Prepared by the PEM tax team after the Spring 2021 Budget announcement.
Stamp Duty Land Tax
As anticipated the Chancellor has extended the SDLT holiday for residential property, although it will be less generous from 1 July 2021. The £500,000 nil band will remain in place until 30 June 2021 (saving up to £15,000 of SDLT compared to the normal residential rates). From 1 July to 30 September 2021 the band will fall to £250,000 (saving up to £2,500), with the normal band of £125,000 returning from 1 October 2021. The higher rates for additional dwellings (3% surcharge) will still apply within these bands if relevant. The aim of the extension is to allow those who are already in the process of buying a house to secure the tax benefit. There was great concern that the heavy workload on conveyancers at this time would mean that buyers could lose out due to delays in completing. First Time Buyer’s Relief, which provides SDLT savings for purchases up to £500,000, is now due to return from 1 July 2021, so these types of buyers will not be disadvantaged. There was no mention of the 2% surcharge for non-residents buying dwellings in England and Northern Ireland, which is due to come into force from 1 April 2021. These rules are complex and could catch out some purchasers. Hopefully more clarity on the final rules will be released shortly.
The Chancellor Rishi Sunak has announced as part of his plan to fix the public finances that the rate of corporation tax will increase from 19% to 25%. Fortunately, this new rate does not come into effect until 1 April 2023 and is tiered based on a company’s level of profits:
Taxable Profits Rate of Corporation tax
Up to £50,000 19%
£50,000-£250,000 25% with marginal relief to be applied
Above £250,000 25%
As readers may recall back in 2008, the loss carry back rules were extended as a means of helping businesses through that financial crisis. Today the Chancellor has announced a similar measure. Under the current rules, companies can carry back unrestricted losses to the previous 12 months – this provision is unaffected. The additional measure announced today provides for:
- A further loss carry back to an additional two years capped at £2 million for each accounting period ending between 1 April 2020 and 31 March 2022.
- The £2 million is capped for groups of companies as a whole.
The Government is aware that with the continuing economic impact that COVID is having on companies which are reluctant to commit cash in long term investments. As such, the Chancellor has announced a new super-deduction available to companies investing in new qualifying plant and machinery. The super-deduction provides companies with:
- A 130% super-deduction capital allowance on qualifying plant and machinery investments
- A 50% first-year allowance for qualifying special rate assets
As anticipated given the Government’s roadmap out of the pandemic, the Job Retention Scheme has been extended beyond its current end date of 30 April 2021 and will now end on 30 September 2021. Whilst employees on furlough leave will still receive 80% of their relevant pay for hours not worked (capped at £2,500), from 1 July 2021 employer’s will see an increase in their employment costs, with furlough claims limited to 70% of relevant pay from that month, reducing to 60% of relevant pay from 1 August 2021 onwards.
Alongside this extension, £100m is to be invested in up to 1,265 HMRC staff to combat fraud in respect of the government’s COVID-19 support packages, which includes the Job Retention Scheme.
Enterprise Management Incentive (EMI) Share Option Schemes
It is a requirement under the EMI legislation that the option holder meets the working time condition (being 25 hours per week, or if less, at least 75% of their working time). This requirement was relaxed from 19 March 2020 for those employees who could not meet the working time test because of Covid-19, for example if they were furloughed. As the pandemic continues, the relaxation of the working requirement test is extended to 5 April 2022.
As part of the “Scientific Superpower” creation goal, the Government is committed to ensuring that EMI schemes provide support for high-growth companies to recruit and retain the best talent and to examine if more companies should be able to access the scheme. A Call for Evidence has been launched to consider this further.
Despite calls for its delay, the introduction of the Off-Payroll Working rules in the private sector will still be going ahead from 6 April 2021, a year after its original planned start date. Some minor changes to the operation of this legislation are being introduced ahead of this date but the government expect to collect an additional £3.79bn of tax by 2025/26.
There were no changes in the tax rates, although the temporary 5% reduced rate for supplies of hospitality, holiday accommodation and admission to attractions has been extended to 30 September 2021. This temporary rate will be replaced by one of 12½% between 1 October 2021 and 31 March 2022 with the standard rate of 20% applying again from 1 April 2021.
The Chancellor also announced that the annual VAT registration threshold will remain at £85k (where it has been since 1 April 2017) until 31 March 2024.
At the beginning of the Covid-19 crisis, the Chancellor provided taxpayers with the opportunity to defer VAT payments otherwise due between 20 March 2020 and 30 June 2020. Many taxpayers took advantage of this interest free offer. The original plan was for taxpayers deferring VAT to settle up by 31 March 2021. Now, though, any deferred VAT remaining due can be paid off in instalments over the course of the 2021/22 financial year under the New Payment Scheme. Taxpayers need to be up to date with their VAT returns otherwise they will not be allowed to join the scheme Any taxpayers eligible to join the scheme need to do so by 21 June 2021. Taxpayers can still, of course, pay any deferred VAT by the end of this month as originally intended. Any taxpayers needing extra help to pay should contact HMRC on 0800 024 1222 by 30 June 2021. The warning from HMRC is that failure to take any action will potentially result in interest or penalties being imposed.