As widely predicted the Chancellor announced an increase to corporation tax rates from April 2023 to 25% for taxable profits above £250,000, which is slightly higher than the 23% rumors pre-Budget. 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 provisions in place between the £50,000 up to £250,000 when the full rate of 25% will be applied.
The diverted profit tax will also increase to 31% from April 2023 to ensure a deterrent remains in place against diverting funds out of the UK.
This will not come as a surprise to business and many will be grateful of the delay to it being implemented to give them chance to recover from Covid 19 effects on trade.
Back in 2017 we saw major changes in the loss relief allowed for businesses and this Budget has also introduced major reforms for 2020-21 and 2021-22.
The announcements have come through in two parts, firstly the 12-month loss carry back claim has been temporarily extended to 36 months, which is the same as the current terminal loss relief provisions. This temporary extension applies to periods ending between 1 April 2020 and 31 March 2022 for corporates. Sole traders should look at losses in 2020/21 and carry back 3 years.
The second is in respect on the amount of losses which can be relieved in a single period. 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, which is similar to provisions we currently in place albeit higher at £5,000,000.
Although the rules have been enhanced on the one hand, they have also brought down the overall threshold from £5 million to £2 million which will not help businesses struggling the most.
CAPITAL ALLOWANCES – SUPER DEDUCTION
From April 2021 until 31 March 2023 companies investing in qualifying new plant and machinery assets will benefit from 130% first year capital allowance.
This will be music to many businesses ears as they prepare to move out of this pandemic era and start to push forward. This is the first time we have seen this type of capital allowance in the UK and it will be interesting to see how businesses react.
Announced today is the welcome review of both Research and Development Tax Credit (R&D) and the Enterprise Management Incentive scheme (EMI). Both schemes not only help growth and business innovation but also help to retain key employees in the business whilst the business develops and rewards the individuals for the efforts in making the business growth succeed.
What we have also seen is that in relation to R&D for small and medium sized businesses, in order to tackle abuse the amount of payable R&D will be capped at £20,000 plus three times the company’s total PAYE and NIC liability starting from April 2021.
Recent pole of accountants identified a significant proportion wanted COVID-19 fraud to be investigated and identified it as a widespread problem. It was announced today that £100 million would be invested in a Taxpayer Protection Taskforce of 1,265 HMRC staff to deal with fraud in relation to COVID-19 including furlough and the self- employed grant scheme. This is welcomed news for professionals as we see recording borrowing and the knowledge that tax rises which will inevitably follow and want to ensure funds are legitimately paid to those who require support.
The Government had previously announced various aspects in relation to VAT to assist with the COVID-19 pandemic and more has been announced today.
- 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.
The government has announced to extend the business rates relief for eligible retail, hospitality, and leisure properties until 30 June 2021. This will be further extended by 2/3rds relief on rates due until 31 March 2022 capped at £2 million per business.
In addition, a significant amount of businesses have announced that they will repay their business rates relief, and it has been confirmed that a corporation tax deduction will be in place for the repayments as if they have made the payment.
We are seeing business who are able to repay any support they have received, and it is welcomed news that they will be placed back in the same position as if they have paid it in the first place.
BUSINESS RESTART GRANTS
Restart grants will be provided of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses to enable them to safely relaunch once restrictions are lifted.