According to the Autumn Budget 2021, business rates in England are due to be frozen until 2023, with business rate discounts available for commercial properties in certain sectors.

Detailed guidance has yet to be published, but let’s take a look at some of the measures announced by Chancellor Rishi Sunak to relieve the financial burden of the pandemic for businesses.

Business rates 2022-2023

For another year, the government is going to freeze business rates multipliers at the current levels. The standard rate will remain at 51.2p and the small business rate will remain at 49.9p until 2023.

These multipliers will be used to calculate business rate bills for commercial properties below £51,000 in value, which are likely to be ineligible for other small business relief.

They will also introduce temporary business rate relief
for 2022-2023. Eligible retail, hospitality, and leisure businesses can get a 50% discount on business rates, up to a cap of £110,000 per business.

This is less than the 66% retail discount for 2021-2022, but it will still be helpful for medium businesses who can’t get small business rates (for property values between £12,001-£15,000).

Transitional relief will also prevent business rates from fluctuating too much for the next year. Rates can’t increase after revaluation by more than 15% for small businesses (up to £20,000) or 25% for medium businesses (up to £100,000) – subject to subsidy controls and London uplifts.

Tax reliefs for creative industries and charities

Museums and Galleries Exhibition Tax Relief (MGETR)
will be extended until March 2023 to support charitable companies running museum or gallery exhibitions – expenditure after this isn’t eligible.

MGETR and Theatre Tax Relief (TTR) will temporarily increase by 25% from 27th October 2021 to 31st
March 2023. Touring production tax relief will rise from 25% to 50%, and non-touring production tax relief will increase from 20% to 45%. They will reduce to 35% and 30% respectively on 1st April 2023.

Orchestra Tax Relief (OTR) will also increase from 25% to 50% from now until March 2023, reducing to 35% for the 2023-2024 tax year. All MGETR, TTR, and OTR rates will return to pre-increase 2021 levels from 1st April 2024 (decreasing back to either 25% or 20%).

From 1st April 2022, production companies can switch between Film Tax Relief (FTR) and High-End TV Tax Relief (HETR) if they change their distribution method, so they don’t lose out on tax relief.

The government plans to look into increasing safeguards for these tax relief options from 1st April 2022, to ensure that businesses aren’t abusing the system.

Long-term measures for business rates

The 2021 Autumn Budget announcements aren’t quite the radical business rate reform many were hoping for, but further measures being taken in 2023 and onwards will help in the future.

For example, the government plans to increase revaluation frequency to every three years, instead of every five years. They’re also aiming to introduce further exemptions and relief for eligible property improvements that would otherwise increase the property’s rateable value.

This includes a 100% improvement relief for twelve months. The government will outline eligibility and implementation by 2023 and review it in 2028. Most machinery upgrades won’t affect rateable value, but adding assets and amenities such as CCTV or bike sheds might.

Similarly, targeted exemptions for renewable energy
plants and machinery will apply between April 2023 and March 2035, with 100% relief for low-carbon heat networks. This means that you could get business rate exemptions when installing electric vehicle charging points or solar panels.

You can find all the current business rate relief details for English properties on the government website. Should you need assistance with business valuations or HMRC tax enquiries, please get in touch with the accounting experts at GBAC.

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:

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.

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.

No changes for Inheritance Tax, and only an administrative adjustment for Capital Gains Tax. From 27th 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.

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.

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 (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:

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

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;

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

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:

Picture1

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

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:

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:

Buyers of building and construction services need to:

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:

Rateable value

Amount of grant

£15,000 or under

£4,000

Between £15,000 and £51,000

£6,000

Over £51,000

£9,000

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:

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 1st 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 31st
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.