Chancellor ‘meets the moment’ with Budget 2021

• The Chancellor, Rishi Sunak, delivered Budget 2021 today (3rd March 2021) which was entitled “Protecting the jobs and livelihoods of the British people”.
• Government has published a number of policy papers on the Government page. A full summary of the Budget can be found here.
• The Budget details further measures to address issues of the Covid-19 pandemic, as well as a three-point plan to provide support for jobs and businesses as we come out of the pandemic and rebuild the economy.
• Budget publications also confirm that the imminent changes to the off payroll working rules will take effect from 1st April 2021.
• Government also published new Notes on the Finance Bill resolutions 2021 here.

Aspire round up;

Off-payroll working rules

Where the Intermediary is a company

• In the Finance Act 2020, the conditions relating to an intermediary that is a company were amended to prevent perceived potential avoidance of the ‘Off–Payroll’ working rules
• Prior to the amendment, workers could potentially dilute their shares in their PSC so that they do not have a material interest which would have meant that the off-payroll working rules didn’t apply (having a shareholding equal to or less than 5%).
• However, the amended condition had a wider impact than intended and meant that workers would still be caught by the rules even if they already had the full payment taxed as employment income (for example, via an umbrella company).

Policy Change 3rd March 2021

• Government has published the Policy Paper which will be introduced via legislation in the Finance Bill 2021 to amend ITEPA 2003 and relevant National Insurance Contributions regulations.
• The amendment will be amended via Section 61O and the condition will only need to be considered where the worker has an interest in the company intermediary that is less than material and receives a chain payment that is not wholly treated as employment income.

Targeted Anti-Avoidance Rule (TAAR)

• A TAAR is being introduced that will target any arrangements where the main purpose, or one of the main purposes, is to gain a tax advantage by circumventing the conditions of an intermediary and taking the engagement out of scope of the off-payroll working rules.

Amendment to Section 61U (and Regulation 21)

• The amendment will require either the worker or the intermediary to confirm to the potential deemed employer whether one of the conditions in section 61N is met and therefore whether the rules should apply to the engagement.
• It remains the case that where the worker or intermediary does not confirm if the conditions are met, the client organisation must assume that one of the conditions is met and consider the application of the rules.

Amendment to Section 61V (and Regulation 22)

Where a UK based party in the supply chain has provided fraudulent information, the subsequent liability will be moved to the party that provided the fraudulent information.

Covid- 19

The Chancellor’s statement acknowledged the tremendous impact which the pandemic has had on the economy and the British people before confirming the measures being taken in order to support jobs with the current loan schemes coming to an end.

• The Coronavirus Job Retention Scheme and Self Employment Income Support Scheme will be extended to September 2021.
• It was estimated that, with the extension to the Self Employment Income Support Scheme being extended to September 2021, potentially 600,000 more people who filed a tax return in 2019-20 will now be able to claim for the first time.  
• Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay per employee.
• To further support the cashflow of businesses, Government is proposing to introduce legislation in Finance Bill 2021 to extend the loss carry back rules for businesses.
• Government announced in July 2020 that a temporary VAT rate of 5% for hospitality, accommodation and attractions across the UK would be introduced and it was subsequently extended to 31 March 2021. Government have now announced a further extension of six months to 30 September 2021 with a new reduced rate of 12.5% applying until 31 March 2022.
• Government also announced a new ‘Taxpayer Protection Taskforce’ with £100 million in funding to tackle COVID related fraud and those who have exploited UK Government support schemes.

Personal Taxes

• From April 2021 the income tax personal allowance will rise to £12,570.
• This means the basic rate limit will be £37,700 and the higher rate tax threshold will rise to £50,270.
• Government has pledged that these rates will remain from April 2021 until April 2026. See the policy paper here.
• The national insurance contribution thresholds will rise (as previously announced) with the Primary Threshold/Lower Profits Limited to £9,568 and the Upper Earnings Limit (UEL)/Upper Profits Limited to £50,270. The UEL will remain at this level until 2026 with all other national insurance contribution thresholds being considered and set at future fiscal events.

Business Tax and Policy

• Government will be introducing new late submission penalties which will affect those who fail to meet their obligations to provide returns and other information requested by HMRC on time. It will initially apply to VAT and Income Tax Self-Assessment. Further information was also published regarding penalties for late payment and interest harmonisation.
• Taxpayers will no longer receive an automatic financial penalty if they fail to meet a submission obligation. Instead, they will incur a certain number of points for missed obligations before a financial penalty is levied.
• A measure was announced introducing an exemption from Income Tax for financial support payments received by potential victims of modern slavery and human trafficking.
• Government announced an extension to the temporary Income Tax and National Insurance contribution exemption for employer reimbursed expenses that cover the cost of relevant home-office equipment.
• It was announced that the Corporation Tax rate is set to increase to 25% from 1 April 2023. Corporation Tax rates will be;
  • 19% for the financial year beginning 1 April 2022
  • 25% for the financial year beginning 1 April 2023 – profits exceeding £50,000 but not exceeding £250,000 will remain chargeable at the current rate of 19%
  • Small Profits Rate at 19% for the financial year beginning 1 April 2023 – this will be applicable to business with profits below the lower limit of £50,000
• There will be an extension to Making Tax Digital requirements to include smaller VAT registered businesses from April 2022 following its successful roll out in April 2019 to businesses who exceeded the VAT registration threshold.
• Government has committed to maintaining VAT thresholds for a further two years from 1 April 2022;
  • The taxable turnover threshold, which determines whether a person must be registered for VAT, will remain at £85,000 until 31 March 2024.
  • The taxable turnover threshold, which determines whether a person may apply for deregistration, will remain at £83,000 until 31 March 2024.
• Businesses who deferred VAT payments that would otherwise have been payable with VAT returns due between 20 March 2020 and 30 June 2020 will be given longer to pay, in up to 11 smaller interest-free instalments. See the policy paper here.
• By March 2022, Government will introduce reforms to the immigration system introducing an elite points-based visa. Government will also modernise the immigration sponsorship system to make it easier to use to help the UK attract the best international talent. A delivery roadmap will be published in the summer.
• Government announced a new Help to Grow scheme to offer up to 130,000 companies across the UK a digital and management boost via new training which will be funded by up to 90% by the Government.
• The Low Pay Commission’s (LPC) new remit was published which asks the LPC to make recommendations for the National Living Wage and National Minimum Wage rates that should apply from April 2022. The NLW will rise to £8.91 from 1 April 2021 and will apply for the first time ever to workers agreed over 23.

Avoidance, evasion and non-compliance

• Government published a summary of responses received to the consultation on proposed changes to penalties which can be levied on people receiving Follower Notices and penalties as a result of using avoidance schemes. We are advised to expect legislation in the Finance Bill 2021.
• A measure was announced to introduce a new Financial Institution Notice which will be used to require financial institutions to provide information to HMRC when requested about a specific taxpayer, without the need for approval from the independent tribunal that considers tax matters.
• Government published a summary of responses to the consultation on the proposed changes to strengthen the sanctions against those who promote or enable tax avoidance schemes and intend to take forward measures in the Finance Bill 2021.
• HMRC is being given an additional £180 million in 2021-2022 to improve resources and technology. The additional funding is expected to enable HMRC to bring in over £1.6 billion of additional tax revenues between now and 2025-26.