Last week what will become Finance Act 2021 (Finance No. 2 Bill) commenced its various stages through Parliament. The usual explanatory notes are also available.
HMRC sent Chartered Accountants Ireland the following information on the key elements to the Finance Bill.
“COVID-19 easements:
- Extension of Reduced Rate for Hospitality and Tourism
The Chancellor announced at Budget 2021 that the temporary reduced rate of 5 per cent (which came into force on 15 July 2020) will be extended to 30 September 2021.
From 1 October 2021 the reduced rate for these supplies will be replaced by the introduction of a new reduced rate of VAT of 12.5 per cent which will remain in effect until 31 March 2022. The types of supplies that the relief applies to will remain unchanged when the new temporary 12.5 per cent rate is introduced on 1 October 2021.
Further guidance on the operation of the new reduced rate will be published when it comes in to force on 1 October 2021.
Further information can be found in our recently published Revenue and Customs Brief, including links to more information.
Stamp Duty Land Tax (SDLT) nil rate extension
As announced at Spring Budget 2021, the temporary increase to the Stamp Duty Land Tax (SDLT) nil rate band for residential property in England and Northern Ireland that was due to end on 31 March 2021 has been extended. The nil rate band will continue to be £500,000 for the period 8 July 2020 to 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be stepped down to £250,000. The nil rate band will return to the standard amount of £125,000 from 1 October 2021.
VAT New Payment Scheme (NPS)
The VAT Deferral New Payment Scheme (NPS) was announced by the Chancellor of the Exchequer on 24 September 2020 as part of the Winter Economy Plan. The legislation being introduced today] provides the legal framework for NPS to operate and a penalty that may apply to businesses that take no action to pay their deferred VAT. Businesses that deferred VAT to 31 March 2021, which would otherwise have been payable between 20 March 2020 and June 2020, are now able to join NPS to spread payments into 2022 across up to 11 interest-free instalments. Businesses that intend to join NPS need to do so before the end of June 2021. Businesses that do not pay in full by 31 March 2021 or sign up to NPS may be liable to a penalty.
Income tax exemption for employer-provided and employer-reimbursed COVID-19 antigen tests
The Finance Bill 2021 includes legislation to introduce a retrospective income tax exemption for employer-provided and employer-reimbursed coronavirus antigen tests for the tax years 2020 to 2021 and 2021 to 2022. There will be no income tax liability for the employee or employer. More information can be found in the income tax exemption for employer-reimbursed coronavirus antigen tests tax information and impact note. These measures will take effect on and after Royal Assent of Finance Bill 2021. The corresponding National Insurance contributions disregard is already in force.
A further tax information and impact note on the extension of the measure for 2021 to 2022 will also be published in due course.
Super-deduction allowance
From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:
o a 130 per cent super-deduction capital allowance on qualifying plant and machinery investments
o a 50 per cent first-year allowance for qualifying special rate assets.
The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive.
Other items:
Stamp Duty Land Tax (SDLT) and Annual Tax on Enveloped Dwellings (ATED) relief for housing co-operatives
As announced at Spring Budget 2021, and following consultation on draft legislation over the summer of 2020, the government will introduce new reliefs from ATED and the 15 per cent rate of SDLT for certain qualifying housing co-operatives.
For SDLT, the relief can be claimed for land transactions where the effective date of the transaction is on or after 3 March 2021. For ATED, the relief will apply to chargeable periods beginning on or after 1 April 2020, allowing eligible housing co-operatives who have already paid ATED for that period to claim a refund.
A tax information and impact note is published on GOV.UK.
Restoring plant or machinery leases to pre-COVID-19 treatment
The government has included primary legislation in the 2021 Finance Bill for restoring plant or machinery leases to pre-COVID-19 treatment.
This measure applies only where anti-avoidance legislation is triggered between 1 January 2020 and 30 June 2021, due to a plant or machinery lease term being extended in relation to COVID-19. Either party to the lease can disregard this easement, an election which will be binding upon both parties.
The published policy paper is available on GOV.UK.
Civil Information Powers:
The government has included legislation in the Finance Bill amending HMRC’s civil information powers. The legislation allows HMRC to issue a notice to a financial institution to request documents and information, without the requirement for tribunal approval, to help check a taxpayer’s tax position or assist with collecting a tax debt. The legislation follows a consultation in 2018 after which a summary of responses and draft legislation was published last year. A tax information and impact note has been published about these changes.
Plastic Packaging Tax
Following a technical consultation, the 2021 Finance Bill includes primary legislation for the new Plastic Packaging Tax, due to take effect from 1 April 2022. We are working closely with stakeholders to develop guidance to help businesses prepare for the change – and aim to publish this on GOV.UK later this year.”
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