Following are Changes to Business Taxes and Reliefs that have been announced in Spring Budget 2020-

Changes to Corporation Taxes:

It was expected that corporation rate for financial year beginning 1 April, 2020 will be reduced to 17% from 19%. However, Chancellor Rishi Sunak has announced that the corporation tax rate will remain 19% for the period 1^st April, 2020 to 31^st March, 2021.

Changes to Capital Allowances:

• For Corporation Tax, the annual rate of capital allowance for qualifying investments to construct new structures and buildings, or upgrade existing ones will increase to 3% from 2%. This change is effective from 1^st April 2020.
• For income tax, capital allowances for qualifying investments to construct new or upgrade old non-residential structures will also increase to 3% from 2%. This change will however, be effective from 6^th April 2020.
• Spring Budget 2020 has announced 100% first year allowance for investments in new plant and machinery in marked Enterprise Zones. This will be available till 31^st March, 2021; after which it will be subject to Spring Budget 2021 announcement.
• There is an extension to 100% first year allowance for zero-emission business cars and zero-emission business goods, vehicles and equipment by four years beginning April 2021. Beginning April 2021, CO2 emission thresholds will be reduced from 50g/km to 0g/km for low emission cars first year allowance and from 110g/km to 50g/km for purpose of writing down allowance for business cars. This means that cars with CO2 emissions of only 0g/km will be eligible for writing down allowance at 18%. Cars with emissions exceeding 50g’km will only be eligible for 6% writing down allowance.

Increase in Research and Development Expenditure Credit (RDEC):

In order to rebuild UK economy after the COVID-19 Outbreak, the UK government announces a huge increase from 1% to 13% for tax credit for all companies that are eligible for RDEC schemes. This increased tax credit rate is effective from 1^st April, 2020.

In another happy move for RDEC scheme eligible companies, the Chancellor has announced that the 2018 Budget Restrictions for qualifying loss making companies’ tax credits will be delayed till 1^st April, 2021; as of now. Previously, 2018 Budget announced that effective from 1^st April, 2020, the amount of R&D tax credit for all qualifying loss making companies will be restricted to maximum of three times of net Total PAYE and NIC Liability of a given year.

Corporation Tax Loss Relief Proposed Changes in Spring Budget 2020:

Draft legislations have been issued to restrict deduction allowance to £5 million inclusive of all capital losses brought forward, from 1^st April 2020. This will impact where companies have been carrying forward capital losses to reduce their chargeable gains.

Corporate Tax Relief for Intangible Assets from 1st July 2020:

On the other hand, the government has announced extension to corporation tax relief so that all Pre-finance Act 2002 intangible assets acquired on or after 1^st July 2020 will also be covered. This means companies can now claim relief for older intellectual property rights also. All intangible assets will now be taxed under a single regime.

Business Rates Tax Holiday and Cash Grants for Small Businesses:

The government has announced a 100% Business rates Tax Holiday for all small businesses with Rateable value of less than £51,000.  This applies to all businesses in retail, leisure and hospitality sectors. These may include shops and restaurants, museums, art galleries, theatres, cinemas, caravan parks, gyms and sports clubs, small hotels, Bed & Breakfasts, guest houses, music venues and night clubs. All business rates will be discounted for £5,000 for the year up against the £1,000 for the year for Pubs.

All small businesses eligible for Business Rates Relief have been promised £3,000 cash grant. The Chancellor announced that currently there are about 700,000 such businesses in UK.

Changes to National Insurance Threshold in Spring Budget 2020:

From 1^st April, 2020, the National Insurance Threshold is up to £9,500 from £8,632.

VAT amendment in Spring 2020 Budget:

Only two changes to VAT have been mentioned in the recent budget.

1) Tampon tax stands abolished from 1^st January 2021 when Britain’s Transition period for exiting EU ends. This includes scrapping of VAT on all women sanitary products; no longer classifying them as luxury or non-essential products.
2)VAT will also be abolished from 1^st December, 2020 for all digital publications, e-books,

Academic journals and newspapers.

New Digital Services Tax:

Spring Budget 2020 announces implementation of new Digital Services Tax of 2% on all revenues generated from search engines, social media platforms and online market places that are derived from UK users only. This new tax applies only when two conditions are present:

1)The group’s worldwide revenue from digital activities exceed £500 million.

2)At least £25 million are derived from UK users.

Diesel Tax Relief Amendment:

Previously some companies enjoyed Diesel Tax Relief where they paid just over 11p/litre as compared to the regular 58p/litre consumption. The Government has now announced complete abolishing of Diesel Tax for such companies; majority of which belong to agriculture sector. This means they won’t even be required to pay the 11p/litre tax now.

New ‘Green’ Tax Introduced:

The UK Government has been trying to achieve ambitious green targets. In a new bid, the government has announced that all manufacturers or importers of products that have less than 30% recyclable material composition will henceforth be charged at £200/tonne.

Amendment to the Entrepreneur Relief:

Contrary to the expected, The Entrepreneur Relief has not been abolished completely. However, the lifetime allowance has been reduced to £1 million from £10 million.

Proposal for Ten New UK Free Ports:

The Chancellor has announced that UK Government is considering establishing ten free ports across all four UK nations. The proposal revolves around following tariff benefits:

• No Tariffs/ import VAT/ Excise or Duty suspension for all goods being brought from across border into the Free ports. The taxes and duties will apply only when goods leave the free port for domestic market.
• Duty Inversions for all goods where the duty of final product is lower than duty on component parts. In such cases, the government will allow duty free import of component so that businesses pay duty at finished product rate when goods enter domestic market.
• Duty exemptions for re-exported goods. This will allow businesses to import components duty free in free ports, manufacture final product and then export it without any tariff.
• Simplification of customs processes and documentation requirements for all businesses accessing free ports.

Other Business Grants and Reliefs in Spring Budget 2020:

• The government will refund employers; with less than 250 employees, Statutory Sick Pay Costs for up to 2 weeks per employee that has either contracted COVID-19 or is self-isolating.
• For Self Employed, the minimum income barrier of Employment Support Allowance is temporarily removed. This means self-employed will have access to such benefits from day 1 of illness or isolation. This was previously only available after 1 week.
• Government has also announced Business Interruption Loans of up to £1.2 million to any SME has incurred additional costs as result of Covid-19 outbreak.
• The chancellor has also promised a review of High street business rates system in coming few days.
• The Government’s Time to Pay Scheme ensures that all businesses are given a pre agreed deferral period and time frame to eventually pay their HMRC liabilities.

Certax Fitzrovia Ltd prides itself on keeping all its Clients up to date with changes in Taxes and Reliefs, as announced by the government. Book your appointments now to see how the Spring Budget 2020 will impact your business and how can you take benefits from latest Reliefs and Grants announced by the government.

The post CHANGES TO BUSINESS TAXES AND RELIEFS IN SPRING BUDGET 2020 appeared first on Blogs or News Offical Certax London.

WHICH EMPLOYEES CAN BE FURLOUGHED?

Let us now understand, some additional bullet points for Coronavirus Job Retention Scheme and Furlough Grant system

• To begin with, there is a cut-off date; 19^th March 2020. This means that the employee that needs to be furloughed, must have been on the employer payroll on 19^th March 2020. New employees that have been hired after 19^th March 2020 are generally not covered by the Coronavirus Job Retention Scheme.
• Employers must have documented proof that their business is not doing well due to COVID-19 and how it has impacted their workforce
• There should be evidence that there is no work for each furloughed worker
• Employees can be furloughed if they need to self-isolate for themselves or for a person, they live with, in accordance to the government guidelines
• Employees can be furloughed if COVID-19 has altered their childcare commitments.
• Those employees who had been on sick leave can begin their furlough term as soon as the sick leave ends.

Which Type of Employees can be Furloughed?

Given, they are on employer’s payroll on 19^th March 2020, following employees can be eligible for furlough scheme.

1) Full-time employees (generally understood to work 35 hours or more per week)
2) Part-time employees
3) Any agency employees that work on agency contracts (they are eligible only if they have no work at all)
4) Zero-hour contract workers in circumstances where they your employees on flexible contract basis

What will be maximum furlough salary for employees with two or more jobs?

If a person has two or more jobs, he will receive 80% of his salary for each job. The £2,500 cap will apply to each job individually. This means he will have £5,000 cap if he works two jobs.

What is legal position on working elsewhere while being furloughed?

This is a very subjective question. It will depend on individual circumstances rather than a one fit for all situation ruling. If an employee agrees to be furloughed but uses his free time to top up his salary to manage his outgoings by working in a totally unrelated job, the employer cannot reasonably withhold the employee from doing so. For example, a furloughed computer operator can work as a delivery driver and the first employer cannot reasonably object.

If the furloughed employee work in a related job like a competitor, the employer can reasonably object to the employee taking such a job while on furlough. But let us say the employer had two same level employees. He furloughed one and retained the other. The furloughed employee will be losing 20% or more if the £2,500 cap applies. This will be unfair given one of his colleague is still taking regular salaries. If this furloughed employee is offered a well-paid job elsewhere, the first employer has two choices now. He can either top up remaining salary or cancel the furlough agreement. If both not suitable, the employer can start a redundancy process; in which case the employee will no longer be furloughed.

Ultimately what happens is matter of what agreement is reached between the employee and employer. The UK government has cleared its position that it will not announce a law that will prevent any individual from earning extra in these hard times. The employee and employer can seek regular tribunals and other arbitrary methods where available in case of discord.

Can Business Owners or Partners furlough themselves?

Business owners and business partners will be covered only till the extent of what they receive through PAYE system. If a small business director takes a salary as well as dividends, the furlough conditions will work for salary only. Partner owners or LLP members who receive no payments through PAYE payroll are excluded from furlough grants.

Coronavirus Job Retention Scheme and furlough grant will be of no or very less benefit to people whose major home takes are made up of dividends. These people will be in a better position if they apply for Coronavirus Self Employment Income Support Scheme if their taxable profit is below £50,000 annual threshold.

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What is Job Retention Covering?

Even if the businesses are being shut down temporary, HMRC allows employers to claim a grant that can cover a majority proportion of their payroll expense. Employers will furlough every employee, who otherwise would have been made redundant. For each employee, employers can claim

• 80% of their usual monthly wage
• Or £2,500; whichever is lower of the two
• And associated Employer NI and pension Contributions on the subsidized furlough pay

What does furlough mean?

Essentially, furloughing employees is just like giving them paid leave. Instead of having employers lay off employees in COVID-19 crisis, the earlier can retain the later temporarily on their payroll. It helps in letting the grant reach systematically to those who would otherwise not have any kinds of wages and salaries. During the furlough time, employers cannot ask the furloughed employee to do any kind of work or provide any services that directly or indirectly leads to revenue generation for the business. The employee can, however, voluntarily agree to do any side-line work that does not lead to revenue generation.

The employees will be retained up till 30^th June 2020 or to any further date Government announces for the Furlough period. Beyond the said date, if businesses reopen and revive, employees can be taken back on regular payroll paid by employers. In case the business permanently closes, employees can then be made redundant as per their original employment contract terms and conditions.

What is Time Frame for Furloughing?

Employees can be temporarily furloughed from 1^st March 2020. As of Friday, 17^th April 2020, the UK Treasury has published formal rules on operating the Coronavirus Job Retention Scheme. The Chancellor of Exchequer, Rishi Sunak has confirmed that the scheme will be available up until 30^th June; with a possibility of further extension if deemed necessary.

Originally, any employee that has been on payroll on or before 28^th February, qualified to be furloughed. The employee can be re-employed and then furloughed if he/she has been made redundant any time after 28^th February. Any employee made redundant before 28^th February does not qualify.

For further details on which employees qualify to be furloughed, Read our next blog.

Who can claim under Coronavirus Job Retention Scheme?

Before any employer can claim furlough grant for employee wages, they need to ensure:

1)They have an already operational PAYE payroll scheme on or before 19^th
2)They have enrolled for online PAYE
3)They have a UK based bank account

All employers, big or small, across UK are eligible as long as they meet the above conditions.

Employers further must ensure that their employee retention calculations include only employees that have been on their payroll on or before 19^th March. The date has been revised in recent announcements. The original date announced was 28^th February.

Can you backdate the furlough pay?

Yes. Furlough pay can be backdated to as far as 1^st March. The online portal for applying for the furlough scheme has just been operational. So, all those employers who have paid their employees themselves can claim the backdated employee pay from HMRC for periods starting 1^st March. The Exchequer believes that the payments will reach the employers by end of April. Many may have received the grant already. The UK Government is urging employers to pay employees on time; where they can and not wait for the Grant, with assurance that sooner or later, the Grant will be disbursed to them.

What is UK Government Furlough Guidance about Employee Retention Agreements?

The UK Government has advised all the employers to seek written Furlough Agreements from their employees. They should do so retrospectively if they have not already done it. In case, an employee is not informed that he/she has been furloughed, he/she may claim full wages or salaries as opposed to 80% furlough pay. Such disputes may employee altogether ineligible for the Coronavirus Job Retention Scheme. The Employee Retention Letter with furlough terms and conditions must be signed by the employee and retained by employer for minimum 5 years. This is because employment laws allow employees to back claim unpaid wages and salaries as far as five years old.

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