2021 Budget

This is the fifth in our series of seven blogs regarding the 2021 Budget delivered by the Chancellor, Rishi Sunak on 3 March 2021 and covers:-

1. SDLT and LBTT
2. Licensing in Scotland
3. Freeports
4. Levelling Up Fund Prospectus Launch
5. Green Initiatives
6. Investment in HMRC
7. Funding for Scotland 

1. SDLT and LBTT

SDLT Thresholds extended in England and Northern Ireland.

SDLT does not apply in Scotland or Wales.  Please see the LBTT and LTT sections below.

Last March in order to stimulate the housing market the Chancellor announced a temporary cut in Stamp Duty Land Tax for home buyers across England and Northern Ireland which was scheduled to last until 31 March 2021.

This has now been further extended until 30 June 2021 so that transactions in progress will continue to benefit from the reduced rates.

As a transitional measure from 1 July 2021 the Nil Rate Band of Residential SDLT in England and Northern Ireland will then decrease to £250,000 for 3 months until 1 October 2021 when it will revert to £125,000 for purchases completed on or after that date. There has been no change to the SDLT rates above the Nil Rate Band. The 3% supplementary charge for second and subsequent homes in England and Northern Ireland will continue to apply.

Note that there are different rates of tax on property transactions in Scotland and Wales as such taxes have been devolved in those countries.

Land and Buildings Transaction Tax (LBTT) in Scotland

The Scottish LBTT rates and thresholds were announced in the Scottish Budget:-

https://jsca.co.uk/scottish-budget-2021-2022/

The Scottish Finance Secretary, Kate Forbes rejected calls to follow the Chancellor’s extended temporary cut in SDLT on 4 March 2021.

https://dailybusinessgroup.co.uk/2021/03/forbes-rejects-calls-for-lbtt-relief-extension/

Land Transaction Tax (LTT) rates and bands in Wales

The details of Welsh LTT rates and band can be found on the following link:-

https://gov.wales/land-transaction-tax-rates-and-bands 

2. Licensing in Scotland

From April 2023, the UK Government will make the renewal of certain licences in Scotland conditional on applicants completing checks that confirm they are appropriately registered for tax, consistent with reforms which come into force in England and Wales in April 2022.

In Scotland, this will apply to licences to drive taxis and Private Hire Cars (PHCs) or operate from PHC booking offices and licences to be a metal dealer.

The UK Government will consult on how to implement this reform.   

3. Freeports

Freeports in England

East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames have been successful in the Freeports bidding process for England. Subject to agreeing their governance arrangements and successfully completing their business cases, these Freeports will begin operations from late 2021.

The Freeports will contain areas where businesses will benefit from more generous tax reliefs, customs benefits and wider UK Government support with the aim of  bringing investment, trade and jobs to regenerate regions across the country that need it most.

Freeports in Scotland, Wales and Northern Ireland

The Chancellor stated that Freeports will benefit the whole of the UK and that discussions continue between the UK Government and the devolved administrations to ensure the delivery of Freeports in Scotland, Wales and Northern Ireland as soon as possible.

Tax sites in Freeports

The UK Government will legislate for powers to create ‘tax sites’ in Freeports in Great Britain. Businesses in these tax sites will then be able to benefit from a number of tax reliefs.

• An enhanced 10% rate of Structures and Buildings Allowance for constructing or renovating non-residential structures and buildings within Freeport tax sites in Great Britain

This means businesses’ investments will be fully relieved after 10 years compared with the standard 33 ¹/³ years at the 3% rate available nationwide.

This will be made available for corporation tax and income tax purposes. To qualify, the structure or building must be brought into use on or before 30 September 2026.

• An enhanced capital allowance of 100% for companies investing in plant and machinery for use in Freeport tax sites in Great Britain

This will apply to both main and special rate assets, allowing firms to reduce their taxable profits by the full cost of the qualifying investment in the year it is made, and will remain available until 30 September 2026.

• Full relief from Stamp Duty Land Tax on the purchase of land or property within Freeport tax sites in England.

Land or property must be purchased and used for a qualifying commercial purpose. The relief will be available until 30 September 2026.

• Full Business Rates relief in Freeport tax sites in England.

Relief will be available to all new businesses, and certain existing businesses where they expand, until 30 September 2026. Relief will apply for five years from the point at which each beneficiary first receives relief

• Subject to Parliamentary process and approval, the UK Government also intends to make an employer National Insurance contributions relief available for eligible employees in all Freeport tax sites from April 2022 or when a tax site is designated if after this date.

This would be available until at least April 2026 with the intention to extend for up to a further five years to April 2031, subject to a review of the relief.

4. Levelling Up Fund Prospectus Launch

The UK Government is launching the prospectus for its £4.8 billion Levelling Up Fund

• The Levelling Up Fund will invest in infrastructure that improves everyday life across the UK, including town centre and high street regeneration, local transport projects, and cultural and heritage assets

• The prospectus will provide guidance to local areas on the process for submitting bids, the types of projects eligible for funding, and how bids will be assessed

• To ensure that funding reaches the places most in need, the UK Government has identified priority places based on an index of local need to receive capacity funding to help them co-ordinate their applications

5. Green Initiatives

Green Gilt

The UK Government will issue its first sovereign green bond, or green gilt, this summer with a further issuance to follow later in 2021 as the UK looks to build out a ‘green curve’

• Green gilt issuance for the financial year will total a minimum of £15 billion

• The green gilt framework, to be published in June, will detail the types of expenditures that will be financed to help meet the UK Government’s green objectives

• The UK Government also commits to reporting the contributions of green gilt spending towards social benefits such as job creation and levelling up

Green Retail National Savings and Investment (NS&I) product

In addition, the UK Government will offer a green retail savings product through NS&I in the summer of 2021.

This product will be closely linked to the UK’s sovereign green bond framework and will give all UK savers the opportunity to take part in the collective effort to tackle climate change, benefiting from the innovative reporting standards planned for the green gilt programme.

6. Investment in HMRC

The UK Government will invest a further £180 million in 2021/2022 in additional resources and new technology for HMRC. This is forecast to bring in over £1.6 billion of additional tax revenues between now and 2025/2026 by enabling HMRC to:

• invest in IT systems to enable taxpayers to “more easily access tax services and update customer accounts digitally and make the collection of tax and payments from taxpayers easier”

• recruit additional compliance staff to increase its ability to target non-compliance “through illicit financial flows”

• carry out initial design and development of Digitalising Business Rates to help modernise the business rates system in England and support more effective analysis and oversight of the collection of the tax

• continue to fund compliance work on the loan charge, historic disguised remuneration cases and early intervention to encourage individuals to exit tax avoidance schemes 

7. Funding for Scotland

The budget confirmed that there would be an additional £1.2 billion of Barnett consequentials for the Scottish Government.

Taken together with the SR20 settlement, this means the Scottish Government will receive an additional £3.6 billion in 2021/2022 through the Barnett formula on top of the baseline of £35 billion, as well as more than £700 million of non-Barnett funding, notably for farms and fisheries.

In line with the agreed fiscal framework, the UK Government is also doubling the Scottish Government’s resource borrowing to £600 million for each of the next three financial years as well as waiving drawdown limits from the Scotland Reserve for the same period.

Links to other 6 Budget Blogs

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

Income Tax and National Insurance

https://jsca.co.uk/budget-2021-2/

Capital Gains, Inheritance Tax, Pensions, ISAs, 95% Mortgage Guarantee and Wealth Tax

https://jsca.co.uk/budget-2021-3/

Corporation Tax, Super-deduction and Special Rate Allowance, Extended Loss Carry Back for Businesses, New Recovery Loan Scheme, Preventing abuse of Research and Development (R&D) and Reform of Self-Assessment Penalties and Interest

https://jsca.co.uk/budget-2021-4/

VAT and Duties

https://jsca.co.uk/budget-2021-6/

Self Employed Income Support Scheme (SEISS)

https://jsca.co.uk/budget-2021-7/

Coronavirus Job Retention Scheme (CJRS)

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

Photo by Moritz Kindler on Unsplash