Finance Bill 2020/21: What to expect

Last week was a busy week as the Finance Bill 2020 received Royal Ascent and has now become the Finance Act 2020. The government also published draft legislation for the Finance Bill 2020/21, which is now available for further consultation until 15 September 2020.

Many of the announcements were already disclosed in the Spring Budget, which we have summarised here. However, new proposals were made for the Finance Bill 2020/21, which we would like to make you aware of.

VAT

• VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax Digital (MTD) rules for their first VAT return starting on or after April 2022.

Income Tax

• Self-employed businesses and landlords with a business turnover above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.
• A new temporary exception to working time requirements in respect of Enterprise Management Incentives (EMI) will undoubtedly prevent individuals from exercising their options earlier than planned due to the effects of coronavirus (i.e. being furloughed, reduction in working hours or taking unpaid leave). The exception takes effect from 19 March 2020 till 5 April 2021 and there is an opportunity of the exception being extended by a further 12 months if necessary.
• New measures for the taxation of termination payments and post-employment notice pay for individuals whose pay period is defined in months, but their contractual notice period or post-employment notice period is not a whole number of months.
• One of the new proposals also aims to reduce the cash equivalent of the van benefit charge to zero for vans that emit zero carbon dioxide emissions.

Corporate Tax

• There are two technical amendments to the Corporate Interest Restriction (CIR) rules:
  • The legislation will be amended so that it will clarify the way rules apply to Real Estate Investment Trust since non-resident companies with a UK property business are now subject to Corporation tax rather than Income tax.
  • The second proposal is to ensure that no penalties will be raised for filing late of an Interest Restriction return so long as there is a reasonable excuse for failing to bring the company’s affairs up to date.

Stamp Duty Land Tax (SDLT) and Annual Tax on Enveloped Dwellings (ATED)

• This was excluded from the Finance Bill 2020 but at Budget 2020 it was announced that a 2% surcharge would be introduced from April 2021 for non-residents buying residential property in England and Northern Ireland.
• The draft legislation also sets out new reliefs for the ATED charge and 15% flat rate of SDLT for housing co-operatives. The former is due to take effect from 1 April 2020, whilst the latter will be introduced by the Autumn Budget 2020.

Other proposals

• New proposals have been introduced to tackle promoters and enablers of tax avoidance schemes and to increase transparency.

One of the other interesting aspects is that the government has also published a ten-year plan to reform and modernise the tax administration with the use of digital tax systems, currently in application for VAT and soon to be income tax. Although the intention to reform the tax administration has been noted for several years, we have seen lately several setbacks as to its implementation. Thus, it will be interesting to see the proposals regarding the transition and the timing of corporation tax to MTD.