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Spring Budget 2020 - Martin Aitken & Co. Summary
Spring Budget Summary 2020
Martin, Aitken & Co.
“….get it done” was a recurrent phrase in the Budget speech of the new Chancellor, Rishi Sunak. It could equally have been “get it spent” or “get it borrowed” as Mr Sunak announced a raft of spending initiatives with few supporting tax increases.
His performance did not follow the standard playbook for the first Budget after a general election. Such set pieces have generally been when a Chancellor takes advantage of his distance from the next visit to the polls to deliver the bitter medicine of tax rises. However, with the threat to the global economy caused by the coronavirus pandemic these were not normal times.
The Office for Budget Responsibility (OBR) was expected to cut projected UK economic growth even before the virus emerged. Its pre-measures forecasts were all closed by 25 February, meaning that the coronavirus effect was “largely confined to a modestly weaker outlook for growth in world trade and the UK’s export markets”.
Mr Sunak had the benefit of seeing what happened since that date and clearly decided that the medicine required was a large dose of tonic, rather than tax. He announced a total package of fresh spending for 2020/21 of £30 billion, of which £12 billion was directly attributed to countering the impact of coronavirus on the UK economy and NHS finances.
Total government borrowing was increased for the next five years by over £110 billion as a result of decisions taken in this Budget. But this is not the end of the story, as another Budget is due in the autumn. By then the consequences of coronavirus should be clearer and we may see other topics addressed, such as inheritance tax reform, which were understandably put on hold this time around.
Key Announcements from the Spring Budget 2020
- The Chancellor announced a £12 billion “temporary, timely and targeted” coronavirus stimulus on top of an £18 billion increase in general public spending, but tax measures were relatively few.
- The pension annual allowance thresholds will each be increased by £90,000 from 2020/21, removing taper as an issue for most people with incomes under £200,000.
- The capital gains tax entrepreneurs’ relief lifetime limit has been cut from £10 million to £1 million with immediate effect.
- The annual investment limit for junior ISAs and child trust funds will be increased to £9,000 from 2020/21.
- The national insurance contributions employment allowance will increase from £3,000 to £4,000 from April 2020.
- There will be a review of the taxation of funds to make the UK more attractive for fund management. It will also consider the VAT treatment of fund management fees.
- From April 2021, only zero emission vehicles will get 100% first year allowances. Cars with emissions up to 50g/km will have an 18% a year writing down allowance; for higher emitters the allowance will be 6% a year.
- From April 2022, red diesel (and rebated biofuels) will only be available to users for agriculture, rail and non-commercial heating.
- E-publications (e-books, e-newspapers, e-magazines and academic e-journals) will be VAT zero-rated from 1 December 2020.
- UK Business and Personal Tax rates 2020-21 >download a pdf
- Employment taxes: changes for the new tax year from 6 April 2020 >read more
Click on the links below to read the full articles:
The personal allowance will remain at £12,500 and the higher rate threshold will stay at £50,000 for 2020/21, as announced in the 2018 Budget. The changes announced in the Scottish Budget in December 2019 were as follows:
- There will be no changes to the current Scottish income tax rates – see Tax Rates 2020-21
- The basic (20%) and intermediate (21%) band thresholds will be increased by inflation.
- The higher (41%) and additional higher rate (46%) band thresholds will be frozen.
Off-payroll working (IR35)
From April 2020 the responsibility for operating the off-payroll working rules in the private and third sectors will move from individual workers to the organisation, agency or other third party engaging them. The change applies to services carried out from 6 April 2020.
The car benefit scale charge percentages for 2020/21 will be restructured, taking account of the recently introduced Worldwide Harmonised Light Vehicle Test Programme (WLTP) emissions standards. The scales for 2020/21 are as follows:
All zero CO2 emission vehicles: 0%
Petrol and diesel hybrids with CO2 emissions 1-50g/km
Range – electric-only miles < 30 30 – 39 40 – 69 70 – 129 130 +
Registered pre-6/4/20 (NEDC) 14% 12% 8% 5% 2%
Registered post-5/4/20 (WLTP) 12% 10% 6% 3% 0%
All non-diesel cars over 50 g/km CO2 51-54 55 & over
Registered pre-6/4/20 (NEDC) 15% 16%*-37%
Registered post-5/4/20 (WLTP) 13% 14%*-37%
All diesels that do not meet RDE2 standards: add 4% to the above, subject to a maximum 37% scale charge.
*Increased for every extra 5g/km by 1% up to the maximum 37%
The rates will increase by 1% in 2021/22 and a further 1% in 2022/23 before being frozen until 2024/25.
Increasing the flat rate deduction for homeworking
From April 2020 the maximum flat rate income tax deduction available to employees to cover additional household expenses will increase from £4 per week to £6 per week, where they work at home under homeworking arrangements.
Tax treatment of welfare counselling provided by employers
The scope of non-taxable counselling services will be extended from April 2020 to include related medical treatment when it is provided to an employee as part of an employer’s welfare counselling services.
Employment allowance Employment taxes: changes for the new tax year from 6 April 2020 >download a pdf
The employment allowance will be increased from £3,000 to £4,000 a year for 2020/21, as previously announced. But it will be restricted to employers with an employer Class 1 national insurance contributions (NICs) bill below £100,000 in 2019/20.
In the Autumn Budget 2018 the government announced that there would be restrictions on the eligibility for claiming Employment Allowance.
New rules will apply from April 2020 and employers should check to see if the new rules will affect their claim.
- Employment Allowance can only be claimed if total qualifying employers (Secondary) Class1 NIC’s liability in the previous tax year was less than £100,000.
- For Businesses with multiple PAYE schemes or a part of a group of connected companies then the secondary Class 1 NICs must be combined to assess eligibility.
- Multiple/connected companies must decide which Company/PAYE scheme will claim the employment Allowance.
From 6 April 2020 Employment Allowance will operate as De Minimis state aid. This means that Employment Allowance will contribute to the total aid you are entitled to claim under the relevant de minimis state aid cap in a relevant 3 year period.
De minimis state aid rules apply if your business engages in economic activity. (i.e. providing goods or services to the market).
If your business has received any De Minimis state aid then checks must be put in place to ensure that the relevant threshold for your business sector is not exceeded if in receipt of Employment Allowance.
If we operate/process a payroll on your behalf, it is your responsibility to make our payroll department aware if you have been in receipt of any de minimis state aid.
Further guidance can be found https://www.gov.uk/guidance/changes-to-employment-allowance
Employer taxes: Changes for the new tax year from 6 April 2020 >download a pdf
Don’t lose your personal allowance. Your personal allowance of £12,500 in 2020/21 is reduced by 50p for every pound by which your income exceeds £100,000. You could make a pension contribution or a charitable gift to bring your income below £100,000.
National insurance contributions
The primary threshold (employee contributions) for Class 1 NICs and the lower profits limit for Class 4 NICs will rise to £9,500 for 2020/21, as announced in January 2020. However, the secondary threshold (employer contributions) will not move in parallel, but instead it will increase to £8,788.
Tapered annual allowance for pensions
The two tapered annual allowance thresholds for pensions will each be raised by £90,000 from 2020/21. The ‘threshold income’ figure will therefore be £200,000 and the ‘adjusted income’ figure will be £240,000.
This will help many people, such as medical consultants, who have faced large tax bills on extra pay. While the rate of taper is unchanged, the minimum annual allowance for the highest earners from April 2020 will be reduced from £10,000 to £4,000 – at an ‘adjusted income’ of £312,000 or more.
Lifetime allowance for pensions
The lifetime allowance for pension savings will increase to £1,073,100 for 2020/21, in line with inflation.
The pension lifetime allowance will rise by £18,100 from 6 April 2020. If you plan to draw from your pensions and already have funds exceeding the current £1,055,000 lifetime allowance limit, you may want to wait before taking your pension benefits.
Individual savings account (ISA) subscription limits
The ISA annual subscription limit for 2020/21 will remain at £20,000. However, the annual subscription limit for junior ISAs (JISAs) and child trust funds (CTFs) will more than double, from £4,368 to £9,000.
The dividend allowance and personal savings allowance has been frozen since 2018/19. Your ISA allowance is £20,000 in 2019/20 and 2020/21 – use it or lose it.
Top slicing relief on life insurance policy gains
In response to the Silver First-Tier Tribunal case, legislation will specify how allowances and reliefs must be set against life insurance policy gains. This measure will apply to all relevant gains occurring on or after 11 March 2020.
Review of the UK funds regime
A review of the UK funds regime will be undertaken during 2020, covering direct and indirect tax, as well as relevant areas of regulation. A consultation paper will examine whether there are “targeted and merited” tax changes that could help to make the UK a more attractive location for companies used by funds to hold assets. The review will also consider the VAT treatment of fund management fees and other aspects of the UK funds regime.
Call for evidence on pension tax administration
Depending on how their pension scheme administers tax relief, people earning around or below the level of the personal allowance may or may not benefit from a top-up on their pension savings equivalent to the basic rate of tax.
A review of the options for addressing the differences will begin shortly with a call for evidence on pensions tax relief administration.
Venture capital trusts (VCTs) and enterprise investment schemes (EISs)
The venture capital limits and reliefs remain unchanged, as detailed below:
Venture capital allowances and reliefs 2020/21 2019/20
Venture capital trust at 30% £200,000 £200,000
Enterprise investment scheme at 30%1 £2,000,000 £2,000,000
– EIS eligible for capital gains tax deferral relief No limit No limit
Seed EIS (SEIS) at 50% £100,000 £100,000
– SEIS capital gains tax reinvestment relief 50% 50%
*Investment above £1,000,000 must be in knowledge-intensive companies
Corporation tax rate
The rate of corporation tax will remain at 19% and will not fall to 17% in 2020, as had been planned.
Structures and buildings allowance
The annual rate of capital allowances for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%, from 1 April 2020 for corporation tax and 6 April 2020 for income tax.
Research and development (R&D)
The rate of R&D expenditure credit will increase from 12% to 13% from 1 April 2020.
The government will consult on whether expenditure on data and cloud computing should qualify for R&D tax credits.
The introduction of the PAYE cap on the payable tax credit in the R&D schemes for SMEs will be delayed until 1 April 2021, following consultation last year. There will be further consultation on changes to the cap’s design to ensure it targets abusive behaviour, while also ensuring that eligible businesses can access the relief.
Your business might be entitled to a valuable research and development (R&D) tax credit – even if it doesn’t make a taxable profit. Check out the position as you might be surprised what expenditure can qualify and how much it could be worth to you.
First year allowances for business cars
Only zero emission vehicles will qualify for first year allowances from April 2021. The main rate of writing down allowance (WDA) of 18% will be given for cars with emissions up to 50g/km. The 6% WDA rate will apply to cars with emissions above 50g/km.
First year allowances for zero emission goods vehicles and natural gas and hydrogen refuelling equipment will be extended until 2025.
Company car tax rules change from 6 April 2020. Make certain you – and anyone you employ – are aware of the consequences.
Corporate capital loss restriction
The proportion of annual capital gains that can be relieved by brought-forward capital losses will be restricted to 50% from 1 April 2020, on similar lines to the corporate income loss rules. An allowance will give companies unrestricted use of up to £5 million capital and/or income losses each year. Certain companies in liquidation will be excluded from the scope of the restriction.
Non-UK resident companies with UK property income
Non-UK resident companies will be charged corporation tax on their UK property income from 6 April 2020, under legislation enacted in Finance Act 2019. Further legislation will ensure these rules work as intended to provide a smooth transition of the taxation of UK property profits from income tax to corporation tax.
Digital services tax
A new 2% tax will be charged from April 2020 on the revenues of certain digital businesses that derive value from their UK users. The tax will apply to revenues generated from the provision of search engines, social media platforms and online marketplaces, where those activities are linked to the participation of UK users and will be subject to an annual allowance of £25 million.
The tax will only apply to groups that generate global revenues from in-scope business activities of more than £500 million a year. It will include a safe harbour provision that will exempt loss makers and reduce the effective rate of tax on businesses with very low profit margins.
Private use of company vehicles
The fuel multiplier for 2020/21 will be £24,500 for cars. For vans, the fuel chargeable amount will be £666.
For zero-emission vans, the van benefit charge will be nil from April 2021.
From 6 April 2020, fuel benefit charges and the van benefit charge will increase in line with the consumer prices index (CPI) rather than the retail price index (RPI).
The pre-2002 exclusion from the Intangible Fixed Assets regime will be removed. This means that tax relief for the cost of acquiring corporate intangible assets from 1 July 2020 will be provided under a single regime subject to restrictions to prevent tax avoidance.
The Budget included several reliefs from business rates, some of them temporary in response to coronavirus.
The retail discount for properties with a rateable value below £51,000 in England will be increased to 100% for 2020/21 and will be expanded to include hospitality and leisure businesses for 2021.
There will be a discount of £5,000 for pubs in England with a rateable value below £100,000 for one year from 1 April 2020.
The £1,500 discount for office space used by local newspapers in England will be extended until 31 March 2025.
A fundamental review of business rates will call for evidence in the spring and report in the autumn.
The following changes to non-domestic rates for 2020-21 were outlined in the Scottish Budget in December 2019.
- An Intermediate Property Rate for properties with rateable value of between £51,000 and £95,000 will be charged 1.3p on rates on top of the standard poundage.
- Properties with rateable value above £95,000 will continue to be charged the Higher Rate of 2.6p plus the poundage.
- An extension of 100 per cent relief for Enterprise Areas to 31 March 2022 was announced.
- The reset period for Empty Property Relief is going up from 6 weeks to 6 months.
- Following the Barclay Review recommendation, the Scottish Government has introduced a requirement for self-catering property to be actually let for 70 days in order to be considered non domestic and liable for NDR rather than Council Tax.
- To support Scottish retailers a new 100 per cent relief for Reverse Vending Machines will be introduced from April 2020.
We shall have to wait to see if any of the reliefs, temporary or otherwise, announced in the UK Budget on 11 March 2020 will be applied in Scotland.
Time to Pay
Tailored arrangements will be available to give a business the time it needs to pay HMRC. The aim is to support the business’s recovery while operating through any temporary financial challenges that occur, for example as a result of the coronavirus pandemic.
HMRC will also waive late payment penalties and interest where a business experiences administrative difficulties because of coronavirus in trying to contact HMRC or pay taxes.
If you want to take advantage of Time to Pay, make sure that you have adequate records to justify your claim to HMRC.
Enterprise management incentives (EMI) scheme
The EMI scheme will be reviewed to ensure it provides support for high-growth companies to recruit and retain the best talent.
Plastic packaging tax
A new tax will be introduced from April 2022 to incentivise the use of recycled plastic in packaging. The rate will be £200 per tonne of plastic packaging that contains less than 30% recycled plastic. It will apply to the production and importation of plastic packaging.
The entitlement to use red diesel and rebated biofuels will be removed from April 2022 except for agriculture (including horticulture, pisciculture and forestry), rail and non-commercial heating.
Tax guidance for self-employed people
To make it easier for self-employed individuals to navigate the tax system, the government will this summer launch new interactive online guidance for taxpayers with non-PAYE income.
Capital gains tax (CGT): annual exempt amount
The annual exempt amount for individuals and personal representatives will rise to £12,300 for 2020/21, while the amount for most trustees will increase to £6,150 (minimum £1,230).
For disposals on or after 11 March 2020, the lifetime limit on gains eligible for Entrepreneurs’ Relief (ER), which offers a reduced 10% rate of CGT on qualifying disposals, will be reduced from £10 million to £1 million. There will be rules that apply to forestalling arrangements entered into before Budget day.
If you have crystallised a transaction >£1m that involves an ER claim in this tax year get in touch with us.
Private residence relief
From 6 April 2020, lettings relief of up to £40,000 will only apply where the owner of the property shares occupancy with the tenant. The final period exemption for CGT will be reduced from 18 months to 9 months. There will be no changes to the 36-month final period exemption available to disabled individuals or people in a care home.
Inheritance tax (IHT)
The IHT nil rate band will remain at £325,000 for 2020/21.
The residence nil rate band (RNRB) will increase to £175,000 from 6 April 2020, as set out in existing legislation.
IHT simplification remains on the agenda. Now may be a good time to review making lifetime gifts before the tax rules are ‘simplified’ into something less generous.
Non-UK resident stamp duty land tax (SDLT) surcharge
A 2% SDLT surcharge will be introduced from 1 April 2021 for non-UK residents purchasing residential property in England and Northern Ireland.
Annual tax on enveloped dwellings (ATED)
The ATED for 2020/21 will be increased in line with inflation.
Property value Charge for tax year 2020/21 Charge for tax year 2019/20
More than £500,000 but not more than £1m £3,700 £3,650
More than £1m but not more than £2m £7,500 £7,400
More than £2m but not more than £5m £25,200 £24,800
More than £5m but not more than £10m £58,850 £57,900
More than £10m but not more than £20m £118,050 £116,100
More than £20m £236,250 £232,350
Registration and deregistration thresholds
The taxable turnover threshold for registration for value added tax (VAT) will remain at £85,000 until April 2022. The deregistration threshold will stay at £83,000 for the same period.
The zero-rate of VAT on printed books, newspapers, magazines and academic journals will be extended to their electronic counterparts from 1 December 2020. The government will consult on the details of the legislation ahead of its implementation.
Postponed accounting for VAT will apply from 1 January 2021 to all imports of goods, including from the EU. The measure is aimed at helping VAT-registered UK businesses that are integrated in international supply chains as they adapt to the UK’s position outside the EU.
VAT on call-off stock
Simplified rules will be introduced for the VAT treatment of intra-EU movements of call-off stock, allowing businesses to delay accounting for VAT until the goods are called off. The legislation will be backdated to goods removed from a Member State on or after 1 January 2020.
Long-term cross-border goods policy
The government will consult informally with stakeholders on the VAT treatment of goods crossing UK borders after the EU exit transition period.
VAT rules on cross-border trading may change after the EU exit transition period. Take advice periodically on how exit from the EU might affect your business.
Women’s sanitary products
The zero rate of VAT will be charged on tampons and other women’s sanitary products from 1 January 2021.
In Scotland the government has agreed initial backing to the Period Products (Free Provision) (Scotland) Bill. If passed, the Bill would place a legal duty on the Scottish Government to ensure anyone who needs period products can obtain them for free.
Agricultural flat rate scheme
New entry and exit rules for the agricultural flat rate scheme will be introduced from 1 January 2021. Businesses will be able to join the scheme when their annual turnover for farming-related activities is below £150,000.
They must deregister from it once such turnover exceeds £230,000 and register for VAT instead. Businesses with a turnover that exceeds £85,000 for non-farming activities will be ineligible for the scheme and will have to register for VAT.
Construction Industry Scheme (CIS) abuse
Legislation will be introduced in the Finance Bill 2020-21 to prevent non-compliant businesses from using the CIS to claim tax refunds to which they are not entitled. The government is also launching a consultation that considers options on how to promote due diligence in the supply chain.
Domestic reverse charge for building and construction services
The implementation of the VAT domestic reverse charge for building and construction services will be delayed until 1 October 2020, as previously announced.
This is one of the biggest changes to VAT, in this short Video, Iain Johnston, VAT Specialist at Martin Aitken, explains how the “reverse charge” will apply to the construction industry.
Conditionality for granting business licences
Legislation in Finance Bill 2020-21 will make the renewal of licences to drive taxis and private hire vehicles (PHVs), operate PHV firms, and deal in scrap metal conditional on applicants completing checks that confirm they are appropriately registered for tax. This measure will take effect in England and Wales in April 2022.
The government is considering extending this reform to Scotland and Northern Ireland in the future and will work with the devolved administrations to this effect.
In the spring a discussion document will be issued seeking views on the wider application of tax conditionality.
The forthcoming Finance Bill will legislate to implement the recommendations of the Independent Loan Charge Review that the government has accepted. A call for evidence on further action to stamp out disguised remuneration schemes will be issued shortly.
HMRC’s promoter strategy
HMRC will publish a new strategy for tackling the promoters of tax avoidance schemes in addition to the legislative changes in Finance Bill 2020-21.
A call for evidence will be published in the spring about raising standards for tax advice.
Large business notification
From April 2021 large businesses will be required to notify HMRC when they take a tax position that HMRC is likely to challenge.
Clarifying the treatment of Limited Liability Partnership (LLP) returns
The government will legislate prospectively and retrospectively in Finance Bill 2020 to put beyond doubt that LLPs should be treated as general partnerships under income tax rules.
Money laundering levy
The government intends to introduce a levy to be paid by firms subject to the Money Laundering Regulations to help fund new action to tackle money laundering. A consultation on the levy will be published later this spring.
Stamp duty and stamp duty reserve tax – transfer of unlisted securities to connected companies
The targeted market value rule is intended to prevent artificial reduction of the tax due on share acquisitions when listed shares are transferred to a connected company. The rule is being extended to unlisted shares.
The measure will be in Finance Bill 2020. As part of this change, the government will amend legislation to prevent a double tax charge arising on certain company reorganisations.
This UK Budget 2020 summary has been prepared very rapidly and is for general information only. All statements within this document are based on our understanding of the changes within the 11 March 2020 UK Spring Budget.
You are recommended to seek professional advice before taking any action on the basis of the contents of this summary. Publication date: 12 March 2020.
The UK government’s Streamlined Energy and Carbon Reporting (SECR) policy was implemented on 01 April 2019, when the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 came into force.
Businesses need to comply for the financial years starting on or after 01 April 2019, so the first set of reporting will be due on or after 01 April 2020 depending on when your own financial year runs.
Companies that fall within the following definitions must comply (with certain exemption criteria):
(1) Quoted companies of any size that are already obliged to report under mandatory greenhouse gas reporting regulations.
(2) Unquoted companies incorporated in the UK that meet the definition of ‘large’ under the Companies Act 2006 will have new reporting obligations. This applies to registered and unregistered companies. Note that the criteria for ‘large’ differs from the ESOS Regulations.
(3) ‘Large’ Limited Liability Partnerships (LLPs) will be required to prepare and file an ‘Energy and Carbon Report’.
The introduction of SECR coincides with the end of the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. The new regulations will require an estimated 11,900 companies to disclose their energy and carbon emissions – a far greater number than were required to act under the CRC.
SECR builds on – but does not replace – existing requirements that companies may face, such as mandatory greenhouse gas (GHG) reporting for quoted companies, the Energy Saving Opportunity Scheme (ESOS), Climate Change Agreements (CCA) Scheme, and the EU Emissions Trading Scheme (ETS).
SECR extends the reporting requirements for quoted companies and mandates new annual disclosures for large unquoted and limited liability partnerships (LLPs).
If you are affected by these changes then please get in touch with us in the first instance. You can find out more about the changes here >read more
This is a guest article by Neil Sullivan from Boxfish. Boxfish are an expert utility consultancy who have been streamlining utilities and saving money for businesses for the past 25 years.
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