Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into the them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.
While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.
The Autumn Budget or a Party-Political Broadcast
This was a question I heard posed during the coverage of the budget on the BBC. It was very theatrical but you did come away from the event thinking that there was a lot of smoke and mirrors. There were one of two nuggets but that was about it. We have set out some key tax changes below.
Change in Tax Year Basis – could be expensive
The change from current year basis to the tax year basis will happen for all self-employed individuals and partners from 6 April 2024.
Under the tax year basis all unincorporated businesses will be taxed on the profits arising in the tax year, rather than the profits that are made in the accounting period that end in that tax year.
This change will affect unincorporated businesses that do not currently draw-up their accounts to a date between 31 March to 5 April. If you are affected your tax payments will be advanced.
The transitional year will now be 2023/24, which could mean double taxation for some businesses as they will be taxed on more than 12 months’ of profits.
If you do not change your accounting period to align with the tax year end, you will have to apportion profits from two accounting periods to complete your finalisation statement (the new name for the tax return under MTD).
£1M Annual Investment Allowance extended
The government will extend the temporary £1m level of the Annual Investment Allowance (AIA) to 31 March 2023. It was due to expire at the end of 2021.
The AIA is a 100% capital allowance for qualifying expenditure on plant and machinery up to a specified annual limit.
‘Extending the £1m AIA to March 2023 is unlikely to be of benefit to the vast majority of UK businesses who are already able to benefit from the 130% super deduction over the same period.
From April 2023 the AIA and super deduction will be withdrawn, and corporation tax rate increased to 25% leading to really tough years of high tax rates and low corporate reliefs and we do not know for how long that regime will continue.
The Recovery Loan Scheme is also being extended until 30 June 2022 to ensure that lenders continue to have the confidence to lend to small and medium-sized businesses. We are not seeing much evidence of that at the moment.
HMRC : Money for IT
There will be significant investment of £468m in HMRC’s IT systems to modernise and improve the quality, resilience and security of its digital services, a substantial increase on the £98m already allocated in 2021-22.
The IT investment will also be focused on reducing the risk of system failures, enhancing the department’s ability to defend against cyberattacks and support the continued digitisation and modernisation of the tax system.
The extension of Making Tax Digital will go ahead as previously announced, but will be delayed by one year until 2024. HMRC is convinced that greater adoption of digital tax will help to make tax simpler for businesses and reduce the scope for errors. Digitisation is forecast to generate up to £1.6bn in additional tax revenues by 2026-27.
There will also be a further £136m investment over the next three years to deliver the Single Customer Record and Account. This will create a simpler, faster and better experience for taxpayers, allowing them to see and manage all their tax affairs in one place.
R&D Tax Credits
Less than half of the R&D spending for which tax reliefs were claimed last year was actually carried out in the UK. R&D Reliefs will in future be restricted to innovation developed in the UK
The relief criteria is also expanding to cover cloud computing and data R&D.
The government plans to increase the R&D spending from £14.8bn this year to 16.1bn in 2022-23, to 19.4bn in 2023-24 and then £20bn from 2024-25..
The investment for R&D funding is aimed to help the UK ‘better support cutting-edge research methods’ and ‘refocus government support towards innovation’.
CGT Payments period extended to 60 days
From 27 October 2021 the deadline for residents to report and pay CGT after selling UK residential property will increase from 30 days after the completion date to 60 days.
For non-UK residents disposing of property in the UK, this deadline will also increase from 30 days to 60 days.
When mixed-use property is disposed of by UK residents, legislation will also clarify that the 60-day payment window will only apply to the residential element of the property gain.
HMRC Tax Evasion budget up £55m
HMRC is set to receive additional funding to ramp up its anti-avoidance and evasion efforts with the specialised taskforce earmarked to receive a multimillion boost
In addition, the government has announced substantial investment in HMRC’s IT systems over the next three years with cybersecurity and resilience seen as priority areas.
The government is also providing a discrete fund of £55m next year for the taxpayer protection taskforce, which was first announced at Spring Budget 2021, expanding HMRC’s compliance work while continuing to pursue those who have abused the government’s Covid-19 support schemes. The primary function of this group is tackling the multimillion pound abuse of the furlough scheme and bounce back loans.
In addition, as part of the spending review settlement, HMRC will receive a further £292m across three years for more resources to tackle the tax gap and ensure that as much as tax as possible is collected.
The government will legislate in Finance Bill 2021-22 for further measures to clamp down on promoters of tax avoidance.
We are likely to see increased HMRC investigations and litigation because not only have all the Covid schemes come to an end but HMRC have been allocated the additional resources to chase down tax that has been avoided.
The government has permanently reduced the taper rate by eight pence from 63 pence to 55 pence, and also increased the universal credit work allowances by £500 a year. These will be implemented on 1 December rather than at the end of the financial year.
Overall, the changes will affect 1.9m households.
The Chancellor stated that the changes will be an ‘effective £2.2bn tax cut’ for the country’s lowest earners.
Enhanced Tax Reliefs for creative industries
The government is to temporarily raise the rates of three corporation tax reliefs that are collectively referred to as the ‘cultural reliefs’. These are the theatre tax relief (TTR), orchestra tax relief (OTR), and museums and galleries exhibition tax relief (MGETR).
The rates for the theatre tax relief for non-touring will be 45% and for touring 50%. The orchestra relief tax will be 50% and the museum and galleries exhibition tax relief will be 45% for non-touring and 50% for touring. The Chancellor stated that this is a relief worth nearly £250m.
This is a rise of the current reliefs which are between 20% to 25%.
The relief is a temporary measure to help these industries recover from the Covid-19 pandemic and is planned to last for two years and five months beginning from 27 October 2021.
The Chancellor has also set out plans to spend about £850m over the course of three years ‘breathe life’ back into cultural hotspots like London’s V&A museum, The Tate Liverpool, and the Imperial War Museum in Duxford. The chancellor also pledged that the funding would be provided to more than 100 museums and libraries so they could be ‘renovated, restored and revived.
If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at email@example.com.