Last month chancellor Rishi Sunak stated that the UK is back on track and unveiled a plan of “£150billion by 2024/25” of post-Covid spending.
The Chancellor stated that, by the end of the year, the economy will reach pre-Covid levels growing by a whopping 6.5% this year.
Larger (than expected) spending on public services was good news but investments in public services were overshadowed by a budget that almost did not mention the climate crisis just before Cop26.
As often happens, the Budget 2021 will sustain some business and sectors living others out instead.
Smaller retail and hospitality businesses
Business rates: Revaluation every three years and a 50% discount capped to £110,000
Alcohol producers, pubs and consumers
New rules on duty paid will link directly to alcoholic strength, and with tax reliefs on draught beers.
UK wine and sparkling wine producers will face lower duties, as will craft beer and cider makers, which means lower prices for drinkers. High strength drinks, including port and gin, will cost more.
Museums, galleries, and concert venues
Museums, libraries, galleries, and concert venues will all benefit from £250m of tax reliefs over the next two years to help them recover from the COVID pandemic. In addition, £800m is to be made available to help renovate local cultural institutions across the UK.
Families receiving Universal Credit
The Chancellor has made major changes to the taper on Universal Credit. The change, more generous than expected, will see as much as a £1,000 increase per year (approximately £19.25 per week) to over four million UK households.
Businesses involved in research and development
R&D tax credits will be extended to businesses incurring costs on cloud computing and data sciences for the first time. However, businesses that subcontract their R&D outside of the UK will lose access to that relief.
Pension top-ups for low earners
Those earning less than their personal allowance can miss out on tax relief if they are members of pension schemes where employee contributions are collected from gross pay before tax. HMRC will identify these individuals and each will become entitled to a top-up contribution from 2025/26, averaging £53 a year. However, there appears to be no intention to backdate this.
As the eyes of the world turn to Glasgow on 1 November for COP26, many might question the Government’s decision to reduce air passenger duty on flights within the UK. And those looking for any increase in petrol or diesel duties to combat vehicle emissions will have been disappointed although perhaps not surprised with no Chancellor in recent memory increasing prices at the pumps.
People aged looking to access their pension
From 6 April 2028 those wishing to access their pensions without incurring an unauthorized payments tax charge will have to wait for their increased normal minimum pension age of 57, up from the current age of 55.
Residential Property Developers
Residential property developers with profits over £25m will be required to pay a 4% tax on profits from 1 April 2022. The revenues generated will be used to make safe cladding on high rise buildings.
Large hospitality and retail businesses
Business rates for retail and hospitality businesses on the high street will be able to claim a discount of 50% on their business rates up to a maximum of £110,000 which it is unlikely to help such businesses that position themselves in high street and shopping centre destinations.
Businesses with large numbers of employees on the National Living Wage
Whilst workers being paid the National Living Wage will welcome the increase to £9.50 per hour from April 2022, businesses with large numbers of employees on the National Living Wage may find it a sharp increase in costs. Businesses with a fixed income, will face issues.
TAX areas in details
Increase of rates of Income Tax applicable to dividend income by 1.25%. The dividend ordinary rate will be set at 8.75%, the dividend upper rate will be set at 33.75% and the dividend additional rate will be set at 39.35%. The dividend trust rate will also increase to 39.35% to remain in line with the dividend additional rate.
The changes will take effect from 6 April 2022
Capital Gain Tax
Extension of the Capital Gains Tax payment on property disposal deadline from 30 days after completion to 60 days, and clarifies the rules for mixed use properties.
This will affect disposals that complete on or after 27 October 2021.
This measure cancels legislation that permits UK companies in certain circumstances to claim group relief for losses incurred in the European Economic Area (EEA).
It also amends legislation that limits the amount of losses that an EEA resident company trading in the UK through a UK Permanent Establishment can surrender as group relief
UK groups with subsidiary companies established in the European Economic Area (EEA) which incur foreign losses that are definitive, and EEA-resident companies that have incurred losses when trading in the UK through a UK Permanent Establishment (PE).
Following the UK exit from the European Union (EU), the government is bringing the group relief rules relating to EEA-resident companies into line with those for non-UK companies resident elsewhere in the world.
In fact Claims involving companies established in the EEA currently are subject to more favorable rules in the UK relating to relief for non-UK losses and losses incurred by a UK PE of a foreign company. These rules were introduced under the UK’s obligations as a Member State of the EU.
Having now left the EU the UK is no longer required to maintain these rules.
This measure will have effect for company accounting periods ending on or after 27 October 2021. Transitional arrangements will apply for accounting periods which straddle this date.
Annual Investment Allowance extension
Extension to the temporary £1,000,000 level of the Annual Investment Allowance until 31 March 2023.
Cultural Relief Rate Rises for Theatre, Orchestra, and Museums and Galleries Exhibition Tax reliefs
The budget temporarily increases the headline rates of relief for the Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR), and Museums and Galleries Exhibition Tax Relief (MGETR) for expenditure taking place from 27 October 2021, gradually being reduced down to normal rates by 1 April 2024.
Extension to Museum and Galleries Exhibition Tax Relief sunset clause
The budgt extends the sunset clause for the Museums and Galleries Exhibition Tax Relief for a further 2 years until 31 March 2024
Theatre, Orchestra, and Museums and Galleries Exhibition tax reliefs
Changes to better target the cultural reliefs and ensures that they continue to be safeguarded from abuse.
Changes will take effect for companies entering production from 1 April 2022.
New tax regime for asset holding companies (AHCs)
Introduction of a new regime for the taxation of qualifying asset holding companies (QAHCs) and certain payments that QAHCs may make.
A QAHC must be at least 70% owned by diversely-owned funds, or certain institutional investors, and mainly carry out investment activity with no more than insubstantial ancillary trading.
A measure that is part of a wider review of the UK funds regime to consider reforms which hold the potential to have positive outcomes for the financial sector and enhance the UK competitiveness as a location for asset management and for investment funds.
The regime is intended to only be available to prescribed investment arrangements involving diversified investment funds, charities, long-term insurance business, sovereign immune entities and certain pension schemes and public bodies.
The regime is not intended to affect the taxation of profits from trading activities, UK land or intangibles.
Residential Property Developer Tax
A new tax on company profits derived from UK residential property development.
The tax will be charged at 4% on profits exceeding an annual allowance of £25 million and will be included in the Corporation Tax returns of those companies liable to the new tax.
Switch between Film Tax Relief and High-End TV Relief during production
Film productions qualifying for Film Tax Relief (FTR) that change during production to instead meet the criteria for High-end Television Tax Relief (HETV) will be able to continue claiming FTR without losing their right to access tax relief, which will benefit film productions in the longer term. The measure will have effect from 1 April 2022.
Tonnage Tax reform
This measure will make substantive reforms to the Tonnage Tax regime, designed to make it easier for shipping companies to join the regime, ensure they are not disadvantaged compared with firms operating in other countries, reduce unnecessary administrative burdens, and boost the use of the UK flag.
Implementation of VAT rules in free zones
This measure will affect VAT registered businesses authorised to operate in the customs site (free zone) of a Freeport.
It will enable the operation of free zones in Great Britain by introducing an additional element to the VAT free zone model. This is a VAT exit charge for goods that have benefited from a zero-rated supply and where, after the goods leave the free zone procedure, there is no onward taxable supply of the goods within a time limit. It also makes consequential amendments to other legislation
A range of benefits will be available to businesses that are authorised to operate in a free zone. The main VAT benefit is that businesses selling goods within free zones will be able to zero rate their supplies, and services carried out on goods in those zones may also be zero rated subject to conditions. This provides a cash flow advantage to businesses.
This measure introduces an additional element to that VAT free zone model. It will ensure that where goods leave a free zone and there is no qualifying onward supply of the goods which meets the conditions, or where there is a breach of the rules of the free zone customs procedure, VAT will be due. It will prevent businesses, that might otherwise seek to locate in a free zone solely to avoid irrecoverable VAT, from gaining an unintended tax advantage and so helps maintain a level playing field for all
The measure will take effect shortly after the measure is announced at Autumn Budget 2021.
VAT exemption for dental prostheses imports
The measure will take effect shortly after the measure is announced at Autumn Budget 2021.
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