This edition includes articles on how HMRC will be reviewing/checking the Self-employment Income Support Scheme claims and the expansion of the Making Tax Digital programme in the coming years.
This edition leads on the changes to the Job Retention Scheme and Self Employed Income Support. In addition there is an article on the "super deduction" for capital allowances being introduced.
The first issue of 2021 provides details of the deferred VAT payments and Corporation tax to go digital
This edition of the newsletter provides a round up of the current Covid-19 financial support.
This edition of the newsletter provides an update on some tax changes as a result of Covid-19
From April 2022, the government plans to create a new social care levy which will see UK-wide tax and National Insurance Contribution (NIC) increases.
There will be a 1.25% increase in NICs on earned income, with dividend tax rates also increasing by 1.25%. The money raised will be ringfenced for health and social care costs.
The Levy will be effectively introduced from April 2022, when NIC for working age employees, the self-employed and employers will increase by 1.25% and be added to the existing NHS allocation. The Levy will not apply to Class 2 or 3 NICs.
From April 2023, once HMRC's systems are updated, the 1.25% Levy will be formally separated out and will also apply to individuals working above State Pension age and NIC rates will return to their 2021/22 levels.
Individuals who receive dividend income will also face a higher tax bill as all rates of dividend tax will increase by 1.25% from April 2022.
The dividend tax is applicable on dividend income above the frozen £2,000 dividend allowance and above the £12,570 personal allowance. Dividends on assets held in ISAs are excluded from the dividend tax.
From the 2022-23 tax year, basic rate dividend tax will be charged at 8.75% instead of 7.5% this year. Higher rate dividend taxpayers will be charged 33.75% instead of 32.5% and additional rate dividend taxpayers will pay 39.35% instead of 38.1% respectively.
Internet links: GOV.UK
HM Treasury has announced that Chancellor Rishi Sunak will deliver the Autumn 2021 Budget on Wednesday 27 October.
On 7 September the Chancellor launched Spending Review 2021, which will conclude on 27 October and will be presented alongside the Autumn Budget. The Spending Review will outline government departments' resource and capital budgets from 2022/23 to 2024/25.
The Spending Review is also expected to set out how the government will deliver on its promises to the British public through leading the transition to net zero across the country; ensuring strong and innovative public services; levelling up across the UK to increase and spread opportunity; and delivering its Plan for Growth.
The Chancellor said:
'Despite the worst economic recession in 300 years, we have not only got people back into work through the Plan for Jobs but continued to deliver on the priorities of the British people.
'At the Spending Review . . . , I will set out how we will continue to invest in public services and drive growth while keeping the public finances on a sustainable path.'
Internet link: GOV.UK
The government's Coronavirus Job Retention Scheme (CJRS) ended on 30 September after supporting millions of workers during the pandemic.
The government said the wages of more than 11 million people were subsidised for at least some of the scheme's duration at a cost of around £70 billion.
Economists say there is likely to be a rise in unemployment due to new redundancies, despite the fact that some may be able to find work in recovering sectors such as travel and hospitality.
The Federation of Small Businesses (FSB) said the end of the furlough scheme, the scrapping of the small employer sick pay rebate and the closure of the government's apprenticeship incentive scheme will only add pressure on companies.
Mike Cherry, the FSB's National Chair, said:
'It's potentially a dangerous moment. As the weather turns colder, so too will the operating environment for many firms. With recent economic growth numbers having fallen below expectations, the upcoming festive season may not provide as much of a boost as hoped to many small businesses' bottom lines.'
The government's scheme that enables small businesses to recoup statutory sick pay costs caused by COVID-19 closed at the end of September.
Legislation ending the Coronavirus Statutory Sick Pay Rebate Scheme (SSPRS) was laid before parliament on 9 September.
Before the COVID-19 pandemic, employers were obliged to pay Statutory Sick Pay (SSP) to eligible employees unable to work because of sickness. It is paid at a flat rate of £96.35 (at the current rate) for up to 28 weeks. The full cost of SSP is met by the employer.
To support employers during the pandemic, the government legislated to allow certain small and medium size employers to reclaim some, or all, of their SSP costs from HMRC via the SSPRS.
Under the new regulations, employers will not be able to reclaim SSP from 30 September 2021 and any claims relating to periods prior to that date must have been filed by 31 December 2021.
The Institute of Chartered Accountants in England and Wales (ICAEW) said:
'It would appear that the suspension of the requirement to wait for three days before SSP is paid has not yet been repealed. The three-day rule was suspended temporarily during the peak of the COVID-19 crisis to encourage people to stay at home as soon as they felt ill.'
The government has opened a £800 million Reinsurance Scheme to cover live events against cancellations stemming from the COVID-19 pandemic.
The live events sector is worth more than £70 billion annually to the UK economy and supports more than 700,000 jobs, including small businesses and the self-employed.
The UK Live Events Reinsurance Scheme will support live events across the country – such as concerts and festivals, conferences and business events – that are at risk of being cancelled or delayed due to an inability to obtain COVID-19 cancellation insurance.
The government has partnered with Lloyd's Market Association to deliver the scheme as part of its Plan for Jobs.
The scheme will see the government act as a 'reinsurer', stepping in with a guarantee to make sure insurers can offer the products events companies need. The scheme is available from 22 September 2021 and will run until the end of September 2022.
Chancellor Rishi Sunak said:
'The events sector supports hundreds of thousands of jobs across the country and as the economy re-opens, we're helping events providers and businesses plan with confidence right through to next year.'
Internet links: GOV.UK
UK workers could get more choice over when and where they work under new proposals to make the right to request flexible working a day one entitlement.
The government will also introduce a day one right to one week's unpaid leave for carers balancing a job with caring responsibilities. The government says the plans will make for more productive businesses, whilst accommodating both employee and employer needs.
The proposals consider whether limiting an employee's application for flexible working to one per year continues to represent the best balance between individual and business needs.
The consultation also looks at cutting the current three-month period an employer has to consider any request.
If an employer cannot accommodate a request, as can be the case, they would need to think about what alternatives they could offer.
Matthew Fell, Chief Policy Director at the Confederation of British Industry (CBI), said:
'Businesses have learnt a huge amount about the pros and cons of flexible working during the pandemic, with many firms expecting to receive more formal and informal requests in the future. Employers support giving employees the right to request flexible working from day one in the job.
'Companies want to work with the government to ensure that they can say 'no' when they have properly considered requests but for good reason can't accept them.'
COVID-19 emergency finance schemes offered £80.5 billion of finance to almost 1.7 million businesses through the British Business Bank (BBB) during the last financial year.
This support, which is not included under the Bank's core programmes, was evenly distributed across the nations and regions of the UK.
In addition, the BBB supported £8.5 billion through its normal core finance programmes, although this was below its target of £9.085 billion due to displacement of existing programmes by COVID-19 emergency finance schemes.
The Bank was independently assessed as having deployed its expertise to the government effectively, ranging from advice on COVID-19 scheme development and delivery to fulfilling priorities on research and market engagement.
Catherine Lewis La Torre, CEO of the BBB, said:
'Throughout 2020/21, in response to the pandemic, the BBB performed a role vital to the UK government, finance markets and the economy as a whole.
'Our financial support to smaller businesses has increased by more than £80 billion during the last financial year, and now stands at nearly £89 billion.
'We look forward to using our unique position in the market to support businesses further as they recover and return to growth once more, thereby rebuilding the foundations of the UK's future prosperity.'
Internet link: British Business Bank website
HMRC has published a policy paper outlining the forthcoming changes to the penalties for late payment and interest harmonisation for taxpayers.
The government intends to reform sanctions for late submission and late payments to make them 'fairer and more consistent across taxes'. Initially the changes will apply to VAT and Income Tax Self Assessment (ITSA).
The changes will see interest charges and repayment interest harmonised to bring VAT in line with other tax regimes, including ITSA.
Under the new regime, there are two late payment penalties that may apply: a first penalty and then an additional or second penalty, with an annualised penalty rate. All taxpayers, regardless of the tax regime, have a legal obligation to pay their tax by the due date for that tax. The taxpayer will not incur a penalty if the outstanding tax is paid within the first 15 days after the due date. If tax remains unpaid after day 15, the taxpayer incurs the first penalty.
This penalty is set at 2% of the tax outstanding after day 15.
If any of the tax is still unpaid after day 30 the penalty will be calculated at 2% of the tax outstanding after day 15 plus 2% of the tax outstanding after day 30. If tax remains unpaid on day 31 the taxpayer will begin to incur an additional penalty on the tax remaining outstanding. This will accrue at 4% per annum.
HMRC will offer taxpayers the option of requesting a Time To Pay arrangement which will enable a taxpayer to stop a penalty from accruing by approaching HMRC and agreeing a schedule for paying their outstanding tax.
For VAT taxpayers, the reforms take effect from VAT periods starting on or after 1 April 2022. The changes will take effect for taxpayers in ITSA from accounting periods beginning on or after 6 April 2023 for those with business or property income over £10,000 per year (that is, taxpayers who are required to submit digital quarterly updates through Making Tax Digital for ITSA).
For all other ITSA taxpayers, the reforms will take effect from accounting periods beginning on or after 6 April 2024.
Internet link: GOV.UK
HMRC has published a consultation that outlines plans to implement reporting rules for digital platforms first put forward by the Organisation for Economic Co-operation and Development (OECD).
In February 2020, the OECD consulted on proposed rules setting out how digital platforms should collect information about the income of sellers and report it to tax authorities.
Under the new rules, websites and applications based in the UK will be required to report sellers' income arising in the previous calendar year to HMRC. The reporting deadline will be 31 January of the year following the calendar year.
HMRC stated that the new rules will improve international co-operation in regard to the exchange of information for tax purposes. They will also allow HMRC to access data from platforms based outside the UK quickly and efficiently, which should encourage compliance and increase the visibility of transactions.
The rules will also help taxpayers to get their tax right and will assist HMRC in detecting and tackling tax non-compliance.
HMRC's consultation will close on 22 October 2021.
Internet links: GOV.UK
The CIOT has warned that some claims being made by firms offering help with Stamp Duty Land Tax (SDLT) refunds are too good to be true.
The CIOT says an increasing number of firms are contacting buyers of properties after completion of a purchase, suggesting that SDLT has been overpaid.
The most common issues raised are that multiple-dwellings relief (MDR) has not been claimed or that the buyer could have paid non-residential rates of SDLT (which are generally lower than residential rates) because the property was a mixture of residential and non-residential land.
The CIOT said:
'SDLT is complicated and sometimes reliefs are overlooked, so it can be worth revisiting transactions if a letter is received.
'However, many unsolicited approaches are indeed too good to be true and responsible taxpayers should act with caution and check independently whether a refund is due.
'The suggested fee arrangements can also seem attractive as it appears that the claims are made on a 'no win no fee' basis. But it is important to remember that receiving a refund is not necessarily a win as HMRC may revisit the claim and deny that it was valid. In these circumstances, the fee may already have been paid.'
Internet link: CIOT