UK: Happy New Tax Year 2020-2021?

Apr 06, 2020

Or is it? As the COVID-19 pandemic continues, today is the first day of the new tax year 2020-21. This heralds a number of significant changes which we remind you of below. It should be noted, however, that HMRC have decided to defer both the IR35 private sector off-payroll working rules and the end of the soft-landing period for MTD for VAT from April 2020 to April 2021. HMRC have also published updated guidance and help sheets in respect of the new tax year.

The following other changes take effect as set out below:-

  • From 1 April 2020, the rate of corporation tax will stay at 19 per cent and will not fall to 17 per cent;
  • From 11 March 2020, the lifetime limit for entrepreneurs’ relief, which will now be known as business asset disposal relief, falls to £1 million with various anti-forestalling measures also applicable;
  • the rate of the R&D expenditure credit increases to 13 per cent for expenditure on or after 1 April 2020;
  • the structures and buildings allowances increases to 3 per cent from 2 per cent from 1 April for companies and 6 April for sole traders/partnerships;
  • From 6 April 2020, the final period exemption for private lettings relief falls to nine months and lettings relief is also reformed;
  • From 6 April 2020, corporate capital losses carried forward will only be able to offset up to 50 per cent of chargeable gains using carried-forward capital losses. Various other changes that are required to deliver or support this
  • the National Minimum Wage and National Living Wage rates for all age bands and for apprentices have increased;
  • rates and thresholds for employers 2020-21 has been published;
  • From 6 April 2020, if you’re a UK resident and sell a residential property in the UK you’ll have 30 days to tell HMRC and pay any Capital Gains Tax owed;
  • HMRC are stopping automatically sending paper Self-Assessment returns;
  • From 1 April 2020, the digital services tax comes into operation;
  • From 6 April 2020, corporate non-resident landlords are subject to UK corporation tax on profits from their UK property rental business instead of 20 per cent basic rate tax – see the guidance on this change; and
  • From 6 April 2020, termination payments in excess of £30,000 will become liable to Class 1A NICs at 13.8 per cent and employers will have in-year reporting and payment responsibilities.

The second reading of the latest Finance Bill is currently due to be considered by MPs on Wednesday 22 April 2020. Parts of the Bill will then be considered in Committee of the Whole House on Monday 27 and Tuesday 28 April 2020.

The update from HMRC in respect of the off-payroll working rules reads as follows:-

“The Government has announced it is delaying the reforms to the off-payroll working rules (IR35) from 6 April 2020 to 6 April 2021.

This deferral has been announced in response to the ongoing spread of Covid-19, to help businesses and individuals deal with the economic impacts of the pandemic. This is a deferral of the introduction of the reforms, not a cancellation.  

The Government remains committed to introducing this policy to ensure that people working like employees, but through their own limited company, pay broadly the same tax as individuals who are employed directly. The policy will be introduced on 6 April 2021, representing a 12-month delay.

Due to this delay HM Revenue and Customs will be pausing the customer support and education programme that HMRC has been delivering to help customers get ready. HMRC will resume education and support activities at the appropriate time ahead of the reform in April 2021.

This deferral means that the current off-payroll working rules in the public sector, introduced in 2017 will continue to operate as they do now. Public authorities will not need to implement the changes on status determination statements or implement status disagreement processes until April 2021. Customers can refer to existing guidance on the current rules for public authorities for more information: https://www.gov.uk/guidance/off-payroll-working-in-the-public-sector-reform-of-intermediaries-legislation.

HMRC developed a wide range of guidance and support to help customers prepare for the changes, which are now delayed. These products will be updated shortly and remain available to access to help you prepare for the changes due in April 2021.

This means that the different rules that exist for inside and outside the public sector will continue to apply until 6 April 2021.

This announcement is a deferral of the introduction of the reforms, not a cancellation. The Government remains committed to introducing this policy to ensure that people working like employees, but through their own limited company, pay broadly the same tax as individuals who are employed directly. This means that the different rules that exist for inside and outside the public sector will continue to apply until 6 April 2021.”