Spring Budget 2021 – Corporation Tax

The deadline for applications for all the government-backed loan schemes including the Bounce Back Loan scheme, Coronavirus Business Interruption Loans and the Future Fund ends on 31 March 2021. The Chancellor did not announce any further extension to these loan schemes but instead announced that a new successor loan guarantee programme would be introduced from 6 April 2021. The Recovery Loan Scheme will allow businesses of any size to access loans and other kinds of finance between £25,000 and £10 million. The new scheme will remain open until 31 December 2021 (subject to review). The scheme will provide further support to businesses to help them recover and grow following the disruption of the pandemic and the end of the transition period. Under the new loan scheme, the government will provide lenders with a guarantee of 80% on eligible loans provided to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes. The following finance options will be available: Term loans and overdrafts will be available between £25,001 and £10 million per business. Invoice finance and asset finance will be available between £1,000 and £10 million per business. Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years. No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security. Further details on how to apply and details of accredited lenders will be released in due course.

Designed to help offset the increased Corporation Tax main rate and promote investment, the Chancellor announced the introduction of a new ground breaking super-deduction tax relief. The new temporary tax relief applies on qualifying capital asset investments and will apply from 1 April 2021 until 31 March 2023. The new super-deduction is designed to help companies finance expansion in the wake of the coronavirus pandemic and help to drive growth. The measure will apply to qualifying expenditures as follows: a super-deduction providing allowances of 130% of most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances a first year allowance of 50% will apply to most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances The measure will apply to qualifying expenditure from 1 April 2021 and will exclude expenditures incurred on contracts entered into prior to Budget day, 3 March 2021. Certain expenditures will be excluded. The government had also previously announced that the temporary Annual Investment Allowance (AIA) cap would be extended for a further 12 months. The AIA allows for a 100% tax deduction on qualifying expenditure on plant and equipment. The temporary limit of £1 million will remain in place until 31 December 2021 before reverting to the usual £200,000 limit.

The Coronavirus Job Retention Scheme (CJRS) commonly known as the furlough scheme will be extended until the 30 September 2021. The Chancellor confirmed that employees will receive up to 80% of their salary for hours not worked subject to a monthly maximum of £2,500 until the scheme ends. The CJRS will also continue in its present form for employers until the end of June 2021. As the economy reopens and demand returns, the government will introduce employer contributions towards the cost of unworked hours of 10% in July and 20% in August and September. The Chancellor, Rishi Sunak also confirmed that the Self Employed Income Support Scheme (SEISS) will continue for a fourth and fifth grant. The fourth grant covers the period from 1 February 2021 to 30 April 2021 and the fifth and final grant will cover the period from May onwards. The fourth grant will provide support covering 80% of average trading profits, up to a maximum of £7,500 for those who meet the eligibility requirements. The fifth and final grant will see those whose turnover has fallen by 30% or more continuing to receive the full 80% grant whilst those whose turnover has fallen by less than 30% will receive a 30% grant. The SEISS scheme will also be extended to the newly self-employed who filed a 2019-20 tax return by midnight, 2 March 2021.

It has been confirmed, by the Chancellor, that the taxable turnover threshold that determines whether businesses should be registered for VAT will be frozen at £85,000 until 31 March 2024. The taxable turnover threshold that determines whether businesses can apply for deregistration will also be frozen at the current rate of £83,000 for the same time period. Businesses are required to register for VAT if they meet either of the following two conditions: At the end of any month, the value of the taxable supplies made in the past 12 months or less has exceeded £85,000; or At any time, there are reasonable grounds for believing that the value of taxable supplies to be made in the next 30 days alone will exceed £85,000. It was also confirmed that the temporary VAT reduction to 5% for the tourism and hospitality sector that was first announced as part of the Summer Economic update last year and had been subsequently extended until 31 March 2021, will be extended for a further 6 months until 30 September 2021. A new reduced rate of 12.5% will then be introduced for the sector until 31 March 2022. It is hoped this VAT cut will help rehabilitate the tourism and hospitality sector that has been severely impacted by the coronavirus pandemic.

The following Budget summary is split into four sections: COVID-19 related support measures for UK businesses Support for the UK housing market Taxation changes Other announcements Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months. COVID-19 related support measures for UK businesses The Treasury is to continue the two existing major support schemes in an attempt to hold back a significant increase in unemployment rates as business owners grapple with the effects of COVID-19 disruption. Details are set out below. Coronavirus Job Retention Scheme This scheme, nicknamed the Furlough Scheme, was due to end 30 April 2021. It is now being extended to 30 September 2021. The judgement must be that there will be enough control over COVID by autumn 2021 to stimulate demand and give employers more confidence to retain staff. The Chancellor has obviously crunched the numbers and considers employment support in this way a more attractive strategy than increasing unemployment costs. In more detail: For employees, there will be no change to the terms – they will continue to receive up to 80% of their salary, for hours not worked, until the scheme ends. Employers will be asked to contribute 10% towards wages for hours not worked from July 2021, rising to 20% in August and September 2021. Self-Employed Income Support Scheme (SEISS) There has been much criticism of this scheme as it has not been possible for self-employed businesses that commenced trading during 2019-20 to claim. To counter this, the following changes to SEISS have been announced. All qualifying self-employed businesses can continue to claim SEISS grants if they continue to be adversely affected by COVID lockdown measures. The present scheme was due to end 30 April 2021. This has now been extended to 30 September 2021. Businesses previously excluded from claims because they commenced during the 2019-20 tax year will now be eligible to claim the fourth and fifth SEISS grants as long as their tax return for 2019-20 was filed by midnight 2 March 2021. For the fifth grant claims can be made from July 2021. Self-employed persons whose turnover has fallen by more than 30% will continue to qualify for the 80% grant. Those with decreases in turnover of less than 30% will be restricted to a 30% claim. Restart grants £5bn of funding is being allocated for these grants. They will support businesses obliged to close during much of lockdown. The grants will consist of: A one-off grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England. Non-essential retail that have tended to open first, can apply for a one-off £6,000 grant. Business rates holiday continued This year, government will continue with the 100% business rates holiday for the first three months of the 2021-22 financial year, in other words, through to the end of June 2021 for the retail, leisure and hospitality sectors. For the remaining nine months of the year, to 31 March 2022, business rates will still be discounted by two thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open. Exemption for COVID-19 related home office expenses The temporary Income Tax exemption and Class 1 National Insurance Contributions disregard for employer reimbursed expenses that cover the cost of relevant home office equipment is extended and will have effect until 5 April 2022. Exemption for reimbursement of antigen test costs The government will legislate in Finance Bill 2021 to introduce a retrospective Income Tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen test for the tax year 2020-21. A new Recovery Loan Scheme The Recovery Loan Scheme ensures businesses of any size can continue to access loans and other kinds of finance between £25,000 and up to £10 million per business once the existing COVID-19 loan schemes close. This will provide further support as businesses recover and grow following the disruption of the pandemic and the end of the transition period. Once received, the finance can be used for any legitimate business purpose, including growth and investment. The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses. The scheme launches on 6 April 2021 and is open until 31 December 2021, subject to review. Loans will be available through a network of accredited lenders. Reduced rate of VAT The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions will be extended until 30 September 2021. This is a welcome bonus for this sector badly affected by COVID lockdown restrictions. This will be followed by the introduction of a new reduced rate of 12.5% from 1 October 2021 that will be in effect until 31 March 2022 at which point it will revert to the 20% standard rate. Other support measures Other measures outlined in the Budget include: Extension of the apprenticeship hiring incentive in England to September 2021 and an increase of payment to £3,000. £7 million for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector. Additional £126 million for 40,000 more traineeships in England, funding high quality work placements and training for 16-24 year olds in 2021-22 academic year. Support for the UK housing market Support will include a mortgage guarantee scheme that will help home buyers purchase properties up to £600,000, and an extension to the existing stamp duty holiday that was due to end 31 March 2021. The detail: Mortgage guarantee scheme The government will underwrite 95% of the risk of default. It will apply to home acquisitions up to £600,000 and set deposits required to 5%. Stamp duty holiday The present £500,000 threshold for paying Stamp Duty Land Tax (SDLT) was increased on a temporary basis and was due to end 31 March 2021. The nil rate band will continue to be £500,000 for the period 8 July 2020 to 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000. The nil rate band will return to the standard amount of £125,000 from 1 October 2021. This applies to England and Northern Ireland only. The devolved administrations have not announced any further extension beyond 31 March 2021 when this summary was written on Budget Day. Non-resident SDLT A 2% SDLT surcharge, above existing rates, for non-UK residents purchasing residential property in England and Northern Ireland is to be introduced from 1 April 2021. Taxation changes Many of the tax changes announced are for a fixed period, generally, from April 2021 to April 2026. This does provide welcome certainty for businesses. Announcements made include: Income Tax 2021-22 to 2025-26 The basic rate threshold is increasing to £37,700 for 2021-22 (2020-21: £37,500) and then frozen until April 2026. For the same period, the personal tax allowance is set at £12,570 (2020-21: £12,500) and will apply to all regions of the UK. Taxpayers who will benefit from annual increases in their earnings up to April 2026 may find themselves paying tax at the higher rates if these increases breach the £37,700 annual basic rate limit. Regional variations to Income Tax rates apply in Scotland and may apply in Wales. National Insurance NIC Upper Earnings limits and Upper Profits limits will also remain at a fixed amount until April 2026 and will be based on the Income Tax higher rate threshold of £50,270. Starting rate for savings The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2021-22. Lifetime Allowance for pension pots From April 2021 to April 2026 the pensions lifetime allowance will be frozen at £1,073,100. Cycle to work scheme change The government will legislate in Finance Bill 2021 to introduce a time-limited easement to the employer-provided cycle exemption to disapply the condition which states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020. The change will have effect on and after Royal Assent of Finance Bill 2021 and be in place until 5 April 2022, after which the normal rules of the exemption will apply. Van benefits for zero carbon emissions The government will legislate in Finance Bill 2021 to reduce the van benefit charge to zero for vans that produce zero carbon emissions. The change will have effect on and after 6 April 2021. Capital Gains Tax Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, the only announcement on this tax that has general relevance is capping the annual exempt amount. This will be fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives and some types of trusts for disabled people; and £6,150 for trustees of most settlements. Corporation Tax As expected, there will be increases in Corporation Tax, but not yet and only for larger companies. Company owners will be relieved that there are no imminent increases in CT rates until April 2023. From 1 April 2023, there will be two rates of CT. Taxable profits up £50,000 will continue to be taxed at 19% under the new Small Business Profits Rate Taxable profits in excess of £250,000 will be taxed at 25% Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods. Carry back of trading losses The present provisions that restrict the carry back of tax losses is being relaxed, temporarily, extending the period over which incorporated and unincorporated businesses may carry-back trading losses from one year to three years. This extension will apply to a maximum £2,000,000 of unused trading losses made in each of the tax years 2020-21 and 2021-22 by unincorporated businesses. The £2,000,000 maximum applies separately to unused trading losses made by incorporated companies, after carry-back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and a separate maximum of £2,000,000 for periods ending between 1 April 2021 and 31 March 2022. The £2,000,000 cap will be subject to a group-level limit, requiring groups with companies that have capacity to carry back losses in excess of £200,000 to apportion the cap between its companies. Further detail on the group limit will be published in due course. R&D tax credit cap to be introduced For accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a company can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and National Insurance contributions liability, in order to deter abuse. Enterprise Management Incentives As announced on 21 July 2020, the government will legislate in Finance Bill 2021 to extend the time-limited exception that ensures that employees who are furloughed or working reduced hours because of coronavirus (COVID-19) continue to meet the working time requirements for EMI schemes. The change will apply to existing participants of EMI schemes and it also allows employers to issue new EMI options to employees who do not meet the working time requirement as a result of COVID-19. This measure will have effect until 5 April 2022. Major new investment reliefs A new “super-deduction” and a 50% first year allowance are to be introduced that will allow businesses to increase the tax relief they can claim for qualifying investments in plant and other equipment. It will apply to expenditure between 1 April 2021 and 31 March 2023. The super-deduction will mean that assets will qualify for tax relief based on 130% of the actual cost of expenditure incurred. Assets that qualify for the special rate relief will qualify for the 50% first year allowance. The existing Annual Investment Allowance £1m limit will continue to be available until 31 December 2021. Freeports In an attempt to reposition the UK as a global player a raft of tax incentives are to be provided to the eight freeport locations in England announced in the Budget. They will include enhanced structures and buildings allowances. Inheritance Tax No changes in the present rates and allowances that are all frozen at current levels until April 2026. This means the nil-rate band will be £325,000 and the residence nil-rate band at £175,000 for this period. VAT There be no changes to the standard 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will be frozen until 31 March 2024. Other announcements Universal Credits The recent increase in benefits of £20 per week is to be extended for a further six months. Working Tax Credit claimants will receive equivalent support via a £500 one off payment. Duties There will be no increases in duty on alcoholic drinks or fuel. Vehicle excise duties will see a small increase in line with the Retail Prices Index (RPI). Air Passenger Duty long haul rates will also increase in line with RPI as will gaming duty and Landfill Tax. ISA investment limits for 2021-22 The limits set for 2021-22 are: Adult ISAs the limit remains at £20,000 Junior ISA limit remains at £9,000 Child Trust Funds remain unchanged at £9,000 National Living Wage increase The NLW will increase to £8.91 per hour from 1 April 2021. Visa reforms There will also be new reforms to the immigration system that will help ambitious UK businesses entice top talent. These reforms will include a new unsponsored points-based visa to attract highly skilled migrants and a new, improved visa process for scale-ups and entrepreneurs. Help to Grow schemes Two new Help to Grow schemes are set to by the autumn to help support 130,000 small and medium sized businesses. The Help to Grow: Management scheme will help small and medium sized businesses get world-class management training with the government contributing 90% of the cost. In addition, the Help to Grow: Digital scheme will help small businesses develop digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software, worth up to £5,000 each. Single contactless payments Our final comment on the Budget seems to anticipate a coming consumer spending bonanza. The legal limit for single, contactless payments is increasing from £45 to £100.

It has been confirmed as part of the Budget announcements that the 2021-22 personal allowance will increase to £12,570 (2020-21: £12,500) and the basic rate limit to £37,700 (2020-21: £37,500). As a result, the higher rate threshold will increase to £50,270 (2020-21: £50,000) from 6 April 2021. The Chancellor, Rishi Sunak revealed that these rates will be frozen until April 2026. This freeze is part of the Chancellor’s approach to improve public finances. This means that the allowances will not increase in line with inflation creating a stealth increase in the limits. The basic rate limit currently applies to non-savings and non-dividend income in England, Wales and Northern Ireland and to savings and dividend income across the UK. The Scottish Parliament sets the basic rate and higher rate thresholds for non-savings and non-dividend income in Scotland. Changes to the Scottish bands were announced on 28 January 2021 as part of the Scottish Budget measures. For high earning taxpayers the personal allowance is gradually withdrawn by £1 for every £2 of adjusted net income over £100,000 irrespective of age. Adjusted net income is total taxable income before any personal allowances, less certain tax reliefs such as trading losses and certain charitable donations and pension contributions. Any taxpayers with an adjusted net income of between £100,000 and £125,140 in 2021-22 will pay an effective marginal rate of tax of around 60% as the tax-free personal allowance is gradually withdrawn.The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source.

Complex VAT rules for Healthcare simply explained

Payroll Tax Changes for the year 2019/20