Government announces National Insurance and dividend tax increases

The Government has announced a considerable investment in both the NHS and Social Care. To fund this investment, the Government have introduced the Health and Social Care Levy from April 2022.

The NHS and Social Care Levy will raise the additional tax as follows:

  • 1.25% increase in National Insurance Contributions from Employers;
  • 1.25% increase in National Insurance Contributions from Employees;
  • 1.25% increase in National Insurance Contributions from the Self-Employed;
  • 1.25% increase in taxation on dividends;
  • Those of pensionable age will also pay the increased 1.25% National Insurance Contribution on any earned income from April 2023.

These tax increases will hit a broad range of taxpayers, from businesses to employees to investors and pensioners. This increased tax will also catch business owners who usually draw their income in the form of dividends.
These changes will lead to higher future costs for all businesses and especially companies, when combined with the 6% increase in Corporation Tax from April 2023. As a result, businesses may need to reduce their payroll or costs elsewhere or consider increasing prices, while individuals will need to think about managing the impact on their personal finances.

As a TC client, you may wish to consider some of the following options:

  • Advice on enhanced tax deductions including:
    • Capital Allowances;
    • Research and Development claims;
    • Patent Box;
  • Drawing down income before April 2022;
  • Advice on HR compliance and taxation implications around redundancies;
  • Employee incentive arrangements and tax-efficient benefits;
    • Review of business costs to identify potential savings;
    • Review of your investment portfolio to non-share investments.

In a separate matter, the Pension Triple Lock has been suspended for one year, given the link with earnings, so there is a double lock on 2.5% and Inflation.

If you would like to speak to us about how best to respond to these changes, please contact Taylorcocks.

TC Group: Detailed guidance on VAT deferral scheme

HMRC has now provided further detailed guidance notes on your payment options for VAT that was deferred in 2020.

The original deferral scheme was introduced to assist VAT registered businesses so that they did not have to make a payment with their VAT return during the VAT period ending between 20th March and 30th June 2020.

The VAT deferral new payment scheme extends the original deferral and will be open from 23rd February up to and including 21st June 2021. You will need to use your Government Gateway access to join the scheme – we cannot do this for you through our agent account.

Anyone on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme will be invited to join the new payment scheme later in March 2021.

The new scheme lets your business pay its deferred VAT in equal instalments, interest-free; and choose the number of instalments, from two to eleven (depending on when you join).

It is important to note that in order to use the online service, businesses and sole traders registered for VAT must:

  • join the scheme yourself;
  • still have deferred VAT to pay;
  • be up to date with your VAT returns;
  • join by 21st June 2021;
  • pay the first instalment when you join; and
  • pay instalments by direct debit (if want to use the scheme but cannot pay by direct debit, there’s an alternative entry route for you).

If you join the scheme, you may still have a Time to Pay arrangement for other HMRC debts and outstanding tax (subject to acceptance).

Please call your usual TC Group contact if you require further assistance on 0330 088 7111.

Taylorcocks: Construction Industry Domestic Reverse Charge to apply from 1st March 2021

Taylorcocks has reported that the Domestic Reverse Charge due to be introduced in October 2019 but was twice delayed due to Brexit and Coronavirus, but will now come in from 1st March.

The charge will apply to all VAT registered construction businesses in the UK and effectively moves the VAT liability from the supplier to the customer. It does not apply on supplies made to non-VAT registered customers or the end-user of the property, such as a business who uses the property in their business. It also does not apply to zero-rated supplies, activities not covered by CIS or supplies of staff or workers.

All VAT-registered subcontractors who are supplying building and construction services to a VAT registered contractor, who is CIS registered, will need to inform the contractor on their invoices that Reverse Charge applies and the need to account for the VAT under the reverse charge rules.

The subcontractor will not charge VAT on their invoice and therefore will only include the amount charged for their service in box 6 of their VAT return. This differs from the current position where the sub-contractor has to include the VAT on their invoice and account for this to HMRC in their VAT return.

The contractor receiving the construction service will have to account for VAT by including it in both box 1 & 4 of their VAT return, rather than simply processing the sub-contractors VAT invoice.
If you require any assistance with this, please contact your local partner at Taylorcocks or on 0330 088 7111.

Patron: Small businesses to receive payments from business interruption insurance policies

The Supreme Court has ruled in favour of small businesses receiving payments from business interruption insurance policies.

Following the ruling, it is expected that tens of thousands of small businesses will receive insurance payouts covering loss of profits from the first national lockdown. Whether you can qualify will need to be discussed with your insurer/broker.

The case only covers the first lockdown. If extended to the subsequent lockdowns, either local or national, then any sole traders or partnerships that have made claims under Self-Employed Income Support Scheme (SEISS) may need to repay some of the grants.

The third version of SEISS required the claimant to declare any anticipated significant reductions in their trading profits. Therefore, if the insurance claim replaces those profits then there will not be a significant reduction in profits and consequently, the SEISS grant will need to be repaid.

If you would like assistance with evaluating the potential losses for your insurance claim then please contact your TC partner on 0330 088 7111 or visit www.tc-group.com.

Patron: Summary of Government support schemes

With most of the UK currently placed under Tier 4 restrictions and another full lockdown looking increasingly likely, we thought it might be beneficial to summarise the support available to businesses at this time.

Coronavirus Job Retention Scheme (CJRS) – This job support scheme will continue to run until the end of April, with Government grants meeting 80% of the normal monthly wage, capped at £2,500 per employee per month. Employees can be fully furloughed or part-time furloughed.

Self-Employed Income Support Scheme (SEISS) – This support scheme for the self-employed or partners is set to run until the end of April with Government Grants available for the three months ending on 31st January of 80% of average profits capped at £7,500.

We await the Government to announce the grant level for SEISS for the three months to 30th April, but we expect this to be 80% of average profits capped at £7,500, in line with the CJRS.

Loan schemes – Both the Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan scheme are still available until 31st March. They will provide loan support for businesses that have been adversely affected by COVID-19.

Local Restrictions Support Grants – These Grants are available for businesses required to close or cannot offer their normal service due to local restrictions, i.e. in Tier 4 all non-essential retail and pubs and restaurants. The business will be required to be closed for at least 14 days due to the restrictions. The Grants are based on the rateable value of the business premises, and the business can receive one Grant for each non-domestic property within the restriction area. The Grants are administered by the local councils, and you will need to contact them to apply for the Grant. The level of the Grants depends on the rateable value as follows:

Rateable value Grant every 14 days
£15,000 or less £667
£51,000 or less but above £15,000 £1,000
Over £51,000 £1,500

If you require guidance on any of these changes, please contact our HR team at hr@tc-group.com or your TC adviser on 0330 088 7111.

Patron: The Government announces increased support for the self-employed, Taylorcocks

Further to the announcement of the second lockdown and the extension of the Furlough Scheme, the Chancellor has made changes to the Self-Employed Income Support Scheme that will apply from 1st November 2020.

The Chancellor has increased the grant available for November from 40% to 80% of average trading profits, whilst the grant for December and January remains at 40% of profits. The cap for the grant for the 3 months ended 31 January 2021 has therefore been increased from £3,750 to £5,160.

In addition, the claims window will now open on 30th November until 14th December, so businesses that are adversely affected by COVID can access a larger grant sooner.

The Government has also extended the deadline for applying for Government-backed loan schemes to 31st January 2021.

If you require guidance on any of these changes, please contact your TC adviser on 0330 088 7111 or visit www.tc-group.com.

Patron: The Chancellor announces extension of Furlough Scheme – Taylorcocks

Following the announcement of a second national lockdown, Rishi Sunak has extended the Furlough Scheme until 2nd December.

The Government have also announced some further extensions of support, and there may well be more to follow.

The Job Retention Scheme
The Job Retention Scheme (JRS) that was due to end yesterday will be extended until 2nd December, and the Job Support Scheme is delayed until the JRS ends.

The extended scheme is expected to be in-line with the existing JRS, and it will:

-apply to employees on full furlough or working part-time;
– with employees receiving 80% of their normal wages for furloughed hours;
– the Government will pay 80% of the normal wages for the furloughed hours, – capped at £2,500 per month for full furlough;
– the employer will pay National Insurance and pension contributions and meet the costs of hours worked.

At this stage, it is unclear whether or not it will be possible to reverse redundancies implemented in accordance with the original deadline. Further details on this point and more regarding the JRS changes are due to follow in the coming days.

Business Grants
Businesses that are required to shut their premises due to the National or Local Lockdown will qualify for business grants. The grant depends on the rateable value of the property but for premises with a rateable value:

-below £15k the grant is £1,334 per month;
– from £15k to £51k the grant is £2,000 per month; and
– of £51k or over the grant is £3,000 per month.

Mortgage payment holidays
The mortgage payment holiday scheme will not end and borrowers who are adversely affected by COVID and have not yet had a mortgage payment holiday can claim for up to 6 months, and those who have already started a mortgage payment holiday can top this up to 6 months.

The FCA will give more details on Monday.

Self-Employed
Although nothing has been announced for the self-employed, we would expect that the grants under the Self-Employed Income Support Scheme would be increased in line with the extension of the JRS, and await to see an announcement on this.

If you require guidance on any of these changes, please contact your TC adviser on 0330 088 7111 or our HR team at hr@tc-group.com.