Spring has arrived in the UK, and along with longer sunny evenings and flowers coming into bloom, the Government has released it's Spring Statement 2022. Many of the announcements are in response to rising cost of living/fuel prices/energy bills. We have rounded up the key tax highlights. Income Tax and National Insurance Contributions (“NICs”) From July 2022, for Class 1 and Class 4 NICs, the National Insurance Primary Threshold and Lower Profits Limit will increase from £9,880 to £12,570, aligning them with the personal allowance for income tax. It is estimated that this will save a ‘typical’ employee over £330 in the year from July. From April 2022, self-employed individuals with profits between the Small Profits Th...

Following the release of our recent blog Structures and Buildings Allowance – Capital Allowances (published 30 June 2021), HMRC have published a policy paper on a proposed additional requirement for preparing an allowance statement. The allowance statement is required to make a claim for Structures and Buildings Allowance (“SBA”) and this proposed amendment will have effect once the next Finance Bill 2021-22 receives Royal Assent. In order to make a claim for the SBA, the current requirements that the allowance statement must meet are as follows: Details of the building or structure; The date of the earliest contract for the construction of the building or structure; The amount of qualifying expenditure incurred on its c...

Structures and Buildings Allowances (“SBA”) was previously introduced to provide relief on qualifying expenditure on non-residential commercial buildings or structures incurred on or after 29 October 2018. SBA is a form of capital allowances which allows the SBA to be deducted when calculating the taxable profits for the business. Since its inception, there have been some changes to the allowance and further changes were announced in the Finance Act 2021 on Freeport qualifying expenditure. Please note that this article does not discuss requirements where the 'relevant interest' is the lease of a building. What expenditure can qualify for the SBA? The SBA is available for qualifying expenditure on non-residential commercial str...

Coronavirus Support Measures The Coronavirus Job Retention Scheme (i.e. the furlough scheme) will be extended until the end of September 2021. Whilst there will be no change to the terms for employees, as businesses re-open employers will be asked to contribute. From July, they will be asked to contribute 10% of the cost of unworked hours, rising to 20% in August 2021. The Self Employment Income Support Scheme will also be extended until September 2021, with those who filed a 2019/20 Self-Assessment Tax Return now able to make a claim. Restart Grants will be available to businesses in England of up to £6,000 per premises for non-essential retail, and up to £18,000 per premises for hospitality, accommodation, leisure, personal c...

Efforts are being made by the Government to motivate businesses to own lower CO2 emission cars in the push to become a greener society. From April 2021, new tax measures - particularly relating to capital allowances - are being introduced to encourage and incentivise businesses to opt for more climate-friendly vehicles. First Year Allowances (FYAs) The Government announced during its last budget in 2020 that FYAs would be restricted to expenditure for new zero emission and new electric cars from 01 April 2021 onwards, with these FYAs being extended until April 2025. These allowances allow the whole of the expenditure incurred by the business to be deducted against trading profits in the period. It is important to note that the FYAs ar...

In line with government guidelines, large swathes of UK workers are currently working from home.  Whilst there are a range of expenses you may be able to claim depending on your specific circumstances, this blog is aimed at those of you who own a limited company and are running the business from home. Rather than claiming the flat rate of £6 per week (£26 per month) under the simplified expenses rules, it may be more beneficial to instead rent out the personal work space in your home to your limited company. Under this arrangement, where the rent charged is equal to costs (see below), then no taxable rental profits will arise. Furthermore, provided that the rent is charged at no more than the market rate then the rental payments ma...

The case of Reneaux and Another v HMRC (2019) provides guidance on the level of business activity required to be treated as “trading” for Entrepreneurs’ Relief (“ER”) purposes. In this case, the First-Tier Tribunal (“FTT”) held that the occasional use of business premises and the letting of those premises were not sufficient to amount to a trade. Entrepreneurs' Relief  ER is a valuable relief which can reduce the rate of Capital Gains Tax (“CGT”) on the sale of business assets to 10%. In brief, in order for sole traders or partners of partnerships to qualify for relief they must have sold whole or part of their business, or disposed of an asset used in a business at the time the business ceases to be carried on ....

When businesses/companies employ capital assets (e.g. machinery, motor vehicles) for use in their business, such costs are not deductible from trading profits because the expenditure will have an enduring benefit for the trade. Instead, relief is available through capital allowances which essentially allows relief for the fall in value of capital assets, providing a deduction when arriving at taxable profit. Furthermore, the annual investment allowance (AIA) is available to businesses to encourage greater levels of investment. The AIA reduces the costs of capital by providing 100% capital allowances for the first £1,000,000 (between 1 January 2019 and 31 December 2020) of plant an machinery (excluding cars) acquired by the business for...

Capital Allowances are a form of tax relief that can be claimed by traders when they incur expenditure on “plant and machinery”. They can be deducted from the tax adjusted profit for the accounting period, thereby reducing the taxable trading profit. However, the definition of what constitutes “plant and machinery” is a contentious issue and one that is discussed in a significant amount of case law. The case law, along with the Capital Allowances Act 2001 and HMRC practice, suggests that an asset qualifies as “plant” if it has an expected life of two years or more and has a clear function in enabling the activities of the business to take place. Buildings and a number of other structures are specifically excluded from t...

Changes introduced by the Finance Act 2019 (FA-2019) address inconsistencies between the tax treatment of tangible fixed assets (e.g. cars, vans, machinery, buildings) and intangible fixed assets (e.g. goodwill, intellectual property). The new provisions bring the intangible fixed assets rules more in line with those applying to tangible fixed assets. Degrouping Charge A degrouping charge may apply where a company (Co A) acquires assets from another group company (Co B) on a no gain/no loss basis, and Co A leaves the group within 6 years of acquiring the asset. The effect of a degrouping change is that Co A is deemed to have disposed of and reacquired the asset at market value immediately after the asset was acquired, thereby crea...