over 11 months from March 2021. To take the advantage of VAT deferral, businesses will need to join the new payment scheme.

The online service is open between 23 February 2021 and 21 June 2021. The new scheme allows the payment of deferred VAT in equal instalments, interest free. 

Businesses can join the scheme by clicking on this link. Before joining, you must:

  •  Create your own Government Gateway account (if you do not already have one)
  •  Submit any outstanding VAT returns from the last four years – otherwise you’ll not be able to join the scheme
  •  Correct errors on your VAT returns as soon as possible
  •  Make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid.


Capital Gains Tax – There has surprisingly been a freeze on the annual exemption of £12,300 until 2026. CGT rates of 10%/20% and 18%/28% on properties has also been frozen currently, but we could well see an increase in future budgets.

Entrepreneurs relief has also been frozen at 10% on the first £1m of gains when selling qualifying business assets.

EIS/SEIS/VCT – these regimes all remain unchanged

SDLT – The current stamp duty holiday will be extended from 31 March 2021 to 30 June 2021. This means that buyers will not pay stamp duty on properties up to £500,000 (3% stamp duty will be charged if a buy-to-let property). The property purchase must be completed before 30 June 2021 in order for the relief to be applied.

New 5% mortgages – The government has created a new mortgage scheme for home buyers, designed to help those with a 5% deposit.  The following link will give further information around the latest government scheme https://www.moneysavingexpert.com/mortgages/new-mortgage-scheme-for-5-deposit/

Universal credit – An uplift of £20 per week will continue for a further six months for those claiming universal credit and working tax credit.

Restart Grant – These will be worth 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 be administered by your local council, so we would advise going to their website to find out how to apply.

 

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Tax

Stamp Duty

Currently, the threshold for paying stamp duty on residential properties is £125,000 in England and Northern Ireland, unless you are a first time buyer, where the threshold is £300,000 (only if the property value is under £500,000).

However, as from 8th July 2020, Chancellor Rishi Sunak announced the threshold will be temporarily raised to £500,000 until 31 March 2021.

This change is to help economic growth in ‘boosting’ the property market and the Treasury have said this change will help nine out of 10 people during this period as they will have no stamp duty to pay as a result.

Green Homes Grant Scheme

The Chancellor also announced vouchers up to £5,000 for homeowners making energy efficient improvements to their properties.

The new Green Homes Grant Scheme offers eligible homeowners vouchers to help pay for environmentally friendly improvements. These improvements include the installation of insulation or double glazing within the home.

For low income households, the government will offer vouchers up to £10,000.

This scheme can be applied for from September 2020.

Eat Out to Help Out Scheme

As a business, you are required to register for the scheme from 13th July 2020, which enables your business to offer a discount to diners, encouraging them to eat at your restaurant.

The scheme covers the period 3rd to 31st August 2020 and is an all-day scheme Monday to Wednesday only.

The scheme offers a 50% discount up to a maximum of £10 per person on food and non-alcoholic drinks and only applies to customers eating in.

The business is then required to make a claim from the government, with registration closing on 31st August 2020.

A list of all participating restaurants, cafe’s and pubs will be published by the government which can be accessed via their website in due course.

The discount will be automatically added for customers and can be used in conjunction with standard discount vouchers. Standard vouchers will be applied to your bill before the government discount is applied.

Alcohol and service charges are excluded from this scheme.

VAT

In addition to the above scheme, the hospitality and tourism sectors will see a reduction in VAT from 20% to 5% as from 15th July. This is a temporary reduction that is due to end on 12th January 2021.

Employers Bonus

A new Job Retention Bonus is being awarded to firms who retain their furloughed staff. Employers within the UK will receive a one-off bonus of £1,000 for every furloughed worker who remains continuously employed through to 31st January 2021.

In order for employers to be eligible, employees must earn at least £520 per month on average between the end of the furlough scheme in October 2020 to 31st January 2021.

These bonuses will be paid to employers from February 2021.

Further details regarding the scheme is due to be released by the end of July 2020.


Further information can be found via the below HMRC links:
Eat Out to Help Out Scheme
UK Recovery Plans
Stamp Duty
Green Homes Scheme

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Tax

The Government has announced an unprecedented package of support for businesses and individuals affected by Covid-19.

The draft legislation Coronavirus Bill 2019-21 include an amendment to support self-employed people a statutory
self-employment pay.

The draft amended legislation is:

Statutory self-employment pay

(1) The Secretary of State must, by regulations, introduce a scheme of Statutory Self-

Employment Pay.

(2) The scheme must make provision for payments to be made out of public funds to individuals who are:

(a) self-employed, or

(b) freelancers.

(3) The payments to be made in subsection (2) are to be set so that the net monthly

earnings of an individual specified in subsection (2) do not fall below:

(i) 80 per cent of their monthly net earnings, averaged over the last three years, or

(ii) £2,917

whichever is lower.

(4) No payment to be made under subsection (2) shall exceed £2,917 per month.

(5) A statutory instrument containing regulations under this section is subject to annulment in

pursuance of a resolution of either House of Parliament.

The purpose of this amendment is to make the Government ‘top up’ self-employed workers’ earnings
to the lower of 80% of their net monthly earnings averaged over three years, or £2,917 a month.

The passage of the Bill may result in other amendments or even removal of the above.


OTHER SUPPORT AVAILABLE:

Employment Support Allowance

Self-employed people unable to work because they are directly affected by Covid-19 or self-isolating will be eligible for
Contributory Employment and Support Allowance.  This is now payable from the first day of sickness, rather than the eighth.

Eligible claimants under 25 will be entitled to £57.90 per week, and over 25’s £73.10 per week.

VAT Deferral

All UK VAT registered businesses, including charities, can defer VAT payments due with their VAT returns between 20 March 2020 until 30 June 2020.

No UK VAT registered business will have to make a VAT payment alongside their VAT return to HMRC in that period.

Normal VAT payment due during this period are 7 April, 7 May or 7 June 2020 or the monthly payments due on each of these dates.

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period.

Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period.

VAT refunds and reclaims will be paid by the government as normal.

The deferral is only for the VAT payment, businesses are supposed to file the VAT returns by normal due dates.

Smaller companies with direct debits to pay VAT to HMRC will also need to cancel these immediately otherwise the money will be deducted automatically. The Treasury said it could not cancel them unilaterally.

Income tax deferral

For Income Tax Self-Assessment, payments due on the 31st of July 2020 will be deferred until the 31st of January 2021.

This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.

HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of Covid-19 and have outstanding tax liabilities.

Useful links (regularly updated):

HMRC Time to Pay help (click here)

COVID-19 support for business (click here)

COVID-19 guidance for employees (click here)

 

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Tax
This week, the Chancellor of the Exchequer; the Rt Hon Rishi Sunak MP, delivered the government’s Budget 2020.

The most important of the tax announcements was probably the reduction in the Entrepreneurs’ relief lifetime allowance from £10m to £1m.
Given that there was a head of steam building up for its complete abolition, most will be relieved that a significant level of relief has been retained.

There was little of direct impact for individuals, although the zero-rating of electronic books and publications from December 2020 will bring welcome price reductions in the run up to Christmas.

We have summarised some of the key measures for you below:

 

       2019/20

        2020/21

 

              £

              £

Income tax rates: England and Wales only
(non-dividend income)

 

 

0% starting rate for savings only (note 1)

      Up to 5,000

     Up to 5,000

20% basic rate tax

   12,501-50,000

   12,501-50,000

40% higher rate tax

 50,001-150,000

  50,001-150,000

45% additional rate tax

  Above 150,000

  Above 150,000

Scottish rates of income tax (non-dividend income)                                                   

19% starting rate

   12,501-14,549

   12,501-14,585

20% basic rate tax

   14,550-24,944

   14,586-25,158

21% intermediate rate tax

  24,945-43,430

   25,159-43,430

41% higher rate tax

  43,431-150,000

  43,431-150,000

46% top rate

  Above 150,000

  Above 150,000

Note 1: Scottish taxpayers pay the same tax as the rest of the UK on dividends and savings interest.


 

      2019/20

     2020/21

Income tax rates (dividend income)

 

Dividend allowance    

       £2,000

       £2,000

Dividend ordinary rate (for dividends within basic rate band)

         7.50%

        7.50%

Dividend upper rate (for dividends within higher rate band)  

        32.50%

       32.50%

Dividend additional rate (for dividends above higher rate band)

        38.10%

       38.10%

Child benefit/guardian’s allowance rates

 

 

Higher rate (eldest or only child) (per week)

          20.7%

        21.05%

Other children

          13.7%

        13.95%

Guardian’s allowance per week

          17.6%

         17.90%

1      An income tax charge will apply to taxpayers with ‘adjusted net income’ exceeding £50,000 in a tax year, when child benefit is also received by them or their partner. The charge will reduce the financial benefit of receiving child benefit for those with income between £50,000 and £60,000 and remove it completely for taxpayers with income above £60,000.

2      From January 2021, no child benefit payments are made in respect of children living overseas. This will apply to EEA migrants arriving in the UK under the new immigration system.

Personal allowances

             £

            £ 

Personal allowance (note 1)

         12,500

        12,500

Dividend allowance

          2,000

        2,000

Maximum married couple’s allowance for those born before 6 April 1935 (note 2) 

            8,915

         8,915

Married couple’s allowance – minimum amount 

          3,450

         3,450

Micro entrepreneur’s allowance: individuals making property or trading incomes below the level of the allowance will no longer need to declare or pay tax, while those whose income exceeds the allowance have the choice of simply deducting the allowance instead of calculating their exact expenses or calculating their profits in the normal manner

     Allowance:
          1,000
          each

    Allowance:               1,000
          each

Income limit (note 3)

        100,000

       100,000

Income limit for married couple’s allowance: born before 6 April 1935 

           29,600

         29,600

Blind person’s allowance

            2,450

          2,450

Rent-a-room relief

            7,500

          7,500

Transferable/shareable tax allowance for married couples and civil partners (note 4)

            1,250

           1,250


 

       2019/20

     2020/21

 

              £

            £

Personal savings allowance for basic rate taxpayers (note 5)

           1,000

         1,000

Personal savings allowance for higher rate taxpayers

              500

          500

Personal savings allowance for additional rate taxpayers

                 0

             0

Note 1: From 2016/17 onward, all individuals are entitled to the same personal allowance, regardless of the individual’s date of birth. This allowance is subject to the £100,000 income limit which applies regardless of the individual’s date of birth.

Note 2: This allowance is reduced by £1 for every £2 of income in excess of the income limit, but married couple’s allowance will not reduce below £3,450.

Note 3: Personal allowances are subject to the £100,000 income limit, which applies regardless of the individual’s date of birth. The individual’s personal allowance is reduced where their income is above this limit. The allowance is reduced by £1 for every £2 above the limit, down to zero.

Note 4: This allowance is available to married couples and civil partners who are not in receipt of married couple’s allowance. A spouse or civil partner who is not liable to income tax, or not liable at the higher or additional rates, can transfer this amount of their unused personal allowance to their spouse or civil partner. The recipient must not be liable to income tax at the higher or additional rates.

If the couple marry or register a civil partnership, they will get the allowance on a pro-rata basis for the rest of that tax year. If one of them dies or there is a divorce or separation, the allowance continues until the end of the tax year.

National insurance

 

 

Lower earnings limit, primary class 1 (per week)

          £118

         £120

Upper earnings limit, primary class 1 (per week)

          £962

          £962

Apprentice upper secondary threshold (AUST) for under 21s/25s

          £962

          £962

Primary threshold (per week)

           £166

         £183

Secondary threshold (per week)

           £166

         £169

Employment allowance (per year/employer) (note 1)

          £3,000

        £4,000

Employee’s primary class 1 rate between primary threshold and upper earnings limit

             12%

           12%

Employee’s primary class 1 rate above upper earnings limit

              2%

            2%

Married woman’s reduced rate between primary threshold and upper earnings limit

           5.85%

          5.85%

Married woman’s rate above upper earnings limit

           2.00%

          2.00%

Employer’s secondary class 1 rate above secondary threshold

           13.80%

        13.80%


 

       2019/20

      2020/21

Class 2 rate (per week where profits are above small profits threshold)

         3.00%

         3.05%

Class 2 small profits threshold (per year)

         £6,365

          £6,475

Special class 2 rate for share fishermen (per week)

           3.65%

          3.70%

Special class 2 rate for volunteer development workers

           5.90%

          6.00%

Class 3 voluntary rate (per week)

          15.00%

          15.30%

Class 4 lower profits limit

           8,632%

          9,500%

Class 4 upper profits limit

         £50,000

        £50,000

Class 4 rate between lower profits limit and upper profits limit

            9.00%

            9.00%

Class 4 rate above upper profits limit

            2.00%

           2.00%

Note 1:

a)   From April 2020, this will be limited to employers with an employer NIC bill below £100,000 in the previous tax year.

b)   Any deemed payments made to off-payroll workers do not count towards the £100,000 employers (secondary) class 1 NICs total. You cannot claim employment allowance for these workers.

c)   Employment allowance cannot be claimed for off-payroll workers.

Pensions

              £

            £

Annual allowance (note 1)

         40,000

        40,000

Lifetime allowance

       1,055,000

       1,073,100

Money purchase annual allowance (note 2)

          4,000

          4,000

Note 1:

a)   The annual allowance is a limit to the total amount of contributions that can be paid to defined contribution pension schemes and the total amount of benefits that you can build up in defined benefit pension scheme each year, for tax relief purposes.

b)   From 2016/17 the annual allowance for those earning above the threshold income of £110,000 and £150,000 adjusted income is to be reduced on a tapering basis by £1 for every £2 of income, subject to a minimum allowance of £10,000. From 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, and the annual allowance will only begin to taper down for individuals who also have an adjusted income above £240,000.

c)   From April 2020, the annual allowance for individuals with total income (including pension accrual) of over £300,000 will reduce from £10,000 to £4,000.

Note 2: The annual allowance is currently capped at £40,000, although a lower limit of £4,000 may apply if you have already started drawing a pension.


 

       2019/20

      2020/21

Reliefs and incentives

 

 

Enterprise Investment Scheme (EIS) – maximum (note 1)

     £1,000,000

    £1,000,000

Venture Capital Trust (VCT) – maximum

        £200,000

     £200,000

Enterprise Management Incentive Scheme (EMI) – employee limit up to the value of £250,000 in a three-year period

        £250,000

      £250,000

Seed Enterprise Investment Scheme (SEIS) – maximum (note 2)

        £100,000

     £100,000

Social Investment Tax Relief (SITR) – maximum

     £1,000,000

   £1,000,000

Income tax relief on EIS schemes

             30%

         30%

Income tax relief on VCT schemes

             30%

         30%

Income tax relief on SEIS schemes

             50%

         50%

Income tax relief on SITR schemes

              30%

         30%

Note 1: From 6 April 2018, the annual limit is doubled to £2m, provided that any amount over £1m is invested in one or more knowledge-intensive companies.

Note 2: Capital gains tax reinvestment relief may also be available for investments made in 2018/19 on 50% of the amount invested.

Individual Savings Account (ISA):

             £

            £

ISA (NISA) annual limit

          20,000

       20,000

Junior ISA investment annual limit – under 18, living in the UK

           4,368

        9,000

Child Trust Fund annual limit

            4,368

         9,000

Lifetime ISA annual limit (note 1)

           4,000

         4,000

Note 1: To open a Lifetime ISA you must be 18 or over but under 40. Contributions can be made until age 50. The government will add a 25% bonus to the savings, up to a maximum of £1,000 per year. The lifetime ISA limit of £4,000 counts towards the annual ISA limit.

Capital gains tax

 

 

Rate

 

 

– basic rate tax payer

           10%

           10%

– higher rate tax payer

           20%

          20%

Gain on sale of residential property

  

– basic rate tax payer

            18%

          18%

– higher rate tax payer

             28%

          28%


 

       2019/20

      2020/21

Annual exemptions – individuals (per year)

          £12,000

       £12,300

Certain trusts for disabled persons (per year)

          £12,000

      £12,300

Other trusts (per year)

           £6,000

       £6,150

Entrepreneurs’ Relief lifetime limit (note 1)

     £10,000,000

    £1,000,000

Investors’ Relief lifetime limit

    £10,000,000

   £10,000,000

Entrepreneurs’/Investors’ rate

             10%

           10%

Chattels exemption

          £6,000

         £6,000

Note 1: Entrepreneurs’ Relief lifetime limit is reduced from £10m to £1m for disposals made on or after 11 March 2020.

Inheritance tax

 

 

Single person’s nil-rate band

     £1-£325,000

   £1-£325,000

Single person’s 40% band

   over £325,000

  over £325,000

Residence nil-rate band (RNRB) – maximum (note 1)

       £150,000

      £175,000

Reduced rate (note 2)

            36%

           36%

IHT rate (for chargeable lifetime transfers)

             20%

           20%

Married couples or civil partnerships allowance nil-rate band

       £650,000

      £650,000

Gifts to charities

         Exempt

        Exempt

Small gifts to same person

            £250

          £250

General gifts – annual exemption

           £3,000

         £3,000

Wedding gifts from parent

           £5,000

        £5,000

Wedding gifts from grandparent/party

          £2,500

        £2,500

Wedding gifts from other person

          £1,000

        £1,000

Note 1: The RNRB is available in respect of a main residence given away to children (including adopted, foster or stepchildren). Any unused nil-rate band transfers to the deceased’s spouse or civil partner, even where death predates the availability of the additional threshold. It applies in addition to the existing nil-rate band (NRB) or threshold (currently £325,000) if the individual and estate meet the qualifying conditions.

Note 2: The estate can pay inheritance tax at a reduced rate of 36% on some assets if you leave 10% or more of the net value to charity in your will.

Business Property Relief

 

 

Business or interest in a business and transfer if unquoted shareholdings

          100%

          100%


 

       2019/20

      2020/21

Taxation of trusts

 

 

Accumulation or discretionary trusts:

 

 

Trust income up to £1,000 – dividend type income (note 1)

          7.50%

          7.50%

Trust income up to £1,000 – all other income

           20%

            20%

Trust income over £1,000 – dividend type income (note 1)

          38.10%

         38.10%

Trust income over £1,000 – all other income

             45%

            45%

Interest in possession trusts:

 

 

Dividend type income

         7.50%

         7.50%

All other income

            20%

           20%

Note 1: Trustees do not qualify for the dividend allowance. This means trustees pay tax on all dividends depending on the tax band they fall within.

Corporation tax

 

 

All profits and gains (excluding determination agreements and diverted profits (note 1)

             19%

           19%

S455 tax on all loans made by close companies to participator

           32.50%

          32.50%

Capital allowances

 

 

Main writing-down allowance (reducing balance)

           18%

            18%

Special rate writing-down allowance (reducing balance)

            6%

             6%

Structures and buildings allowance (SBA)

             2%

              3%

Motor cars if CO2 > 50g/km but does not exceed 110g/km (note 1)   

            18%

            18%

Motor cars if CO2 > 110g/km (note 1)

             6%

             6%

FYA – New and unused motor cars if CO2 emissions are 50 g/km or less (or car is electric) (note 1)

           100%

          100%

Small pool write-off where WDV is £1,000 or less

            100%

          100%

First-year allowances for certain energy-saving/water-efficient products (note 2)

            100%

           NA

Annual investment allowance (AIA) (note 3)

       £1,000,000

     £1,000,000

Annual investment allowance

           100%

         100%

Note 1: From April 2021, the thresholds for FYA will be reduced from 50g/km to 0g/km. Main rate of 18% capital allowance will be applicable for business cars with CO2 emissions not exceeding 50g/k. Business cars’ CO2 emission exceeding 50g/km will be eligible for writing-down allowance at the special rate of 6%.

Note 2: From 1 April 2020 for incorporated businesses and from 6 April 2020 for unincorporated businesses, environmental enhanced capital allowances will be abolished.

Note 3: From 1 January 2019 the annual investment allowance is increased from £200,000 to £1m for investment made from 1 January 2019. This is temporarily increased for two years until 31 December 2020. The threshold will revert back to £200,000 from 1 January 2021.


 

       2019/20

      2020/21

Research and development tax credit rates

 

 

SME rate

           230%

         230%

Research and development SME payable credit

            14.5%

          14.5%

Research and development expenditure credit (RDEC) scheme

              12%

           13%

Film/High-end TV/videogames tax credit

              25%

           25%

Open-ended investment companies and authorised unit trusts

             20%

          20%

Patent box

 

 

Patent box

            10%

           10%

VAT

 

 

Standard rate

            20%

          20%

Reduced rate

             5%

           5%

Zero rate

             0%

           0%

Flat rate of VAT on gross turnover (for limited cost trader)

           16.5%

         16.5%

Normal scheme registration threshold

        £85,000

        £85,000

Deregistration threshold

         £83,000

        £83,000

Cash accounting scheme – maximum to join

      £1,350,000

     £1,350,000

Cash accounting scheme – exit threshold

      £1,600,000

     £1,600,000

Annual accounting scheme – maximum to join

       £1,350,000

      £1,350,000

Annual accounting scheme – exit threshold

        £1,600,000

     £1,600,000

Flat-rate scheme – maximum allowed to join

         £150,000

       £150,000

Flat-rate scheme exit threshold

         £230,000

      £230,000

 

 

 


 

       2019/20

      2020/21

Annual tax on enveloped dwellings (ATED)

             £ 

             £ 

More than £0.5m but not more than £1m

          3,650

         3,700

More than £1m but not more than £2m

          7,400

          7,500

More than £2m but not more than £5m

         24,800

         25,200

More than £5m but not more than £10m

          57,900

         58,850

More than £10m but not more than £20m

          116,100

         118,050

More than £20m

          232,350

         236,250

 

  

March 2020

LEGAL NOTICE

  

This is a basic guide prepared by ACCA UK‘s Technical Advisory Service for members and their clients. It should not be used as a definitive guide, since individual circumstances may vary. Specific advice should be obtained, where necessary.


Further guidance:

HMRC Employer Bulletin Budget Special (click here)
Tolley Budget Summary 2020 (click here)
HMRC Tax Agent Blog (click here)
HMRC – Minimum Wage (click here)
DansonOsborne Accountants (contact us)
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Tax

Find out about ATED, what you need to pay and how to appoint an agent or adviser to act on your behalf.

What is ATED and does it apply to you?

ATED is an annual tax payable mainly by companies that own UK residential property valued at more than £500,000.

 

You’ll need to complete an ATED return if your property:

 

  • is a dwelling
  • is in the UK

 

was valued at more than:

    • £2 million (for returns from 2013 to 2014 onwards)
    • £1 million (for returns from 2015 to 2016 onwards)
    • £500,000 (for returns from 2016 to 2017 onwards)

 

is owned completely or partly by a:

    • company
    • partnership where any of the partners is a company
    • ­collective investment scheme – for example a unit trust or an open-ended investment vehicle


Returns must be submitted on or after 1 April in any chargeable period.


There are reliefs and exemptions from the tax, which may mean you do not have to pay.

Definition of ‘dwelling’

Your property is a dwelling if all or part of it is used, or could be used, as a residence, for example a house or flat. It includes any gardens, grounds and buildings within them.

 

Some properties are not classed as dwellings. These include:

 

  • hotels
  • guest houses
  • boarding school accommodation
  • hospitals
  • student halls of residence
  • military accommodation
  • care homes
  • prisons


Section 19 of the ATED technical guidance explains more about the meaning of ‘dwelling’.

Valuing your property

To work out what you need to pay you’ll need to value your property using a valuation date.

In some circumstances you can also ask HMRC for a Pre-Return Banding Check (PRBC).

For the 5 chargeable periods beginning from 1 April 2018, the 1 April 2012 valuation date was superseded by the 1 April 2017 valuation date. Properties owned on or before 1 April 2017 should be revalued using that date. If you acquired the property after 1 April 2017 the later date is to be used.

What you need to pay

The amount you’ll need to pay is worked out using a banding system based on the value of your property.

Chargeable amounts for 1 April 2019 to 31 March 2020

Property value

Annual charge

More than £500,000 up to £1 million

£3,650

More than £1 million up to £2 million

£7,400

More than £2 million up to £5 million

£24,800

More than £5 million up to £10 million

£57,900

More than £10 million up to £20 million

£116,100

More than £20 million

£232,350


Chargeable amounts for 1 April 2018 to 31 March 2019

Property value

Annual charge

More than £500,000 up to £1 million

£3,600

More than £1 million up to £2 million

£7,250

More than £2 million up to £5 million

£24,250

More than £5 million up to £10 million

£56,550

More than £10 million up to £20 million

£113,400

More than £20 million

£226,950


Chargeable amounts for 1 April 2017 to 31 March 2018

Property value

Annual charge

More than £500,000 up to £1 million

£3,500

More than £1 million up to £2 million

£7,050

More than £2 million up to £5 million

£23,550

More than £5 million up to £10 million

£54,950

More than £10 million up to £20 million

£110,100

More than £20 million

£220,350

 

Section 6 and 7 of the ATED technical guidance tells you more about how to work out the charge if:

  • you own the dwelling for part of a year
  • you claim a relief for part of the year

You may also have to pay:

 

Submit your return and pay

You can use the ATED online service to submit your return and appoint an agent.

You’ll then need to pay anything you owe.

Other ways to submit your return

If you’re unable to use the ATED online service, further information can be found in the ATED returns notice.

Penalties

You could be charged a penalty and interest if:


If you need help with your ATED Return, contact DansonOsborne Accountants on 01908 965003

 

 

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Tax
30 June year ends will benefit from the full 100% relief of £1m for the financial year starting 1 July 2019.

AIA has been temporarily increased to £1,000,000 as from 1 January 2019 for two years.

Transitional rules apply where years fall outside the two-year window, so for December year ends these transitional rules had no real impact.

As an example, for June year ends the transitional rules would have the following impact on the maximum allowance that a business can claim:

Year end 30 June 2019
£1m x 6/12 plus original allowance £200,000 x 6/12 = £600,000

Year end 30 June 2020
£1m

Year end 30 June 2021
£1m x 6/12 plus reversion back to the original allowance £200,000 x 6/12 = £600,000
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Tax

Types of work that are covered by the scheme

The scheme covers all construction work carried out in the UK, including jobs such as:

  •  site preparation
  •  alterations
  •  dismantling
  •  construction
  •  repairs
  •  decorating
  •  demolition


The UK includes UK territorial waters up to the 12-mile limit.

The scheme doesn’t apply to construction work carried on outside the UK. However, a business based outside the UK and carrying out construction work within the UK is within the scheme and must register accordingly.

Types of businesses that are covered by the scheme

The scheme covers all types of businesses and other concerns that work in the construction industry, including:

  •  companies
  •  partnerships
  •  self-employed individuals


These businesses can be:

  •  contractors
  •  subcontractors
  •  contractors and subcontractors


Under the scheme, the terms ‘contractor’ and ‘subcontractor’ have special meanings that cover more than is generally referred to as ‘construction’.


Contractor

A contractor is a business or other concern that pays subcontractors for construction work.

Contractors may be construction companies and building firms, but may also be government departments, local authorities and many other businesses that are normally known in the industry as ‘clients’.

Subcontractor

A subcontractor is a business that carries out construction work for a contractor.

Businesses that are contractors and subcontractors

Many businesses pay other businesses for construction work but are themselves paid by other businesses too. When they’re working as a contractor, they must follow the rules for contractors and when they’re working as a subcontractor, they must follow the rules for subcontractors.

Registering for the scheme

All contractors must register with HMRC for the CIS. Subcontractors who don’t wish to have deductions made from their payments at the higher rate of deduction should also register with HMRC. HMRC will provide registration details that contractors and subcontractors will need to use when they deal with payments.

Verifying subcontractors

Before a contractor can make a payment to a subcontractor for construction work, they may need to verify with HMRC that the subcontractor is registered. HMRC will check whether the subcontractor is registered and then tell the contractor the rate of deduction they must apply to the payment, or whether the payment can be made without any deductions.

Making deductions from payments

Under the scheme, all payments made from contractors to subcontractors, must take account of the subcontractors’ tax status. This may require the contractor to make a deduction, which they then pay to HMRC from that part of the payment that does not represent the cost of materials incurred by the subcontractor.

If no deduction is required, the contractor can make the payment to the subcontractor in full.

If a deduction is required, the contractor must:

  • calculate the deduction
  • make the deduction
  • record details of the payment, materials and deduction
  • make the net payment to the subcontractor
  • complete and give the appropriate statement of deduction to the subcontractor 


Returns

Each month, contractors must send HMRC a complete return of all the payments they have made within the scheme or tell HMRC that they have made no payments. The return will include:

  • details of the subcontractors
  • details of the payments made, and any deductions withheld
  • a declaration that the employment status of all subcontractors has been considered
  • a declaration that all subcontractors that need to be verified have been verified

 

Payments to HMRC

Each month, or quarter in some cases, contractors must send HMRC a payment for the deductions they’ve made from subcontractors.

How subcontractors pay tax

Subcontractors have to make a return of their profits each year, and their tax liability is based on that return. A subcontractor may already have paid tax by payments on account or had deductions made, as shown on the payment and deduction statements given to them by their contractors.

If the amount already paid or deducted is greater than the amount due, HMRC will repay the excess. If there is a shortfall, then the subcontractor must make a balancing payment.

Subcontractors setting off deductions

Subcontractors that are limited companies should set off deductions they bear on their receipts against the following sums payable to HMRC:

  • PAYE tax due from the company’s employees
  • Employers’ and employees’ National Insurance contributions due
  • Student Loan repayments due from the company’s employees
  • CIS deductions made from the company’s subcontractors


At the end of the tax year, once HMRC have received the company’s final Full Payment Submission (FPS) and final EPS, any excess CIS deductions that cannot be set off may be refunded or set against Corporation Tax due. No repayments or set-offs against other liabilities can be made in-year except where the company is in liquidation or administration.

Further guidance:
HMRC and CIS (click here)
What you need to do as a contractor (click here)
What you need to do as a subcontractor (click here)
CIS and VAT – further changes (click here)
DansonOsborne Accountants (contact us)

 

 

 

 

 

 

 

 

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Tax

A Taxing Decision

Membership of the European Union has contributed to the economic prosperity of the United Kingdom. Uncertainty about the outcome of the referendum has already started to weaken growth in the United Kingdom.

A UK exit (Brexit) would be a major negative shock to the UK economy, with economic fallout in the rest of the OECD (Organisation for Economic Co-operation and Development), particularly other European countries. In some respects, Brexit would be akin to a tax on GDP, imposing a persistent and rising cost on the economy that would not be incurred if the UK remained in the EU.

The shock would be transmitted through several channels that would change depending on the time horizon.

In the near term, the UK economy would be hit by tighter financial conditions and weaker confidence and, after formal exit from the European Union, higher trade barriers and an early impact of restrictions on labour mobility. By 2020, GDP would be over 3% smaller than otherwise (with continued EU membership), equivalent to a cost per household of GBP 2200 (in today’s prices).

In the longer term, structural impacts would take hold through the channels of capital, immigration and lower technical progress. In particular, labour productivity would be held back by a drop in foreign direct investment and a smaller pool of skills.

The extent of foregone GDP would increase over time. By 2030, in a central scenario GDP would be over 5% lower than otherwise – with the cost of Brexit equivalent to GBP 3200 per household (in today’s prices).

The effects would be larger in a more pessimistic scenario and remain negative even in the optimistic scenario.

Brexit would also hold back GDP in other European economies, particularly in the near term resulting from heightened uncertainty would create about the future of Europe.

In contrast, continued UK membership in the European Union and further reforms of the Single Market would enhance living standards on both sides of the Channel.

 

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