Not the Autumn Budget: Government releases a raft of tax updates
Over a dozen tax announcements were quietly slipped out in a written parliamentary statement on 12 November, Rebecca Cave summarises what you need to know.
Chancellor Sunak postponed his Budget Statement to Spring 2021, but the tax policy machine has not stopped. It fell to Jessie Norman, financial secretary to the Treasury, to announce the government’s reaction to concluded tax consultations and launch some new ones, including the long-awaited consultation on MTD for corporation tax. There is also an important change for capital allowances.
AIA cap extended
The £1m annual investment allowance (AIA) cap was due to revert to £200,000 on 1 January 2021. The ATT called for an extension of the higher AIA cap in September and again in October, and it appears the Treasury listened. The AIA cap will be held at £1m until 1 January 2022.
MTD for corporation tax
We’ve waited over four years for this con doc on MTD for corporation tax, and I’ll have more to say about it in a future article as the consultation is open until 5 March 2021. In the meantime, all you need to know is:
- MTD for CT will apply to ALL entities that pay corporation tax, with no minimum turnover threshold.
- Quarterly reports summarising income and expenses will be required.
- A pilot will start in 2024.
- MTD for CT will be compulsory from 2026, but possibly later.
- HMRC will not provide free software for MTD filing.
R&D tax credit PAYE cap
The cap on the amount of payable R&D credits, linked to the amount of PAYE and NIC payable by a small company, was removed in 2012. But in 2018 Chancellor Philip Hammond announced he would reintroduce a cap, after consultations which stretched in 2020.
The government has now decided the R&D tax credit cap will be £20,000 per period plus 300% of the PAYE and NIC payable for the period. This will take effect for periods starting on and after 1 April 2021.
Reforming the CIS
This proposed reform is framed as tackling abuse of the construction industry scheme (CIS). The changes will take effect from 6 April 2021 and will:
- allow HMRC to amend the CIS repayment claimed on the EPS
- increase penalties for supplying false information to HMRC relating to the CIS
- change the definition of deemed contractors
Next year promises to be a particularly challenging one for the construction industry, as the VAT domestic reverse charge commences on 1 March, also these new CIS rules and the off-payroll regime for the private sector both start on 6 April.
David Kirk warned us about an error in the off-payroll legislation contained in FA 2020 that would widen the definition of an intermediary to include both umbrella companies and agencies. HMRC quickly responded, and the technical error will be corrected in FA 2021 to take effect from 6 April 2021.
Raising standards for tax advice
The regulation of the tax profession was at the core of the consultation on raising standards for tax advice, as discussed with CIOT tax policy director John Cullinane in August.
HMRC has now released a summary of responses to that consultation and has suggested further steps which would include:
- consulting on whether all tax advisers should have professional indemnity insurance
- defining “tax advice” and “tax advisers” to distinguish those advisers from tax scheme promoters
- HMRC to enforce their standard for agents code of practice, which is less comprehensive that the PCRT, but would represent a step forward.
Tackling tax scheme promoters
This is an issue that government are under pressure to do something about, so they are going to consult again in 2021 to build on the proposals already announced.
The language in Norman’s written statement is reassuring as he says: “The proposals are aimed at targeting those promoters who exploit every opportunity to personally profit by side-stepping the rules and whose unscrupulous actions often leave taxpayers with significant tax bills.”
A number of proposed policy changes have been delayed or scrapped, which is a sign that the consultation process is working as it should.
For example, it is proposed that large businesses should notify HMRC if they use uncertain tax treatments. This proposal has come in for a lot of criticism of definitions and details during consultation, and the implementation has been push back to April 2022.
The van specific vehicle excise duty (VED) will not be introduced from April 2021.
The sugar tax (soft drinks levy) may be extended to sugary milk and milk-substitute drinks from April 2022, if the amount of sugar in those drinks is not reduced.
Further evidence will be gathered on the need for changes to the timing of tax payments and the review of the tax administration framework. Expect more consultations in this area in Spring 2021.
Draft law and guidance have been published on the following issues: