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ONLINE ACCOUNTANTS & TAX ADVISERS

Budget 2020 & Covid-19 government support (updated 22/04/20)



Covid-19 government support


Limited companies (Director controlled)


A claim can be made for financial support through the Coronavirus Job Retention Scheme (Link) where there is no trade or income generating related work for the director to undertake because of Covid-19. Please contact us if you require our assistance in making a claim.

The following points should be noted:



















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 31/01/21.


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 2016-17, 2017-18, and 2018-19 must be less than £50,000 and constitute more than half of the average taxable income during the period.


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.


All businesses


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-sized businesses (i.e under 250 employees as of 28/02/20) will be able to recover SSP incurred in relation to COVID-19, under the following criteria:



Contractors operating under an umbrella scheme may find their provider does not qualify for recovery from HMRC.


Local authorities will provide a one-off grant to businesses currently eligible for SBRR or Rural Rate Relief to help meet their ongoing business costs. If your business is eligible for SBRR or Rural Business Rate Relief, you will be contacted by your local authority (no application is required).


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-19. A new helpline (0800 0159 559) has been established so that taxpayers can discuss instalment arrangements for payment of their tax liabilities, suspension of debt collection proceedings, and cancellation of penalties and interest.


Universal Credit can be applied for (subject to assets and income limits) (Link)   


Budget 2020


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)


(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%.


IR35 - Private sector


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-19 to help businesses and individuals.


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-payer.


Businesses will not have to pay penalties for errors relating to off-payroll working in the first year, except in cases of deliberate non-compliance.


Use of home allowance


From 6th April 2020, the flat-rate expense available to employees / directors to cover additional household expenses (where they are required to work at home) will increase from £4 per week to £6 per week.


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-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year.


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.


Non-residents and UK property


From 6th April 2020, non-UK resident companies that carry on a UK property business, or have other UK property income, will be charged to corporation tax rather than being charged to income tax.


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-registered customer will no longer be required to account for VAT.  Instead the customer will account for VAT under a “reverse charge” arrangement. Please view the following flowchart for a concise outline: (Link).


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.


Employment Allowance


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-publications such as e-books, e-newspapers, e-magazines and academic e-journals.


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).


Top-slicing relief on life insurance policies


For gains made on or after 11 March 2020, any allowances and reliefs within the top-slicing relief calculation must be set as far as possible against other income in preference to the gain. The personal allowance will be reinstated within the calculation of top-slicing relief.


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:



Employers - The National Living Wage


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-year allowance will end for energy and water-efficient plant and machinery from April 2020 onwards.

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.


All pre-Finance Act 2002 intangible assets acquired from 1 July 2020 will come within the intangible fixed asset regime, subject to certain transitional provisions


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.