April 2021 Tax Update
In this month's Enews we consider the extension of business rates relief to COVID-hit businesses outside of the retail, hospitality and leisure sectors, the announcements from the inaugural Tax Day and the details of the 2021 Finance Bill.
With guidance on the new Brexit fund aimed at SMEs, the fourth and fifth instalments of the support grant for the self-employed and minimum wage increases there is a lot to update you on.
- Business rates relief extended with £1.5 billion fund
- Consultations launched on UK's first Tax Day
- Government publishes details of Finance Bill 2021
- £20 million SME Brexit Support Fund opens for applications
- HMRC publishes details of final grants for self-employed
- National Minimum and Living wages increases
- UK cuts electric vehicle grants by £500
- ICAEW urges HMRC to rethink quarterly reports under MTD for corporation tax
Business rates relief extended with £1.5 billion fund
The government is to extend business rates relief with a £1.5 billion fund targeted at those businesses unable to benefit from the current COVID-19 support.
Retail, hospitality and leisure businesses have not been paying any rates during the pandemic, as part of a 15 month-long relief which runs to the end of June this year.
However, many businesses ineligible for reliefs have been appealing for discounts on their rates bills, arguing the pandemic represented a 'material change of circumstance' (MCC).
The government says that market-wide economic changes to property values, such as from COVID-19, can only be properly considered at general rates revaluations, and will therefore be legislating to rule out COVID-19 related MCC appeals.
Instead, the government will provide a £1.5 billion pot across the country that will be distributed according to which sectors have suffered most economically, rather than on the basis of falls in property values. It says this will ensure the support is provided to businesses in England in the fastest and fairest way possible.
Chancellor of the Exchequer Rishi Sunak said:
'Our priority throughout this crisis has been to protect jobs and livelihoods. Providing this extra support will get cash to businesses who need it most, quickly and fairly.
'By providing more targeted support than the business rates appeals system, our approach will help protect and support jobs in businesses across the country, providing a further boost as we reopen the economy, emerge from this crisis, and build back better.'
Internet link: GOV.UK
Consultations launched on UK's first Tax Day
The government has published over 30 updates, consultations and documents on the UK's first ever Tax Day.
The announcements, which would traditionally be published at Budget, have been released later to allow for scrutiny from stakeholders.
It was announced that HMRC will tighten rules to force holiday let landlords to prove they have made a realistic effort to rent properties out for at least 140 days per year. There are suspicions that many simply declare that they will do this but leave the properties empty.
Declaring a home to be a holiday let means that it is exempt from council tax and owners pay business rates instead.
The Treasury plans to cut the rate of domestic Air Passenger Duty. The consultation also seeks views on supporting the UK's commitment to net zero emissions by 2050 by increasing the number of international distance bands.
Inheritance tax (IHT) reporting regulations 'will be simplified' to ensure that from 1 January 2022 more than 90% of non-taxpaying estates will no longer have to complete IHT forms when probate or confirmation is required.
Jesse Norman, Financial Secretary to the Treasury, said:
'We are making these announcements to increase the transparency, discipline and accessibility of tax policymaking.
'These measures will help us to upgrade and digitise the UK tax system, tackle tax avoidance and fraud, among other things.
'Many of today's announcements form a key part of the government's wider 10-year plan to build a trusted, modern tax system.'
Government publishes details of Finance Bill 2021
The details of the Finance Bill 2021 have been published by the government.
The Bill outlines the key measures set to be brought into legislation, including many measures announced in the recent 2021 Budget.
In his Budget speech, Chancellor Rishi Sunak announced an extension of the stamp duty holiday in England; a super-deduction capital allowance; extensions of the Coronavirus Job Retention Scheme (CJRS) and the Self-employment Income Support Scheme (SEISS); and an extension of the VAT cut for the tourism and hospitality sectors.
The Bill will make sure the measures announced in the Budget take effect from 6 April 2021. It also legislates for tax changes that were previously consulted on and subsequently confirmed at the Budget.
Internet link: UK Parliament website
£20 million SME Brexit Support Fund opens for applications
The UK government has unveiled a £20 million Brexit support package to help small and medium-sized enterprises (SMEs) with changes to customs and tax rules when trading with the EU.
The SME Brexit Support Fund aims to help businesses prepare for the implementation of further import controls which come into force later this year.
Businesses who trade only with the EU and are therefore new to importing and exporting processes will be encouraged to apply for grants of up to £2,000 for each trader to pay for practical support, including training and professional advice, to ensure they can continue trading effectively.
Businesses must meet certain criteria, including having been established in the UK for at least 12 months, having fewer than 500 employees and no more than £100 million in turnover.
The closing date for applications is 30 June. HMRC states that the fund may close for applications earlier if the full £20 million is allocated.
Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said:
'We have been asking for proper financial assistance of this scale so that a cash-strapped small business can afford to buy-in expertise, training and practical support. The new fund will make a significant difference.'
HMRC publishes details of final grants for self-employed
HMRC has published details of the eligibility criteria of the final two grants available under the coronavirus (COVID-19) Self-employment Income Support Scheme (SEISS).
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. It will cover the period from February 2021 to April 2021.
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.
Eligibility will be based on the 2019/20 self assessment tax return which may affect the amount of the fourth grant which could be higher or lower than previous grants.
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.
Claims can be made from late April until 31 May 2021.
The fifth SEISS grant will cover the period from May to September 2021 and will be available from July.
It 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%.
Further details of the fifth grant will be provided in due course.
Internet link: GOV.UK
National Minimum and Living wages increases
UK workers are set to benefit from rises in the National Minimum Wage (NMW) and the National Living Wage (NLW) rates that took effect from 1 April 2021.
The NMW which applies to 21 and 22 year-olds has risen from £8.20 to £8.36 and the NLW has risen from £8.72 to £8.91. 23 and 24-year-olds are now eligible for the NLW, prior to 1 April 2021, only workers aged 25 and over were eligible.
The rates for NMW and NLW for all employees are as follows:
Rate from April 2021
National Living Wage
21-22 year-old rate
18-20 year-old rate
16-17 year-old rate
The change follows recommendations made to the government by the Low Pay Commission (LPC) and marks the first step towards the government's target of the NLW reaching two-thirds of median earnings for workers aged 21 and over by 2024.
Commenting on the wage increases, Bryan Sanderson, Chair of the LPC, said:
'This week's increase in the NLW is our first step towards the government's target of two-thirds of median earnings. It is a real-terms increase, meaning that an hour's work can buy more than it could last year at the start of the pandemic.
'Young people should be fairly rewarded for their work. We will seek to understand how young people's pay and employment are affected by this in our consideration of a further reduction in the NLW age qualification to 21.'
The LPC will make recommendations to the government on the 2022 NMW and NLW rates in October.
Internet link: GOV.UK news
UK cuts electric vehicle grants by £500
The government has cut the Plug-in Car Grant and Van & Truck Grant by £500 and lowered the pricing cap on qualifying electric vehicles.
The Department for Transport will now provide grants of up to £2,500 for electric vehicles on cars priced under £35,000. This is a reduction from the current £3,000 available for vehicles costing up to £50,000.
This will mean the funding will last longer and be available to more drivers, the government statement said. Grants will no longer be available for higher priced vehicles, typically bought by drivers who can afford to switch without a subsidy from taxpayers.
The number of electric car models priced under £35,000 has increased by almost 50% since 2019 and more than half the models currently on the market will still be eligible for the grant.
However, Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT), said:
'The decision to slash the Plug-in Car Grant and Van & Truck Grant is the wrong move at the wrong time. New battery electric technology is more expensive than conventional engines and incentives are essential in making these vehicles affordable to the customer.
'This sends the wrong message to the consumer, especially private customers, and to an industry challenged to meet the government's ambition to be a world leader in the transition to zero emission mobility.'
ICAEW urges HMRC to rethink quarterly reports under MTD for corporation tax
The Institute of Chartered Accountants in England and Wales (ICAEW) has urged HMRC to rethink the requirement for companies to report quarterly under Making Tax Digital for corporation tax (MTD for CT).
In response to HMRC's consultation on expanding the MTD initiative to corporation tax, the ICAEW suggested that HMRC should reconsider reporting requirements 'at the very least for businesses below the VAT registration threshold' and other organisations including those that require a senior accounting officer.
The Institute argued that quarterly reports would merely consist of cash in and out transactions.
The ICAEW said:
'These reports will tell HMRC very little about the true accounting or tax results of the company for the quarter concerned.
'The additional burden placed on companies in providing quarterly reports is not justified and should not be introduced until digital record keeping has become established and the software available is shown to work efficiently for companies and HMRC.'
Internet link: ICAEW website
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