Making Tax Digital (MTD) for Income Tax
As announced on 23 September 2021, the government has decided to delay the requirement for sole traders and landlords with income over £10,000 to file income tax self assessment (ITSA) information using MTD until the tax year 2024/25. General partnerships will not be required to join the system until 6 April 2025.
At the same time that MTD for ITSA is introduced, new penalties for late filing and late payment will apply to those within the new system.
To reduce the burden of business rates in England, the government will:
- freeze the business rates multiplier for a second year, from 1 April 2022 to 31 March 2023
- introduce a new temporary business rates relief for eligible retail, hospitality and leisure properties for 2022/23, giving 50% relief up to a £110,000 per business cap
- extend transitional relief for small and medium-sized businesses, and the supporting small business scheme, for 1 year, restricting increases in rates bills, subject to subsidy control limits
The government will reform the system of business rates by increasing the frequency of revaluations from 5 years to 3 years, starting in 2023. At the same time, it will introduce reliefs where occupiers incur certain types of expenditure on improvements, including eligible plant and machinery used in onsite renewable energy generation and storage
Recovery Loan Scheme
The Recovery Loan Scheme, which was introduced to help businesses recover from the impact of the pandemic, will be extended until 30 June 2022. The following changes will apply to all offers made from 1 January 2022:
- The scheme will only be open to small and medium-sized enterprises
- The maximum amount of finance available will be £2 million per business
- The guarantee coverage that the government will provide to lenders will fall to 70%
In England, the government will continue to meet 95% of the apprenticeship training cost for employers who do not pay the Apprenticeship Levy. The £3,000 apprenticeship hiring incentive payment (per new hire) has been extended by four months to 31 January 2022.
In Wales, apprenticeships are funded by the Welsh government, and apprenticeship incentive payments ranging from £1,500 – £4,000 are available until 28 February 2022.
In Scotland, the type of funding available depends upon the type of apprenticeship. Additionally, the Adopt an Apprentice scheme entitles employers to £5,000 for employing an apprentice who has been made redundant.
Alcohol duty reform
The Chancellor devoted space in his speech to set out a number of measures that he intends to take to make the taxation of alcoholic drinks simpler and more rational. This will include a 5% cut on duty for various drinks sold in pubs, and a relief for small producers of drinks below 8.5% ABV. The government is consulting on the details, and has not announced when the reforms will take effect.
In the meantime, alcohol duty rates have been frozen at their present levels.
The Chancellor announced two measures that are intended to benefit Universal Credit recipients: reducing the taper rate at which extra earnings leads to a reduction in benefits (from 63% to 55%) and increasing the Work Allowance by £500 a year. These measures are intended to take effect not later than 1 December 2021. They will benefit some claimants by more than the £20 per week that has been recently taken away, but not everyone will qualify.
The March Budget outlined the introduction of ‘Freeports’, areas in which a number of tax and other incentives will operate to encourage trade. The enhanced tax reliefs will include 10% Structures and Buildings Allowances (instead of 3%), 100% First Year Allowances for plant and machinery, full relief from Stamp Duty Land Tax, full Business Rates relief for five years, and relief from Employer’s NIC. The reliefs will depend on designation as a ‘tax site’ within a Freeport and will run until 30 September 2026, with a possible extension to April 2031.
The English Freeports announced so far are East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames. The first tax sites have been designated at Humber, Teesside and Thames, and those Freeports will begin initial operations from November.
The October Budget included further measures clarifying the VAT reliefs that will apply in free zones. The main VAT benefit is that businesses selling goods within free zones will be able to zero rate their supplies, and services carried out on goods in those zones may also be zero rated subject to conditions. This provides a cash flow advantage to businesses. Where goods leave a free zone and there is no qualifying onward supply of the goods which meets the conditions, or where there is a breach of the rules of the free zone customs procedure, VAT will be due. This prevents a business that cannot recover input tax locating in a free zone to avoid irrecoverable VAT.