Stamp Duty Land Tax: Extension to the SDLT temporary rates

It has been announced the government will extend the temporary increase to the Stamp Duty Land Tax nil rate band for residential property in England and Northern Ireland, that was due to end on 31 March 2021.

The nil rate band will continue to be £500,000 for the period 8 July 2020 to 30 June 2021.

From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000.

The nil rate band will return to the standard amount of £125,000 from 1 October 2021.

Extending Making Tax Digital for VAT to all VAT registered businesses from 1 April 2022

The Finance Bill 2021 announced that HMRC will extend the scope of Making Tax Digital for VAT to include all VAT registered businesses (including those voluntarily registered) with effect from 1 April 2022.

Super-Deduction and 50% First Year Capital Allowances

Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will be able to benefit from generous new first year Capital Allowances.

Under this new measure, for most business equipment purchased, there will be a 130% ‘Super Deduction’ against taxable profits.                                                                                      For new additions qualifying for Special Rate relief, this expenditure will benefit from a 50% first year allowance.

Making Tax Digital (MTD)

Since April 2019, government regulations mean that self employed people and business owners, including rental property businesses, who are over the VAT threshold, are required to keep digital business records and have to file their VAT returns quarterly using Making Tax Digital (MTD) compatible software.

Meridian are well equipped to help any of our VAT registered business clients and can advise on suitable software available to achieve this.

Cryptocurrencies/ Cryptoassets

HMRC sees cryptocurrencies, not as a currency, but as investment assets and so transactions are subject to Capital Gains Tax.

You might need to pay Capital Gains Tax when you:

Your gain is normally the difference between what you paid for the cryptoasset and what you sold it for. If the cryptoasset was free, you will need to use the market value when working out your gain.

Income tax, instead of Capital Gains Tax, would only apply to dealers that are generating trading profits in cryptoassets. It would be very rare for HMRC to assess an individual’s cryptoassets activity to be applicable to Income Tax and this is likely to only affect professional traders and businesses.

Reporting and Paying CGT within 30 days

From 6th April 2020, anyone selling a property in the UK may have to complete an online report to HMRC and pay any Capital Gains Tax which is due, within 30 days of the date of completion of sale. You can find more information on this on our Capital Gains page.

Off Payroll Working (IR35) Rules from 6th April 2021

The Off Payroll Working rules exist to cover situations where clients are effectively treating contractors as employees, but choose to utilise their work via their company, in order to avoid paying Employer’s National Insurance. By having these regulations in place, the aim is to ensure workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees.

Previously the rules were that the contractor (yourself), working through your own Personal Service Company, was responsible for reviewing the guidance and making the decision regarding your employment status. From April 2021, this is switching round such that Public sector clients and medium or large-sized Private sector clients will be responsible for deciding your employment status as a worker (see below for further requirements). There are no changes to the rules if your client is a small, Private sector client.

If it is deemed the Off Payroll Working rules apply to you, your income received via your Personal Service Company will be subject to PAYE tax and National Insurance Contributions before being paid to your company. This income will not be subject to corporation tax and can be withdrawn to a personal bank account. The income, and associated income tax already deducted, should be included on your personal tax return as employment income.

 

Public sector clients and medium or large-sized Private sector clients will need to determine your employment status as a worker, subject to the following:

If your client does not have a UK connection (i.e. they are not UK resident or do not have a permanent establishment in the UK), the April 2021 changes to the Off Payroll Working rules will not apply. Your own limited company should continue to consider whether the Off Payroll Working rules apply for your worldwide income for each contract.

You can use the Check Employment Status for Tax service to help you decide if the Off Payroll Working rules apply to a specific contract. The test considers the following issues to establish your employment status:

If your client does have a UK connection (i.e. they are UK resident or do have a permanent establishment in the UK), your client will need to decide if the rules apply, and what your employment status for tax is for each contract. They should communicate this to you via what is called a “Status Determination Statement” setting out and explaining their decision.

If your client determines that your contract is inside the Off Payroll Working rules and so you are a deemed employee for tax purposes, then your client, or the Agency who pays your fees, will also be responsible for deducting Income Tax and National Insurance Contributions before they pay your company.

If your client determines that your contract is outside the Off Payroll Working rules, they will continue to pay your company gross, as before.

If you disagree with the decision made by your client on your employment status for tax, you will be able to raise your concerns through your client’s Status Disagreement Process. All clients are required to introduce a process from April 2021 to allow you to disagree with their decision.

Please note these changes do not affect whether you can continue to work through your own limited company. This will still be possible after 6 April 2021, however the way Income Tax and National Insurance Contributions are calculated and paid may change for some contractors, or some clients/ agencies may change the way they wish to engage you.

Finally, if you work through an Agency, the Agency should take reasonable care when making a decision about whether the Off Payroll Working rules apply and it is not right to rule all engagements to be inside or outside of the rules irrespective of the contractual terms and actual working arrangements.

We understand this is a very detailed and complex area, so if you have any further thoughts or queries, please do not hesitate to contact us.

Covid-19

These are very difficult times, unprecedented in any of our lifetimes, and we know you will be worried about when the next contract will become available and more importantly when you will next get paid. There is help for some, but this will differ depending on your circumstances. We are keeping abreast of every announcement as it happens. Please contact us first before making any claims to enable us to advise you accordingly.

Disguised Remuneration

You may have heard of certain schemes where income payments are described as ‘loans’ or ‘advances’ thereby deferring or even avoiding tax on these payments.

HMRC’s view is that these schemes do not work and they have been successfully challenging these arrangements on a case by case basis.  As a result of this, HMRC have issued some guidance about how to deal with the tax consequences of these schemes. By notifying them of your interest in settling the tax liabilities on these payments, this will avoid further increased tax and hefty penalties and interest.

We can guide you through this process if you are in this position – please contact us using the information on our ‘Contact’ page.