A quick reminder of the key tax changes that have come into effect this month.
April heralds the start of a new tax year and, as usual, a number of changes to tax legislation also took effect from 1 April or 6 April 2021. This article provides a quick reminder of the key changes.
As announced in this year’s Budget, companies investing in new qualifying plant and machinery between 1 April 2021 and 31 March 2023 will benefit from a tax ‘super-deduction’. Expenditure on assets qualifying for main pool capital allowances (including software accounted for as intangible fixed assets) will receive a 130 percent first-year allowance and assets qualifying at the special rate (e.g. integral features and long-life assets) will benefit from a 50 percent first-year allowance. This relief applies only to expenditure incurred under contracts entered into from 3 March 2021 onwards.
From 6 April 2021, medium and large private sector organisations – as well as all public sector bodies – must assess the ‘IR35’ status of engagements with workers who operate through intermediaries (such as personal service companies). A number of amendments to the new off-payroll working regime are included in Finance Bill 2021 to clarify the position for corporate intermediaries and make other minor changes.
Construction Industry Scheme (CIS) changes
From 6 April 2021, new rules apply in respect of the application and administration of the CIS which are aimed at tackling abuse of the scheme.
Business car capital allowances rates
Following an announcement at Budget 2020, for acquisitions from April 2021, only business cars with CO2 emissions of 0g/km will be eligible for a 100 percent first-year allowance. Business cars with CO2 emissions not exceeding 50g/km will be eligible for writing down allowances (WDAs) at the main rate (18 percent) while cars with CO2 emissions exceeding 50g/km will be eligible for WDAs at the special rate (6 percent).
R&D credit for SMEs – new PAYE/NIC cap
For accounting periods starting on or after 1 April 2021, a new restriction applies to the payable research and development (R&D) tax credit available to loss making small and medium-sized enterprises (SMEs). Subject to certain exemptions, the amount of R&D tax credit that a company can receive in any one year is capped at £20,000 plus three times the company’s total PAYE and NIC liability for the period. The legislation included in Finance Bill 2021 has been changed from the earlier draft to help ensure genuine businesses are not adversely impacted.
Making Tax Digital (MTD) – VAT digital links
All businesses within the scope of MTD for VAT are required to put in place digital links between all parts of their functional compatible software in time for their first VAT return period starting on or after 1 April 2021. This is later than originally envisaged as HMRC provided extra time to reflect the impact of the COVID-19 pandemic.
Stamp Duty Land Tax (SDLT) surcharge for overseas buyers
From 1 April 2021, an extra 2 percent is added to all residential rates of SDLT (including the current 3 percent ‘additional homes’ surcharge, the flat 15 percent rate for certain corporate purchases and the rates of lease duty) where a non-UK buyer purchases residential property in England and Northern Ireland. It should be noted that the residence of an individual for the purpose of this SDLT surcharge is not determined by the statutory residence test used for other tax purposes and there are also specific rules for companies and other entities so great care is needed when identifying which taxpayers are in scope.
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