Archives for 2021

Tax Diary December 2021/January 2022

7th December 2021

1 December 2021 – Due date for Corporation Tax payable for the year ended 28 February 2021.

19 December 2021 – PAYE and NIC deductions due for month ended 5 December 2021. (If you pay your tax electronically the due date is 22 December 2021).

19 December 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2021.

19 December 2021 – CIS tax deducted for the month ended 5 December 2021 is payable by today.

30 December 2021 – Deadline for filing 2020-21 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2022-23.

1 January 2022 – Due date for Corporation Tax due for the year ended 31 March 2021.

19 January 2022 – PAYE and NIC deductions due for month ended 5 January 2022. (If you pay your tax electronically the due date is 22 January 2022).

19 January 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2022.

19 January 2022 – CIS tax deducted for the month ended 5 January 2022 is payable by today.

31 January 2022 – Last day to file 2020-21 self-assessment tax returns online.

31 January 2022 – Balance of self-assessment tax owing for 2020-21 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2021-22.

Christmas gifts for staff

7th December 2021

Readers are reminded that there is a tax-free allowance for the provision of an annual party or other event for the benefit of staff and their partners. The present limit to tax relief is £150 per head. If this amount is exceeded, the full cost of the benefit is taxable, not the excess over £150.

Where it’s not possible to calculate individual costs, an averaging process can be adopted. There are also other considerations that must be met to qualify for this relief.

Another way to benefit staff tax-free for Christmas is to consider making small gifts.

You don’t have to pay tax on a benefit (gift) to your employee if all of the following apply:

it costs you £50 or less to provide
it isn’t cash or a cash voucher
it isn’t a reward for their work or performance
it isn’t in the terms of their contract

Gifts that fall into this category are known as a ‘trivial benefit’; and whilst they may be much more than trivial in substance, you don’t need to pay tax or National Insurance or let HMRC know you are making the gift.

Any gifts that do not meet this definition will likely be taxable.

Gifts to directors are treated in a similar fashion with one over-riding condition: a director cannot receive trivial gifts of more than £300 in total each tax year. This restriction only applies to the directors of “close companies”. A close company is a limited company with five or fewer shareholders.

Watch out for VAT charge

If you recover the input tax charged when you buy gifts for employees, and if the total value of gifts given to an employee in a tax year exceeds £50, then you will have to account for VAT on the total value of gifts provided. If this is the case, you may be advised to avoid recovering the VAT in the first place.

Business gifts and tax

7th December 2021

Business gifts are not allowed as a tax deduction against profits. The legislation treats gifts in the same way as business entertaining expenditure, which is also disallowed.

HMRC define a gift as:

“… something that is given to a person without receiving anything in exchange. It is offered voluntarily and without any expectation of a return. An example of this would be gifts provided for potential customers who take a test drive in a new car – there is no obligation to buy the car and so nothing has been given to the trader in return for the gift.

Gifts may also arise where goods or services are supplied at less than the cost to the trader. For instance, a hotel might offer meals to its suppliers at a nominal charge. Here the difference between the cost of the meal and the price paid is a non-allowable gift. By contrast, if a baker reduces the price of fresh bread at the end of the day, this is a normal commercial transaction (as the bread will be worthless by the next day) and the cost is allowed in full.”

Budget bad news 27 October 2021

7th December 2021

Income Tax Allowances frozen: The Income Tax personal allowance and the rates and bands are frozen until April 2026. Whilst this is not a direct tax increase, it does mean that any increases in earnings will be fully taxed and certain taxpayers may find that this process will push some of their income into the higher rate bands.
Dividend Tax: To ensure that the tax payable on dividend income increases in line with the increase in NIC next year, from April 2022 the new rates payable on dividends in excess of the £2,000 tax-free allowance will be:

o Dividends that form part of the basic rate band – 8.75% (7.5% 2021-22)

o Dividends that form part of the higher rate band – 33.75% (32.5% 2021-22)

o Dividends that form part of the additional rate band – 39.35% (38.1% 2021-22)

For most director/shareholders of smaller companies who have adopted the high dividend low salary approach to remuneration, will pay more tax as a result, but this should not affect the overall strategy.

Corporation Tax: The planned increase in rates to 25% (currently 19%) from April 2023 was confirmed. From 1 April 2023, there will be two rates of CT. Taxable profits up to £50,000 will continue to be taxed at 19%, taxable profits more than £250,000 will be taxed at 25%. Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.
Increasing the normal minimum pension age: The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing. From 6 April 2028, the normal minimum pension age is increasing from 55 years to 57 years. Affected individuals may need to revisit their retirement plans.

If you are concerned by any aspects of the recent Budget, please call.

Budget bonuses 27 October 2021

7th December 2021

There was little good cheer in the Chancellor’s announcements to parliament on 27 October. A short summary of the good news is listed below:

Annual Investment Allowance (AIA): The £1m limit to claims for tax relief when purchasing qualifying assets was due to return to a more modest £200,000 from the 1^{st of} January 2022. This change has now been postponed until 31 March 2023. This takes the urgency out of decisions to purchase appropriate assets. This is a welcome extension of tax relief for capital expenditure, especially for unincorporated businesses who do not have access to the new 130% Super-deduction that is only available to companies.
Museums and Galleries: The Museums and Galleries Exhibition tax relief is extended for a further two years until 31 March 2024.
Theatre, Orchestra and Museums and Galleries Exhibition Relief: rates of relief have been increased to 31 March 2024.
Capital Gains Tax deadline increased: The requirement to file calculations of capital gains due on certain residential property sales and pay any tax due within 30-days of completion – primarily on disposal of second homes and buy-to-let property – has been extended to 60-days. This affects all sales completed on or after 27 October 2021.
Business rates relief extended: The business rates multipliers are frozen for a second year until 31 March 2023. The small business multiplier is set at 49.9p and the standard multiplier at 51.2p. Different rates apply in London and in Wales. The freezing of the multipliers will mean that your business rates will not increase in 2022-23. Eligible retail, hospitality and leisure properties will benefit from a 50% relief in their business rates for 2022-23, subject to a cap of £110,000 per business.
National Living Wage: The basic NLW rate is increasing to £9.50 per hour from April 2022.

Tax Diary November/December 2021

16th November 2021

1 November 2021 – Due date for Corporation Tax due for the year ended 31 January 2021.

19 November 2021 – PAYE and NIC deductions due for month ended 5 November 2021. (If you pay your tax electronically the due date is 22 November 2021.)

19 November 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2021.

19 November 2021 – CIS tax deducted for the month ended 5 November 2021 is payable by today.

1 December 2021 – Due date for Corporation Tax payable for the year ended 28 February 2021.

19 December 2021 – PAYE and NIC deductions due for month ended 5 December 2021. (If you pay your tax electronically the due date is 22 December 2021)

19 December 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2021.

19 December 2021 – CIS tax deducted for the month ended 5 December 2021 is payable by today.

30 December 2021 – Deadline for filing 2020-21 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2022-23.

Changes in VAT rates for hospitality traders

16th November 2021

The temporary reduced rate of VAT (5%), introduced to assist qualifying hospitality trades disrupted by COVID lockdown measures, was increased to 12.5% on 1 October 2021. Based on present information, from 31 March 2022, this 12.5% rate will revert to the 20% standard rate.

Businesses that manage their own accounts software will need to change the VAT settings to include the new 12.5% rate, and make sure that this new rate is applied to all relevant taxable sales from 1 October 2021, in place of the temporary 5% rate.

Affected businesses will also need to consider the effects of this change on their selling prices to customers.

If you decide to maintain the VAT inclusive price that you charged when the 5% VAT rate applied, the increase in VAT to 12.5% will lower your profit margin. If you decide to pass on the VAT increase to your customers, you may experience a drop in demand for your services.

If you are unsure which way to proceed, please call. We can help you consider your options and, if required, change your accounts software to include the new 12.5% rate.

Self-assessment tax deadline approaching

16th November 2021

There are still two ways to submit your self-assessment tax return.

Most taxpayers chose to file electronically, and if we file your tax return, this is the way we would file on your behalf. If you do file electronically, the filing deadline for the 2020-21 tax year is 31 January 2022.

But there are still taxpayers that prefer to fill out a paper return. If this is your preference, please note that if your 2020-21 self-assessment tax return is still not filed, you have missed the filing deadline (31 October 2021). You have two options, to minimise penalties complete and submit the outstanding return asap or complete and submit the return online. If you need help switching to the electronic filing option, please call, we can help.

In a recent press release, HMRC was at pains to remind taxpayers that this year, they will also have to declare if they received any grants or payments from COVID-19 support schemes up to 5 April 2021. These grants are taxable, including:

Self-Employment Income Support Scheme,
Coronavirus Job Retention Scheme,
other COVID-19 grants and support payments such as self-isolation payments, local authority grants and those for the Eat Out to Help Out scheme.

The £500 one-off payment for working households receiving tax credits should not be reported in self-assessment.

Company filing dates

16th November 2021

In most cases, the statutory filing date for a Corporation Tax return is twelve months after the end of the relevant accounting period.

HMRC considers reasonable excuse to be something that stops a company from meeting a tax obligation despite them having taken reasonable care to meet that obligation. HMRC will consider what a reasonable person, who wanted to meet their obligation, would have done in the same circumstances.

Whether a company has a reasonable excuse will depend on the circumstances in which the failure occurred. What is a reasonable excuse for one company may not be a reasonable excuse for another company.

The company must remedy the failure to file as soon as it can reasonably be expected to do so after the excuse has ended.

HMRC have published examples off what might be considered a reasonable excuse. They include:

One director runs the company, and he (or an immediate family member) dies or suffers a sudden and serious illness close to the filing date. Alternatively, the director has a prolonged and serious illness throughout much of the return period.
Unavoidable and unexpected absence abroad of the responsible director close to the deadline because of business commitments or domestic emergency.
Accidental destruction of the records through fire or flood.

Autumn Budget Summary 27 October 2021

28th October 2021

As with the Spring Budget 2021, much of the detail for the Autumn Budget had been leaked to the press prior to the official report to parliament, 27th October 2021.

But we now have all the details and, as usual, there is much to consider. The following Budget summary is split into two sections:

Taxation changes
Other announcements

Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

Taxation changes

Income Tax 2022-23 to 2025-26

No increase in rates and the higher rate threshold is frozen at £37,700 through to April 2026. For the same period, the personal tax allowance is also frozen at £12,570 (£12,570 2021-22) and will apply to all regions of the UK.

In what many commentators consider to be a “stealth tax”, wage earners benefitting from annual increases in their earnings up to April 2026 will find themselves paying tax on the full value of any increases. This is because, with personal allowances and the higher rate thresholds frozen until April 2026, any increases in earnings will be taxed and, in some cases, this may push earnings into the higher rate tax bands.

Regional variations to Income Tax rates may apply in Wales and Scotland.

Income Tax and dividend income

The current £2,000 dividend tax-free allowance is unchanged.

As announced 7 September 2021, the tax rates payable on dividend income will increase in line with the 1.25% increase in certain NIC contributions. The rates that will apply in all regions of the UK from 6 April 2022 are:

Dividends that form part of the basic rate band – 8.75% (7.5% 2021-22)
Dividends that form part of the higher rate band – 33.75% (32.5% 2021-22)
Dividends that form part of the additional rate band – 39.35% (38.1% 2021-22)

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2022-23.

Reform of Basis Periods for self-employed and partners

The basis on which profits are taxed in a tax year are to be changed from the account’s year ending in a tax year to the actual profits arising in a tax year. Self-employed sole traders and partners who already have a year end at the end of the tax year will experience no change in their basis of taxation.

For affected traders with year ends other than the end of March or 5 April, there will be a transition to an actual basis during 2023-24 and the new rules will come into force from 6 April 2024.

The reform will include greater flexibility on the use of overlap relief in the transition year and provisions to reduce the impact of transition profits on allowances and profits.

National Insurance

Boris Johnson announced – earlier this year – a 1.25% increase in certain National Insurance Contributions from April 2022. This is ring-fenced to provide funding for health and social care. From April 2023, this NIC increase will be withdrawn and replaced by a new Health and Social Care Levy at the same rate.

The government will use the September Consumer Prices Index figure of 3.1% as the basis for uprating National Insurance limits and thresholds, and the rates of Class 2 and 3 National Insurance contributions, for 2022-23.

This excludes the Upper Earnings Limit and Upper Profits Limit which will be maintained at 2021-22 levels, in line with the higher rate threshold for Income Tax.

Lifetime Allowance for pension pots

From April 2021 to April 2026 the pensions lifetime allowance will remain frozen at £1,073,100.

Capital Gains Tax

Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, there are two changes worth mentioning:

Capping the annual exempt amount. This was fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people; and £6,150 for trustees of most settlements, and
The deadline for reporting chargeable residential property sales – not a main residence, this covers sales of second homes or buy-to-let properties – is increased from 30 days to 60 days. This change applies to disposals that complete on or after 27 October 2021.

The second change is welcomed as the 30 days reporting window was a tight reporting timeline in which to gather all the relevant data to make a submission to HMRC and to pay any taxes due.

Corporation Tax

No change in Corporation Tax rates until April 2023. For the financial year beginning 1 April 2022, the rate will remain at 19%.

As announced earlier this year, from 1 April 2023, there will be two rates of CT.

Taxable profits up £50,000 will continue to be taxed at 19%
Taxable profits more than £250,000 will be taxed at 25%
Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.

Corporation Tax and banking companies

From 1 April 2023, the rate of surcharge on banking companies will be 3% and the surcharge allowance increased from £25m to £100m.

Corporate Tax – R&D Relief

R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. This will effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and target abuse and improve compliance. These changes will be legislated for in Finance Bill 2022-23 and take effect from April 2023.

Museums and Galleries Exhibition Tax Relief

The sunset clause in this relief is extended for a further two years until 31 March 2024.

Cultural Relief changes

Theatre Tax Relief and Museums and Galleries Tax Relief

Rates will increase from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50% respectively from 27 October 2021.

From 1 April 2023, the rates will fall to 30% and 35%, with a return to 20% and 25% on 1 April 2024. As mentioned above, the Museums and Galleries Tax Relief will expire after 31 March 2024.

Orchestra Tax Relief

From 27 October 2021, the relief will increase from 25% to 50%, reducing to 35% from 1 April 2023, and returning to 25% from 1 April 2024.

Reliefs for investments in qualifying assets

Super-deduction

The temporary “Super-deduction” and a 50% first year allowance – that were introduced April 2021 – will continue to apply to qualifying expenditure up to 31 March 2023.

The super-deduction allows businesses to remove 130% of qualifying expenditure as a deduction from taxable profits.

Annual Investment Allowance

The existing Annual Investment Allowance (AIA) was due to reduce to £200,000 (from the present £1m) from 1 January 2022. This date has been changed. The £1m of AIA relief will now revert to £200,000 from 1 April 2023.

Business owners thinking about high-value investments in qualifying assets will now have more time to consider their timing of capital acquisitions.

Reform of loss relief rules for Corporation Tax

The government will legislate in the Finance Bill 2021-22 to amend the loss relief rules to ensure that the legislation continues to work as intended for companies adopting International Financial Reporting Standard (IFRS) 16. The changes will have retrospective effect from 1 January 2019.

Van and car benefit changes

This measure increases the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2022. The flat-rate van benefit charge will increase to £3,600; the multiplier for the car fuel benefit will increase to £25,300; and the flat-rate van fuel benefit charge will increase to £688.

Inheritance Tax

No changes to present rates and allowances. These are all frozen at current levels until April 2026.

This means the nil-rate band will continue to be £325,000 and the residence nil-rate band at £175,000, for this period.

VAT

There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will remain at these levels until 31 March 2024.

The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions was increased to 12.5% from 1 October 2021. This rate will remain until 31 March 2022 when it will revert to 20%. This acknowledges the disruption and financial hardship suffered by this sector during the COVID pandemic.

VAT rules in Freeports

From 3 November 2021, the government will introduce new elements into the VAT free zone model for Freeports. They are:

implement a free zone exit charge to ensure businesses do not gain an unintended tax advantage from the zero-rate in the free zone model,
make amendments to existing VAT law to ensure free zone rules and warehousing rules are mutually exclusive,
amend some parts of historic free zone legislation which are incompatible with the new free zone VAT rules.

Other announcements

Business rates changes

The business rates multipliers are frozen for a second year until 31 March 2023. The small business multiplier is set at 49.9p and the standard multiplier at 51.2p. Different rates apply in London and in Wales. The freezing of the multipliers will mean that your business rates will not increase in 2022/23.

Eligible retail, hospitality and leisure properties will benefit from a 50% relief in their business rates for 2022/23, subject to a cap of £110,000 per business.

A relief is also being introduced for improvements to business properties which will delay the start date of higher business rates triggered by the improvements for 12 months. The government are to consult on how to implement the relief, which will take effect from 2023 and will be reviewed in 2028. If you are planning improvements to your business premises, this may benefit you.

From 1 April 2023 until 31 March 2035 a targeted business rates exemption will apply for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief will be available for eligible heat networks. This is to support the decarbonisation of non-domestic buildings.

From 2023, business rate revaluations will take place every three years rather than every five years.

Transitional relief for small and medium-sized businesses is extended for one year, which will restrict bill increases to 15% for small properties (i.e. those with a rateable value of up to £20,000 or up to £28,000 in Greater London), and to 25% for medium properties (i.e. those with a rateable value of up to £100,000).

Increasing the normal minimum pension age

The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing.

From 6 April 2028, the normal minimum pension age is increasing from 55 to 57.

Universal Credits

To compensate for the recent withdrawal of the £20 a week UC payment, the government is to decrease the amount it reduces UC payments when a claimant works more hours. Presently, for every £1 earned UC payments decrease by 63p. From 1 December 2021 at the latest, this will be lowered to 55p for every £1 earned.

Duties and Miscellaneous taxes

Tobacco Duty will be increased by agreed rates above the Retail Prices Index (RPI) from 6pm on 27 October 2021.
Alcohol duty rates will be frozen.
Landfill Tax will increase in line with RPI increases. The increase will be effective from April 2022.
Aggregates Levy – the government will freeze the Levy rates in 2022-23.
Gaming Duty will increase in line with RPI changes. The increase will be effective from April 2022.
VED rates for cars, vans and motorcycles will increase in line with RPI changes. Change will be effective from April 2022.
VED rates for HGVs. The government will continue to freeze HGV VED for 2022-23. It will also suspend the HGV Levy for a further year from 1 August 2022.
Fuel Duty rates for 2022-23 will remain frozen.
Air Passenger Duty rates for flights within the UK will be reduced from April 2023 when new bandings are introduced. Rates for short and long-haul flights will increase in line with the RPI and a new ultra-long-haul band will be introduced.

ISA investment limits for 2022-23

The limits set for 2022-23 are: