Just two weeks ago, Chancellor Rishi Sunak’s summer statement was issued to help the UK plan its economic recovery following the coronavirus pandemic. After promising that this was not a ‘mini-budget’, the Government has now released further policy statements on the eve of parliamentary recess, including big news surrounding Making Tax Digital.
Read more about this below, or download the full guide here.
These new measures have been included in the draft legislation, supporting the Finance Bill for 2020-21 which was published 21 July 2020.
For accountants and their clients, it has been a confusing time. After the budget in March, there were a variety of fiscal announcements during March and April as well as July’s statement, as the Government seek to help businesses during the coronavirus crisis.
The upcoming Autumn budget is expected to be rather substantial, packed to the brim with tax reforms.
The most recent announcements have demonstrated the areas in which the Government is looking to make changes. For example, with pensions tax and research and development (R&D) tax credits. If you want to find out more, please read on below.
What has happened with Making Tax Digital?
It has now been announced that the Making Tax Digital (MTD) reporting regime will be expanded to all VAT-registered businesses as of April 2022. Before this, the scheme only applied to businesses with taxable turnover of £85,000.
Following on from the changed as of April 2022, it will then expand further in 2023 to cover unincorporated businesses and landlords that turn over more than £10,000.
Without comprehensive data regarding specific businesses, it’s harder for the Government to implement support measures, with the COVID-19 pandemic illustrating the need for flexible, resilient and responsive tax systems.
This will go a long way in helping businesses and HMRC staying updated with their finances, particularly during times of crisis.
In addition, the Government have confirmed they are looking to reassess the situation in the autumn, with the view of extending the MTD to cover incorporated businesses which are liable to pay Corporation Tax.
The wait for these changes to the MTD permit businesses, landlords and agents the time to plan, and software providers the opportunity to introduce MTD products, such as free software for businesses with the simplest tax affairs.
What about tax reforms?
The Government has announced that the next revaluation of business rates which will apply from 2023, based upon property values recorded on 1 April 2021. There was a call for a review of business rates for a long time, in order to reduce the burden placed upon businesses, especially in order to reflect the impact of COVID-19.
In the Spring Budget 2020, consultations into what costs companies can claim back through R&D tax credit relief. This has now fully launched, with a deadline of 13 October for responses. In addition, it will consider whether R&D tax credits will apply to investments made in data technology and cloud computing.
Consultations were also announced regarding the economic crime levy, carbon emissions tax and a national insurance contribution holiday for employers who have employees that have served in the armed forces. Consultation outcomes have also been confirmed, such as on stamp duty land tax surcharge for non-UK residents.
This consultation report also confirms that a non-UK resident surcharge will apply from 1 April 2021, which is supported by legislation in the finance bill for 2020-21. This additional support will help to relieve pressure on the supply of properties in the UK housing market from overseas investors.
What is the comprehensive spending review?
Chancellor Rishi Sunak also revealed new measures to reduce spending across Government departments. Whilst many of the recent statements have shown the Government’s intention to rebuild, level up and invest into businesses people and places to help provide equal opportunities across the nation, there is now a clear message that the Government will prioritise spending and find efficient saving methods.
What does this mean for me?
The reaffirmed importance of digital record-keeping and reporting underlines the importance of businesses being ready and armed with MTD cloud accounting software.
It is never too early to do this, particularly as we now know what might be in the Autumn Budget for 2020, so we can now start planning tax for 2021/22!
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