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Accountants Chester | Phillips & Co Accountants Chester

Start of 2021/22 tax year brings in number of fiscal changes

06 April 2021

The 6 April start of the 2021/22 tax year sees important fiscal and business changes come into effect, including the introduction of the Coronavirus (COVID-19) Recovery Loan Scheme (RLS).

The scheme provides financial support to businesses affected by the COVID-19 pandemic. The scheme gives lenders a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The RLS is open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.

The RLS is initially available through a handful of lenders accredited by the British Business Bank.

The rules relating to off-payroll workers, commonly known as IR35, also change from 6 April 2021. The new rules shift responsibility for making the decision on employment status on each contract away from contractors and personal service companies (PSCs) and on to the client receiving their services. This has already been done in the public sector.

From 6 April, you are no longer responsible for deciding your employment status if you are working for a ‘medium’ or ‘large’ client in the private sector. It becomes the client’s responsibility instead. The change also has consequences for tax and national insurance contributions (NICs).

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

Finally, the personal allowance rises to £12,570 for the 2021/22 tax year. It has been frozen at this level for the tax years 2022/23 to 2025/26.

Accountants Chester | Phillips & Co Accountants Chester

Payment deadline looming for self assessment taxpayers

31 March 2021

Self assessment taxpayers must pay any outstanding tax liabilities in full or set up an online payment plan for the 2019/20 financial year by 1 April to avoid incurring penalty charges, HMRC has stated.

Normally a 5% late payment penalty is also charged on any unpaid tax that is still outstanding on 3 March. But this year, because of the impact of the coronavirus (COVID-19) pandemic, HMRC is giving taxpayers more time to pay or set up a payment plan.

Taxpayers can pay their tax bill or set up a monthly payment plan online and are required to do this by midnight on 1 April to prevent being charged a late payment penalty. The online Time to Pay facility allows taxpayers to spread the cost of their self assessment tax bill into monthly instalments until January 2022.

Almost 117,000 taxpayers have set up a self-serve Time to Pay arrangement online, totalling more than £437 million. Find out more about setting up a Time to Pay arrangement here.

Jim Harra, HMRC’s Chief Executive, said: ‘Anyone worried about paying their tax can set up a payment plan to spread the cost into monthly instalments. Support is available at GOV.UK to help anyone struggling to meet their obligations.’

Accountants Chester | Phillips & Co Accountants Chester

Second home owners dealt blow after tax crackdown on holiday lets

24 March 2021

Tens of thousands of second-home owners who falsely register their properties as holiday lets in order to claim tax breaks face a clampdown by the taxman, the treasury said yesterday.

At present owners can declare they are renting out second properties – meaning they are charged business rates rather than council tax, which is higher.

A total of 60,000 properties are registered in this way. But the Treasury is concerned that many owners are getting away with paying business rates while making little or no effort to rent their properties.

Now HMRC will tighten rules to force holiday landlords to prove they have made a realistic effort to rent properties out for at least 140 days per year.

HMRC said 96 per cent of those who have registered their property to avoid paying council tax – 57,000 – have declared a rateable value of £12,000 or less.

That means they are also exempt from business rates under a Covid scheme designed to help small firms. In effect, they are getting their rubbish collected and other council services for free.

Officials also believe some owners may have claimed coronavirus support grants of up to £9,000 each to replace lost income which they suspect they would never have achieved because they had no intention of letting properties out. 

Accountants Chester | Phillips & Co | VAT Deferral

VAT deferral – apply now to spread your payments

19 March 2021

The VAT deferral new payment scheme is open for all businesses who deferred VAT due between 20 March and 30‌‌ ‌June‌‌ ‌2020 and still have payments to make, or who are unable to pay in full by 31‌ ‌March‌‌ ‌2021. This includes those on Payment on Account and Annual Accounting schemes.

Businesses can apply now to spread these payments over a number of months – the later the join date the fewer instalments available to them. Businesses should join by 19‌‌ ‌March‌‌ ‌2021 to benefit from the maximum number of 11 instalments.

Businesses can join the scheme quickly and simply online without the need to call HMRC. To find out more information, including the things you need to do before joining, go to GOV‌‌‌.UK.

Businesses need to apply by or before 21‌‌ ‌June‌‌ ‌2021 if they want to join the scheme online.

Accountants Chester | Phillips & Co

Super deduction allows companies to claim a 130% first year allowance

17 March 2021

The much-vaunted super deduction allows companies to claim a 130% first year allowance (FYA) for investment incurred on ‘main pool’ items of plant and machinery acquired in the period between 1 April 2021 and 31 March 2023.

This includes the more obvious items of plant and machinery like manufacturing equipment, machines and computers, but it also extends to items of main pool plant and machinery that are fixtures in properties.

When we think of investment in new plant and machinery, we must remember that the super deduction may also be available for a proportion of construction expenditure incurred on new or refurbished buildings. This point is often overlooked but it could be a stimulus to commence building works in the period.

Accountants Chester | Phillips & Co

Individuals who started their business in 2019/20 need to provide additional evidence to HMRC

15 March 2021

HMRC is writing to up to 100,000 self-employed traders asking them to confirm their identity and prove they have been trading before they can claim fourth SEISS grant. If the trader does not respond adequately to HMRC they won’t get the grant.

Only taxpayers who started trading as a self-employed business after 5 April 2019 will receive the SEISS verification letter from HMRC and we understand that only part of that group will be contacted.

Those new traders can claim support under the SEISS for the first time if they submitted their 2019/20 tax return by midnight on 2 March 2021.

Accountants Chester | Phillips & Co | SEISS

Details of fourth grant for the self-employed published

08 March 2021

HMRC has published details of the eligibility criteria for the fourth grant under the coronavirus (COVID-19) Self-employment Income Support Scheme (SEISS), which will cover the period February 2021 to April 2021.

At the 2021 Budget it was confirmed that the fourth SEISS grant will be set at 80% of three months’ average trading profits, paid out in a single instalment, capped at £7,500 for those with a turnover reduction of 30% or more.

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

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

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

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

Accountants Chester | Phillips & Co | Budget 2021

Budget 2021 key points

03 March 2021

Everything you need to know as the Chancellor Rishi Sunak delivers a budget dominated by the battle to recover from the COVID-19 crisis.

The Economy

  • Rishi Sunak said Covid-19 has ‘fundamentally altered’ our way of life, telling the Commons: ‘Much has changed, but one thing has stayed the same: I said I would do whatever it takes – I have done and I will do.’
  • He told MPs that the damage coronavirus has done to the UK economy has been ‘acute’ as he began his statement.
  • The Chancellor added it will take the UK and the whole world a ‘long time to recover from this extraordinary economic situation, but we will recover.’
  • Sunak said more than 700,000 people have lost their jobs since March 2020 and the economy has shrunk by 10 per cent, the largest fall in more than 300 years.
  • The Office for Budget Responsibility is now forecasting, in their words ‘a swifter and more sustained recovery’ than expected in November.
  • The OBR forecasts that the economy will grow this year by 4 per cent, by 7.3 per cent in 2022, then 1.7 per cent, 1.6 per cent and 1.7 per cent in the last three years of the forecast.
  • Sunak said a July 2020 forecast suggested unemployment could peak at 11.9 per cent but the forecast now is for a much lower peak of 6.5 per cent.
  • He said the measures to support the economy amounted to £65billion over this year and next, taking the total Government support to £407billion.
  • The Bank of England will keep its 2 per cent inflation target but now its remit will also reflect the importance of environmental sustainability and the transition to net zero.

Furlough scheme 

  • The Chancellor confirmed the furlough scheme will be extended until the end of September, and employees will continue to receive 80 per cent of their salary for hours not worked.
  • He said the support for self-employed workers will also continue until September, with the fourth grant providing three months of support at 80 per cent of average trading profits.
  • The Chancellor said: “When the scheme was launched, the newly self-employed couldn’t qualify because they hadn’t all filed a 2019/20 tax return. But as the tax return deadline has now passed, I can announce today that, provided they filed a tax return by midnight last night, over 600,000 more people, many of whom only became self-employed last year, can now claim the fourth and fifth grants.”

Personal taxation 

  • The Chancellor said the Government will not raise the rates of income tax, national insurance, or VAT but will freeze personal tax thresholds at the current level this year.
  • The basic allowance will increase again next year to £12,570 and be held there until April 2026.
  • The higher rate threshold will y be increased next year to £50,270, and will then also remain at that level until 2026.
  • Sunak said the inheritance tax threshold, the pensions lifetime allowance and the annual exempt amount in capital gains tax will be held at current levels until April 2026.

Business taxation and support

  • The Chancellor said a ‘new restart grant’ will be provided in April to help businesses reopen.
  • He told MPs non-essential retail businesses will receive grants of up to £6,000 per premises.
  • Hospitality and leisure businesses, including personal care and gyms which open later, or be more impacted by restrictions when they do will get grants of up to £18,000. That totals £5 billion of new grants, on top of the £20 billion already provided.’
  • When the Bounce Back Loan and CBIL schemes come to an end a new recovery loan scheme starts with loans from £25,000 up to £10 million available through to the end of this year.
  • Sunak said the 100% business rates holiday in England will continue from April until June.
  • The 5% reduced rate of VAT for hospitality, holiday accommodation and attractions will be extended for six months to September 30, followed by an interim rate of 12.5% for another six months.
  • Corporation tax paid on company profits will increase to 25% in 2023.
  • Small businesses with profits of £50,000 or less will be kept on the current rate of 19%. This accounts for around 70% of companies – 1.4 million businesses.
  • A taper above £50,000 will also be introduced to ensure only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.
Accountants Chester | Phillips & Co | Domestic VAT reverse charge

Domestic VAT reverse charge comes into effect on 1 March

01 March 2021

The twice-delayed introduction of the domestic VAT reverse charge for construction services will come into effect on 1 March 2021.

The change was originally scheduled to come into effect from 1 October 2019 but was deferred for 12 months after industry bodies highlighted concerns about the lack of preparation and the impact on businesses.

It was put back another five months due to the impact of the coronavirus (COVID-19) pandemic on the sector. The change will now apply from 1 March 2021 and will overhaul the way VAT is payable on building and construction invoices as part of a move to reduce fraud in the sector.

Under the domestic reverse charge, the customer receiving the service will have to pay the VAT owed straight to HMRC instead of paying the supplier if they report via the Construction Industry Scheme (CIS).

An amendment to the original legislation has made it a requirement that for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their subcontractors, in writing, that they are end users or intermediary suppliers.

HMRC said the additional amendment is designed to make sure both parties are clear in regard to whether the supply is excluded from the reverse charge. It reflects recommended advice published in HMRC guidance and brings certainty for subcontractors as to the correct treatment for their supplies.

Accountants Chester | Phillips & Co

HMRC announces that Self Assessment customers will not be charged the initial 5% late payment penalty

19 February 2021

Today HMRC has announced that Self Assessment customers will not be charged the initial 5% late payment penalty if they pay their tax or make a Time to Pay arrangement by 1‌‌ April.

The payment deadline for Self Assessment is 31 January and interest will be charged from 1 February on any amounts outstanding. The deadline has not changed, but this year, because of the impact of COVID 19, HMRC is giving taxpayers more time to pay or set up a payment plan.

Payment plans or payments in full must be in place by midnight on 1‌‌ April to avoid a late payment penalty.

HMRC recognises the pressure affecting customers due to the pandemic, and anyone worried about paying their tax should contact HMRC for help and support on 0300‌‌ 200‌‌ 3822.

The self-serve Time to Pay facility allows customers to spread the cost of their tax liabilities into monthly instalments until January‌‌ 2022. Customers can set up a payment plan online, on GOV‌‌.UK.

Self Assessment customers who have yet to file their tax return should do so‌‌ by‌‌ 28‌‌‌‌ Fe‌bruary to avoid a late filing penalty.

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