Technical and Insight
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This Budget special is designed to be sharable. 

There are no restrictions on using the content below and you can share it with staff and clients (you can even use it in your own communications).


This Budget special is designed to be sharable. There are no restrictions on using the content below and you can share it with staff and clients (you can even use it in your own communications).

Download and share two key guides to Budget 2020

ACCA's Guide To... Budget 2020 and Guide To... Tax Rates and Allowances 2020 summarise the key information you need from Budget 2020.


ACCA's Guide To... Budget 2020 and Guide To... Tax Rates and Allowances 2020 summarise the key information you need from Budget 2020. Download both now and share them with your colleagues and clients.

Both Guides To... can be customised at the top to include your firm's name. We actively encourage you to share them with clients and contacts!

Business rates and SDLT - summary guides

Further guides from ACCA include: Guide To... Business Rates and Guide To... Stamp Duty Land Tax summarise the key information you need from Budget 2020.


Further guides from ACCA include: Guide To... Business Rates and Guide To... Stamp Duty Land Tax summarise the key information you need from Budget 2020.

CGT: reduction in Entrepreneurs’ Relief lifetime limit

Significant cut to lifetime limit – but not quite abolition.


Significant cut to lifetime limit – but not quite abolition.

 

Effective immediately (from 11 March 2020) the lifetime limit on gains eligible for Entrepreneurs’ Relief (which offers a reduced 10% rate of CGT on qualifying disposals) will be reduced from £10m to £1 million.

 

The legislative detail will be introduced in Finance Bill 2020. It has been announced that Finance Bill will also provide that the lifetime limit must take into account the value of Entrepreneurs’ Relief claimed in respect of qualifying gains in the past. Therefore, any entrepreneurs who have already claimed this relief on past business disposals for gains in excess of £1m will no longer have access to this relief.

 

This is a significant reduction that was anticipated in some form, and comes in response to evidence that it has done little to incentivise entrepreneurial activity and that most of the benefit accrues to a small number of very affluent taxpayers.

 

The good news is that it has not been completely abolished and will still be available for small to medium sized business disposals, subject to the usual criteria for eligibility.

Pension reforms at a glance

Tapered annual allowance threshold to be raised by £90,000.


Tapered annual allowance threshold to be raised by £90,000.

 

To support the delivery of public services, particularly in the NHS, the Chancellor has unveiled plans as of next month to raise the point at which tapering of the annual allowance kicks in by £90,000.


This means that from 2020/21 the ‘threshold income’ will be £200,000 (increased from £110,000), so individuals with income below this level will not be affected by the tapered annual allowance, and the annual allowance will only begin to taper down for individuals who also have an ‘adjusted income’ above £240,000.

The tapered annual allowance for pensions has increased. The pensions’ annual allowance is the maximum amount of tax-relieved pension savings that can be accrued in a year.

  • Under current rules: The standard annual allowance is currently £40,000. Unused annual allowance from the three previous tax years for the individual can be carried forward and added to the current annual allowance. If the individual’s pension savings for the tax year exceed this total, the annual allowance charge is applied to the excess.

    The tapered annual allowance applies to individuals with ‘adjusted income’ for a tax year above £150,000 subject to their threshold income exceeding £110,000. Both income limits have to be exceeded before a person is affected by the tapered annual allowance.

    The annual allowance is reduced by £1 for every £2 of adjusted income above £150,000, subject to a minimum reduced annual allowance of £10,000.

    Where the reduction would otherwise take an individual’s tapered annual allowance below £10,000 for the tax year, their reduced annual allowance for that year is restricted to £10,000.
  • Proposed revisions: Legislation will be introduced in Finance Bill 2021 to amend the threshold income to £200,000 and the adjusted income to £240,000, whilst also reducing the minimum tapered annual allowance from £10,000 to £4,000.

 

Lifetime allowance

The lifetime allowance, the maximum amount someone can accrue in a registered pension scheme in a tax-efficient manner over their lifetime, has been reduced from £1.25m to £1m for 2016/17 onwards (subject to transitional provisions) and indexed for 2018/19 onwards so for 2020/21 the lifetime allowance is £1,073,100

Some in the industry had previously said that while moving the threshold would help, it would not go far enough to address the core issue.

 

 

We are also sharing the following from HMRC:

 

At Budget 2020, the government announced increases to the threshold income and adjusted income limits that you use to work out your tapered annual allowance. From 6 April 2020, the adjusted income limit will rise to £240,000 (increased from £150,000) and the threshold income limit will rise to £200,000 (increased from £110,000). The Chancellor also reduced the minimum reduced annual allowance that you can have under the tapering rules from £10,000 to £4,000.

 

What is the annual allowance?

The annual allowance is the most you can save in your pension schemes each year with the benefit of tax relief.

 

For 2020 to 2021 the annual allowance is £40,000 but if you have a high income, your pension’s annual allowance may be lower than £40,000.

 

This tapering of the annual allowance is applied depending on your income within the tax year and applies to all pension savings that you make or that are made on your behalf.

 

Will the tapered annual allowance apply to me?

To see if the taper applies to you, you’ll need to work out your:

  • net income in that tax year
  • pension savings in that tax year
  • threshold income in that tax year
  • adjusted income in that tax year

 

From 6 April 2020, you’ll have a reduced (‘tapered’) annual allowance if both:

  • your threshold income is over £200,000 (this was previously £110,000)
  • your adjusted income is over £240,000 (this was previously £150,000).

 

You won’t be subject to the tapered annual allowance if your threshold income for that year is £200,000 or less, no matter what your adjusted income is.

 

What effect does the tapered annual allowance have on my savings?

If you’re subject to the tapered annual allowance, for every £2 your adjusted income goes over £240,000, your annual allowance for that year reduces by £1.

 

From 6 April 2020 the minimum that this can reduce to is a tapered annual allowance of £4,000.

 

Example 1

For 2020 to 2021 an individual with an adjusted income of £300,000 will exceed the adjusted income limit by £60,000. The individual’s annual allowance would be reduced by half of this, so by £30,000 leaving them with a tapered annual allowance of £10,000 (the standard annual allowance of £40,000 less the £30,000 reduction under the tapering rules).

 

Example 2

For 2020 to 2021 another individual earns £330,000. Their income exceeds the adjusted income limit by £90,000. Their annual allowance should be reduced by £45,000 (the standard annual allowance of £40,000 less the £45,000 reduction under the tapering rules).

 

However the minimum that the annual allowance can reduce to under the tapered annual allowance rules is £4,000. So, this individual will have a tapered annual allowance of £4,000.

 

Don’t forget though, that you can also carry forward any unused annual allowance from the previous three tax years and use this. Your available annual allowance is your reduced (or tapered) annual allowance plus any unused allowance from the previous three tax years.

 

What should I do if I’ve made pension savings over my available annual allowance?

If your pension savings made in the tax year are more than your available annual allowance, you should include the excess amount on your self assessment return. This amount is added to your taxable income and you will pay income tax on it, at the tax rate that applies to you.

 

Employment allowance to increase by £1000

Steps in the right direction to take some weight off the shoulders of SMEs.


 Steps in the right direction to take some weight off the shoulders of SMEs.

 

The Chancellor announced an increase in the Employment Allowance from £3,000 to £4,000 to protect small businesses from the rise in the minimum wage. From next month companies will not have to pay Employer National Insurance Contributions on the first £4,000 of their annual bill.

 

Changes had already been announced that the Allowance is only available where from 6 April the Class 1 National Insurance bill of the business or charity was below £100,000 in the previous tax year.

 

You cannot claim the Employment Allowance from April 2020 if:

  • you’re the director and the only employee paid above the secondary threshold
  • you employ someone for personal, household or domestic work (like a nanny or gardener) – unless they’re a care or support worker
  • you’re a public body or business doing more than half your work in the public sector (such as local councils and NHS services) – unless you’re a charity
  • you’re a service company working under ‘IR35 rules’ and your only income is the earnings of the intermediary (such as your personal service company, limited company or partnership)
  • Class 1 National Insurance contributions (NICs) liability are at or above £100,000 in the tax year before the year of claim. This includes connected companies
  • if the business exceeds the de minimis state aid threshold.

 

From 6 April 2020 the Employment Allowance falls within the state aid definition and those claiming the employment allowance will need to declare they do not exceed the de minimus state aid threshold. This means it will contribute to the total aid you are allowed to get under the relevant de minimis state aid cap in the relevant three year period.

 

Covid-19: Immediate support for SMEs

Extra costs of paying Covid-19-related SSP can be recovered.


Extra costs of paying Covid-19-related SSP can be recovered.

 

To support SMEs in response to Covid-19, the Chancellor announced the following immediate measures for their employees.

 

Temporary return of Statutory Sick Pay claims

This offers immediate support for small and medium-sized businesses and employers by helping them cope with the extra burden of paying Covid-19-related SSP. Eligible costs will be refunded, with the criteria being as follows:

  • this refund will be limited to two weeks per employee
  • employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020
  • employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of Covid-19
  • employers should maintain records of staff absences, but should not require employees to provide a GP fit note
  • the eligible period for the scheme will commence from the day on which the regulations extending SSP to self-isolators come into force.

 

Covid-19: Time to pay arrangement for outstanding tax liabilities

HMRC has a set up a phone helpline to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus (Covid-19).


HMRC has a set up a phone helpline to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus (Covid-19).

 

The helpline allows any business or self-employed individual who is concerned about paying their tax due to coronavirus to get practical help and advice. 

 

For those who are unable to pay due to coronavirus, HMRC will discuss your specific circumstances to explore:

  • agreeing an instalment arrangement
  • suspending debt collection proceedings
  • cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately.

 

The helpline number is 0800 0159 559 - and is an addition to other HMRC phone contact numbers. The helpline is open from Monday to Friday 8am to 8pm, and Saturday 8am to 4pm (excluding bank holidays).

 

Other HMRC business payment support contact details can be found here.

 

 

No delay to IR35 changes

Previous changes to IR35 administration to be implemented without any further modification.


Previous changes to IR35 administration to be implemented without any further modification.

 

Beyond those announced in the review published on 27 February 2020, there will be no further amendments to IR35.

 

In essence, any large businesses contracting for provision of services will need to consider whether the Off Payroll Working Rules apply, in which case the large business will be responsible for assessing whether the engagement falls within the intermediaries rules (IR35) and if so, communicating that finding to the service provider and applying the appropriate payroll tax deductions to any payments made.

 

The new obligations are covered in the IR35 pack, subject only to the minor modifications announced on 27 February. These include:

  • Penalties: HMRC will not enforce penalties for errors relating to the new rules for the first year except in cases of deliberate non-compliance. However, HMRC will collect any taxes due, and the Office of Budget Responsibility has confirmed that the yield estimates for the measures have been maintained at the previously estimated levels in the light of the revised penalties policy.
  • Size of client: The draft legislation has been amended to provide that the worker or any agency can request information from the client about their size, in order to clarify whether an SDS should be expected. If the client is small, the existing obligation on the PSC to operate IR35 will remain in place.
  • Overseas clients: The draft legislation has been amended to confirm that where a client is ‘wholly overseas’ the existing obligation on the PSC to operate IR35 will remain in place.

 

The updated draft legislation will not be published until 19 March 2020, giving businesses 11 working days to develop and implement information request mechanisms and confirm compliance with the updated overseas clients rules.

 

View our recent IR35 myth buster article, which contains many FAQs.

 

Retail rates relief to double

Welcome boost for smaller retailers.


Welcome boost for smaller retailers.

 

The Budget included measures to increase the 50% Retail Rates Relief announced earlier this year to 100% from April 2020.

 

This relief will be extended to include retail, leisure and hospitality sectors, meaning a full relief for those with a rateable value under £51,000 in these sectors. Additionally, small business that qualify for 100% Small Business Rate Relief will be eligible for Small Business Grant Funding of £3000 via local authorities.

 

From April 1 2020 a one year business rates discount of £5000 will be available for pubs with a rateable value below £100,000.

 

The Government has also announced a fundamental review of business rates which will report in Autumn 2020; members should submit representations and evidence to supportingpractitioners@accaglobal.com.

HMRC in £4.5bn compliance crackdown

More staff and funding for tax compliance and investigations teams.


More staff and funding for tax compliance and investigations teams.

 

HMRC has been given the budget to increase compliance and investigation team headcounts by 1,300, with an expectation that they will raise an additional £4.5bn in tax by 2025, including measures such as a crackdown on taxi firms and scrap metal dealers operating in the grey economy and CIS scheme irregularities. 

 

HMRC has been given further funding to tackle non-compliance in a number of areas. Large businesses will be placed under an obligation to notify HMRC of any tax positions adopted which they expect HMRC to challenge, based on IFRS accounting practices.

 

Abuses of the CIS scheme will be tackled by allowing HMRC to adjust unverified claims by offset against PAYE from 2022. Previously flagged measures to link the issue of taxi and scrap metal dealer licences with confirmation of tax registration will go ahead from April 2022, giving time for affected businesses to prepare.

 

HMRC expects to raise an additional £4.5bn from a range of unspecified compliance measures linked to targeting high risk areas of the tax gap, staffed by an additional 1,300 personnel in the compliance teams, implemented from 2019 onwards.

Corporation tax rate unchanged

Expected cut to an already low rate did not happen.


Expected cut to an already low rate did not happen.

 

Since 2010 the government has cut the headline rate of CT from 28% to 19%, giving the UK the lowest headline rate in the G20.

 

The expected cut to corporation tax did not take place and to ‘provide support for vital public services while maintaining the UK’s competitive rate of CT, the government will legislate to retain the current 19% rate in April 2020’.

The charge to CT and the main rate will also be set at 19% for the financial year beginning 1 April 2021.

National Insurance cut from next month

New National Insurance threshold to save the average employee £100 a year.


New National Insurance threshold to save the average employee £100 a year.

 

Around 31m people will benefit from a tax cut, as National Insurance contributions thresholds will rise to £9,500 per year from April 2020.

 

A typical employee will save around £104 in 2020/21, while self-employed people, who pay a lower rate, will have £78 cut from their bill.

 

The level at which taxpayers start to pay NICs has risen by more than 10% from £8,632 to £9,500 per year for both employed and self-employed people.

 

For owner-managed businesses, this will mean more money can be personally drawn from the company profits before any tax or national insurance is payable.

 

All the other thresholds for 2020/21 will rise with inflation, except for the upper NICs thresholds, which will remain frozen at £50,000, as previously announced at Budget 2018.

 

Brexit - changes that may affect your business

Changes reflecting the UK’s future as an independent trading nation.


Changes reflecting the UK’s future as an independent trading nation.

 

The Chancellor has taken the opportunity to start building a process for exports and imports before UK enters into the negotiation phase with EU. Some of measures announced included:

 

Import duty variation

Section 15 of the Taxation (Cross-border Trade) Act 2018 will be amended by refining the criteria used to determine when the government may vary the amount of import duty in the context of an international trade dispute. This will allow the government to vary import duty where it considers this appropriate, having regard to relevant international agreements and obligations. The  amendment will enable the UK to respond adequately to developments in the international trading system.

 

VAT postponed accounting

From 1 January 2021 postponed accounting for VAT will apply to all imports of goods, including from the EU. This will provide an important boost to those VAT registered UK businesses which are integrated in international supply chains as they adapt to the UK’s position as an independent trading nation.

 

A consultation is announced on the potential approach to duty and tax free goods policy for the transition period following the UK’s departure from the EU.

 

You can send your suggestions to ACCA by emailing supportingpractitioners@accaglobal.com

 

R&D expenditure credit increased to 13%

Consultation announced on data and cloud computing expenditure qualifying for R&D tax credits.


Consultation announced on data and cloud computing expenditure qualifying for R&D tax credits.

 

Research & Development tax credits

This objective will be supported by increasing the Research & Development Expenditure Credit (RDEC) rate from 12% to 13% from 1 April 2020.

 

The government will also consult on whether expenditure on data and cloud computing should qualify for R&D tax credits. This would be a welcome relief for many businesses that are either planning to or already incurring significant costs in improving their IT infrastructure to provide a more secure and flexible working environment for employees, especially in view of the threat posed by Covid-19.

We encourage our members to ensure that they participate in this consultation to maximise the impact for a favourable policy.

 

Preventing abuse of the R&D relief for small and medium-sized enterprises:

It was announced in Budget 2018 that a PAYE cap on the payable tax credit in the SME R&D schemes would be introduced for qualifying loss-making businesses. The maximum R&D relief in an accounting period would be capped to three times the company’s total PAYE and NICs liability for that year.

 

This change was originally intended to be implemented from April 2020 but has been delayed until 1 April 2021 following consultation. It is welcome news to businesses that the government has listened to industry and will also consult on changes to the cap’s design, to ensure it targets abusive behaviour as intended while ensuring that eligible businesses are able to access the relief.

 

View our webinar on R&D

Prompt payment – good news for small businesses

Small businesses facing late payment issues no longer have to suffer in silence.


Small businesses facing late payment issues no longer have to suffer in silence.

 

The important work undertaken by the Small Business Commissioner, whom ACCA has been supporting, was highlighted in the Budget, with the government also committing to continue its efforts to ensure that small businesses are paid promptly.

 

It was announced that BEIS will shortly be publishing a consultation on the merits of strengthening the powers of the Small Business Commissioner (SBC), building on the success the SBC has had in resolving payment disputes.

 

We’d love to hear your thoughts on the powers you would expect the Small Business Commissioner to have – drop us an email to supportingpractitioners@accaglobal.com

 

Here’s a recent tweet on the work of the SPC.

Corporation tax and intangible fixed assets

Important changes for companies that acquire intangible fixed assets from related parties from 1 July 2020.


Important changes for companies that acquire intangible fixed assets from related parties from 1 July 2020.

 

It’s been announced that legislation will be introduced in Finance Bill 2020 to allow companies who acquire pre-FA 2002 intangible assets (including intellectual property such as trademarks, patents, design rights etc) from related parties on or after 1 July 2020 to be brought within Part 8 CTA 2009.

 

Under the current legislation, the corporation tax rules that deal with intangible assets are contained in Part 8 Corporation Tax Act 2009 (CTA 2009). The Part 8 CTA 2009 rules only apply to intangible assets that are created on or after 1 April 2002 or to intangible assets acquired from an unrelated party on or after 1 April 2002.

 

Intangible assets that do not meet this condition are referred to as ‘pre-FA 2002 assets’ - normally dealt with under the corporate capital gains rules within the Taxation of Chargeable Gains Act 2002 (‘TCGA 1992’) or under Part 9 of CTA 2009.

 

The new measures will support UK investment in intangible assets by allowing a company’s pre-FA 2002 intangible assets acquired from 1 July 2020 to be relieved and taxed under a single regime.

 

Transitional rules will also be introduced to counter avoidance between related parties where a pre-FA 2002 asset is acquired from a related party on or after 1 July 2020 (including a licence in respect of a pre-FA 2002).

 

The transitional related party rules will be extended to include related party acquisitions of assets from a person who is not a company in relation to assets created before 1 April 2002. 

 

Further details to be published in the Finance Bill 2020.

Loan finance and grant support enhanced

Small businesses set to benefit from funding opportunities.


Small businesses set to benefit from funding opportunities.

 

Many of the announcements made by the Chancellor aim to ease the flow of capital to small businesses faced by disruptions caused by Covid-19. Some will be available for a short period while others form part of a longer term investment strategy.

 

They include:

  • The Coronavirus Business Interruption Loan Scheme: Delivered via the British Business Bank to support the continued provision of finance to UK businesses during the Covid19 outbreak, with an additional £1bn being made available on top of existing support offered through the Bank. It will operate in much the same way as the current Enterprise Finance Guarantee but on more attractive terms for both businesses and lenders.
  • Start Up Loans extension: Funding for the Start Up Loans programme has been extended until March 2022, with further consideration about how to expand the programme at the upcoming Spending Review. The extension of funding will enable the provision of up to 10,000 more loans to new and early stage businesses. To date the scheme has made over 69,000 loans worth over £560m with 40% of recipients being women (compared to 22% of existing SMEs that are female led), 22% being from a BAME background, and 35% being unemployed when they applied.
  • Further support for innovative high growth firms: £200m has been provided to enable the UK’s high growth businesses to take full advantage of new opportunities now that the UK has left the EU. This is a continuation of the additional support provided in April 2019, and will be deployed by the British Business Bank through venture capital and growth finance funding partners during 2020/21 to ensure that innovative British firms can access more of the finance they need to grow.
  • Life Sciences Investment Programme: £200m of funding has been provided to the British Business Bank, with private sector investment expected to contribute around a further £400m, to unlock the potential of the UK’s best innovations in health technology and life sciences, allowing companies to grow and ensure the UK remains a world leader in life sciences innovation. The programme will launch within a year. This funding will build on the £350m of finance to life sciences firms currently supported by the British Business Bank through large-scale venture growth funds.
  • Enhanced local business support: There is a focus on local support for businesses where they are located. The government announced it will:
    • invest £10m to increase Growth Hub10 capacity and provide a high-quality, core business advice and guidance offer across all 38 Growth Hubs
    • invest £13m to expand the British Library’s network of Business and Intellectual Property Centres to 21 cities and 18 surrounding local library networks, providing entrepreneurs with business support, free access to market intelligence, intellectual property workshops and one-to-one coaching.

 

Flat-rate deduction for homeworking increases

Employees contracted to work from home can claim £6pw without records.


Employees contracted to work from home can claim £6pw without records.

 

Employees who have to work (under contract) from home on a regular basis can claim tax relief for the incremental costs of certain bills, such as business telephone calls, gas and electricity (although fixed costs such as rent and broadband where these costs represent both personal and business use cannot be included in these claims).

 

If the employee either voluntarily agrees or chooses to work from home (ie not as part of the employment contract), this allowance cannot be claimed.

 

A flat-rate deduction of £4 per week is available to employees to cover additional household expenses. From April 2020, this will be increased to £6 per week where they work at home under homeworking arrangements. No records of actual costs incurred need to be kept if claiming the flat-rate allowance.

 

What happened previously?

 

Employees working from home

It is a condition for tax relief under section 336 ITEPA 2003 that the expenses must be incurred ‘wholly and exclusively’ in the performance of the employee’s duties. In practice this means that tax relief can only be allowed for:

  • the additional unit costs of gas and electricity consumed while a room is being used for work
  • the metered cost of water used ‘in the performance of the duties’ (if any) but no tax relief would be available for water rates
  • the unit costs of business telephone calls (including ‘dial up’ internet access).

 

From 6 April 2012 HMRC normally accepted that employees who satisfy the conditions for relief are entitled to a deduction of £4 per week (or £18 per month) for each week/month that they are required to work at home, without having to justify that figure. 

 

Employees who wish to deduct more than £4 per week (or £18 per month) will be expected to keep records and to be able to show how their figure has been calculated. 

 

Before 6 April 2012 lower weekly figures were allowed as above; these amounts were £2 per week for 2006/07 and 2007/08 and £3 per week for 2008/09 to 2011/12.

 

From 2006/07 the following expenses were not treated as allowable for employee tax purposes, because the employee will be required to make the payments whether or not they are working from home:

  • council tax (rates)
  • rent
  • water rates
  • mortgage interest/endowment premiums
  • insurance for the property or its contents

 

HMRC will usually accept that an employee is entitled to claim allowable expenses under section 336 ITEPA 2003 if all of the following conditions apply:

  • the duties that the employee performs at home are substantive duties of the employment (these are duties that an employee has to carry out and that represent all or part of the central duties of the employment)
  • those duties cannot be performed without the use of appropriate facilities
  • no such appropriate facilities are available to the employee on the employer’s premises (or the nature of the job requires the employee to live so far from the employer’s premises that it is unreasonable to expect him or her to travel to those premises on a daily basis)
  • at no time either before or after the employment contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere.

 

You can see Tax allowances available when working from home issued before the announcement.

No further changes to capital allowances

Main change sees an increase of 1% for structures and buildings allowance.


Main change sees an increase of 1% for structures and buildings allowance.

 

Structures and buildings allowance

As previously announced the annual rate of capital allowances available for qualifying investments on or after 29 October 2018 to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%.

 

The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax. Businesses whose chargeable period spans 1 April (corporation tax) or 6 April (income tax), may claim 2% per year for days in that period before the operative date and 3% for days thereafter.

 

Capital allowances for business vehicles

The government previously announced that it is consulting on bringing forward to 2035 the ending of sales of new petrol, diesel and hybrid cars and vans.

 

To encourage businesses to purchase more environmentally friendly (lower CO2 emission) vehicles, the availability of First Year Allowances (FYAs) has been extended to April 2025 (this was due to come to an end from April 2021).

 

100% FYAs will continue to apply for business cars acquired from April 2021 with CO2 emissions of 0g/km (pure electric vehicles).

 

Business cars with CO2 emissions up to 50g/km will be eligible for WDAs at the main rate of 18% while cars with CO2 emissions over 50g/km will be eligible for WDAs at the special rate of 6%.

 

The new 50g/km threshold will also apply for determining the lease rental restriction of 15% of the costs of hiring business cars.

Rounding up changes to VAT

Digital publications will be zero-rated, with the agricultural flat rate scheme entry and exit rules also amended.


Digital publications will also become zero-rated, while the agricultural flat rate scheme entry and exit rules are amended.

 

The VAT registration rates are unchanged, with few announcements. The main business changes concern:

 

Sanitary products

VAT is currently charged at a reduced rate of 5% on women’s sanitary products as they are treated as luxury products. From 1 January 2021, VAT will be charged at zero rate.

 

Digital publications

Currently, VAT is charged at the standard rate of 20% on digital publications (e-books, e-newspapers, e-magazines and academic e-journals). From 1 December 2020, VAT will be charged at zero rate, following the same rules as physical books.

The government expects the publishing industry, including e-booksellers, to pass on the benefit of this relief to consumers.

 

Agricultural flat rate scheme (AFRS)

New entry and exit rules will be implemented from 1 January 2021. Businesses can join the AFRS when their annual turnover for farming-related activities is below £150,000. Once annual turnover for farming-related activities exceeds £230,000, businesses must notify HMRC to be deregistered from the scheme and register for VAT instead.

 

Businesses with turnover that exceeds £85,000 for non-farming-related activities will still be required to register for VAT and will be ineligible for the scheme.

 

Non-UK resident SDLT surcharge will support rough sleepers

New 2% rate will come into effect on 1 April 2021.


New 2% rate will come into effect on 1 April 2021.

The government will introduce a 2% stamp duty land tax (SDLT) surcharge on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021.

 

This will help to control house price inflation and to support UK residents to get onto and move up the housing ladder. The surcharge income will be used to help combat rough sleeping.

Digital services tax on revenues over £25m from UK users

Online giants targeted by new tax.


Online giants targeted by new tax.

 

From 1 April 2020, there will be a new 2% digital services tax on the revenues of search engines, social media services and online marketplaces which derive value from UK users, when the group’s worldwide revenues from these digital activities are more than £500m and more than £25m of these revenues are derived from UK users.

 

Under the current international tax framework, the value businesses derive from user participation is not taken into account when allocating the profits of business between different countries. This measure will ensure the large multinational businesses in-scope make a fair contribution to supporting vital public services.

 

There is an allowance of £25m, which means a group’s first £25m of revenues derived from UK users will not be subject to digital services tax.

 

The provision of a social media service, internet search engine or online marketplace by a group includes the carrying on of any associated online advertising service. A single entity in the group will be responsible for reporting the digital services tax to HMRC. Groups can nominate an entity to fulfil these responsibilities. Otherwise, the ultimate parent of the group will be responsible.

 

The digital services tax will be payable and reportable on an annual basis.

 

It is unclear if or how these large businesses will charge the small businesses that use their platforms.

 

All change for landlords

Make sure you’re aware of new CGT requirements and finance cost restrictions for residential properties.


Make sure you’re aware of new CGT requirements and finance cost restrictions for residential properties.

 

Capital gains tax (CGT)

For UK residents, there is another change in payments of CGT for disposals made on or after 6 April 2020. Return and payment of CGT has to be paid within 30 days following the completion day for UK land (including buildings) when there is a charge to CGT. This change may cause a substantial cashflow difficulty for landlords in the short term.

 

If your client is already within self-assessment and has to complete one, you will need to ensure that the gain is also included on their self-assessment tax return; HMRC will be amending the self-assessment return to allow you to do this.

 

How to calculate capital gain on disposal of residential property:

The self-assessed calculation of the amount payable on account takes into consideration unused losses brought forward or in the same tax year and the person’s annual exempt amount, whereas any anticipated losses on future disposals cannot be taken into account. The rate of tax for individuals is determined after making a reasonable estimate of the amount of taxable income for the year.

 

Once the provisional calculation has been submitted and the tax paid, it cannot be reduced (for example, because your client made a capital loss later in the year) until the client submits their self-assessment return. Failing to meet deadlines for submission and payment will trigger penalties.

 

The provisions are contained in Schedule 2 of Finance Act 2019. Some of the main points are as follows:

  1. These changes to capital gains tax apply to the following (subject to some limited exclusions). Schedule 2 Part 1 1(1) states that the schedule applies to:
  1. 'Any direct or indirect disposal of UK land which meets the non-residence condition (whether or not a gain accrues) and which is made on or after 6 April 2019, and
  2. Any other direct disposal of UK land on which a residential property gain accrues and which is made on or after 6 April 2020.’

 

CGT payable on residential property and carried interest is 18% and 28% as opposed to normal capital gain tax rate of 10% and 20% respectively for basic and higher rate taxpayers.

 

As highlighted within Agent Update March 2020, ‘To enable customers to report and pay any CGT liability arising from gains on the sale of a property HMRC are developing a new digital service accessible from GOV.UK, which will be available from April 2020 to make it easier for customers to report and pay their CGT property disposal liability.’

 

Finance cost restrictions

Since 6 April 2017, landlords are no longer able to deduct all of their finance costs from their property income to arrive at their property profits. Instead, they receive a basic rate reduction from their income tax liability for their finance costs. Year to 5 April 2020 will be the final year when 25% of finance cost is allowed in full, whereas 75% of the finance cost is used as a tax reducer. From 6 April 2020 no finance cost is deductible when computing property income and losses, and 100% finance cost is used a tax reducer.

 

Finance costs include mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans. No relief is available for capital repayments of a mortgage or loan. You may find these examples useful for understanding how do these changes impact on your client’s tax position.

 

The following won’t be affected by the introduction of the finance cost restriction: 

  • UK resident companies
  • non-UK resident companies
  • landlords of furnished holiday lettings.

 

 This rate restriction pushes more landlords into the higher rates of tax and make the renting properties business uneconomical.

 

Useful resources

FAQ for Residential BTL

 

 

Changes to protect tax in insolvency

HMRC moves up creditor hierarchy.


HMRC moves up creditor hierarchy.

 

Despite concerns raised from many businesses, legislation will be introduced in Finance Bill 2020 to amend the relevant section of the Insolvency Act, Bankruptcy (Scotland) Act 2016 and the Insolvency (Northern Ireland) Order to move HMRC up the creditor hierarchy for the distribution of assets in the event of insolvency.

 

It will make HMRC a secondary preferential creditor in respect of certain tax debts held by a business (this includes individuals and partnerships) on behalf of their customers and employees.

 

This reform will only apply to taxes collected and held by businesses on behalf of other taxpayers (VAT, PAYE income tax, employee national insurance contributions, student loan deductions and construction industry scheme deductions).

 

The rules will remain unchanged for taxes owed by businesses themselves, such as corporation tax and employer national insurance contributions.

 

The legislation will be introduced in Finance Bill 2020 and will take effect from 1 December 2020.

 

HMRC Charter – have your say

Opportunity to comment on HMRC’s revised draft Charter.


Opportunity to comment on HMRC’s revised draft Charter.

 

The HMRC Charter is fundamental to expectations of how HMRC ought to behave in its engagement with taxpayers and their advisers.

 

The Charter was last reviewed in 2015 and, in line with HMRC’s legal commitment to regularly review and revise the document, it is now undertaking another review.

 

Following initial discussions with some stakeholders, HMRC has now published a draft revised charter for consultation, which is open until Friday 15 May.

 

In HMRC’s words ‘The revised draft charter aims to take account of views we have received so far, for example that the revised charter:

  • is short and direct with simple, accessible language
  • embodies or represents HMRC’s values: we are professional, we act with integrity, we show respect and we are innovative
  • is more focused on HMRC’s commitments to customers, while not losing sight of customers’ obligations to HMRC’.

 

This is a great opportunity for you to influence HMRC and we strongly encourage you to provide feedback

  

ACCA will also be submitting a corporate response, and we would value input from members to inform our commentary. Please send your comments to supportingpractitioners@accaglobal.com

 

 

 

NEWS
Budget 2020: What it means for you

View and download our key Guides To Budget 2020.

We have a host of webinars and support available to help you and your practice understand Budget 2020.


We have a host of webinars and support available to help you and your practice understand Budget 2020.

 

Webinar: The first Budget of a new era

13 March - 12:30

Join lecturer, presenter and ACCA member Paul Soper, who will be doing a deep dive into the new budget and highlighting what it means for you.

 

 

Spring 2020 series of webinars for practitioners

  • IR35 – the extension of IR35 to the private sector Available on demand
    Speaker: Louise Dunford, LD Consultancy Limited

  • Reliefs and claims for personal taxation Available on demand
    Speaker: Paul Soper, tax lecturer and consultant

  • Getting the most out of cloud accounting and app stacks for your firm and your clients 12 March (12:30)
    Speaker: Matt Flanagan, Co-Founder of Appacus

  • Benefits in Kind update 18 March (12:30)
    Speaker: Dr Ros Martin, consultant and lecturer

 

High quality training events:

 

Essential technical update for finance professionals

Friday 13 March

09.30-12.30: Tax update for businesses and their employees
13.30-16.30: VAT problem areas

 

General tax update

23 March

09:30 - 16:00, London

CPD: 7 units

Fee: 233 GBP + VAT (279.60 GBP)

 

Implications of BREXIT on business planning and economic outcomes 2020

23 March 2020, London

 

Advanced budgeting, planning and forecasting

24 March 2020, London

 

Saturday CPD conference one

Birmingham - 14 March, London B - 21 March, Sheffield - 28 March & London C - 04 April

 

Sessions:

  • Tax planning for residential landlord
  • VAT update
  • Employment taxes
  • Money laundering threats for accountants
Enter the Accounting Excellence Awards 2020

The Accounting Excellence Awards are back to showcase the best of the accounting and finance profession.


The Accounting Excellence Awards are back to showcase the very best the accounting and finance profession has to offer.

 

AccountingWEB’s prestigious accounting and finance awards are now open for entries. The awards, which are accepting submissions until the end of March, recognise the UK firms and individuals who are innovating, driving success and inspiring the profession to even greater heights.

 

The awards, now in their 10th year, are continuing the long-standing partnership between the ACCA and AccountingWEB. And ACCA members have had a huge amount of success previously, with ACCA firms or members winning six awards in 2019.

 

Three new categories have been launched for 2020 to reflect the contribution and achievements of bookkeepers, sole practitioners, and pioneering digital firms. The awards will also continue to salute the achievements of large, medium and small firms who can demonstrate the impact they are making across a number of key areas including bottom-line growth, client success and employee development.

 

Last year’s popular ‘Investing in People’ award returns for a second year. This was a new award in 2019, recognising the importance the profession has placed on employee engagement, wellbeing and learning and development.

 

Firm awards

  • Bookkeeping Firm of the Year
  • Client Service Award
  • Digital Firm of the Year
  • Fast-track Firm of the Year
  • Innovative Firm of the Year
  • Investing in People Award
  • Large Firm of the Year
  • Medium Firm of the Year
  • New Firm of the Year
  • Small Firm of the Year
  • Specialist Team of the Year
  • Sole Practitioner of the Year
  • Software Innovation of the Year
  • Practice Pioneer of the Year

 

Entries will be judged by a panel comprising experts from within the accounting, finance, business and L&D profession, with finalists announced at the end of May. The winning firms will be announced at an awards ceremony taking place at The Brewery in London on 10 September.

 

To read about last year’s winners and what winning an Accounting Excellence award meant for them, visit accountingexcellence.co.uk/news/.

 

If your firm has what it takes to win this year, enter at accountingexcellence.co.uk before 31 March.

 

If you’re stimulated to enter, but not sure where to start, take a look at ACCA’s guidance on entering awards to help kick-start the process.