The first Autumn Budget since 2018, and Chancellor Rishi Sunak’s third Budget in fewer than 20 months, focuses mainly on public spending.

It reveals no major increases in personal taxes, but no major reductions, either.

Another Budget earlier in the year addressed how to raise necessary extra revenue, including corporation tax rises and allowance freezes.

Here are the highlights from the Autumn Budget 2021:

• Income Tax and Dividend Tax

The personal allowance and income tax rates for 2022-2023 will remain frozen at the same levels as 2021-2022, but the Married Couple’s Allowance and Blind Person’s Allowance will increase. Tax for dividends above the frozen allowance of £2,000 will be increasing by 1.25% in each tax rate band.

• National Insurance Contributions and the Health and Social Care Levy

As announced back in September, National Insurance Contributions will also increase by 1.25% from April 2022. This applies for Class 1 (employee), Class 2 (Employer), and Class 4 (Self-Employed) NIC. From April 2023, this 1.25% will be legislated as the Health and Social Care Levy to help fund the NHS and social care, and NIC will return to 2021-2022 rates while the Levy is paid separately. The 2023 Levy won’t apply to Class 2 or Class 3 (Voluntary) NIC, but includes workers above State Pension age.

• Inheritance Tax and Capital Gains Tax

No changes for Inheritance Tax, and only an administrative adjustment for Capital Gains Tax. From 27^th October 2021, the deadline for reporting and paying CGT after selling a property in the UK will increase from 30 to 60 days. The Chancellor may have abandoned plans for CGT reform for now.

• State Pension and Pension Tax Relief

The government will temporarily suspend the ‘Triple Lock’ uprating system for 2022-2023, so both new and old State Pensions will increase in line with the Consumer Prices Index (to a maximum of 2.5%). Despite fears of negative changes to Pension Tax Relief, there will potentially be an increase for low earners from 2024, with a new top-up payment system due to be introduced in 2025-2026.

• Individual Savings Account Contributions

The Individual Savings Account (ISA) annual limit will remain at £20,000 for adults for another year, as set back in 2017. For Junior ISAs and Child Trust Funds, the annual limit will remain at £9,000.

• Vehicle Excise Duty and Fuel Duty

Vehicle Excise Duty (VED) will be uprated in line with the Consumer Prices Index for cars, vans, and motorcycles. To support the struggling haulage sector, the freeze on VED for heavy goods vehicles (HGVs) will continue, with the HGV Levy suspension extended for another year from August 2022. The Fuel Duty freeze will also continue for the twelfth consecutive year due to rising pump prices.

Though the Chancellor specified in his Budget speech that reducing taxes is a future goal, this will not happen in 2022. We’ll have to wait until next year’s budget for progress on this front.

As 2021 is drawing to a close, it’s the ideal time to start taking care of your year-end tax plans. If you would benefit from tax consultancy services to help with this, contact GBAC today.

There are various tax advantages to a rental property being treated as a furnished holiday letting, but inheritance tax (IHT) business relief is generally not one of them. Even though the law supports HMRC’s view, property owners regularly appeal against their refusal to give relief.

The tax advantages

The most immediate benefit is full tax relief for finance costs. For normal rentals, relief is restricted to the basic rate, so a higher-rate taxpayer with a £250,000 mortgage at an interest rate of 2.5% will receive extra tax relief of £1,250 annually.

When it comes to disposing of a property, business asset disposal relief and holdover relief will be available.

Business relief

Some £225,000 in IHT was at stake in the recent appeal by the executors appointed by Sheriff Graham Loudon Cox against business relief being denied. Although the late taxpayer worked hard to ensure guests enjoyed their stay in his three furnished holiday flats, the First Tier Tribunal dismissed the appeal, finding that there was nothing exceptional about the business to elevate it beyond being one of mainly investment.

And that is the essential problem. The level of additional services provided must be sufficient that the activity is considered as non-investment. This needs to be more than just:

• cleaning;
• providing heating and hot water;
• a welcome pack; and
• being on call to deal with queries and emergencies.

These are considered as simply incidental or ancillary activities. The extra services which would have helped the appeal, such as dog-sitting, childminding, transport, breakfast and supper, were not provided to guests with sufficient regularity. Owners of holiday lets could consider making use of the CGT reliefs by gifting furnished holiday property to the intended beneficiaries during their lifetime. The property then drops out of charge to IHT after seven years.

Details about the reliefs available for furnished holiday lettings, and the qualifying conditions, can be found here.

If you would like to discuss any queries surrounding IHT, please call our tax team on 01226 298 298.

New IR35 changes will be implemented in April 2021 for private sector contractors that will transfer responsibility from contractors to large and medium companies to assess off-payroll worker status.

But what exactly are the IR35 rules, and what can you do to prepare for these changes?

What is IR35?

Some independent contractors who work through an intermediary, such as a personal service company, may benefit from a certain level of tax efficiency. They may not be entitled to employee benefits such as holiday pay or sick pay, but their tax status often enables them to take home more net pay than an employee in the same role.

The benefit to a company of hiring an individual in this way, is that they don’t have to operate PAYE or National Insurance Contributions.

IR35 legislation ensures that UK contractors pay the same tax and National Insurance contributions as an equivalent employee would.

How does it work?

IR35 effectively determines whether an individual is a bona fide contractor or a ‘disguised employee’ for the purposes of paying tax. If it is concluded that an individual is a ‘disguised employee’, they will be deemed to be inside IR35 and will be subject to PAYE and NIC. If it is concluded that an individual is actually a contractor, then they will be deemed to be outside IR35 and will not be caught by the rules.

The key question that needs to be answered is whether the worker would have been an employee of the client if they had been working directly for it.

The most important factors to consider include (but are not limited to) whether there is

• personal service,
• mutuality of obligation,
• employee-type benefits and
• whether the individual provides his or her own equipment.

What are the IR35 changes?

Currently, in the private sector, contractors working through a personal service company are responsible for making their own assessment as to whether they fall inside or outside of IR35. If they make the assessment incorrectly, it is the contractor and not the client or agency who is liable for any unpaid tax and NICs.

In April 2021, changes to IR35 will be implemented for private sector contractors, transferring responsibility from contractors to large and medium companies to determine if IR35 will apply.

There is a limited exclusion for small companies, defined by HMRC as not exceeding two or more of the following criteria;

• an annual turnover above £10.2 million,
• a balance sheet total over £5.1 million, or
• more than 50 employees.

Liability for PAYE and NICs will potentially pass to the hiring company or fee payer if it is deemed to have failed to take ‘reasonable care’ in making the decision.

What will the changes mean for contractors?

If they are assessed as inside IR35, contractors will need to pay the same income tax and NICs as if they were employed, but they still won’t receive employment benefits, such as paid holiday or sick leave, from the hiring company or fee payer. Being assessed as inside IR35 can also have financial implications for the contractor, including a reduction in their net income.

What can you do to prepare?

Large and medium-sized organisations should

• undertake a review of their use of contractors, setting out who they are currently contracting with and on what basis.
• make use of an HMRC online tool called CEST. However, this should be approached with caution and should not be used as a substitute for a full and proper investigation.
• evaluate any contracts that they have in place with individual contractors.
• Issue a Status Determination Statement to contractors of how the decision on their IR35 status is reached.

If agreement cannot be reached on status, a process of appeal must be made available to the contractor.

Whilst it is important that contracts are drafted in such a way as to reduce the risk of IR35 applying, it is also important that the practical reality is in accordance with those terms. A carefully drafted contract will not avoid being caught by IR35, unless it also reflects the reality of the situation.

Final words

IR35 is a complex area of law so speaking to a tax specialist early on and before starting your review is recommended.

The tax cases brought for judgement recently have highlighted the fact-sensitive nature of the legislation. Currently no easily applicable checklist exists making it difficult for businesses to apply blanket procedures to ensure adherence to IR35 with multiple contractors. At this time employee status will be best analysed on a case by case basis.

The changes to IR35 will likely result in administrative challenges for large and medium-sized organisations.

If you are a business and you think that the IR35 changes may impact upon your operations, then please get in touch and we will be happy to discuss this further.

Did you defer your VAT payments last year due to the financial effect on the COVID-19 pandemic? If so, you were not alone. Over half a million businesses deferred VAT payments that fell due between March and June 2020 with the balances needing to be paid in full by 31 March 2021.

However, HMRC have recently announced a new online VAT deferral payment scheme which will enable businesses to pay their outstanding VAT liability in equal consecutive monthly instalments from March 2021.

Businesses will need to voluntarily opt-in to the service and they can do this via the online service which opened on 23 February 2021 and closes on 21 June 2021, following the link on the gov.uk website below:

https://www.gov.uk/guidance/de…

The month you decide to join the scheme will determine the maximum number of instalments that are available to you. For example, if you join the scheme in February or March you will be able to pay your deferred VAT in 11 instalments or fewer.

Please see the extract below from HMRC website with regards to the dates and corresponding number of instalments available to you:

To use the online service, you must ensure you meet the following criteria:

• you can only join the scheme yourself, your agent cannot do this for you
• still have deferred VAT to pay
• be up to date with your VAT returns
• join by 21 June 2021
• pay the first instalment when you join
• pay your instalments by Direct Debit (if you want to use the scheme but cannot pay by Direct Debit, there is an alternative entry route but you will need to call the COVID-19 helpline on: 0800 024 1222)

More detailed information can be found on the gov.uk website or please contact our office on 01226 298 298 and we can discuss the options for you and your business in further detail.

From 1 March 2021 the domestic VAT reverse charge must be used for most supplies of building and construction services.

The charge applies to standard and reduced-rate VAT services:

• for individuals or businesses who are registered for VAT in the UK
• reported within the Construction Industry Scheme

When the reverse charge applies, a supplier of building or construction services does not charge VAT on those supplies to the customer. Instead the customer accounts for the VAT that would have been due on the supply as output tax on their VAT return, and (subject to the usual rules) claims it back as input tax on the same return.

This may put suppliers of such services in a position of regularly claiming refunds of VAT, as they no longer receive VAT on sales. They may therefore wish to consider moving to monthly VAT returns to improve their cashflow. Sub-contractors should also be aware that their customers will no longer be paying VAT, which will reduce the gross value of payments coming into the business. They will need to consider and plan for the impact of this on day-to-day cashflow.

There are various exceptions to the reverse charge, including certain services which, when supplied on their own, are excluded. Details are given in HMRC guidance (links below)

For reverse charge purposes consumers and final customers are called end users. They are businesses, or groups of businesses, that are VAT and Construction Industry Scheme registered but do not make onward supplies of the building and construction services supplied to them. The reverse charge does not apply to supplies to end users where the end user tells their supplier or building contractor in writing that they’re an end user.

Intermediary suppliers are VAT and Construction Industry Scheme registered businesses that are connected or linked to end users. If intermediary suppliers buy construction services and re-supply them to a connected or linked end user, without making material alterations to the supplies, they’re all treated as if they’re end users and the reverse charge does not apply. The reverse charge does not apply to supplies to intermediary suppliers where the intermediary supplier notifies their supplier or building contractor in writing that they’re an intermediary supplier. Intermediary suppliers can refer to themselves as end users.

Suppliers of building and construction services need to:

• Check if the customer has a valid VAT number
• Check the customer’s CIS registration
• Review each contract to decide if the reverse charge will apply, and tell customers if so
• Ask customers if they are an end user or intermediary as described above
• Record the reverse charge in their accounts

Buyers of building and construction services need to:

• Check if the supplier has a valid VAT number
• Tell the supplier whether you’re an end user or intermediary
• Account for the charge

The above is a brief overview, HMRC’s detailed guidance is at: https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services#whentouse
and https://www.gov.uk/guidance/vat-reverse-charge-technical-guide

Please contact us if you need any further information.

In the eleventh hour move, HMRC have announced that they are extending the tax self-assessment deadline by a month, from 31 January to 28 February as there are more than 3 million people who have still not filed their 2019/20 tax return.

It is hoped that the extension will be a sigh of relief for many individuals who HMRC say are faced with “immense pressure” due to the current pandemic. In usual circumstances individuals would have received a late filing penalty of £100 if their return were not submitted by 31 January.

However, HMRC have advised that taxpayers are still obliged to pay any tax that they owe for the 2019/20 tax year by 31 January and interest would be applied to any balance due from 1 February.

HMRC’s Chief Executive, Jim Harra yesterday stated that he would still encourage tax returns to be filed on time, but accepted this may not always be possible:

“We want to encourage as many people as possible to file their return on time so we can calculate their tax bill and help them if they can’t pay it straight away.

We recognise the immense pressure that many people are facing in these unprecedented times and it has become increasingly clear that some people will not be able to file their return by 31 January.

Not charging late filing penalties for late online tax returns submitted in February will give them the breathing space they need to complete and file their returns, without worrying about receiving a penalty.

We can reasonably assume most of these people will have a valid reason for filing late, caused by the pandemic.

https://www.express.co.uk/fina…

We would always encourage self-assessment tax returns to be filed by 31 January, especially if you are an individual with tax liabilities of up to £30,000 and need additional time to pay. HMRC will only allow a Time to Pay arrangement to be set up using the online tool once your 2019/20 has been submitted and there is no outstanding return, debt or existing payment plan in place. 

With a new national lockdown from 5 January, the Treasury announced another round of one-off cash grants for retail, hospitality and leisure businesses to help them through to the spring. There is also further discretionary funding to support other impacted businesses.

The new grants are only for businesses situated in England, with the devolved administrations of Scotland, Wales and Northern Ireland providing their own support.

Grants will be paid on a per-property basis, with the amount dependent on the property’s rateable value:

To qualify, a business needs to be legally required to close and not able to operate effectively remotely. The new grants are in addition to any previous business support, such as the recent local restrictions support grant. Grants may well be paid automatically but keep an eye on your local authority’s website in case you need to register or apply.

Discretionary grants

Businesses not eligible for a cash grant can apply to their local authority for financial help if they are affected by the restrictions. Help is aimed at smaller businesses which do not pay business rates but have relatively high ongoing fixed property-related costs. This might include:

• those in shared offices or other flexible work spaces;
• market traders;
• bed and breakfast businesses paying council tax instead of business rates.

Other recent announcements

Just before parliament broke for Christmas, the Chancellor extended the employee furlough scheme by another month to the end of April, with the government-backed bounce back loan scheme now available up to 31 March – it was due to end on 31 January. The business interruption loan schemes have been similarly extended.

The job retention bonus that was due to be paid to employers in February 2021 of £1,000 for each eligible employee returning from furlough has been postponed due to the recent further extension of the furlough scheme.

You can find out what Covid-19 financial support is available for your business by working through the government’s business support finder.

In order to support individuals who require additional time to pay, HMRC is encouraging use of its online tool to set up an instalment plan for self-assessment tax payments via a Time to Pay arrangement.

The online tool can be used for tax liabilities of up to £30,000.

This is a self-serve process which means you must apply online yourself, unfortunately, we cannot do this on your behalf.

Provided all the criteria are met, a short-term payment arrangement can be put in place without having to discuss this with HMRC directly, and without having to provide details of current income and expenditure.

Please note that arranging the instalment plan does not avoid incurring interest charges. Interest at 2.6% per annum will still be charged from 1^st February 2021 on unpaid amounts. However late payment penalties are avoided if the payment plan is in place and payments are made as agreed.

The online tool can only be used after your 2019/20 return has been submitted, and there must be no outstanding return, debt or existing payment plans with HMRC.

The payment plan must be in place within 60 days of the 31^st
January 2021 payment becoming due and payments must be made by direct debit.

If you wish to set up a payment plan online please follow the link below, scroll to “If you cannot afford to pay your latest bill” and there is a direct link which will require you to enter your Government Gateway ID:

https://www.gov.uk/pay-self-as…

If you wish to discuss any of the above in further detail with a member of our tax team, please give us a call on 01226 298 298.

As a proud Yorkshire based accountancy firm founded over 50 years ago, we are overjoyed to share the news of our inclusion to the Handpicked Accountants network which shortlists the highest calibre of trusted accountants across the country. Our extensive and experienced team of business consultants, accountants, auditors, tax advisors, payroll and legal compliance experts are part of our business journey, assisting in upholding our reputation as a respectable service provider across Barnsley and Leeds. We cater to businesses across Yorkshire, providing a broad range of services which encompass all your business needs, from business valuation, tax consultancy to audit and assurance.

Handpicked Accountants is an online platform which filters the best performing accountants across the country, regardless of their market share or national presence. Businesses on the hunt for a local accountant can turn to Handpicked Accountants to source a reputable provider in their local vicinity, now featuring gbac under the Yorkshire region. Each accountant is rigorously tested to ensure that they meet high customer service standards and have a strong understanding of the industry.

At gbac accountants, we believe in acting on our values to help us deliver unmatched service, driven by our heavyweight management team. We have a dedicated office in Barnsley, which best places us to reach businesses across the North of England.

David Tattersall, Head of Client Relations at Handpicked Accountants, said: “Gbac accountants are an established accountancy firm with a loyal customer base due to business longevity and a team with an impeccable history in the accountancy trade. We are happy to welcome them to the Handpicked Accountants family and adding them to our directory of outstanding accountants.”

The profile for gbac accountants is now active on Handpicked Accountants.