There will be no Autumn Budget this year, but that doesn’t mean tax policy has paused, changes are still being made in the following areas:
MTD for corporation tax
We have been waiting for an indication of when the MTD rules will apply to companies, and now we know those rules won’t be compulsory until 2026 at the earliest.
However, the MTD regime will apply to all organisations that pay corporation tax; there will be no minimum turnover threshold as applies for income tax. There will be quarterly reporting of income and expenses, and a pilot to test the software will commence in 2024. HMRC will not provide free software for filing the corporation tax returns required under MTD.
The annual investment allowance (AIA) cap is currently £1 million, and was due to reduce to £200,000 on 1 January 2021. This £1 million cap will now be extended to 31 December 2021.
R&D tax credits
There is currently no cap on the amount of R&D payable tax credit a small company can receive if their company has made a loss after deduction of their R&D claim. This will change for claim periods starting on and after 1 April 2021. The payable tax credit will be capped at three times the PAYE and NIC payable for the period plus £20,000. You need to factor this into cash flow forecasts for your clients.
The construction industry is facing a triple whammy of tax changes in 2021: VAT domestic reverse charge on 1 March, off-payroll and CIS reforms on 6 April.
The later changes may affect sub-contractor companies who claim their tax refund through RTI, and large businesses who could be classified as deemed contractors as they undertake more than £3 million of construction expenditure within 12 months.
There will also be new penalties for supplying false information to HMRC when applying for gross payment status or CIS registered status. This penalty will have a wide scope as it can be applied to any person who influences another to provide false information.