Autumn Budget 2021 – In March the Chancellor announced an increase to corporation tax rates from April 2023 to 25% for taxable profits above £250,000. Currently we have one unified tax rate of 19% and this will remain for business with taxable profits of up £50,000 with a tapering relief provision in place between the £50,000 up to £250,000 when the full rate of 25% will be applied.
The diverted profit tax was also announced in March to increase to 31% from April 2023 to ensure a deterrent remains in place against diverting funds out of the UK.
The banking surcharge is also being set at 3% from April 2023, this was anticipated following calls to lower this charge as the banking sector has been more severely affected by Brexit than previously anticipated.
RESEARCH AND DEVELOPMENT TAX RELIEF (‘R&D’)
In March 2021 a consultation was announced to review the R&D tax relief.
The results are now announced, and the following changes are being implemented to take effect from April 2023.
- Qualifying expenditure to include data and cloud computing costs.
- To tackle abuse of R&D, only UK investment will be eligible with overseas activity excluded.
Previously we had seen the payable R&D capped at £20,000 plus three times the company’s total PAYE and NIC liability starting from April 2021.
The R&D provides significant support to companies developing products as well as research in the UK. Following on from a consultation it is disappointing to see these are the only announcements in this area and mainly focused on abuse.
To assist with recovery from Covid, various loss reliefs were announced in March.
- 12-month loss carry back claim extended to 36 months
- Unincorporated businesses and companies that are not members of a group will be able to claim up to £2 million of losses in each of the years 2020-21 and 2021-22.
In corporate group situations, each member will be able to claim up to £200,000 of loss relief in both these periods unrestricted by group limitations. Group restrictions will give an overall loss relief limit of £2 million as a cap across the group.
The Chancellor has just announced from 27 October 2021 it will abolish cross boarder loss relief, to ensure losses from EU companies (previously allowable when the UK was part of the EU) are now excluded from being claimed by UK companies.
THEATRE TAX RELIEF
From 27 October 2021 the rate will be temporarily extended for non-touring productions to 45% and touring productions to 50%.
In March the new super-deduction was announced from April 2021 until 31 March 2023 for companies investing in qualifying new plant and machinery benefiting from 130% first year capital allowance.
Figures from the Office for National Statistics suggest that as of December 2021, claims are building up more slowly than expected.
Annual Investment Allowance (‘AIA’)
It was a welcome announcement today for businesses to see the AIA of 100% for qualifying assets up to £1 million being extended from 31 December 2021 to 31 March 2023.
Together with the super-deduction should encourage businesses invest as we come back out of the pandemic.
RESIDENTIAL PROPERTY DEVELOPMENT TAX
This was previously announced in Feb 21 that this new tax would be introduced from April 2022 on the profits exceeding £25 million pa that companies derive from UK residential property development at a rate of 4%.
Previously announced was a consultation into Enterprise Management Incentive scheme (EMI). Unfortunately, we have yet to receive any changes in this area, which is critical to businesses which are facing labour shortages and trying to retain key employees.
The Government had previously announced various aspects in relation to VAT to assist with the COVID-19 pandemic.
- VAT deferral on VAT returns due between 20 March to the end of June 20, instead of paying back in one payment in March 21 you can elect to pay back in 11 equal instalments starting from March 21.
- The 5% rate of VAT will be extended in the hospitality and tourism sector until 30 September with a further 6 months at an interim rate of 12.5% until the normal rate of 20% applies from April 2022.
The VAT registration and deregistration limits will not change for a further period of two years from 1 April 2022.
In addition, a reform of penalties and interest on late paid VAT will be introduced from April 2022.
In March the government announced to extend the business rates relief for eligible retail, hospitality, and leisure properties until 30 June 2021. This was further extended by 2/3rds rates relief until 31 March 2022 capped at £2 million per business.
The Chancellor has today announced following a review of the business rates system the following.
- Business rates relief of 50% for hospitality, leisure, and retail next year up to a cap of £110,000.
- Freezing the business rates multiplier in 2022-23
- From 2023 business rates no change in ratable value for property improvements for first 12 months
- Exemptions for eligible plant and machinery used in renewable energy generation and storage.
- Business rates valuation to take place every 3 years instead of 5.
Although we have seen major calls for reform and even removing business rates during the pandemic this was not possible given the income it generates for the government. There are also the new on-line digital tax discussions taking place and all receipts are to be given to this area to assist.