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Limited company formation services
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We can help you achieve your entrepreneurial ambitions and expertly structure and manage your Tax & Accountancy responsibilities.
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ONLINE ACCOUNTANTS & TAX ADVISERS
Budget 2020 & Covid-
Limited companies (Director controlled)
A claim can be made for financial support through the Coronavirus Job Retention Scheme ()
However, the following issues need to determined:
HMRC expect to have the scheme up and running by the end of April and application is expected to be via an online portal.
Associated Employer NIC and minimum automatic enrolment employer pension contributions can be included as part of the claim.
Sums paid to employees / directors will be subject to NIC (employees and employers) and PAYE income tax as normal (as well as automatic enrolment pension contributions on qualifying earnings unless opted out etc).
The claim (which can be backdated to 01/03/20 if applicable) can be made for a minimum of 3 weeks and for up to 3 months (subject to extension).
Self employed (inc partners in a partnership)
Income tax / NIC due on 31/07/20 (second payment on account for 2019/20) can be deferred until 31/07/21.
A claim can be made for financial support via a taxable grant (maximum of £2,500 per month) for the next 3 months (subject to extension).
The following conditions apply:
The annual trading profits for 2018/19 must also be:
Alternatively, the average trading profits in 2016-
The (taxable) grant will be 80% of the average profits from the tax years (where applicable):
2016 to 2017
2017 to 2018
2018 to 2019
HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.
HMRC will pay the grant directly into the traders bank account as a single instalment.
HMRC will contact those eligible with an invitation to apply.
VAT can be deferred until 31/03/21. This applies to any VAT due to HMRC from 20/03/20 to 30/06/20. Any direct debit in place will need to cancelled to benefit from the scheme and then reinstated in due course.
VAT refunds will be paid by HMRC as normal.
Small / medium-
Contractors operating under an umbrella scheme may find their provider does not qualify for recovery from HMRC.
Local authorities will provide a one-
A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will be launched to support businesses to access bank lending and overdrafts. The business support helpline (0300 456 3565) can provide additional guidance.
Tax / NIC 'Time to Pay' arrangements will be extended to businesses affected by COVID-
Universal Credit can be applied for (subject to assets and income limits) ()
Summaries of the main announcements following the Chancellor of the Exchequer presentation of his Budget to Parliament which affect Small businesses, Contractors / Freelancers, Private individuals and Landlords are outlined below.
All applicable clients will receive an expert and bespoke review (not a standard mail shot) of their tax affairs to identify any specific and relevant tax planning opportunities or restrictions arising from the legislative changes.
The proposals below are subject to change upon passing of the actual legislation.
Rate and threshold changes
(Click here) (Scottish residents)
For 2020/21 there will be no personal allowance available where adjusted net income exceeds £125,000.
The main rate of corporation tax is 19%. The rate for the Financial Year beginning on 1 April 2020 was due to fall to 17% but the Chancellor has announced the rate will remain at 19%.
The government is postponing the reforms to the off payroll working rules, IR35,
from 5th April 2020 to 6th April 2021. This is a deferral in response to the ongoing
spread of Covid-
From 6th April 2021, medium and large businesses will need to decide whether the IR35 rules apply to an engagement with individuals who work through their own company. If IR35 applies the business, agency or third party that pays the individual’s company will need to deduct income tax, employee NICs, and also pay employer NICs.
For small businesses (as defined under Companies Act), the existing IR35 rules will
continue and individual contractors will be responsible for deciding whether IR35
applies and accounting for any PAYE/NIC due. There will be a legal obligation on
clients to respond to a request for information about their size from the worker
or the fee-
Businesses will not have to pay penalties for errors relating to off-
Use of home allowance
From 6th April 2020, the flat-
Entrepreneurs’ Relief (ER)
The lifetime limit is reduced from £10 million to £1 million for ER qualifying disposals made on or after 11th March 2020. There are special provisions for disposals entered into before 11th March 2020 that have not been completed.
Any entrepreneurs’ relief claimed on previous qualifying gains must be taken into account when establishing the extent of the lifetime limit still available.
Pension contribution tax relief
From 6 April 2020, threshold income limit will increase from £110,000 to £200,000, the adjusted income limit will increase from £150,000 to £240,00, and the minimum reduced tapered allowance will be decreased from £10,000 to £4,000.
The lifetime allowance will increase in line with inflation for 2020/21 to £1,073,100.
R&D tax relief
From 1st April 2021 (new delayed date), the amount of payable R&D tax credit that
a qualifying loss-
The rate of tax credit for companies claiming under the RDEC scheme will rise by 1% to 13% from 1st April 2020.
The Government will consult on whether qualifying R&D tax credit costs should include expenditure in data and cloud computing.
Private resident relief
From 6th April 2020, lettings relief will only apply where the owner of the property is in shared occupancy with the tenant.
The final period exemption is reduced from 18 months to 9 months. There will be no changes to the 36 month final period exemption available to disabled individuals or to those in a care home.
New rules are to be announced in the future where capital gains have arisen on property which have been let and where ownership has at some point been transferred between spouses.
CGT payment date on sale of residential property
From 6th April 2020, all CGT due on UK residential property will become payable within 30 days of completion (UK or foreign resident individuals). The requirements will apply to Individuals whether or not already within the Self Assessment system.
This payment on account of CGT will only apply if a chargeable gain arises and will not affect the sale of an exempt main residence.
From 6th April 2020, non-
Employment termination payments
From 6th April 2020, termination payments in excess of the £30,000 exemption will be subject to employer’s national insurance contributions (NIC).
This new Class 1A liability will not apply to any termination awards paid after 5 April 2020 in respect of employment which was terminated before 6 April 2020.
Foreign service relief is removed but if the employment to which the termination payment relates was not taxable as employment income in the UK, the termination payment will not be chargeable to tax in the UK
Tax relief for loss on disposal of shares
The current Income Tax relief for losses arising on the disposal of certain shares is now extended to shares in companies that carry on business worldwide rather than just those carrying on their business in the UK. The new rules apply to disposal made on or after 24 January 2019, regardless of when the original subscription took place.
Insolvency and tax debts
From 1st December 2020, HMRC will move up the creditor hierarchy for the distribution of assets in the event of an insolvency. HMRC will become a secondary preferential creditor in respect of certain tax debts (VAT, PAYE, employee NIC, CIS deductions) held by a business which represent amounts paid by customers or employees.
Draft legislation has also been issued to make directors, and other persons connected to companies subject to an insolvency procedure, jointly and severally liable for amounts payable to HMRC by the company in certain circumstances. This is mainly for cases where the company has engaged in avoidance, evasion or ‘phoenixism’.
Labour provision in the construction sector
From 1st October 2020, a person supplying specific construction industry services
to a VAT-
Structures and buildings allowance
The annual rate of capital allowances available for qualifying investments will increase from 2% to 3%. The change will take effect from 1st April 2020 for corporation tax and 6th April 2020 for income tax.
The Structures and Buildings Allowance (SBA) is available on the eligible construction costs of new commercial structures and buildings. The allowance provides tax relief over a period of time for the construction costs of buildings intended for commercial use, for the costs of improvement of existing structures, and buildings including the cost of converting existing premises for use in a qualifying activity. If the structure or building is of mixed use (i.e. it has some residential element) then the relief will be apportioned accordingly. It is not available for workspaces within a domestic dwelling (e.g. a home office). The relief will be limited to the original construction or renovation costs over a fixed period of 50 years at a rate of 2/3% per year. This is available irrespective of changes of ownership.
The maximum Employment Allowance will be increased from £3,000 to £4,000 with effect from 6th April 2020. From 6th April 2020 the Employment Allowance will operate as de minimis State aid. This means it will count towards the total aid a business is entitled to under the relevant de minimis State aid cap.
VAT registration threshold
The VAT registration threshold will remain frozen at £85,000 until 2022 (the deregistration threshold will remain at £83,000).
VAT on digital books
From 1st December 2020, a zero rate of VAT will apply to e-
Inheritance tax (IHT) nil rate bands
The nil rate band has remained at £325,000 since April 2009 and will remain frozen at this amount until April 2021. The additional 'residence nil rate band' (RNRB) for deaths in 2019/20 is £150,000 rising to £175,000 for deaths in 2020/21 (Thereafter it will rise in line with CPI).
For gains made on or after 11 March 2020, any allowances and reliefs within the top-
VAT on goods entering the UK
From 1st January 2021, ‘postponed accounting’ will apply to all goods coming into the UK (inc EU goods). The VAT payable and repayable will be accounted for on the VAT return (instead of paying import VAT at the time the goods arrive in the UK and subsequently reclaiming this on a subsequent VAT return). This should result in a cash flow benefit.
Relief from Capital Gains Tax for loans to traders
Relief from Capital Gains Tax on loans to traders is now extended to loans made worldwide rather than solely to UK resident entities. This rule change has retrospective effect for loans made from 24 January 2019.
Welfare counselling provided by employers
The government will extend the scope of non taxable counselling services to include related medical treatment, such as cognitive behavioural therapy, when provided to an employee as part of an employer’s welfare counselling services. The changes will take effect from April 2020.
Student Loan threshold increases
From 6th April 2020, the earnings thresholds for repaying student loans will increase as follows:
The National Living Wage applies to all working people aged 25 and over. From April 2019 the rate will increase to £8.72.
Special rate writing down allowance
The availability of a 100% first-
Goodwill and intangible assets
A new fixed rate amortisation relief of 6.5% has been introduced for goodwill and similar intangible assets acquired after 1st April 2019.
In brief terms, the relief will be:
Goodwill acquired prior to 1 April 2019 will continue to be subject to the tax law prevailing at the time it was acquired.
Tax relief on vehicles
First year allowances for zero emission cars, goods vehicles and equipment for gas refuelling stations will be extended by four years from April 2021.
Changes from April 2021 will mean that zero emission cars will attract first year allowances at 100%, while cars with CO2 emissions not exceeding 50g/km will be eligible for writing down allowances at the main rate of 18%. Vehicles with emissions above 50g/km will be eligible for relief at 6%.
The threshold for restrictions to lease rentals will also be reduced from 110g/km to 50g/km with effect from 6th April 2021.
Company vehicle benefit
Benefit in kind rates will be cut by 2% for vehicles that qualify for the new standard (Worldwide harmonised Light Vehicle Test Procedure (WLTP) for all new cars registered from 6 April 2020.