Tax Update 24/07/2020

Keep up to date with the key announcements made this past week.

Finance Bill 2020

On the 22nd July the Finance Bill 2020 received royal accent and became the Finance Act 2020

Finance Bill 2021

A day earlier on the 21st July, HMRC published the draft legislation for the next finance bill.

The draft provisions, which can be found here, cover the following.

Zero-emission vans: Starting in 2021/22 the cash equivalent of the van benefit for zero-emission vans will be nil.

Enterprise Management Incentives (EMI): An extension has been granted to the exception for EMI share options that were granted on or after 19th March 2020. This will ensure that participants do not suffer disqualifying events as a result of taking leave, being furloughed or working reduced hours as a result of coronavirus. The changes initially apply from 19th March 2020 to 5th April 2021.

Termination Payments: The introduction of a new calculation of post-employment notice pay (PENP) for employees paid in monthly equal instalments and whose post-employment notice period is not a whole number of months. PENP will also be chargeable to UK tax for individuals who are non-resident individuals in the year of termination. The provision will only apply from 6th April 2021 and apply to individuals who have their employment terminated and receive a termination payment after this date.

Non-residents Stamp Duty Land Tax (SDLT) surcharge: A 2% surcharge on the purchase of dwellings by non-residents along with certain UK-resident companies that are controlled by non-residents. The surcharge will apply to purchases in England and Northern Ireland on or after 1st April 2021.

SDLT higher rate reliefs for housing co-operatives: There will be the introduction of a relief on the 15% higher rate of SDLT when purchasing residential property valued in excess of £500,000 by a company. The relief will apply to housing co-operatives that have no transferable share capital. No definitive date have been given as of yet, however it is believed this will take effect as of the date of the autumn 2020 budget.

Annual tax on enveloped dwellings (ATED) relief for housing co-operatives: Along with the aforementioned SDLT reliefs, housing co-operatives will also benefit from ATED relief. Relief will be so long as the property is held exclusively by non-publicly funded, non-social housing cooperatives that have no transferable share capital. This change is expected to retrospectively apply from 1st April 2020.

Corporate interest restriction: Clarification of the way certain provisions in the corporate interest restriction rules apply to real estate investment trusts. Taking into account that UK property businesses of non-resident companies are within the charge of corporation tax rather than income tax this is effective immediately (21st July 2020). Steps have also been taken to ensure that no penalties arise for late filing so long as there is a reasonable excuse for the failure. This brings the rules inline with the administrative rules for corporation tax.

HMRC powers: HMRC will be granted further powers, with the introduction of a new financial institution notice. The notice will require financial institutions to provide them with information when requested about specific taxpayers. There will now be no need for tribunal approval the these requests.

Tax checks on licence applications: The granting of certain licences (e.g. private hire vehicles) will be conditional on providing information to HMRC.

VAT changes for 2021

With the end of the Brexit transition period approaching, HMRC have published a policy paper detailing the changes to VAT treatment of overseas goods sold to customers from 1st January 2021. The paper expands on the 13th July publication of the border operating model. It also provide further details on the sections covering VAT treatment of consignments not exceeding £134 from 1st January 2021.

Non-resident company landlords

At the start of the current tax year the profits, or UK property income of UK property businesses, from over 20,000 Non-resident company landlords were brought within the scope of corporation tax. Despite HMRC sending out letters in January/February of 2020 advising these companies of their corporation tax unique taxpayer references (UTR’s) and alerting them of any action that needs to be taken, many of them were not received by the intended recipients.

HMRC have also noted that they cannot issue details of corporation tax UTR’s to agents without a signed 64-8 authority. If agents have already written to HMRC, they are advised that HMRC are working to deal with this as soon as possible but COVID -19 has delayed response times.

Where the UK property businesses started after 6th April 2018, it would not be on the database used in the automated process for allocating the corporation tax UTR’s. HMRC will be writing separately to these companies and are considering this task as a priority, however once again due to COVID-19 this may take longer than usual.

Source – Lexis Nexis via Tolley Guidance