Autumn 2021 UK Budget – Businesses

Annual Investment Allowance extension (AIA)

The temporary £1 million level of the Annual Investment Allowance  will be extended to 31 March 2023. The 100% relief was scheduled to revert to £200,000 on 1 January 2022. This deduction is available to unincorporated businesses as well as limited companies and the equipment does not have to be new.

This tax allowance is not as generous as the 130% super-deduction announced in the UK March 2021 Budget which is available when new plant and machinery is acquired by limited companies between 1 April 2021 and 31 March 2023.

The Health and Social Care Levy 

The new 1.25% Health and Social Care Levy to fund investment in the NHS and social care to be introduced from April 2022 will also apply UK-wide to Class 1 Employer’s National Insurance contributions.

https://jsca.co.uk/new-health-and-social-care-levy/

Company Car Tax

As advised in the 2020 UK  Budget the Company Car Tax rates  already announced for 2022/2023 will remain frozen until 2024/2025.

However, from 6 April 2022,  car fuel benefit charges will increase in line with the Consumer Price Index and the new multiplier will be £25,300.

Company Vans 

From 6 April 2022, the van benefit charge and the van fuel benefit charges will increase in line with the Consumer Price Index to £3,600 and £688 respectively.

Vehicle Excise Duty (VED)

Vehicle Excise Duty for cars, vans and motorcycles will increase in  line with RPI from 1 April 2022.

VED and Levy rates for heavy goods vehicles

The Government will continue to freeze heavy goods vehicles VED for 2022/2023 and suspend the HGV Levy for another 12 months from August 2022.

Research and Development (R&D) tax reliefs

From April 2023 R&D tax reliefs will be reformed to:-

• support modern research methods by expanding qualifying expenditure to include data and cloud costs
• more effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK
• target abuse and improve compliance.

Recovery Loan Scheme 

The Recovery Loan Scheme will be extended until 30 June 2022 to ensure that lenders continue to have the confidence to lend to small and medium-sized businesses. Finance will be available up to a maximum of £2 million per business to support their recovery and growth following the Covid 19 pandemic.

However, the UK Government guarantee will be reduced from 80% to 70% to encourage the lending market to move towards normality as the economy continues to recover.

Residential Property Developer Tax

From April 2022 the UK Government will introduce a new tax on the profits that companies and corporate groups derive from UK residential property development, to ensure that the largest developers make a fair contribution to help pay for building safety remediation.

The tax will be charged at 4% on profits exceeding an annual allowance of £25 million.

Group Relief for European Company Losses to End

With effect from 27 October 2021, group relief for losses of 75% subsidiary companies resident in the European Economic Area and companies trading in the UK through permanent establishments will end.

Basis period reform for sole traders, partnerships and LLPs

Basis periods for sole traders, partnerships and LLPs will be reformed so that the business’s profit or loss for a tax year will be the profit or loss arising in the tax year itself, regardless of its accounting date.

This will remove the current complex basis period rules, the need to charge tax on profits twice and the need for overlap relief.

The transition to the new rules will take place in 2023/2024 and the new rules will come into force from 6 April 2024.

Making Tax Digital (MTD) for Income Tax Self-Assessment Delayed by One Year

The UK Government will give sole traders and landlords, with income over £10,000 an extra year to prepare for Making Tax Digital for Income Tax Self-Assessment.  This will now be now be introduced from 6 April 2024.

Partnerships will not be required to join MTD for ITSA until 6 April 2025.

Reform of penalties for late VAT submissions and payments

The new regime of penalties for VAT will come into effect for VAT taxpayers from periods starting on or after 1 April 2022

Alcohol Duty Reform

The UK Government intends to:

• restructure alcohol duty so that all beverages will be taxed in direct proportion to their alcohol content
• reduce the number of main rates from 15 to 6, with common thresholds for each set of bands across product categories, and rates will be harmonised for drinks at 8.5% ABV or above
• introduce reduced rates for products below 3.5% ABV
• Introduce a common small producer relief, so to reduce the tax burden on smaller producers of wine, cider, spirits and made-wine below 8.5% ABV
• bring in a new relief that recognises the importance of pubs and also supports responsible drinking with duty rates on draft beer and cider being cut by 5%.

The UK Government is publishing a consultation on the detail of these reforms, which will close on 30 January 2022. The Government will continue to discuss the application of these reforms to Northern Ireland with the EU during the consultation period of the review.

https://jsca.co.uk/autumn-2021-uk-budget-individuals/

https://jsca.co.uk/autumn-2021-uk-budget-english-business-rates/