Finance Secretary Kate Forbes delivered the 2021/22 Scottish Draft Budget on Thursday 28 January 2021, setting out the Scottish Government’s financial and tax plans.

The Government has devolved powers to set the rates and bands of income tax (other than those for savings and dividend income) which apply to Scottish resident taxpayers.

The Scottish Budget announced the following income tax rates and bands for 2021/22. These will be considered by the Scottish Parliament, and an agreed Scottish Rate Resolution will set the final Scottish income tax rates and bands for 2021/22.

The current rates and bands for 2020/21 and the proposed rates and bands for 2021/22 on non-savings and non-dividend income are as follows:

* Assumes individuals are in receipt of the Standard UK Personal Allowance.

** the personal allowance will be reduced if an individual’s adjusted net income is above £100,000. The allowance is reduced by £1 for every £2 of income over £100,000.

In the UK Spending Review in November 2020, the UK Government announced that the UK wide Personal Allowance and the UK higher rate threshold would be uprated by CPI inflation of 0.5% for the tax year 2021/22 (to £12,570 and £50,270 respectively). All other policy decisions about UK rates and bands will be announced at the UK Budget on 3 March 2021. Continue reading...

HMRC has issued some guidance to taxpayers that deferred their VAT payments between 20 March and 30 June 2020 and still have payments to make.

HMRC is advising taxpayers who deferred their VAT payments to:

• pay the deferred VAT in full on or before 31 March 2021
• or opt in to the VAT deferral new payment scheme when it launches in 2021
• or to contact HMRC if they need more help to pay.

Taxpayers can pay their deferred VAT in full by 31 March 2021. There is no need to contact HMRC. However, if taxpayers want to use the new payment scheme they will need to opt in. The new online opt in process will be available in early 2021. Taxpayers will need to opt in themselves as this cannot be carried out by tax agents.

Where taxpayers opt in to the VAT deferral new payment scheme instead of paying the full amount by the end of March 2021, they can make up to 11 smaller monthly instalments which are interest free. All instalments of the outstanding amount must be paid by the end of March 2022.

In order for taxpayers to use the scheme they must:

• still have deferred VAT to pay
• be up to date with their VAT returns
• opt in before the end of March 2021
• pay the first instalment before the end of March 2021
• be able to pay the deferred VAT by Direct Debit.

Taxpayers must prepare to opt in by:

HMRC is advising the self employed that the Self-Employment Income Support Scheme (SEISS) has been extended. Taxpayers who were not eligible for the first and second grant will not be eligible for the third.

To make a claim for the third grant the taxpayer’s business must have had a new or continuing impact from coronavirus between 1 November 2020 and 29 January 2021, which they reasonably believe will have a significant reduction in their profits.

The third taxable grant is worth 80% of a taxpayer’s average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total.

The online service to claim the third grant is open. Taxpayers should make their claim from the date HMRC give taxpayers either by email, letter or within the service. Eligible taxpayers must claim the third grant on or before 29 January 2021.

The grant does not need to be repaid, but will be subject to Income Tax and self-employed National Insurance and must be reported on the taxpayer’s 2020 to 2021 Self Assessment tax return. Taxpayers must keep evidence to support their claim.

The Institute of Directors (IoD) has warned the government that a rise in CGT would affect Britain’s entrepreneurial spirit.

The business group believes CGT could be targeted by the Treasury and increased in order to help put public finances back on a stable footing following the coronavirus (COVID-19) pandemic.

Tej Parikh, Chief Economist at the IoD, said:

‘But any reform would have to be done with extreme care to prevent a knock-on effect. Positive entrepreneurialism will be more important than ever in the months ahead.’

‘All told, ramping up CGT will pour cold water over Britain’s entrepreneurialism just when we need it most. It’s not an answer to the costs of COVID-19, but rather paves the way for a stunted recovery.’ 

Additionally, increasing CGT ‘would only add to the impression held by some that wealth creation is falling down the list of priorities’, the IoD said. It has urged the government to consider the UK’s international standing as a destination for business, arguing that the UK has ‘long held a strong reputation as a place to start, run and grow a company’.

Chancellor Rishi Sunak has announced a new £4.6 billion package of grants to support businesses through the latest national lockdown.

UK businesses in the retail, hospitality and leisure sectors are to be given one-off grants worth up to £9,000.

The payments are expected to support 600,000 business properties across the UK. A further £594 million will be made available to councils and devolved nations to support businesses not covered by the new grants.

The Chancellor said:

‘The new strain of the virus presents us all with a huge challenge, and whilst the vaccine is being rolled out, we have needed to tighten restrictions further.’

‘Throughout the pandemic we’ve taken swift action to protect lives and livelihoods and… we’re announcing a further cash injection to support businesses and jobs until the spring.’

‘This will help businesses to get through the months ahead – and crucially it will help sustain jobs so workers can be ready to return when they are able to reopen.’

Chancellor Rishi Sunak has extended the Coronavirus Job Retention Scheme (CJRS) until the end of April 2021.

Businesses adversely affected by the coronavirus (COVID-19) can make use of the CJRS until the end of April, with the government continuing to pay 80% of employees’ salaries for hours not worked. Employers will only be required to pay wages, national insurance contributions (NICs) and pensions for hours worked, and NICs and pensions for hours not worked.

Additionally, Mr Sunak stated that he is extending COVID-19 business loan schemes until the end of March 2021. Businesses will be given until the end of March to access the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS). These schemes had been due to close at the end of January.

The Chancellor also confirmed that the 2021 Budget will be delivered on 3 March 2021 and will outline the next phase of the government’s plan to combat COVID-19 and protect jobs.

The Chancellor said:

‘Our package of support for businesses and workers continues to be one of the most generous and effective in the world – helping our economy recover and protecting livelihoods across the country.

‘We know the premium businesses place on certainty, so it is right that we enable them to plan ahead regardless of the path the virus takes, which is why we’re providing certainty and clarity by extending this support.’ Continue reading...

From 1 January 2021, the UK will operate a full external border with the EU, which will entail major changes for imports and exports to and from the trading bloc. From 1 January 2021, declarations will be needed to import or export specific (limited) goods categorised as ‘controlled’.

However, for non-controlled goods brought from the EU to GB, import controls apply in three stages: January, April and July 2021. Some changes will apply to all goods movements, and will involve customs declarations, customs duties and VAT on imports, and safety and security declarations. ‘Additional requirements’ come in, but only affect certain specific goods movements, such as foodstuffs.

Action points to consider now include:

Economic Operators Registration and Identification (EORI) numbers: from 1 January 2021, an EORI number with the prefix ‘GB’ is needed to move goods between the UK and the EU, unless you only move goods between Northern Ireland and Ireland.

Remember that from January 2021, it will be important to think about both the UK and EU sides of the equation: to comply with EU requirements, you will, for example, need an EU EORI number if your business makes customs declarations or gets a customs decision in the EU.

Using a customs intermediary: given the complexity of UK and EU customs declarations, you may want to engage a customs intermediary to deal on your behalf. Continue reading...

Chancellor Rishi Sunak has announced approved additional funding for cash grants to support businesses required to close in England due to the lockdown.

Those businesses affected will be eligible for the following:

• For properties with a rateable value of £15,000 or under, grants to be £1,334 per month, or £667 per two weeks
• For properties with a rateable value of between £15,000-£51,000 grants to be £2,000 per month, or £1,000 per two weeks
• For properties with a rateable value of £51,000 or over grants to be £3,000 per month, or £1,500 per two weeks

The Chancellor said:

‘I have always said that we will do whatever it takes as the situation evolves. Now, as restrictions get tougher, we are taking steps to provide further financial support to protect jobs and businesses. These changes will provide a vital safety net for people across the UK.’

The government has increased the support available to self-employed workers and extended its emergency business loan schemes as the UK heads for a second national lockdown.

On 5 November Rishi Sunak announced an increase in the level of the third instalment of the Self-employment Income Support Scheme (SEISS) from 55% to 80% of average trading profits for November to January. SEISS grants are calculated over three months and the uplift for November to January, increases the level of the third grant to 80% of trading profits. The maximum grant will be capped at £7,500.

The SEISS grants will also be paid faster than previously planned, with the claims window opening at the end of November rather than the middle of December.

Chancellor Rishi Sunak said:

‘The rapidly changing health picture has meant we have had to act in order to protect people’s lives and I know this is an incredibly worrying time for the self-employed. That is why we have increased the generosity of the third grant, ensuring those who cannot trade or are facing decreased demand are able to get through the months ahead.’

The Association of Taxation Technicians (ATT) has issued a last call for businesses looking to make use of the increased Annual Investment Allowance (AIA).

The AIA will be reduced from £1 million to £200,000 from 1 January 2021. Businesses that incur significant expenditure on plant and machinery before the end of this year are likely to get tax relief on the cost much earlier than if the purchase is made in 2021.

Jeremy Coker, President of the ATT, said:

‘The AIA rules can catch a business unawares. Many businesses will have deferred decisions about purchasing capital equipment this year because of the enormous uncertainties created by the pandemic. For any which are considering such purchases now, the scheduled ending of the temporary increase in the AIA in two months’ time introduces an unwelcome additional complexity.

‘Although the timing of a purchase may make no difference in the long run to the amount of expenditure which qualifies for tax relief, it can make an enormous difference to how quickly that relief is received and the contribution that the relief can make to the cashflow of a business.‘