UK Budget 2021 - other important tax measures

Mar 08, 2021

As usual the accompanying Budget documents contained a plethora of other measures on transport taxes, R&D tax relief and VAT in addition to future changes to the penalty regimes for VAT and income tax (broadly introduced to coincide with the next steps in the Making Tax Digital project).

Key items are as follows:-

  • For accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a business can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and NICs liability;
  • In line with the recommendations of the NI Tax Committee in its response to the consultation on the scope of expenditure for R&D Tax Credits, the government is considering bringing data and cloud computing costs into the scope of relief. In addition, a review is being carried out of R&D tax reliefs, with a consultation published alongside the Budget;
  • The VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2022 (currently these are £85,000 and £83,000 respectively) however this does suggest the thresholds may be reduced in future which was the subject of a consultation in 2018;
  • The penalty regime for VAT and Income Tax Self-Assessment (“ITSA”) for late returns will be points-based and a financial penalty will only be issued when the relevant threshold is reached. A new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is and the government will also introduce a new approach to interest charges and repayment interest to align VAT with other tax regimes. These reforms will take effect for VAT from periods starting on or after 1 April 2022, from accounting periods beginning on or after 6 April 2023 for taxpayers in ITSA with business or property income over £10,000 per year and for all other taxpayers in ITSA from accounting periods beginning on or after 6 April 2024;
  • A call for evidence has been launched on whether and how more UK companies should be able to access Enterprise Management Incentives to help them recruit and retain the talent they need to scale up;
  • The operation of social investment tax relief is extended to April 2023;
  • From 6 April 2021, fuel benefit charges and the van benefit charge will increase in line with CPI;
  • Fuel duty is frozen once again however air passenger duty rates will increase in line with RPI but not until April 2022; and
  • The duty rates on beer, cider, wine and spirits are frozen for another year.