On Wednesday the Chancellor of the Exchequer, the Rt. Hon Rishi Sunak MP, delivered the government’s Budget for 2021.
In his speech, the Chancellor announced extensions to a number of current COVID-19 schemes, alongside additional support for individuals and businesses, as the UK continues to navigate the impact of the pandemic, including:
• extending the Coronavirus Job Retention Scheme until the end of September 2021
• the continuation of the Self Employment Income Support Scheme (SEISS) until September 2021, with extended eligibility to include 19/20 Self-Assessment filers
• the continuation of a range of COVID-19 temporary easements including for home office expenses and COVID-19 antigen tests for the 2021-22 tax year
• investment of around £200 million in additional resources and new technology for HMRC in 2021-22.
Further details of other HMRC related measures, including announcements about tax rate changes, can be found below. For more information about all the measures announced today please visit GOV.UK.
To allow for more transparency and scrutiny of documents that would traditionally be published at Budget, Her Majesty’s Treasury have also announced that a range of tax consultations and calls for evidence will also be published on 23 March. Several of these consultations are key to the government’s 10-year tax administration strategy. We'd encourage you to engage with these - further information will be issued sharing details of these documents with you once published.
Extending the Coronavirus Job Retention Scheme (CJRS) until the end of September 2021:
The UK government will continue to pay 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month, up to the end of June 2021. For periods in July, CJRS grants will cover 70% of employees’ usual wages for the hours not worked, up to a cap of £2,187.50. In August and September, this will then reduce to 60% of employees’ usual wages up to a cap of £1,875. Employers will need to continue to pay their furloughed employees at least 80% of their usual wages for the hours they do not work during this time, up to a cap of £2,500 per month. They also need to pay the associated Employer National Insurance contributions and pension contributions on subsidised furlough pay from their own funds. When claiming for periods 1 May 2021 onwards, eligible employees must have been employed on 2 March 2021 and had a Real Time Information (RTI) submission to HMRC notifying a payment of earnings for that employee by their employer between 20 March 2020 and 2 March 2021. You can find out more about the CJRS on GOV.UK.
Self-Employment Income Support Scheme (SEISS) will continue until September with a fourth and fifth grant:
The fourth and fifth grants will take into account 2019-20 tax returns and will be open to those who became self-employed in the 2019-20 tax year. To qualify, customers must have submitted their 2019-20 tax returns by 2 March 2021 at the latest. Eligibility for the fourth SEISS grant will also depend on whether you reasonably believe you have experienced a significant financial impact from coronavirus between February 2021 and April 2021. For the fourth grant, the UK government will pay a taxable grant based on 80% of average trading profits for three months. It will be paid in a single payment and capped at £7,500 in total. The value of the grant is based on an average of trading profits for up to 4 tax years between 2016 to 2020, where available. Further details of the scheme can be found on GOV.UK by searching ‘Self Employment Income Support Scheme’.
Extended loss carry back for business:
To help otherwise-viable UK businesses which have been pushed into a loss-making position, the trading loss carry-back rule will be temporarily extended from the existing one year to three years. This will be available for both incorporated and unincorporated businesses. Unincorporated businesses and companies that are not members of a corporate group will be able to obtain relief for up to £2 million of losses in each of 2020-21 and 2021-22. Companies that are members of a corporate group will be able to obtain relief for up to £200,000 of losses in each of 2020-21 and 2021-22 without any group limitations. Companies that are members of a corporate group will be able to obtain relief for up to £2million of losses in each of 2020-21 and 2021-22, but subject to a £2 million cap across the group as a whole. Further details are available from our guidance note.
The VAT deferral new payment scheme:
The new payment scheme helps businesses with deferred VAT to pay what they owe in smaller, monthly instalments from March, interest free. The scheme is now open and you can choose to make 2-11 monthly payments, depending on when you join. The later you join the fewer instalments are available to you. You can join through a simple online service without needing to contact HMRC. You need to join the scheme before the end of June. More details are available from GOV.UK.
VAT reduction for the UK’s tourism and hospitality sector:
The government will extend the temporary reduced rate of 5% VAT for goods and services supplied by the tourism and hospitality sector until 30 September 2021. To help businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31 March 2022.
Continuation of the home office equipment expenses COVID-19 easement for the 2021-22 tax year:
An Income Tax exemption and corresponding NICs disregard were introduced for the 2020-21 tax year. This allowed employers to reimburse employees for the cost of home office equipment deemed necessary to work from home as a result of the COVID-19 outbreak free from Income Tax and Class 1 NICs. The exemption was due to end on 5 April 2021 but will now be extended to have effect until 5 April 2022.
Income Tax exemption for employer-reimbursed coronavirus antigen tests for tax year 2020-21 and 2021-22:
This measure will continue the income tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen. There will be no Income Tax liability for the employee or employer.
Temporary Stamp Duty Land Tax (SDLT) cut:
The government will extend the temporary increase in the residential SDLT nil rate band to £500,000 in England and Northern Ireland until 30 June 2021. From 1 July 2021, the nil rate band will reduce to £250,000 until 30 September 2021 before returning to £125,000 on 1 October 2021.
Tax rate changes:
Personal Allowance and higher rate threshold (HRT):
The income tax personal allowance will rise with CPI as planned to £12,570 from April 2021 and will remain at this level until April 2026. The income tax HRT will rise as planned to £50,270 from April 2021 and will remain at this level until April 2026. The personal allowance applies across the UK. The HRT for savings and dividend income will also apply UK-wide. The HRT for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland.
The rate of corporation tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19% and there will be relief for businesses with profits under £250,000 so that they pay less than the main rate. In line with the increase in the main rate, the Diverted Profits Tax rate will rise to 31% from April 2023 so that it remains an effective deterrent against diverting profits out of the UK.
Pensions Lifetime Allowance:
The government will maintain the Lifetime Allowance at its current level of £1,073,100 until April 2026.
Annual Tax on Enveloped Dwellings (ATED) and 15 % rate of Stamp Duty Land Tax (SDLT):
Relief for Housing Co-Operatives: Following a consultation on draft legislation over the Summer of 2020, the Government will introduce new reliefs from ATED and the 15% rate of SDLT for certain qualifying housing co-operatives. For SDLT, the relief can be claimed for land transactions where the effective date of the transaction is on or after 3 March 2021. For ATED, the relief will apply to chargeable periods beginning on or after 1 April 2020, allowing eligible housing co-operatives who have already paid ATED for that period to claim a refund. A tax information and impact note is published here.
Other HMRC related measures:
Mandatory Disclosure Rules:
The government will consult on the implementation of OECD rules to combat offshore tax evasion by facilitating global exchange of information on certain cross-border tax arrangements.
The Van Benefit and Car and Van Fuel Benefit uprating for 2021:
The government has announced that the van benefit charge and fuel benefit charges for cars and vans will be uprated by the Consumer Price Index from 6 April 2021.
Technical changes to the off-payroll working legislation:
The government has confirmed in the Budget that technical changes will be made to the off-payroll working legislation in the upcoming Finance Bill to ensure the off-payroll working rules operate as intended. These changes will have effect from 6 April 2021 and alongside the rest of the rules, will not have any additional impacts for engagements that were already in scope of the rules. HMRC has published a Tax Information and Impact Note (TIIN) with more detail.
OECD reporting rules for digital platforms:
The government will consult on the implementation of the Organisation for Economic Co-operation and Development (OECD) rules that will require digital platforms to send information about the income of their sellers to both HMRC and the seller themselves. This will help taxpayers in the sharing and gig economy get their tax right, and help HMRC detect and tackle non-compliance.
Interest harmonisation and reform of penalties for late submission and late payment of tax:
The government will reform the penalty regime for VAT and Income Tax Self Assessment (ITSA) to make it fairer and more consistent. The new late submission regime will be points-based, and a financial penalty will only be issued when the relevant threshold is reached. The new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is. The government will introduce a new approach to interest charges and repayment interest to align VAT with other tax regimes. These reforms will come into effect: for VAT taxpayers, from periods starting on or after 1 April 2022; for taxpayers in ITSA with business or property income over £10,000 per year, from accounting periods beginning on or after 6 April 2023; and for all other taxpayers in ITSA, from accounting periods beginning on or after 6 April 2024
Making Tax Digital:
We are progressing with the extension of Making Tax Digital (MTD) to other businesses and taxes, as part of our 10-year strategy to deliver a modern and trusted tax administration system. Building on the successful introduction of MTD for VAT in 2019, today’s budget sets out that we will shortly introduce primary legislation to deliver on our commitment to extend MTD to those VAT registered-businesses with income below the VAT threshold from their first VAT period starting on or after 1 April 2022. Around a quarter of businesses impacted by this measure have already joined MTD for VAT voluntarily.
Powers to tackle electronic sales suppression (ESS):
The government will introduce new powers to make the possession, manufacture, distribution and promotion of ESS software and hardware an offence. This will enable HMRC to tackle tax evasion undertaken by those businesses that use software and hardware to hide or reduce the value of transactions and the corresponding tax liabilities. New ESS-specific information powers will allow HMRC investigators to identify developers and suppliers in the ESS supply chain and access software developers’ source code.
Licensing in Scotland and Northern Ireland: From April 2023, the government will make the renewal of certain licences in Scotland and Northern Ireland conditional on applicants completing checks that confirm they are appropriately registered for tax, consistent with reforms which come into force in England and Wales in April 2022. In Scotland, this will apply to licences to drive taxis and Private Hire Cars (PHCs) or operate from PHC booking offices, and licences to be a metal dealer. In Northern Ireland, this will apply to licences to drive taxis. Licensing bodies will have to obtain confirmation that an applicant has completed the check before deciding on their renewal application, making it more difficult for traders to operate in the hidden economy. The government will consult on how to implement this reform. The government remains committed to seeking views on the wider application of tax conditionality.
Tax sites in Freeports:
The government will legislate for powers to create ‘tax sites’ in Freeports in Great Britain; it will bring forward legislation to apply in Northern Ireland at a later date. Tax sites within Freeports will need to be approved and confirmed by the government. Businesses in these tax sites will be able to benefit from a number of tax reliefs.
• an enhanced 10% rate of Structures and Buildings Allowance for constructing or renovating non-residential structures and buildings within Freeport tax sites in Great Britain, once designated. This means firms’ investments will be fully relieved after 10 years compared with the standard 33 ¹/³ years at the 3% rate available nationwide. This will be made available for corporation tax and income tax purposes. To qualify, the structure or building must be brought into use on or before 30 September 2026
• an enhanced capital allowance of 100% for companies investing in plant and machinery for use in Freeport tax sites in Great Britain, once designated. This will apply to both main and special rate assets, allowing firms to reduce their taxable profits by the full cost of the qualifying investment in the year it is made, and will remain available until 30 September 2026
• full relief from Stamp Duty Land Tax on the purchase of land or property within Freeport tax sites in England, once designated. Land or property must be purchased and used for a qualifying commercial purpose. The relief will be available until 30 September 2026
• full business rates relief in Freeport tax sites in England, once designated. Relief will be available to all new businesses, and certain existing businesses where they expand, until 30 September 2026. Relief will apply for five years from the point at which each beneficiary first receives relief
• subject to Parliamentary process and approval, the government also intends to make an employer National Insurance contributions relief available for eligible employees in all Freeport tax sites from April 2022 or when a tax site is designated if after this date. This would be available until at least April 2026 with the intention to extend for up to a further five years to April 2031, subject to a review of the relief.
Investment in HMRC:
The government will invest around £200 million in 2021-22 in additional resources and new technology for HMRC. This is forecast to bring in over £1.6 billion of additional tax revenues between now and 2025-26 by enabling HMRC to:
• invest in IT systems to enable taxpayers to more easily access tax services and update customer accounts digitally and make the collection of tax and payments to taxpayers easier
• recruit additional compliance staff to increase its ability to target non-compliance through illicit financial flows
• carry out initial design and development of Digitalising Business Rates to help modernise the business rates system in England and support more effective analysis and oversight of the collection of the tax
• continue to fund compliance work on the loan charge, historic disguised remuneration cases and early intervention to encourage individuals to exit tax avoidance schemes.
For details about all other measures please visit GOV.UK