Although COVID-19 is taking up most of our time at the moment and business is rightly focused on getting through the next few months, the change of the tax year on 6 April should not be forgotten.
There are some key measures coming into force on 6 April.
In an effort not to inundate you with too much information at a time when there is a lot to process, we are presenting a summary of those changes taking place on 6 April. As always, if you are interested in a particular aspect of our summary, please do get in touch with our tax specialists.
Business tax insights
Corporation Tax extended to non-resident companies
Non-UK resident companies that receive income from carrying on a UK property business in the UK will no longer pay income tax on any income derived from that business but rather corporation tax. Ordinary corporation tax principles will apply to tax profits on:
- any UK property business,
- profits consisting of other UK property income, and
- any profits arising from loan relationships or derivative contracts which the company may be party to in the course of its UK property business.
Commencement of Enterprise investment scheme (EIS) Fund Approval Rules
The EIS approved fund rules are amended with effect from 6 April 2020 to introduce a new knowledge-intensive fund. The amendments include new rules that provide flexibility around investing in such shares by fund managers and the claiming of relief by investors.
The highlights of the new rules are:
- The new fund will be required to invest at least 80% of its capital in knowledge-intensive companies, but managers will have two years to invest 90% of funds (50% must be invested in the first year);
- Investors will be able to set their income tax relief against liabilities in the tax year, or against their liability of the previous tax year, before the fund closes.
HMRC to become secondary preferential tax creditor
This measure enables HMRC to improve its priority in the line of creditors seeking to recover debts from insolvent businesses.
Short-term Business Visitors (STBV) PAYE Scheme extended
The STBV PAYE scheme has been extended so that employees from overseas branches of UK companies are treated in the same way as STBV from overseas companies. These new rules also allow UK companies to operate an annual PAYE scheme for other STBV present in the UK for up to 60 days.
Aligned to this are regulations amending the rules for direct collection, and special arrangements for the collection of PAYE. These amendments will facilitate the payment of tax for STBV.
The annual rate for structures and buildings allowances increases to 3% per annum. This is effective from 1 April for corporation tax purposes and 6 April for income tax purposes. This rate increase was a Conservative Party election pledge. The structures and buildings allowance relieves qualifying expenditure incurred on construction, renovation or conversion costs for non-residential buildings, and the rate increase means that relief can be claimed over 33.33 years rather than 50 years.
Employment tax insights
Employer’s NI chargeable on Termination Payments
6 April sees the implementation of the new Class 1A employer NIC charge on termination payments (the first £30,000 being exempt) and sporting testimonials (the first £100,000 being exempt). No employee NICs are payable on these payments. The reporting of Class 1A NICs must be made in real time.
Interest rate on employment-related loans reduces
Where an employment related loan is made at an interest rate lower than 2.5% it is treated as a benefit in kind. That rate of interest will, from 6 April, be 2.25%.
Van benefit and fuel benefit charges for company cars
These increase in line with the Consumer Price Index and are:
- Flat rate van benefit charge: £3,490 (increased from £3,430)
- Multiplier for car fuel benefit charge: £24,500 (increased from £24,100)
- Flat rate van fuel benefit charge: £666 (increased from £655)
Businesses and charities that are entitled to the employment allowance will see this rise to £4,000. This will be available to set against their Class 1 secondary contributions. The measure is aimed at supporting small and growing businesses to enable them to take on staff without having to pay NIC.
Medical treatment exempt from benefit in kind charge
The welfare counselling exemption is being extended with effect from 6 April to include counselling that is also medical treatment. The relevant medical treatment will have to comply with the conditions for welfare counselling in order to benefit from the exemption.
Exemption for expenses of unpaid office holders
Reasonable private expenses reimbursed or paid to unpaid office holders will be exempt from income tax and national insurance contributions.
Capital Gains Tax (CGT)
From 6 April, UK residents disposing of UK residential property must report any chargeable gain and pay an estimate of the CGT due within 30 days of the disposal of the property. The new rules also apply to trustees of trusts for UK residents that dispose of UK residential property.
The new regime will apply to disposals of main residences, holiday homes, residential lettings and inherited homes that are not used as main residences throughout the period of ownership.
These rules represent a significant change in the timing for the payment of CGT. For all disposals prior to 6 April 2020, the tax due is reported in the personal tax return submitted for the year in which the disposal takes place, which is usually the January following the end of the relevant tax year.
Increase in certain NIC rates and thresholds
The flat rate for weekly voluntary contributions will increase to £15.30, and the weekly rate and small profits threshold for self-employed contributions will increase to £3.05 and £6,475 respectively. In addition the lower limit of profits for self-employed contributions goes up to £9,500 per annum.
The lower earnings limit for employed earners also increases to £120 per week and the primary threshold increases to £183 per week. The secondary threshold increases to £169 per week.
For more information on the Government’s COVID-19 response and all the measures recently introduced, including tax measures, please see our COVID-19 Business Fact Sheet.
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