Tourism and hospitality businesses
The temporary reduced rate for tourism and hospitality businesses of 5% will continue until 30 September 2021.
There will then be a rate of 12.5% for the tourism and hospitality sector until 31 March 2022
A payment scheme is now available for business who deferred their VAT payments due between 20 March and 30 June 2020. The amount due can be paid in up to 11 monthly instalments.
A penalty of 5% of the VAT outstanding may be levied on businesses who have not paid the amount due, signed up to the payment scheme or made alternative arrangements by 30 June 2021.
Other VAT news
VAT threshold – this will remain at £85,000 until 2024 at the earliest.
The current VAT penalty scheme – the default surcharge – is to be replaced by a points based system in April 2022.
The rate of corporation tax will increase to 25% for businesses with profits greater than £250,000 from April 2023.
Businesses with profits below £50,000 will continue to pay corporation tax at 19%. Businesses with profits between these amounts will be subject to a rate of between 19% and 25%, which will be calculated on a taper system.
Research and development tax credits for small and medium sized businesses will be capped at £20,000 + three times the total PAYE and NI liability of the company for the year.
From April 2021 until 31 March 2023 there will be a new ‘Super-deduction’ for companies (not unincorporated businesses) of 130% of the amount invested in qualifying plant and machinery. This means for every £1,000 of capital investment, companies will receive tax relief of £247 (£1,000 x 130% x 19% corporation tax).
There will also be a 50% first year allowance available for qualifying special rate assets. However as the Annual Investment Allowance limit will remain at £1,000,000 until 31 December 2021 (with a return to £200,000 from January 2022), this should be used first for purchases in the special rate pool.
Loss carry back relief
Companies and unincorporated businesses will be able to carry back any losses made in accounting periods ending on or after 1 April 2020 for 3 years. Claims may need to be made now therefore for returns already submitted where additional loss claims could have been made.
This will continue until September 2021. Until 30 June 2021 it will continue unchanged, with the government paying 80% of an employee’s salary for hours not worked. Employers will be required to pay the employers NI and pension contributions.
From 1 July 2021, the government will pay 70% of salary for hours not worked. The employer will be required to pay the additional 10% to bring the total payment up to 80%. This will decrease to 60% in August and September, with businesses required to top up the additional 20% in both of these months.
There will be a fourth and fifth grant under the SEISS scheme. These will take into account profits from 2019/20, so long as the 2019/20 tax return was submitted by 2 March 2021. Claims can be made for the fourth grant from late April 2021.
The fourth grant will pay 80% of 3 months’ profits, calculated as an average of the profits for 2017/18, 2018/19 and 2019/20. If you started trading during 2018/19 or 2019/20, only the years in which you were trading will be taken into account.
The fifth grant will pay either 80% of 3 months’ profits for businesses whose sales fell by 30% or more, or 30% of 3 months profits for businesses whose sales fell by less than 30%. This will be calculated on the same basis as the fourth grant, and can be claimed from late July.
There are various measures designed to prevent the requirement to work from home during the past year having unintended tax consequences for employees and employers. Among these concessions are:
- Cycle to work scheme – employees who joined the scheme before 20 December 2020 will not be required to meet the ‘qualifying journeys’ condition (that the bike must be mainly used for work journeys or commuting) until 5 April 2022.
- Home office equipment expenses – there will be no tax charge on amounts reimbursed to an employee from 16 March 2020 for the purchase of office equipment required for working from home, so long as there is no significant private use.
- The cost of a coronavirus test can be reimbursed to an employee with no tax or NI implications. Coronavirus tests can be provided by an employer free from any tax or NI charge. This does not include antibody tests.
- Enterprise Management Incentive scheme – if the working time requirement of an EMI scheme has not been met because of Covid 19, this will not be a disqualifying event. New options issued during the pandemic will be qualifying options even where the employee hasn’t met the working time requirement due to Covid.