COVID-19: Business rate relief and grants

To help business affected by the COVID-19 pandemic, the Chancellor announced a number of measures effected through the business rates system.

Business rate retail relief increased and extended

At the time of the 2020 Budget, the Chancellor announced that the business rates retail discount for 2020/21 would be doubled from 50% to 100%. The discount is also to be extended to the leisure and hospitality sectors.

Grants

The Chancellor also announced funding of £2.2 billion would be provided to local authorities to enable them to provide grants of £3,000 to all businesses receiving small business rate relief. Following the Budget, the Chancellor announced an increase in the amount of the grant to £10,000. Small business rate relief is available in full where the rateable value of the business premises is less than £12,000. The relief reduces from 100% to nil where the rateable value is between £12,000 and £15,000.

Grants of £25,000 are also to be made available for retail, hospitality and leisure businesses with a rateable value of between £15,001 and £51,000. Businesses in this sector will receive a grant of £10,000 where the rateable value of their business premises is £15,000 or less.

Watch this space

New measures are being announced daily to help businesses survive the pandemic. Speak to us to find out what help is available and check out the Gov.uk website.

March 23, 2020

Entrepreneurs’ relief – reduction in lifetime limit

Prior to the Budget, there had been much speculation that that entrepreneurs’ relief would be abolished. In the event it stayed – albeit with the new name of ‘Business Asset Disposal Relief’ – and a much-reduced lifetime limit.

New £1 million lifetime limit

The lifetime limit is reduced from £10 million to £1 million with immediate effect for disposal on or after 11 March 2020 (Budget Day). Disposals prior to Budget day that qualified for entrepreneurs’ relief count towards the new £1 million limit, and where this has already been reached, the relief will not be forthcoming on future disposals, even if the qualifying conditions are met.

Anti-forestalling

Anti-forestalling measures were announced which may negate protective action taken ahead of the Budget in an attempt to preserve availability of the relief as it applied at that time.

Where arrangements were entered into before Budget day, the old £10 million lifetime limit will only apply if:

the parties to the contract are able to demonstrate that they did not enter into the contract for the purposes of obtaining a tax advantage by virtue of the capital gains tax rules setting the contract date as the date of the disposal; and
where the parties to the contract are connected, the contract was entered into for wholly commercial reasons.

If the above conditions are not met, the reduced lifetime allowance of £1 million applies.

Anti-forestalling rules also apply in certain circumstances where between 6 April 2019 and 11 March 2020, shares were exchanged for those in another company, and both companies are owned or controlled by substantially the same person.

Plan ahead

If you are planning on disposing of business assets or shares in a personal company, it is important to plan ahead to maximise relief. We can help you. Remember, spouses and civil partners each have their own lifetime limit.

Guidance on the changes is available on the Gov.uk website.

March 16, 2020

Budget 2020 – rates and allowances

The Chancellor, Rishi Sunak, presented his first Budget on 11 March 2020, confirming the rates and allowances applying for the 2020/21 tax year. The following key rates and allowances were announced.

Full details of the rates and allowances applying for 2020/21 are available on the Gov.uk website.

Income tax

As previously announced, the personal allowance remains at £12,500 for 2020/21. It is reduced by £1 for every £2 by which income exceeds £100,000. This means that if your income is more that £125,000 for 2020/21, you will not receive a personal allowance.

Income tax rates and allowances are unchanged too. The basic rate remains at 20%, the higher rate at 40% and the additional rate at 45%. The basic rate band is also unchanged at £37,500, meaning that the point at which higher rate tax becomes payable remains at £50,000. Tax is payable at the additional rate on income over £150,000.

The Scottish and Welsh rates of income tax apply to the non-savings, non-dividend income of Scottish and Welsh taxpayers.

Dividends

The dividend allowance remains at £2,000 for 2020/21. Dividends, which are treated as the top slice of income, are taxed at 7.5% to the extent that they fall within the basic rate band, 32.5% to the extent that they fall in the higher rate band and at 38.1% to the extent that they fall in the additional rate band.

Savings

Basic rate taxpayers continue to benefit from a savings allowance of £1,000 for 2020/21, while higher rate taxpayers can enjoy a savings allowance of £500. There is no savings allowance for additional rate taxpayers.

The starting savings rate of 0% applies to savings in the savings starting rate band of £5,000, but remember this is reduced by taxable non-savings income.

Corporation tax

The rate of corporation tax was due to fall to 17% for the financial year 2020. However, as previously announced, it will remain at 19%. It will stay at 19% for the financial year 2021 too.

Capital gains tax

The capital gains tax annual exempt amount is increased to £12,300 for 2020/21 for individuals and personal representatives, and to £6,150 for trustees.

Capital gains tax rates remain at 10% where income and gains fall in the basic rate band and at 20% thereafter. Higher rates of 18% and 28% apply to residential property gains.

March 12, 2020

Off-payroll working rules delayed

In a surprise move, the Government have announced that the reforms to the off-payroll working rules have been delayed by one year and will now come into effect from 6 April 2021. The delay is to help businesses affected by the COVID-19 pandemic. The delay will affect medium and large private sector organisations engaging workers through personal service companies and other intermediaries, and workers providing their services to such organisations in this way.

As the announcement of the delay came only three weeks before the reforms were due to take effect, it comes too late for many. To avoid having to deal with the new rules, many organisations have already taken the decision not to use workers providing their services via an intermediary, opting instead to place all workers ‘on payroll’.

Impact of the delay

The extent to which you will be affected by the delay will depend on whether you are a small, medium or large private sector organisation, a public body or a worker providing their services through a personal service company or other intermediary.

Medium and large private sector organisations

Medium and large private sector organisations (as defined for Companies Act 2006 purposes) who engage workers providing their services through an intermediary can carry on as normal for 2020/21, paying the intermediary gross. They will not need to undertake status determinations and deduct tax and National Insurance from the deemed payment to the worker’s intermediary where the worker would be an employee if their services were provided directly. A further plus is that they will not yet need to pay employer National Insurance contributions on the deemed payment. These changes will now become a reality from 6 April 2021 rather than from 6 April 2020.

Workers providing their services through an intermediary to medium and large private sector organisations

Had the reforms gone ahead as planned from 6 April 2020, the responsibility for determining whether the off-payroll working rules apply would have shifted to the end client where a worker provides his or her services to a medium or large private sector organisation through an intermediary. This shift will now not take place until 6 April 2021.

As a result, the worker’s intermediary will continue to be paid gross, regardless of whether the off-payroll working rules apply. Responsibility for determining whether IR35 applies remains with the worker’s intermediary for 2020/21. If it does, the worker’s intermediary must calculate the deemed payment at 5 April 2021 and account for tax and National Insurance on that deemed payment.

A word of caution here – if the worker would be an employee of the end client if they provided their services directly rather than through an intermediary, the worker’s intermediary will need to operate IR35. While HMRC have said that they will not use off-payroll working determinations to check IR35 compliance for past years, the delay in implementing the reforms is not a licence to ignore the rules.

Small private sector organisations

The extended off-payroll working rules do not apply to small private sector organisations. If you fall into this category and engage workers who provide their service through a personal service company, you should continue, both for 2020/21 and beyond, to make payments to the worker’s intermediary gross.

If you provide your services to a small private sector organisation via a personal service company, your personal service company must determine whether IR35 applies, and apply the IR35 rules if it does.

Public bodies

The delay has no impact on public bodies engaging workers through intermediaries. The rules as they apply where the end client is a public body were reformed from April 2017, and these will continue to apply for 2020/21 (albeit without the tweaks needed to make the rules suitable for application to the private sector).

The delay has no impact on workers providing their services through an intermediary to a public sector body either. The public sector body will continue to determine whether the off-payroll working rules apply, and deduct tax and National Insurance from payment where they do.