Making Tax Digital (MTD) for Income Tax:
Government’s plan is to make it easier for UK resident individuals and businesses to get their taxes right. Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their accounting period starting on or after 6 April 2023.
To follow the rules for Making Tax Digital for Income Tax, business records will need to be kept digitally in a compatible software. After the software is authorised, business income and expense updates need to be sent to HMRC every 3 months. Updates will summarise the business’s income and expenses.
At the end of the accounting period, business income and expenses will need to be finalised by a declaration where confirmation is needed for the updates sent to HMRC are correct and make if any accounting adjustments are needed.
Final declaration will need to be submitted at the end of the tax year it applies to. The final declaration replaces the Self-Assessment tax return. This is when individuals can inform HMRC regarding any personal income or reliefs claimed.
HMRC starts Investigations into COVID-19 support schemes:
HMRC has launched 12,828 investigations into the abuse of COVID-19 government's grants and financial support schemes up to the end of March 2021 which is found by a research carried out by law firm, BLM.
This includes the Coronavirus Job Retention Scheme (CJRS)-7384, the Self-Employment Income Support Scheme (SEISS)-5020 and the Eat Out to Help Out scheme-424.
It is expected that the number of investigations will continue to increase as more fraudulent activity, non-compliance and errors are found.
If anyone received an overpayment for any COVID-19 support grant, it must be notified to HMRC and the excess payment received will need to be repaid. If the grant is claimed wrongfully, then the full amount will need to be repaid.
If an overpayment is received or a grant is received which the individual is not entitled to, it will be subject to penalty. Penalty charges simply depend on behaviour of the individual. Higher penalty applies if it is ‘deliberate and concealed’ which is up to 100%.
Changes to Coronavirus Job Retention Scheme (CJRS):
The UK Government will continue to pay 80% of furloughed employees’ usual wages for the hours not worked, up to a cap of £2,500 per month, to the end of June 2021. Claims for June 2021 must be made on or before Wednesday 14 July 2021.
In July 2021, CJRS grants will cover 70% of employees’ usual wages for the hours not worked, up to a cap of £2,187.50. In August 2021 and September 2021, this will then reduce to 60% of employees’ usual wages up to a cap of £1,875.
Employers will need to pay the 10% difference in July 2021 (20% in August 2021 and September 2021), so that they can continue to pay their furloughed employees at least 80% of their usual wages for the hours they do not work during this time, up to a cap of £2,500 per month.
Corporation tax rate:
Corporation tax rate for small profit 19% (profit up to 50k), rate will be 25% in 2023. In order to support the recovery, the increase will not take effect until 2023. Businesses with profits of £50,000 or less, will continue to be taxed at 19% and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate.
Extension of loss carried back:
The UK Government proposes to introduce a legislation in Finance Bill 2021 to provide a temporary extension to the loss carry back rules for trading losses of both corporate and unincorporated businesses (For accounting periods ending between 1 April 2020 and 31 March 2022). This temporary extended trading loss c/b from one year to three years, to further support the cashflow of businesses, the government is extending the loss carry back against trading income subject to a cap of £2m.
Capital Allowance Super-deduction:
In the UK Finance bill 2021 government introduce Super-deduction on capital allowance which essentially a state subsidy for private sector investment in plant and machinery, an enhanced temporary 130% first-year allowance for main rate assets, and a 50% first-year allowance for special rate assets. The super-deduction apply for capital investments made between 1 April 2021 and 31 March 2023 An investment-led recovery beginning April 2021, the new super-deduction will cut companies’ tax bill by 25p for every pound they invest in new equipment. This is worth around £25 billion to UK companies over the two-year period the super-deduction will be in full effect. Essentially a state subsidy for private sector investment in plant and machinery.
Capital Gains Tax return and payment:
From 6 April 2020, anyone making a taxable gain from selling a UK residential property must submit a residential property capital gains return within the 30-day window from the date of completion and pay any CGT owed. For the non-UK resident persons NRCGT apply since from 6 April 2015 any disposal of residential property in the UK. There will be require a rebasing of residential property on 5 April 2015.
UK property held by non-UK resident’s company
Changes from 6 April 2020, non-UK resident companies that carry on a UK property rental business or have other UK property income will be liable to corporation tax instead of income tax.
Changes from 6 April 2019, UK property gains released by non-UK resident companies are subject to corporation tax instead of CGT. Non-resident companies are no longer be required to complete NRCGT returns, as they are not required under Corporation Tax. The normal Corporation Tax filing and quarterly payment rules apply. However, by concession where there are 4 or more disposals, HMRC accept a 12-month accounting period.
New interim VAT rate for hospitality business:
Will not increase VAT rate on finance bill 2021. For hospitality business reduce VAT rate 5% will be continued until end of September 2021. New interim rate 12.5% a further six months until 31 March 2022.