Chancellor Rishi Sunak announced a raft of measures during his Budget 2021 speech in the House of Commons on Wednesday.

The Chancellor set out the government’s tax and spending plans for the upcoming year whilst detailing the support on offer for businesses and individuals as part of the UK’s long-term economic recovery from the coronavirus pandemic.

In this extensive article, we cover the contents of the Budget and discuss how it could affect you or your business.

Personal Tax

• A consultation seeking views of organisations and individuals on how the Enterprise Management Incentives (EMI) scheme is operating and whether it should be expanded. The consultation runs until 26 May 2021.

Extension of the Social Investment Tax Relief – extending the operation of the Social Investment Tax Relief from April 2021 to April 2023, continuing the availability of income tax relief and capital gains tax hold-over relief for investors in qualifying social enterprises;

Income Tax Personal Allowance and the basic rate limit from 6 April 2022 to 5 April 2026 – maintains the personal allowance and basic rate limit at their 2021–22 tax year levels up to and including the tax year ending 5 April 2026. It set the personal allowance at £12,570, and the basic rate limit at £37,700 for the tax years 2022–23 to 2025–26 inclusive. The higher rate threshold will be £50,270 for these years;

Income Tax exemption for financial support payments made to potential victims of modern slavery and human trafficking – introducing an exemption from income tax for financial support payments received by potential victims of modern slavery and human trafficking, made by the UK Government and devolved administrations;

Setting the standard Lifetime Allowance from 2021 to 2022 to 2025 to 2026 – removing the annual link to the Consumer Price Index increase for the next five fiscal years and so maintains the standard lifetime allowance at £1,073,100 for tax years 2021–22 to 2025–26;

Updates to tax charges when a person is no longer eligible to Self-Employment Income Support Scheme payments – allowing HMRC to recover grants where an individual is no longer eligible for the grant following a change in circumstances and aligns Self-Employment Income Support and the Coronavirus Job Retention Scheme. It also extends the Treasury’s regulation making powers in relation to charges if a person is not entitled to a coronavirus (Covid-19) support payment to brings the SEISS within scope of those powers;

Income Tax and coronavirus (Covid-19) support scheme: working households receiving tax credits – introducing an income tax exemption for payments made under the coronavirus (Covid-19) support scheme to working households receiving tax credits.

Details of Fourth SEISS Grant Published

HMRC have published details of the eligibility criteria for the fourth grant under the Self-Employment Income Support Scheme (SEISS), which will cover the period February 2021 to April 2021. Information on the fifth and final grant are also included.

At the 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. The fourth grant will take into account 2019–20 tax returns and will be open to those who became self-employed in tax year 2019–20. The rest of the eligibility criteria remain unchanged.

The fifth grant will be worth:

• 80% of 3 months’ average trading profits, capped at £7,500, for those with a turnover reduction of 30% or more;

• 30% of 3 months’ average trading profits, capped at £2,850, for those with a turnover reduction of less than 30%.

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

View Self-Employment Income Support Scheme fourth grant.

VAT

HMRC have announced the following measures affecting VAT:

Introduction of a new reduced rate of VAT for hospitality, holiday accommodation and attractions – introducing an extension to the temporary reduced rate of VAT for a further 6 month period until 30 September 2021. A new reduced rate will then be introduced until 31 March 2022;

Legislating for the VAT deferral new payment scheme and deterrent – providing additional support to businesses during the Covid-19 pandemic, giving the important flexibility and a choice of more and smaller instalments at a time of reduced cashflow for many sectors;

Maintain VAT thresholds for 2 years from 1 April 2022 – this measure maintains the VAT registration and deregistration thresholds for 2 years from 1 April 2022;

Extension of Making Tax Digital for VAT – these measures extend Making Tax Digital requirements to smaller VAT businesses from April 2022.

Business & Corporation Taxes

HMRC have announced the following measures affecting business and corporation taxes:

Repeal of provisions relating to the Interest and Royalties Directive – a measure to ensure that companies resident in EU member states will cease to benefit from UK withholding tax exemptions now that the UK no longer has an obligation to provide relief;

New temporary tax reliefs on qualifying capital asset investments from 1 April 2021 – providing capital allowances for qualifying expenditure on plant and machinery incurred between 1 April 2021 and up to and including 31 March 2023;

Super-deduction – the Chancellor has announced a new 130% first-year capital allowance for qualifying plant and machinery assets; and a 50% first-year allowance for qualifying special rate assets. From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim: a 130% super-deduction capital allowance on qualifying plant and machinery investments; a 50% first-year allowance for qualifying special rate assets. The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive;

The scope of qualifying expenditures for R&D tax credits: consultation – HM Treasury has published a summary of responses to its earlier consultation on the scope of qualifying expenditures for research and development (R&D) tax credits;

R&D tax reliefs: consultation – The Government has launched a review of research and development (R&D) tax reliefs. This wide-ranging consultation seeks views from stakeholders on the current R&D tax relief schemes. The consultation runs until 2 June 2021;

Change to the Diverted Profits Tax rate from 1 April 2023 – increasing the rate of diverted profits tax from the current rate of 25% to 31% from 1 April 2023;

Changes to the hybrid and other mismatches regime for corporation tax – introducing a number of changes to the hybrid and other mismatches regime. These changes are designed to make sure that the regime operates proportionately and as intended;

Changes to the reform of loss relief rules for Corporation Tax – making changes to the reform of loss relief rules to make sure the legislation works as intended and to reduce administrative burdens;

Corporation Tax charge and rates from 1 April 2022 and Small Profits Rate and Marginal Relief from 1 April 2023 – this measure sets the corporation tax charge and main rate at 19% for the financial year beginning 1 April 2022 and at 25% for the financial year beginning 1 April 2023. It also introduces the small profits rate at 19% for the financial year beginning 1 April 2023;

Enhanced capital allowance for plant and machinery in Freeports – introducing an enhanced capital allowance (ECA) available to companies for qualifying expenditure on plant and machinery for use within Freeport tax sites. This ECA will be available for such qualifying expenditure incurred on or after the date the Freeport tax site is designated until 30 September 2026;

Enhanced Structures and Buildings allowances in Freeports – introducing an enhanced rate of Structures and Buildings Allowance (SBA), available for businesses on qualifying expenditure for new non-residential structures and buildings constructed within Freeport tax sites;

Exemption from Corporation Tax for Northern Ireland Housing Executive – a measure providing an exemption from corporation tax for Northern Ireland Housing Executive, the Northern Ireland body which provides state funded housing ensuring consistency of tax treatment for the provision of state-funded housing across the whole of the UK;

Introduction of Plastic Packaging Tax from April 2022 – a measure introducing a new tax that will apply to plastic packaging manufactured in, or imported into the UK, that does not contain at least 30% recycled plastic;

Oil and Gas Taxation qualifying decommissioning expenditure – clarifying that certain expenditure incurred by oil and gas companies on decommissioning plant and machinery prior to the approval of an abandonment programme, qualifies for decommissioning tax relief;

Powers to amend interpretation and other provisions relating to banks – updating the powers in the bank-specific tax rules to make amendments to those rules by regulations made by statutory instruments;

Repeal of provisions relating to the Interest and Royalties Directive – a measure to ensure that companies resident in EU member states will cease to benefit from UK withholding tax exemptions now that the UK no longer has an obligation to provide relief;

Reporting rules for digital platforms – introduces a power to enable regulations to be made. Regulations made under this power will require certain UK digital platforms to report information to HMRC about the income of sellers of services on their platform;

Restoring plant and machinery leases to pre Covid-19 treatment – this measure turns off certain capital allowances anti-avoidance legislation triggered when the term of plant or machinery leases is extended due to Covid-19;

Tax deductibility of business rates repayment – a measure outlining the timing and quantum of the tax deduction a business should take when it returns a sum in respect of coronavirus support arrangement to a public authority;

Temporary extension to carry back of trading losses for Corporation Tax and Income Tax – introducing a temporary extension to the period over which businesses may carry trading losses back for relief against profits of earlier years to get a repayment of tax paid;

Temporary increase in annual investment allowance for plant and machinery – temporarily increasing the limit of the annual investment allowance from £200,000 to £1,000,000 for expenditure on plant and machinery incurred during the period from 1 January to 31 December 2021;

Updates to taxation of the Self-Employment Income Support Scheme grants for Income Tax – This measure updates the legislation that confirms that payments from Self-Employment Income Support Scheme (SEISS) are subject to tax. Under the current legislation, a payment from SEISS is taxed as income for the tax year 2020–21. This measure will provide for a payment from SEISS to be taxed as income for the tax year in which it is received;

Extended Loss Carry Back for Businesses – explaining the new rules for making extended loss carry back claims for companies and unincorporated businesses and to set out the procedure for making such claims;

Making payments of interest or royalties to connected companies in the EU – guidance explaining the new requirements to deduct tax from some payments of interest and royalties made to companies in EU Member States. The EU Interest and Royalties Directive ceased to apply to the UK on 31 December 2021. This guidance explains what that means, and what affected companies need to do.

Employment Taxes

HMRC have announced the following measures affecting employment taxes:

Changes to Statutory Parental Bereavement Pay and Optional Remuneration Arrangements for Income Tax and National Insurance contributions – ensuring that employees who receive certain long-term salary sacrifice benefits do not lose entitlement to a tax advantage if they also begin to receive Statutory Parental Bereavement Pay;

Easement for employer provided cycles exemption – introducing a time-limited easement to disapply the condition which states that cycles and cyclist’s safety equipment, where obtained through a Cycle to Work scheme, must be used mainly for qualifying journeys;

Enterprise Management Incentives extension of time-limited exception to working time requirements – this measure ensures that, until 5 April 2022, individuals who are furloughed or who have their working hours reduced below the current statutory working time requirement for EMI as a result of Covid-19 will retain access to the scheme’s tax advantages. This will apply both to existing participants of EMI schemes and in circumstances where new EMI share options are being granted;

Extension to the Income Tax and National Insurance contributions exemption for employer provided and employer-reimbursed coronavirus antigen tests – extending the existing income tax exemptions and National Insurance contributions disregards that were introduced during the 2020–21 tax year;

Extension to the temporary Income Tax and National Insurance contribution exemption for home-office expenses – extending the temporary income tax and Class 1 National Insurance contributions exemption for employer-reimbursed expenses that cover the cost of relevant home-office equipment;

Income Tax changes to benefit charges for vans and the fuel benefit charge for cars and vans – increasing the van benefit charge and the fuel benefit charges for cars and vans by the Consumer Price Index from 6 April 2021;

Income Tax exemption for employer-reimbursed coronavirus antigen tests – introducing an 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;

Off-payroll working rules from April 2021 – shifting responsibility for operating the off-payroll working rules from the individual’s intermediary, to the client organisation or business to which the individual is supplying their services;

Technical changes to make sure off-payroll working legislation operates as intended – makes technical changes to the off-payroll working rules to make sure the legislation operates as intended from 6 April 2021.

Capital Gains Tax

HMRC have announced the following measures affecting capital gains tax:

Capital Gains Tax relief for gifts of business assets – clarifying an anti-avoidance rule that disapplies Gift Hold-Over Relief when the non-UK resident person gifting the asset also controls the recipient company;

Maintaining the annual exempt amount for Capital Gains Tax – this measure maintains the capital gains tax annual exempt amount at its current amount of £12,300 for individuals and personal representatives and £6,150 for most trustees of settlements for the tax years from 2021–22 to 2025–26.

Inheritance Tax

The Government will introduce legislation in Finance Bill 2021 so that the inheritance tax nil-rate bands will remain at existing levels until April 2026.

The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000, and the residence nil-rate band taper will continue to start at £2m.

This means qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1m without an inheritance tax liability.

This will have effect from 6 April 2021 to 5 April 2026.

View Inheritance Tax nil rate band and residence nil rate band thresholds from 6 April 2021.

Stamp Taxes & ATED

HMRC have announced the following measures affecting stamp taxes and ATED:

Extension of the temporary increase to the Stamp Duty Land Tax nil rate band for residential properties – This measure introduces a staged withdrawal of the temporary increase to the amount that a purchaser can pay for residential property in England and Northern Ireland before they pay Stamp Duty Land Tax (SDLT), by both: extending to 30 June 2021 the nil rate band of £500,000, which was due to end on 31 March 2021; and introducing a nil rate band of £250,000 for the period 1 July 2021 to 30 September 2021;

Stamp Duty Land Tax relief for Freeports – This measure introduces SDLT relief for purchases of land and buildings within a Freeport tax site, subject to a ‘control period’ of up to three years and the land being acquired and used in a ‘qualifying manner’.

Customs & Excise Duties

HMRC have announced the following changes affecting Customs and Excise duties.

Key measures include:

Administrative amendment to Vehicle Excise Duty expensive car supplement – to ensure that where the vehicle licence end date and the expensive car supplement end date do not align, registered keepers of cars in their last year of paying the expensive car supplement are issued correct Vehicle Excise Duty refunds when required;

Amendment to Customs and Excise review and appeals legislation – providing HMRC with a power to temporarily approve businesses whose previous approval to trade has been removed, and following the lodging of an appeal against revocation by the affected business;

Air Passenger Duty rates from 1 April 2022 to 31 March 2023;

Changes to Schedule 3 of Customs and Excise Management Act (CEMA) 1979 for seizure in situ – allowing goods to be seized and, with the agreement of a person responsible, remain at the place where it is first seized rather than being removed elsewhere;

Consolidation of Rates into Finance Bill 2021 for Tobacco Duty– the rates of duty previously implemented through the Tobacco Products (Alteration of Rates) Order 2020 will be consolidated into Finance Bill 2021. This consolidation will update the Table in Schedule 1 to the Tobacco Products Duty Act 1979 and revokes the Order;

Gross gaming yield increase for Gaming Duty – the measure ensures that the gaming duty accounted for by the casino operators is maintained at real levels and does not increase simply on account of inflation;

Heavy goods vehicle levy suspension – introducing a further suspension of the collection of the levy for 12 months from 1 August 2021. Heavy goods vehicle levy rates will also remain frozen in 2021–22;

New tax checks on licence renewal applications in England and Wales – the tax check will apply to renewed applications in England and Wales for licences to drive taxis or private hire vehicles; operate a private hire vehicle business; and deal in scrap metal;

Northern Ireland Steel Import Duty – this measure will enable businesses who import steel which originates from countries outside of the EU and the UK into Northern Ireland to access the UK tariff including tariff rate quotas or an equivalent relief provided the equivalent EU tariff rate quota is open;

Reform of red diesel entitlements – introducing legislative changes to restrict entitlement to use red diesel and rebated biofuels for certain uses;

Vehicle Excise Duty rates for cars, vans, motorcycles and trade licences from April 2021 – uprating, by the Retail Price Index (RPI), the Vehicle Excise Duty (VED) rates for cars, vans, motorcycles and motorcycle trade licences. This is a standard uprating to come into effect from April 2021;

Reference Document for The Customs (Northern Ireland) (EU Exit) Regulations 2020 – the Steel Notice sets out the necessary steps businesses who import steel originating from countries outside the EU and the UK into Northern Ireland will need to take to ensure they are not charged safeguarding tariffs on entry to Northern Ireland where there is capacity in the relevant quotas.

Other Indirect Taxes

HMRC have announced the following measures affecting other indirect taxes:

Changes to Landfill Tax rates from 1 April 2021;

Changes to rates for the Climate Change Levy for 2022 to 2023 and 2023 to 2024.

Recovery Loan Scheme (RLS) Set for April Launch

Now that the Bounceback Loan ends and CBILS loans are closing on 31 March 2021 to new applications and topups the Government has introduced a new finance scheme for UK businesses to access finance to aid the recovery from the Covid-19 economic disruption.

The RLS launches on 6 April 2021, after the above schemes close, until 31 December 2021 with full details to emerge in the next few weeks. Any size of businesses borrow up to £10 million with major banks like Barclays, Lloyds and Virgin Money already signed up to the new scheme. The new finance includes term loans and asset finance with terms up to six years, and overdrafts and invoices finance with terms up to three years with no personal guarantees on facilities up to £250,000.

If you have any questions about the issues raised in this article, we at Key Business Consultants can help. Get in touch with us today or call us directly on 02037 282 848.

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