On 12 November 2020, the Financial Secretary to the Treasury, Jesse Norman, released a written Ministerial Statement which provided an update on a number of tax policies, in addition to opening a consultation on Making Tax Digital (MTD) for Corporation Tax.

Some of the key announcements from the Treasury Statement are summarised below.

Extending the Annual Investment Allowance (AIA) provisional £1 million cap

The Treasury Statement confirmed that the current Annual Investment Allowance (AIA) of £1,000,000, which was due to revert down to £200,000 on 1 January 2021, will be extended for a further year up to and including 31 December 2021.

The change means that businesses will continue to benefit from 100% tax relief on up to £1,000,000 of qualifying capital expenditure incurred, with the aim of encouraging investment including plant and machinery.

This is an extremely helpful extension to this relief, giving businesses the opportunity to claim tax relief on expenditure incurred as a result of having to change the way they operate due to Covid-19, but also on items of plant and machinery where deferments on the purchase and delivery process have occurred due to the pandemic and potential import delays.

Generally, whenever the AIA limit reduces, the transitional rules add complexity for businesses with accounting periods spanning the date of the change. The extension of the allowance for another year will be helpful to those business investing in plant and machinery.

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Making Tax Digital for Corporation Tax

The Making Tax Digital (MTD) for Corporation Tax (CT) consultation explores how the principles established for MTD could be applied to corporation tax, including what may be required of customers and agents following its introduction.

The consultation closes at 11:45pm on 5 March 2021.

The government has already confirmed that MTD will be extended to

  • The remaining VAT population from April 2022 (businesses below the £85,000 VAT threshold) for their first VAT return period starting on or after 1 April 2022; and
  • Unincorporated businesses and landlords with £10,000 or more total business and property income who file Income Tax Self-Assessment returns, for periods of account starting on or after 6 April 2023.

If the principles within the consultation are adopted, those within the charge to corporation tax would need to

  • Maintain their records (e.g. records of income and expenditure) digitally;
  • Use MTD compatible software to provide regular (quarterly) summary updates of their income and expenditure to HMRC; and
  • Provide an annual CT return using their MTD compatible software.

Key points from the consultation include

  • The scope of MTD for CT will include all entities resident in the UK that pay corporation tax, regardless of turnover;
  • The proposed date to commence the voluntary pilot scheme is April 2024;
  • The scheme will be mandatory from 2026 at the earliest; and
  • HMRC will not provide free software for filing.

Reforming the Construction Industry Scheme

Changes to the Construction Industry Scheme (CIS) rules are being introduced from 6 April 2021, including

  • HMRC will be able to amend the CIS deduction amounts claimed by sub-contractors on their Real Time Information (RTI) Employer Payment Summary (EPS) returns, enabling:
    – The correction of errors or omissions relating to claims;
    – Removal of claims; and
    – The prevention of further claims, where employers do not provide evidence of eligibility.
  • There will be a change to the definition of ‘deemed contractors’ (entities operating outside the construction sector) and a requirement for them to monitor construction expenditure regularly and only apply the CIS when this exceeds £3 million within the previous 12 months; and
  • Individuals and companies will be liable to a penalty for supplying false information when applying for gross payment status (GPS) or payment under deduction within the CIS.

Tighter regulation on the provision of tax advice

This is a topic HMRC and the government have been playing close attention to and the team at M+A Partners welcome all actions to provide better safeguards for taxpayers seeking advice from tax advisers.

At present, there is no protection available for those taking advice from unqualified, unregulated tax advisers and HMRC (as well as members of the Professional Institutes) are keen to change this.

All those firms with well qualified and regulated tax advisers, such as the tax team at M+A Partners, view the new Treasury announcements as a timely and valuable update which will provide more assurance for those seeking tax advice.

A summary of responses to an earlier consultation on this topic and the intended next steps have been published in order to help taxpayers make informed decisions when seeking tax advice.

  • The Government will consult on making professional indemnity insurance compulsory for tax advisers;
  • HMRC to raise awareness of the Standard for Agents and review powers to enforce the Standard; and
  • Defining ‘tax advice’ and ‘tax advisers’ in order to clearly distinguish those advisers from tax scheme promoters.

The HMRC ‘Summary of responses and next steps’ can be found here.

At M+A Partners, we are here to help and support you, if you need any advice on the above then please get in touch.